[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Invesco Mortgage Capital Inc.'s unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021, with detailed disclosures [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows an increase in total assets to $9.38 billion as of September 30, 2021, from $8.63 billion at year-end 2020, driven by mortgage-backed securities and funded by repurchase agreements and stockholders' equity Condensed Consolidated Balance Sheet Highlights ($ in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$9,379,248** | **$8,632,851** | | Mortgage-backed securities, at fair value | $8,828,002 | $8,172,182 | | Cash and cash equivalents | $189,528 | $148,011 | | **Total Liabilities** | **$7,922,877** | **$7,265,693** | | Repurchase agreements | $7,873,798 | $7,228,699 | | **Total Stockholders' Equity** | **$1,456,371** | **$1,367,158** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q3 2021, net income attributable to common stockholders decreased to $49.3 million ($0.17 per share) from $96.9 million ($0.53 per share) in Q3 2020, while the nine-month period showed a net loss of $59.4 million, a significant improvement from the prior year's $1.83 billion loss Statements of Operations Highlights ($ in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $46,454 | $28,852 | $134,455 | $159,594 | | Total Other Income (Loss) | $18,797 | $85,053 | $(137,758) | $(1,922,793) | | Net Income (Loss) Attributable to Common Stockholders | $49,286 | $96,859 | $(59,436) | $(1,830,385) | | Diluted EPS | $0.17 | $0.53 | $(0.23) | $(10.87) | - Negative interest expense on repurchase agreements in 2021 is due to the amortization of net deferred gains on de-designated interest rate swaps exceeding the current period interest expense[12](index=12&type=chunk) [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Comprehensive income attributable to common stockholders was $43.4 million for Q3 2021, down from $62.2 million in Q3 2020, with the nine-month comprehensive loss improving significantly to $74.0 million from $2.05 billion in the prior-year period Comprehensive Income (Loss) Attributable to Common Stockholders ($ in thousands) | Period | 2021 | 2020 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $43,399 | $62,210 | | Nine Months Ended Sep 30 | $(74,007) | $(2,047,649) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Total stockholders' equity increased from $1.37 billion at year-end 2020 to $1.46 billion as of September 30, 2021, driven by common stock issuances offsetting net losses and dividends, and the redemption of Series A Preferred Stock - The company issued a significant amount of common stock during the first nine months of 2021, raising capital through public offerings and at-the-market sales[17](index=17&type=chunk) - The Series A Preferred Stock was fully redeemed in the second quarter of 2021[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2021, net cash from operating activities was $110.5 million, investing activities used $797.6 million, and financing activities provided $780.8 million, primarily from common stock issuances and repurchase agreements Net Cash Flow Summary for Nine Months Ended Sep 30 ($ in thousands) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net Cash from Operating Activities | $110,455 | $143,712 | | Net Cash from Investing Activities | $(797,630) | $13,656,206 | | Net Cash from Financing Activities | $780,840 | $(13,664,322) | | **Net Change in Cash** | **$93,665** | **$135,596** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the company's accounting policies and financial activities, covering investments, financing, and equity [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operating results, covering market conditions, investment strategies, capital, and non-GAAP measures [Executive Summary](index=33&type=section&id=Executive%20Summary) The company is a Maryland corporation focused on investing in, financing, and managing mortgage-backed securities and other mortgage-related assets, aiming for attractive risk-adjusted returns as an externally managed REIT - The company's current investment focus includes Agency RMBS, non-Agency CMBS and RMBS, TBAs, commercial mortgage loans, and other real estate-related financing[141](index=141&type=chunk) [Market Conditions](index=33&type=section&id=Market%20Conditions) In Q3 2021, financial conditions remained accommodative with stable interest rates and elevated inflation, while Agency RMBS performance was mixed due to anticipated Federal Reserve tapering - The yield curve was largely unchanged in Q3 2021, with the **10-year Treasury yield at 1.49%**, and the Consumer Price Index (CPI) remained elevated at **5.4%**[146](index=146&type=chunk) - Agency RMBS performance was mixed, with lower coupons suffering from the increased likelihood of the Federal Reserve tapering its purchase activity, which is expected to begin in **Q4 2021**[151](index=151&type=chunk) - The company is monitoring the transition from LIBOR to SOFR, noting that its Series B and C Preferred Stock have LIBOR-based rates and existing fallback language will not be amended[156](index=156&type=chunk)[153](index=153&type=chunk) [Investment Activities](index=35&type=section&id=Investment%20Activities) The company's investment portfolio grew to $10.4 billion (including TBAs) as of September 30, 2021, primarily concentrated in 30-year fixed-rate Agency RMBS, with active management involving significant sales and purchases to rotate into higher-yielding securities Total Investment Portfolio, including TBAs ($ in thousands) | Date | Amount | | :--- | :--- | | September 30, 2021 | $10,415,665 | | December 31, 2020 | $9,983,899 | | September 30, 2020 | $6,955,522 | - In the first nine months of 2021, the company sold **$11.8 billion** and purchased **$13.4 billion** of Agency RMBS, primarily to rotate into higher-yielding securities[160](index=160&type=chunk) - The company's Agency RMBS purchases have focused on specified pools with prepayment protection characteristics, such as lower loan balances and higher LTV ratios[162](index=162&type=chunk) [Financing and Other Liabilities](index=37&type=section&id=Financing%20and%20Other%20Liabilities) The company primarily finances assets through short-term repurchase agreements, with collateralized borrowings totaling $7.87 billion as of September 30, 2021, having fully repaid FHLBI secured loans in 2020 Collateralized Borrowings under Repurchase Agreements ($ in thousands) | Quarter Ended | Quarter-end balance | | :--- | :--- | | September 30, 2021 | $7,873,798 | | June 30, 2021 | $7,851,204 | | March 31, 2021 | $8,240,887 | | December 31, 2020 | $7,228,699 | [Capital Activities](index=38&type=section&id=Capital%20Activities) During 2021, the company raised significant capital through two public common stock offerings, generating $103.1 million and $145.9 million in net proceeds, and redeemed all outstanding Series A Preferred Stock for $140.0 million - Completed a public offering of **27.6 million** common shares in February 2021 for net proceeds of **$103.1 million**[177](index=177&type=chunk) - Completed a public offering of **43.1 million** common shares in June 2021 for net proceeds of **$145.9 million**[177](index=177&type=chunk) - Redeemed all outstanding Series A Preferred Stock for **$140.0 million** on June 16, 2021[178](index=178&type=chunk) [Book Value per Common Share](index=38&type=section&id=Book%20Value%20per%20Common%20Share) The company's book value per common share decreased by 15.8% to $3.25 as of September 30, 2021, from $3.86 at year-end 2020, primarily due to Agency RMBS underperforming interest rate swap hedges amid interest rate volatility and Federal Reserve tapering expectations Book Value per Common Share | Date | Book Value per Common Share | | :--- | :--- | | September 30, 2021 | $3.25 | | December 31, 2020 | $3.86 | [Results of Operations](index=40&type=section&id=Results%20of%20Operations) This section details the company's operational results for Q3 and nine months ended September 30, 2021, analyzing key performance drivers [Non-GAAP Financial Measures](index=48&type=section&id=Non-GAAP%20Financial%20Measures) Management uses non-GAAP financial measures like Earnings Available for Distribution to analyze operating results and portfolio earnings capacity - The company uses non-GAAP measures such as earnings available for distribution, effective interest income/expense, and economic debt-to-equity ratio to assess performance[236](index=236&type=chunk) - The non-GAAP measure 'core earnings' was renamed to 'earnings available for distribution' starting in **Q2 2021** to better clarify its purpose, with no change in calculation methodology[236](index=236&type=chunk) [Liquidity and Capital Resources](index=56&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity sources include equity offerings, operations, and repurchase agreements, holding $486.2 million in cash and restricted cash as of September 30, 2021, and has adapted its financing strategy following 2020 market disruptions - As of **September 30, 2021**, the company held cash, cash equivalents, and restricted cash of **$486.2 million**[274](index=274&type=chunk) - The company experienced significant margin calls in **2020** due to COVID-19 market disruptions, leading to a strategy of avoiding repurchase agreement financing for less liquid assets[273](index=273&type=chunk) - As of **September 30, 2021**, the company had approximately **$598.1 million** of unencumbered investments and **$189.5 million** of unrestricted cash[284](index=284&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, primarily interest rate, prepayment, and market value risks, outlining management strategies including derivatives and providing a yield curve sensitivity analysis Interest Rate Sensitivity Analysis (as of Sep 30, 2021) | Change in Interest Rates | Percentage Change in Projected Net Interest Income | Percentage Change in Projected Portfolio Value | | :--- | :--- | :--- | | +1.00% | (1.53)% | 1.74% | | +0.50% | 1.21% | (0.59)% | | -0.50% | (10.60)% | (0.57)% | | -1.00% | (27.82)% | (2.59)% | - The primary components of market risk are identified as interest rate, principal prepayment, and market value risk[299](index=299&type=chunk) - The company uses hedging instruments, primarily interest rate swaps, to manage interest rate risk associated with its short-term repurchase agreement financing[301](index=301&type=chunk)[323](index=323&type=chunk) [Item 4. Controls and Procedures](index=64&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of **September 30, 2021**[325](index=325&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter ended **September 30, 2021**[327](index=327&type=chunk) [PART II OTHER INFORMATION](index=65&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=65&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it was not involved in any material legal proceedings arising in the ordinary course of business as of September 30, 2021 - As of **September 30, 2021**, the company was not involved in any material legal proceedings[330](index=330&type=chunk) [Item 1A. Risk Factors](index=65&type=section&id=Item%201A.%20Risk%20Factors) The company states that there were no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to risk factors were reported for the period[331](index=331&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports that it did not repurchase any shares of its common stock during the three months ended September 30, 2021 - No shares of common stock were repurchased during **Q3 2021**[332](index=332&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section provides an index of the exhibits filed with the Form 10-Q, including corporate governance documents and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act - The report includes certifications from the CEO and CFO pursuant to Sections **302** and **906** of the Sarbanes-Oxley Act of **2002**[342](index=342&type=chunk)

Financial Data and Key Metrics Changes - Earnings available for distribution for Q2 2021 were reported at $0.10 per share, with a change in terminology from core earnings to align with industry conventions [8] - Book value decreased by 12% to $3.21 during the quarter, reflecting underperformance in agency mortgages [10] Business Line Data and Key Metrics Changes - The portfolio remains predominantly agency-focused, with 92% of equity and 99% of assets allocated to agency mortgages [10] - The weighted average yield on agency RMBS holdings improved by 16 basis points to 2.04% as of quarter-end, while prepayments remained low at 6.4 CPR for the quarter [22] Market Data and Key Metrics Changes - Agency mortgages underperformed sharply during the quarter due to elevated net supply and reduced demand from commercial banks, with net supply totaling $290 billion, double the annual average from 2010 to 2019 [17] - The implied financing rates for dollar roll transactions improved during the quarter, increasing the attractiveness of the dollar roll market for investors in lower coupons [19] Company Strategy and Development Direction - The company is focused on rebalancing its capital structure, having redeemed all 140 million of its Series A Preferred Stock and raised an additional $145.9 million of common equity [9] - The strategy includes reducing exposure to agency RMBS through asset sales and prepayments, while maintaining a focus on lower coupon specified pools [20] Management's Comments on Operating Environment and Future Outlook - Management noted that many headwinds faced in Q2 remain intact, including elevated prepayment speeds and inflation uncertainty affecting the Fed's tapering plans [11] - The company expects that the recent widening of spreads and favorable funding environment will support the earnings power of the portfolio in the coming quarters [11] Other Important Information - The liquidity position remains strong, with $651 million of unrestricted cash and unencumbered investments at quarter-end [10] - The economic leverage, including TBA exposure, ticked modestly higher to 6.8 times debt to equity, reflecting a conservative positioning given rich valuations [25] Q&A Session Summary Question: Thoughts on spread widening ahead of a Fed taper - Management indicated that about 25 basis points of widening has occurred, with an expectation of an additional 10 to 15 basis points of widening over the next couple of quarters [31] Question: Update on book value trends - Book value has trended down roughly 2% quarter-to-date [33] Question: Outlook for prepayment speeds with falling rates - Prepayment speeds are expected to remain elevated, particularly for 2.5% coupons and higher, while the company anticipates low prepayment levels for its 2% pools [36][37] Question: Performance of MBS if tenure rates continue to move lower - Mortgages are expected to underperform in a flattening yield curve environment, but could perform well if rates back up due to banks having cash to deploy [38] Question: Impact of FHFA changes on portfolio positioning - New FHFA changes are expected to be more borrower-friendly, leading to elevated prepayments for higher coupons, which the company has avoided [41]

Invesco Mortgage Capital Inc. Second Quarter 2021 Earnings Call August 5, 2021 John Anzalone Chief Executive Officer Lee Phegley Chief Financial Officer Kevin Collins President David Lyle Chief Operating Officer Brian Norris Chief Investment Officer Cautionary Notice Regarding Forward-Looking Statements This press release, the related presentation and comments made in the associated conference call, may include statements and information that constitute "forward-looking statements" within the meaning of the ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________________________________ FORM 10-Q _______________________________________________ (Mark One) 1555 Peachtree Street, N.E., Suite 1800, Atlanta, Georgia 30309 (Address of Principal Executive Of ices) (Zip Code) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) ...

Invesco Mortgage Capital Inc. First Quarter 2021 Earnings Call May 6, 2021 John Anzalone Chief Executive Officer Lee Phegley Chief Financial Officer Kevin Collins President David Lyle Chief Operating Officer Brian Norris Chief Investment Officer Cautionary Notice Regarding Forward-Looking Statements This presentation 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 as defined ...

Invesco Mortgage Capital Inc. (NYSE:IVR) Q1 2021 Earnings Conference Call May 6, 2021 9:00 AM ET Company Participants Jack Bateman - IR John Anzalone - CEO Brian Norris - CIO Conference Call Participants Mikhail Goberman - JMP Securities Jason George - Jay Gee Investments Operator Welcome to the Invesco Mortgage Capital Inc's First Quarter 2021 Investor Conference Call. All participants will be in a listen-only mode until the question-and-answer session. [Operator Instructions] As a reminder, this call is b ...

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Invesco Mortgage Capital Inc.'s unaudited condensed consolidated financial statements for Q1 2021 and Q1 2020, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $9.76 billion as of March 31, 2021, driven by mortgage-backed securities, while total liabilities and stockholders' equity also rose Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$9,762,836** | **$8,632,851** | | Mortgage-backed securities, at fair value | $9,099,742 | $8,172,182 | | **Total Liabilities** | **$8,280,904** | **$7,265,693** | | Repurchase agreements | $8,240,887 | $7,228,699 | | **Total Stockholders' Equity** | **$1,481,932** | **$1,367,158** | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss of $9.3 million for Q1 2021, a significant improvement from a $1.6 billion loss in Q1 2020, despite decreased net interest income Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total interest income | $40,010 | $186,699 | | Total interest expense | $(1,660) | $85,688 | | **Net interest income** | **$41,670** | **$101,011** | | Total other income (loss) | $(44,068) | $(1,703,147) | | **Net income (loss)** | **$(9,275)** | **$(1,616,192)** | | Net income (loss) per share (Basic & Diluted) | $(0.09) | $(10.38) | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities was $34.5 million, while investing activities used $986.3 million, and financing activities provided $1.14 billion, leading to an overall cash increase of $186.5 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $34,505 | $110,038 | | Net cash provided by (used in) investing activities | $(986,251) | $11,553,491 | | Net cash provided by (used in) financing activities | $1,138,197 | $(11,588,052) | | **Net change in cash, cash equivalents and restricted cash** | **$186,451** | **$75,477** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail accounting policies, the $9.1 billion Agency RMBS-dominated portfolio, $8.2 billion in repurchase agreements, derivative hedging, and significant capital raising activities - The company is a REIT primarily focused on investing in, financing, and managing mortgage-backed securities (MBS) and other mortgage-related assets, externally managed by Invesco Advisers, Inc[20](index=20&type=chunk) - The MBS portfolio totaled **$9.1 billion** at fair value as of March 31, 2021, a significant increase from **$8.17 billion** at year-end 2020, with Agency RMBS constituting **$9.0 billion** of the total[30](index=30&type=chunk) - Borrowings outstanding under repurchase agreements increased to **$8.24 billion** as of March 31, 2021, from **$7.23 billion** at the end of 2020, with a weighted average interest rate of **0.15%**[55](index=55&type=chunk) - In Q1 2021, the company completed a public offering of **27.6 million shares** of common stock for net proceeds of approximately **$103.1 million** and sold an additional **15.55 million shares** under its equity distribution agreement for net proceeds of **$57.8 million**[113](index=113&type=chunk)[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the significant improvement in Q1 2021 financial results, portfolio repositioning, a 5.4% decrease in book value per share, non-GAAP core earnings of $0.11 per share, and sufficient liquidity [Market Conditions and Investment Activities](index=31&type=section&id=Market%20Conditions%20and%20Investment%20Activities) Q1 2021 saw a steepening yield curve, prompting the company to sell $5.5 billion of lower-yielding Agency RMBS and purchase $7.0 billion of higher-yielding Agency RMBS, growing the total investment portfolio to $10.7 billion - The yield curve steepened dramatically in Q1 2021, with the 10-year Treasury yield rising **83 basis points** to **1.74%**, driven by inflation fears and economic stimulus[138](index=138&type=chunk) - The company sold **$5.5 billion** of lower-yielding Agency RMBS and purchased **$7.0 billion** of higher-yielding Agency RMBS to capitalize on the sharp increase in interest rates[153](index=153&type=chunk) Investment Portfolio Composition (in thousands) | Asset Class | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Agency RMBS | $8,997,918 | $8,050,866 | | Non-Agency CMBS | $91,250 | $109,583 | | Non-Agency RMBS | $10,574 | $11,733 | | Commercial loan | $20,000 | $23,098 | | TBAs (implied cost) | $1,548,066 | $1,772,211 | | **Total Investment Portfolio** | **$10,683,574** | **$9,983,899** | [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Net loss attributable to common stockholders improved significantly to $20.4 million in Q1 2021, primarily due to a $287.0 million gain on derivatives and a smaller loss on investments, despite reduced net interest income - Net interest income decreased to **$41.7 million** in Q1 2021 from **$101.0 million** in Q1 2020, primarily due to a smaller average portfolio of earning assets[199](index=199&type=chunk) - A net loss on investments of **$331.9 million** was recorded, mainly from unrealized losses on MBS due to wider interest rate spreads and rising mortgage rates[202](index=202&type=chunk)[205](index=205&type=chunk) - A net gain on derivative instruments of **$287.0 million** was recorded, driven by a **$327.5 million** realized gain on interest rate swaps as interest rates rose[169](index=169&type=chunk)[210](index=210&type=chunk) - Management fees decreased to **$4.9 million** from **$11.0 million** year-over-year due to a lower average equity base for the fee calculation[219](index=219&type=chunk) [Non-GAAP Financial Measures](index=45&type=section&id=Non-GAAP%20Financial%20Measures) The company reported non-GAAP core earnings of $25.2 million, or $0.11 per share, for Q1 2021, with an economic debt-to-equity ratio of 6.6x and an effective interest rate margin of 1.32% Core Earnings Reconciliation (in thousands, except per share) | Metric | Q1 2021 | | :--- | :--- | | Net loss attributable to common stockholders | $(20,382) | | Adjustments (net) | $45,540 | | **Core earnings attributable to common stockholders** | **$25,158** | | **Core earnings per share** | **$0.11** | Leverage Ratios | Ratio | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Debt-to-equity ratio (GAAP) | 5.6x | 5.3x | | Economic debt-to-equity ratio (Non-GAAP) | 6.6x | 6.6x | [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with $579.0 million in cash, cash equivalents, and restricted cash, supported by $1.1 billion from financing activities, and actively manages margin call risk - Held cash, cash equivalents, and restricted cash of **$579.0 million** at March 31, 2021[257](index=257&type=chunk) - Financing activities provided **$1.1 billion** in cash, including **$1.0 billion** net from repurchase agreements and **$161.4 million** from common stock issuances[260](index=260&type=chunk) - The average haircut under repurchase agreements for Agency RMBS was **4.9%** as of March 31, 2021[261](index=261&type=chunk) - As of March 31, 2021, the company had approximately **$494.5 million** of unencumbered investments and **$198.4 million** of unrestricted cash[267](index=267&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages primary market risks—interest rate, prepayment, and market value—through hedging and asset selection, with a 100 basis point rate increase projected to decrease portfolio value by 3.00% and net interest income by 2.31% Interest Rate Sensitivity Analysis (as of March 31, 2021) | Change in Interest Rates | Percentage Change in Projected Net Interest Income | Percentage Change in Projected Portfolio Value | | :--- | :--- | :--- | | +1.00% | (2.31)% | (3.00)% | | +0.50% | 0.21% | (1.35)% | | -0.50% | (8.72)% | 0.44% | | -1.00% | (23.89)% | (0.36)% | - The company's primary market risks include interest rate risk, spread risk, prepayment risk, extension risk, and credit risk[283](index=283&type=chunk)[291](index=291&type=chunk)[304](index=304&type=chunk) - Risk management strategies include using derivatives (primarily interest rate swaps), structuring financing agreements with varied maturities, and actively managing the interest rate sensitivity of assets and liabilities[307](index=307&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[309](index=309&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[311](index=311&type=chunk) [PART II OTHER INFORMATION](index=60&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2021, the company was not involved in any material legal proceedings - As of March 31, 2021, the company was not involved in any material legal proceedings arising in the ordinary course of business[314](index=314&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2020, were reported for the period[315](index=315&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=60&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any shares of its common stock during the three months ended March 31, 2021 - The company did not repurchase any of its common stock during the three months ended March 31, 2021[316](index=316&type=chunk)

Invesco Mortgage Capital Inc. (NYSE:IVR) Q4 2020 Earnings Conference Call February 23, 2021 9:00 AM ET Company Participants Jack Bateman - Investor Relations John Anzalone - Chief Executive Officer Brian Norris - Chief Investment Officer Conference Call Participants Doug Harter - Credit Suisse Trevor Cranston - JMP Securities Operator Welcome to Invesco Mortgage Capital Inc's Fourth Quarter 2020 Investor Conference Call. All participants will be a in a listen-only mode until the question-and-answer session. ...

AUM and Flows - Record AUM at year-end of $1,349.9 billion compared to $1,218.2 billion at the end of Q3[8] - Average AUM of $1,278.2 billion compared to $1,206.2 billion in Q3[8] - Record gross long-term inflows of $91.6 billion compared to $71.9 billion in Q3[8] - Long-term net inflows of $9.8 billion, versus long-term net inflows of $7.8 billion in Q3[8] - Total ETF net inflows of $6.1 billion, including $4.7 billion in long-term ETF net inflows[8] Investment Performance - 55%, 58%, 61% and 70% of actively managed assets in top half of peer group on a 1-, 3-, 5-, and 10-year basis[8] Financial Results - Net revenues up 12.4% to $1,228.4 million from $1,092.5 million in Q3[8] - Adjusted operating income of $485.4 million compared to $406.7 million in Q3[8] - Adjusted operating margin increased to 39.5% in the quarter from 37.2% in Q3[8] - Adjusted diluted EPS increased to $0.72 versus $0.53 in Q3[8] Strategic Evaluation - Net savings of $200 million expected by the end of 2022, with $150 million (75%) of these savings to be achieved by the end of 2021[34]

Part I [Business](index=5&type=section&id=Item%201.%20Business) Invesco Mortgage Capital Inc. is a mortgage REIT externally managed by Invesco Advisers, Inc., focused on providing risk-adjusted returns through investments in mortgage-backed securities and other mortgage-related assets. - The company is a mortgage REIT focused on providing returns to stockholders primarily through dividends by investing in mortgage-related assets[17](index=17&type=chunk) - Due to unprecedented market conditions from the COVID-19 pandemic in the first half of 2020, the company sold a substantial portion of its MBS and GSE CRT portfolio to generate liquidity and reduce leverage[19](index=19&type=chunk) - Following the portfolio restructuring, the company has largely completed its reallocation, with approximately **98% of its investment portfolio** (excluding TBAs) invested in Agency RMBS by year-end 2020[19](index=19&type=chunk) - The company is externally managed by Invesco Advisers, Inc., an indirect wholly-owned subsidiary of Invesco Ltd., and has no employees of its own[17](index=17&type=chunk)[20](index=20&type=chunk) Target Asset Classes | Asset Class | Description | | :--- | :--- | | **Agency RMBS** | Residential MBS guaranteed by Ginnie Mae, Fannie Mae, or Freddie Mac | | **Agency CMBS** | Commercial MBS guaranteed by a U.S. government agency or federally chartered corporation | | **Non-Agency RMBS/CMBS** | Residential or Commercial MBS not guaranteed by a U.S. government agency | | **GSE CRT** | Unsecured credit risk transfer securities issued by government-sponsored enterprises | | **TBAs** | To-be-announced forward contracts to purchase Agency RMBS | | **Mortgage Loans** | Residential and commercial mortgage loans | [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces a multitude of risks, including market volatility, liquidity challenges, and margin calls, exacerbated by the COVID-19 pandemic, alongside investment, financing, hedging, and external management structure risks. - The COVID-19 pandemic has adversely affected the U.S. economy and the mortgage REIT industry, causing severe volatility, forced asset sales, and higher-than-historical levels of margin calls[74](index=74&type=chunk)[75](index=75&type=chunk) - The company's reliance on short-term repurchase agreements for financing creates significant risk, as market volatility can lead to margin calls, forcing asset sales at depressed prices to maintain liquidity[81](index=81&type=chunk)[82](index=82&type=chunk) - The planned discontinuation of LIBOR after 2021 presents a significant risk, as many of the company's investments, financing agreements, and preferred stock dividends are indexed to LIBOR, potentially affecting asset values, interest income/expense, and hedging effectiveness[115](index=115&type=chunk)[116](index=116&type=chunk) - The company's external management structure creates potential conflicts of interest, as the Manager and its affiliates manage other funds and accounts that may compete for the same investment opportunities[176](index=176&type=chunk)[177](index=177&type=chunk) - Failure to maintain qualification as a REIT would subject the company to corporate income tax, significantly reducing cash available for distribution to stockholders, requiring ongoing compliance with complex asset, income, and distribution tests[199](index=199&type=chunk)[201](index=201&type=chunk) [Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission. - As of the report date, there are no unresolved staff comments[247](index=247&type=chunk) [Properties](index=39&type=section&id=Item%202.%20Properties) The company's principal executive office is located in Atlanta, Georgia, with office space and services provided by the Manager as part of the management agreement. - The company's principal executive office is located at 1555 Peachtree Street, NE, Suite 1800, Atlanta, Georgia 30309[248](index=248&type=chunk) - Office space is provided by the Manager under the management agreement[248](index=248&type=chunk) [Legal Proceedings](index=39&type=section&id=Item%203.%20Legal%20Proceedings) As of December 31, 2020, the company was not involved in any material legal proceedings arising outside the ordinary course of business. - The company was not involved in any material legal proceedings as of December 31, 2020[249](index=249&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the NYSE under the symbol "IVR", and a performance graph shows a significant decline in its cumulative total return in 2020 compared to relevant indices. - The company's common stock is traded on the New York Stock Exchange (NYSE) under the symbol "IVR"[252](index=252&type=chunk) 5-Year Cumulative Total Return Comparison | Index | 12/31/2015 | 12/31/2019 | 12/31/2020 | | :--- | :--- | :--- | :--- | | **Invesco Mortgage Capital Inc.** | $100.00 | $207.29 | $50.57 | | **S&P 500** | $100.00 | $171.49 | $203.04 | | **FTSE NAREIT Mortgage REITs** | $100.00 | $174.05 | $141.38 | - As of December 31, 2020, **18,163,982 common shares** were available for repurchase under the company's share repurchase program, with no shares repurchased in the quarter ended December 31, 2020[258](index=258&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2020, the company's financial condition and operations were severely impacted by the COVID-19 pandemic, leading to a net loss of **$1.7 billion** and a significant drop in book value per share, as the portfolio was repositioned to be **98% invested in Agency RMBS**. - In response to the COVID-19 pandemic and resulting margin calls in March 2020, the company sold a substantial portion of its portfolio to generate liquidity and reduce leverage[265](index=265&type=chunk) - The company resumed investing in July 2020, reallocating its portfolio to be approximately **98% invested in Agency RMBS** by year-end[266](index=266&type=chunk) Key Financial Results (Years Ended Dec 31) | Metric ($ in thousands, except per share) | 2020 | 2019 | | :--- | :--- | :--- | | Net Interest Income | $197,904 | $306,047 | | Gain (Loss) on Investments, net | ($961,938) | $624,466 | | Gain (Loss) on Derivative Instruments, net | ($851,050) | ($534,755) | | **Net (Loss) Income Attributable to Common Stockholders** | **($1,718,778)** | **$319,675** | | **(Loss) Earnings Per Share (Diluted)** | **($9.89)** | **$2.42** | Book Value Per Common Share | Date | Book Value Per Share | | :--- | :--- | | Dec 31, 2019 | $16.29 | | Dec 31, 2020 | $3.86 | - The company's economic debt-to-equity ratio, a non-GAAP measure that includes off-balance sheet TBA financing, was **6.6x** as of December 31, 2020[407](index=407&type=chunk)[410](index=410&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=69&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risks include interest rate, prepayment, spread, and market value risks, which are managed through asset selection, liability management, and derivatives, though the COVID-19 pandemic has heightened these risks. - The company's main market risks include interest rate, principal prepayment, market value, spread, real estate, and credit risk[447](index=447&type=chunk)[455](index=455&type=chunk)[457](index=457&type=chunk)[461](index=461&type=chunk)[467](index=467&type=chunk)[468](index=468&type=chunk) - The company uses derivative contracts, primarily interest rate swaps, to mitigate interest rate risk associated with its short-term repurchase agreement financing[449](index=449&type=chunk) Interest Rate Sensitivity Analysis (as of Dec 31, 2020) | Change in Interest Rates | Percentage Change in Projected Net Interest Income | Percentage Change in Projected Portfolio Value | | :--- | :--- | :--- | | +1.00% | 29.73% | (1.91)% | | +0.50% | 20.76% | (0.61)% | | -0.50% | (23.01)% | (0.73)% | | -1.00% | (46.95)% | (1.59)% | - The COVID-19 pandemic has exacerbated market risks, causing significant credit spread widening and making it more difficult to predict prepayment levels[456](index=456&type=chunk)[458](index=458&type=chunk) [Financial Statements and Supplementary Data](index=72&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section indicates that the company's audited consolidated financial statements and supplementary data are included under Item 15 of the report. - The financial statements and supplementary data are included under Item 15 of this Form 10-K[472](index=472&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=72&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure. - There were no disagreements with accountants on accounting and financial disclosure[473](index=473&type=chunk) [Controls and Procedures](index=72&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020, a conclusion affirmed by the independent auditor. - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[474](index=474&type=chunk) - Management assessed internal control over financial reporting using the COSO framework and concluded it was effective as of December 31, 2020[477](index=477&type=chunk) - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting[478](index=478&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=74&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item concerning directors, executive officers, and corporate governance will be provided in the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders and is incorporated by reference into this report. - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's forthcoming proxy statement[483](index=483&type=chunk) [Executive Compensation](index=74&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item concerning executive compensation will be provided in the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders and is incorporated by reference into this report. - Information regarding executive compensation is incorporated by reference from the company's forthcoming proxy statement[485](index=485&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=74&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item concerning security ownership will be provided in the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders and is incorporated by reference into this report. - Information regarding security ownership is incorporated by reference from the company's forthcoming proxy statement[486](index=486&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=74&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item concerning certain relationships, related transactions, and director independence will be provided in the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders and is incorporated by reference into this report. - Information regarding related party transactions and director independence is incorporated by reference from the company's forthcoming proxy statement[487](index=487&type=chunk) [Principal Accounting Fees and Services](index=74&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information required by this item concerning principal accounting fees and services will be provided in the company's definitive proxy statement for the 2021 Annual Meeting of Stockholders and is incorporated by reference into this report. - Information regarding principal accounting fees and services is incorporated by reference from the company's forthcoming proxy statement[488](index=488&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=74&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report. - This item lists all exhibits and financial statement schedules filed with the report, with financial statements located on pages **78-114**[490](index=490&type=chunk)