_______________________________________________________ Press Release For immediate release |
_______________________________________________________ Invesco Mortgage Capital Inc. Reports Third Quarter 2010 Financial Results Investor Relations Contact: Donald Ramon, 404-439-3228 Media Relations Contact: Bill Hensel, 404-479-2886 |
Atlanta – November 8, 2010 -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the “Company”) today announced results for the quarter ended September 30, 2010.
The Company reported net income of $27.6 million, or $1.01 per share (basic and diluted), for the quarter ended September 30, 2010, compared to $22.0 million, or $0.91 per share (basic and diluted), for the quarter ended June 30, 2010. The increase in net income and earnings per share was primarily driven by an increase in average earning assets as the equity from the May 2010 follow-on capital offering was fully deployed throughout the third quarter.
The Company declared a dividend of $1.00 per share for the third quarter of 2010. The dividend was paid on October 27, 2010.
“During the third quarter, we realized the full benefit of the follow-on capital offering we completed in May 2010,” said Richard King, Chief Executive Officer. “For the quarter, we were able to grow net income by 25%, improve our earnings per share by 11% and increase our dividend. We believe asset selection is the key to our success and having the ability and expertise to invest across the mortgage market is a distinct competitive advantage.”
($ in millions, except per share amounts) | ||||||||
Q3 ‘10 | Q2 ‘10 | |||||||
(unaudited) | (unaudited) | |||||||
Average Earning Assets (at fair value) | $ | 2,401.5 | $ | 2,045.6 | ||||
Average Borrowed Funds | 1,862.9 | 1,618.4 | ||||||
Average Equity | 560.4 | 498.3 | ||||||
Interest Income | 36.1 | 29.2 | ||||||
Interest Expense | 8.9 | 6.4 | ||||||
Net Interest Income | 27.2 | 22.8 | ||||||
Operating Expenses | 2.9 | 2.8 | ||||||
Other Income | 3.3 | 2.0 | ||||||
Net Income | 27.6 | 22.0 | ||||||
Average Portfolio Yield | 6.01 | % | 5.71 | % | ||||
Cost of Funds | 1.90 | % | 1.58 | % | ||||
Debt to Equity Ratio | 3.4 | 3.3 | ||||||
Return on Average Equity | 19.71 | % | 17.71 | % | ||||
Book Value per Share (Diluted) | $ | 20.28 | $ | 19.90 | ||||
Earnings per share (Basic and Diluted) | $ | 1.01 | $ | 0.91 | ||||
Dividend | $ | 1.00 | $ | 0.74 |
Financial Summary
The Company’s portfolio of mortgage-backed securities (“MBS”) was $2.5 billion as of September 30, 2010, an increase of $0.2 billion from June 30, 2010. For the quarter ended September 30, 2010, average earning assets were $2.4 billion which generated interest income of $36.1 million. This represents an increase of $0.4 billion, or 17.4%, and $6.9 million, or 23.6%, respectively, from the second quarter of 2010.
During the third 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 12.3, versus a rate of approximately 27.0 for bonds with similar characteristics. The Company’s 30-year agency RMBS portfolio had a 3-month CPR of 14.3, compared to a rate of approximately 31.1 for bonds with similar characteristics. The Company’s agency hybrid adjustable rate mortgage (“ARM”) portfolio had a 3-month CPR of 28.9 and the non-agency RMBS portfolio prepaid at a 3-month CPR of 17.8. Overall, the weighted average 3-month CPR on the portfolio was 13.7.
The Company financed its MBS portfolio with a combination of borrowings under repurchase agreements and the Federal Reserve’s Term Asset-Backed Securities Loan Facility (“TALF”). For the quarter ended September 30, 2010, the Company had average borrowings of approximately $1.9 billion and interest expense of $8.9 million, compared to $1.6 billion and $6.4 million, respectively, for the second quarter of 2010.
Operating expenses for the third quarter 2010 totalled $2.9 million compared to $2.8 million for the second quarter 2010. The ratio of operating expenses to average equity in the third quarter of 2010 decreased 0.15% to 2.09% as the Company benefited from improved operating efficiency during the quarter.
The Company’s book value per share as of September 30, 2010 was $20.28, compared to $19.90 per share as of June 30, 2010.
###
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, Monday, November 8, 2010, at 9:00 a.m. ET, by calling one of the following numbers:
US/Canada Toll Free: 800 768 6727
International: 212 231 2920
Passcode: Invesco
An audio replay will be available until 5:00 pm ET on November 22, 2010 by calling:
800-633-8284 (North America), enter reservation # 21484647,
402-977-9140 (International), enter reservation # 21484647.
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)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
$ in thousands, except per share data | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Revenues | ||||||||||||||||
Interest income | 36,067 | 10,983 | 83,284 | 10,983 | ||||||||||||
Interest expense | 8,873 | 2,070 | 18,904 | 2,070 | ||||||||||||
Net interest income | 27,194 | 8,913 | 64,380 | 8,913 | ||||||||||||
Other income (loss) Gain (loss) on sale of investments, net | (311 | ) | — | 1,064 | — | |||||||||||
Equity in earnings and fair value change in unconsolidated limited partnerships | 3,793 | — | 5,888 | — | ||||||||||||
Loss on other-than-temporarily impaired securities | (124 | ) | — | (510 | ) | — | ||||||||||
Unrealized loss on interest rate swaps | (9 | ) | (13 | ) | (44 | ) | (13 | ) | ||||||||
Total other income (loss) | 3,349 | (13 | ) | 6,398 | (13 | ) | ||||||||||
Expenses | ||||||||||||||||
Management fee – related party | 2,039 | 753 | 5,094 | 753 | ||||||||||||
General and administrative | 263 | 245 | 729 | 349 | ||||||||||||
Insurance | 236 | 354 | 929 | 369 | ||||||||||||
Professional fees | 386 | 375 | 1,181 | 388 | ||||||||||||
Total expenses | 2,924 | 1,727 | 7,933 | 1,859 | ||||||||||||
Net income | 27,619 | 7,173 | 62,845 | 7,041 | ||||||||||||
Net income attributable to non-controlling interest | 1,433 | 970 | 3,860 | 970 | ||||||||||||
Net income attributable to common shareholders | 26,186 | 6,203 | 58,985 | 6,071 | ||||||||||||
Earnings per share: | ||||||||||||||||
Net income attributable to common shareholders (basic and diluted) | 1.01 | 0.70 | 2.74 | NM | ||||||||||||
Dividends declared per common share | 1.00 | — | 2.52 | — | ||||||||||||
Weighted average number of shares of common stock: | ||||||||||||||||
Basic | 26,047 | 8,886 | 21,552 | NM | ||||||||||||
Diluted | 27,478 | 10,311 | 22,981 | NM | ||||||||||||
CONSOLIDATED BALANCE SHEETS
$ in thousands, except per share amounts | As of | ||||
ASSETS | Sept. 30, 2010 | Dec. 31, 2009 | |||
(Unaudited) | |||||
Mortgage-backed securities, at fair value | 2,457,871 | 802,592 | |||
Cash | 20,394 | 24,041 | |||
Restricted cash | 40,235 | 14,432 | |||
Principal paydown receivable | 1,138 | 2,737 | |||
Investments in unconsolidated limited partnerships, at fair value | 61,290 | 4,128 | |||
Accrued interest receivable | 10,950 | 3,518 | |||
Prepaid insurance | 685 | 681 | |||
Deferred offering costs | 237 | 288 | |||
Other assets | 591 | 983 | |||
Total assets | 2,593,391 | 853,400 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||
Liabilities: | |||||
Repurchase agreements | 1,784,969 | 545,975 | |||
TALF financing | 151,757 | 80,377 | |||
Derivative liability, at fair value | 46,265 | 3,782 | |||
Dividends and distributions payable | 27,473 | 10,828 | |||
Payable for investment securities purchased | 57,016 | — | |||
Accrued interest payable | 1,601 | 598 | |||
Accounts payable and accrued expenses | 931 | 665 | |||
Due to affiliate | 2,301 | 865 | |||
Total liabilities | 2,036,313 | 643,090 | |||
Invesco Mortgage Capital Inc. Shareholders’ 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, 26,047,682 and 8,887,212 shares issued and outstanding, at September 30, 2010 and December 31, 2009, respectively | 260 | 89 | |||
Additional paid in capital | 514,423 | 172,385 | |||
Accumulated other comprehensive income | 10,511 | 7,721 | |||
Retained earnings | 771 | 320 | |||
Total Invesco Mortgage Capital Inc. shareholders’ equity | 525,965 | 180,515 | |||
Non-controlling interest | 31,113 | 29,795 | |||
Total equity | 557,078 | 210,310 | |||
Total liabilities and shareholders’ equity | 2,593,391 | 853,400 |
Mortgage-Backed Securities
The following table summarizes certain characteristics of the Company’s mortgage-backed securities portfolio as of September 30, 2010:
$ in thousands | Principal Balance | Unamortized Premium (Discount) | Amortized Cost | Unrealized Gain/ (Loss) | Fair Value | Net Weighted Average Coupon (1) | Average Yield (2) | |||||||||||||||||||||
Agency RMBS: | ||||||||||||||||||||||||||||
15 year fixed-rate | 656,387 | 33,487 | 689,874 | 7,648 | 697,522 | 4.88 | % | 3.24 | % | |||||||||||||||||||
30 year fixed-rate | 652,555 | 44,993 | 697,548 | 9,568 | 707,116 | 5.82 | % | 3.87 | % | |||||||||||||||||||
ARM | 8,247 | 180 | 8,427 | (245 | ) | 8,182 | 3.04 | % | 2.23 | % | ||||||||||||||||||
Hybrid ARM | 33,112 | 1,081 | 34,193 | 630 | 34,823 | 4.08 | % | 3.14 | % | |||||||||||||||||||
Total Agency | 1,350,301 | 79,741 | 1,430,042 | 17,601 | 1,447,643 | 5.30 | % | 3.54 | % | |||||||||||||||||||
MBS-CMO | 22,085 | 889 | 22,974 | 540 | 23,514 | 5.89 | % | 4.52 | % | |||||||||||||||||||
Non-Agency MBS | 1,078,638 | (341,410 | ) | 737,228 | 21,984 | 759,212 | 4.68 | % | 6.68 | % | ||||||||||||||||||
CMBS | 211,512 | (2,899 | ) | 208,613 | 18,889 | 227,502 | 5.17 | % | 5.45 | % | ||||||||||||||||||
Total | 2,662,536 | (263,679 | ) | 2,398,857 | 59,014 | 2,457,871 | 5.05 | % | 4.68 | % |
_____________________
(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 September 30, 2010 and December 31, 2009:
$ in thousands | September 30, 2010 | December 31, 2009 | ||||||||||||||||||
Repurchase Agreements | Amount Outstanding | Weighted Average Interest Rate | Amount Outstanding | Weighted Average Interest Rate | ||||||||||||||||
Agency RMBS | 1,296,368 | 0.30 | % | 545,975 | 0.26 | % | ||||||||||||||
Non-Agency RBS | 434,262 | 1.75 | % | — | — | |||||||||||||||
CMBS | 18,339 | 1.29 | % | — | — | |||||||||||||||
Total Repurchase agreements | 1,748,969 | 0.67 | % | 545,975 | 0.26 | % | ||||||||||||||
CMBS under TALF | 151,757 | 3.56 | % | 80,377 | 3.82 | % | ||||||||||||||
Total Borrowings | 1,900,726 | 0.90 | % | 626,352 | 0.72 | % |