Invesco Mortgage Capital (IVR) - 2025 Q1 - Quarterly Results

Press Release and CEO Update CEO John Anzalone discusses Q1 2025 economic performance, portfolio status, and market outlook CEO Update CEO John Anzalone discusses Q1 2025 economic performance, portfolio growth, and the impact of market volatility on book value - The economic return for Q1 2025 was 2.6%, comprising a $0.34 dividend per common share and a $0.11 decline in book value per common share[3] - The debt-to-equity ratio increased to 7.1x as of March 31, 2025, up from 6.7x at the end of the prior quarter[4] - The investment portfolio totaled $5.9 billion, primarily composed of $5.0 billion in Agency RMBS and $0.9 billion in Agency CMBS, with $372 million in unrestricted cash and unencumbered investments[4] - Book value per common share is estimated to have declined to a range of $7.74 to $8.06 as of April 30, 2025, due to increased interest rate volatility and deteriorating risk sentiment[5] Financial and Operational Highlights The company's Q1 2025 financial performance shows improved net income and EAD, alongside shifts in key balance sheet and interest rate metrics Key Performance Indicators Q1 2025 key performance indicators reflect improved net income and EAD, with changes in dividend, book value, and leverage Q1 2025 vs. Q4 2024 Key Metrics | Metric | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net income (loss) per common share | $0.26 | ($0.09) | | Earnings available for distribution per common share | $0.64 | $0.53 | | Common stock dividend per common share | $0.34 | $0.40 | | Book value per common share | $8.81 | $8.92 | | Economic return | 2.6% | (0.5)% | Detailed Financial Metrics Q1 2025 vs Q4 2024 | ($ in millions, except per share/ratio) | Q1 2025 | Q4 2024 | Variance | | :--- | :--- | :--- | :--- | | U.S. GAAP Measures | | | | | Net interest income | $18.8 | $13.7 | $5.1 | | Net income (loss) attributable to common stockholders | $16.3 | ($5.5) | $21.8 | | Average net interest rate margin | 0.99 % | 0.47 % | 0.52 % | | Book value per common share | $8.81 | $8.92 | ($0.11) | | Debt-to-equity ratio | 7.1 x | 6.7 x | 0.4 x | | Non-GAAP Measures | | | | | Earnings available for distribution | $40.0 | $32.3 | $7.7 | | Effective net interest income | $46.9 | $46.0 | $0.9 | | Effective interest rate margin | 3.27 % | 3.13 % | 0.14 % | Portfolio and Hedging Details This section details the company's MBS portfolio composition, borrowing strategies, and various hedging instruments used to manage interest rate risk MBS Portfolio The MBS portfolio grew in Q1 2025, maintaining concentration in Agency securities with shifts towards higher coupon RMBS MBS Portfolio Composition ($ in thousands) | Category | Fair Value (Mar 31, 2025) | % of Portfolio | Fair Value (Dec 31, 2024) | % of Portfolio | | :--- | :--- | :--- | :--- | :--- | | Total 30 year fixed-rate pass through | $4,974,663 | 83.7% | $4,541,525 | 83.4% | | Agency-CMO | $73,539 | 1.2% | $70,776 | 1.3% | | Agency CMBS | $890,372 | 15.0% | $816,147 | 15.0% | | Non-Agency CMBS | — | —% | $9,836 | 0.2% | | Non-Agency RMBS | $7,215 | 0.1% | $7,224 | 0.1% | | Total MBS portfolio | $5,945,789 | 100.0% | $5,445,508 | 100.0% | Borrowings Total borrowings increased in Q1 2025, with a decreased weighted average interest rate and shorter maturity Borrowings Summary ($ in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Amount Outstanding | $5,354,561 | $4,893,958 | | Weighted Average Interest Rate | 4.47% | 4.80% | | Weighted Average Remaining Maturity (days) | 25 | 29 | TBA Derivatives The company's net TBA derivative contracts showed a reduced net carrying value liability in Q1 2025 with offsetting notional amounts Net TBA Derivatives Summary ($ in thousands) | Metric | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Net Notional Amount | $— | $— | | Net Implied Cost Basis | $219 | $606 | | Net Carrying Value - Liability | ($219) | ($606) | Interest Rate Swaps The company increased its use of interest rate swaps for hedging, extending maturity and locking in higher fixed pay rates Interest Rate Swaps Summary ($ in thousands) | Metric | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Total Notional Amount | $3,640,000 | $3,265,000 | | Weighted Average Fixed Pay Rate | 1.29% | 0.97% | | Weighted Average Floating Receive Rate | 4.41% | 4.49% | | Weighted Average Years to Maturity | 6.4 | 5.3 | Futures Contracts The company significantly reduced its short position in U.S. Treasury futures during Q1 2025, primarily in Ultra 10-year contracts U.S. Treasury Futures Notional Amount - Short ($ in thousands) | Futures Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | 10 year U.S. Treasury | $400,000 | $136,000 | | Ultra 10 year U.S. Treasury | $315,000 | $1,057,000 | | 30 year U.S. Treasury | $187,500 | $209,000 | | Total | $902,500 | $1,402,000 | Capital Activities The company's capital activities for Q1 2025 include common stock dividends, preferred stock dividends, and share issuances and repurchases Dividends The company declared common stock and Series C Preferred Stock dividends for Q1 2025 - Declared a common stock dividend of $0.34 per share for Q1 2025[22] - Declared a Series C Preferred Stock dividend of $0.46875 per share, payable in June 2025[22] Stock Issuances and Repurchases The company issued common stock through its at-the-market program and repurchased Series C Preferred Stock in Q1 2025 - Sold 4,212,057 shares of common stock for net proceeds of $36.0 million through its at-the-market program[23] - Repurchased and retired 90,146 shares of Series C Preferred Stock for a total cost of $2.2 million[24] Portfolio and Liquidity Update This section provides an update on the company's investment portfolio and liquidity position as of April 30, 2025 April 30, 2025 Update As of April 30, 2025, the company's investment portfolio decreased, with a lower estimated debt-to-equity ratio and maintained liquidity Portfolio and Liquidity Snapshot as of April 30, 2025 | Metric | Value | | :--- | :--- | | Total investment portfolio | $5.1 billion | | Portfolio Composition | 82% Agency RMBS, 18% Agency CMBS | | Unrestricted cash and unencumbered investments | ~$336 million | | Estimated debt-to-equity ratio | 6.4x | Financial Statements This section presents the company's condensed consolidated financial statements, including statements of operations, comprehensive income, and balance sheets Condensed Consolidated Statements of Operations Q1 2025 net income attributable to common stockholders showed a significant recovery from the prior quarter's loss Condensed Consolidated Statements of Operations ($ in thousands) | | Three Months Ended Mar 31, 2025 | Three Months Ended Dec 31, 2024 | | :--- | :--- | :--- | | Net interest income | 18,821 | 13,679 | | Total other income (loss) | 5,479 | (5,392) | | Total expenses | 4,659 | 4,781 | | Net income (loss) | 19,641 | 3,506 | | Net income (loss) attributable to common stockholders | 16,289 | (5,472) | | Basic earnings (loss) per share | $0.26 | ($0.09) | Condensed Consolidated Statements of Comprehensive Income (Loss) Comprehensive income attributable to common stockholders for Q1 2025 was positive, reversing the prior quarter's loss Condensed Consolidated Statements of Comprehensive Income (Loss) ($ in thousands) | | Three Months Ended Mar 31, 2025 | Three Months Ended Dec 31, 2024 | | :--- | :--- | :--- | | Net income (loss) | 19,641 | 3,506 | | Total other comprehensive income (loss) | 616 | (188) | | Comprehensive income (loss) | 20,257 | 3,318 | | Comprehensive income (loss) attributable to common stockholders | 16,905 | (5,660) | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets and liabilities increased, with a rise in stockholders' equity Condensed Consolidated Balance Sheets ($ in thousands) | | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Mortgage-backed securities, at fair value | 5,945,789 | 5,445,508 | | Cash and cash equivalents | 42,894 | 73,403 | | Total assets | 6,158,764 | 5,688,034 | | LIABILITIES AND EQUITY | | | | Repurchase agreements | 5,354,561 | 4,893,958 | | Total liabilities | 5,399,598 | 4,957,305 | | Total stockholders' equity | 759,166 | 730,729 | | Total liabilities and stockholders' equity | 6,158,764 | 5,688,034 | Non-GAAP Financial Measures The company presents non-GAAP measures such as Earnings Available for Distribution, effective interest metrics, and economic debt-to-equity ratio to provide additional insights into performance Earnings Available for Distribution (EAD) EAD, a non-GAAP measure, increased in Q1 2025, reflecting the portfolio's income-generating ability for dividends - EAD is calculated by adjusting GAAP net income for items such as net gains/losses on investments and derivatives, and TBA dollar roll income, to provide a consistent measure of operating performance[40][41] Reconciliation of Net Income to EAD ($ in thousands) | | Three Months Ended Mar 31, 2025 | Three Months Ended Dec 31, 2024 | | :--- | :--- | :--- | | Net income (loss) attributable to common stockholders | 16,289 | (5,472) | | Adjustments (net) | 23,758 | 37,725 | | Earnings available for distribution | 40,047 | 32,253 | | EAD per common share | $0.64 | $0.53 | Effective Interest Metrics Effective interest metrics in Q1 2025 demonstrate the positive impact of hedging on funding costs and interest spread - Effective interest metrics are calculated by adjusting GAAP interest expense and net interest income for the contractual net interest on interest rate swaps, which are recorded in gain/loss on derivatives under GAAP[48][49] Reconciliation of GAAP to Effective Interest Metrics (Q1 2025) | Metric | GAAP | Adjustment for Swaps | Effective (Non-GAAP) | | :--- | :--- | :--- | :--- | | Net Interest Income ($M) | $18.8 | $28.1 | $46.9 | | Net Interest Rate Margin | 0.99% | 2.28% | 3.27% | | Total Interest Expense ($M) | $55.0 | ($28.1) | $26.9 | | Cost of Funds | 4.46% | (2.28)% | 2.18% | Economic Debt-to-Equity Ratio The economic debt-to-equity ratio, including off-balance sheet financing, increased in Q1 2025 - The economic debt-to-equity ratio is a non-GAAP measure that adds the implied cost basis of TBAs to total debt to provide what management believes is a more complete view of at-risk leverage[55] Debt-to-Equity Ratio Calculation | Ratio | As of March 31, 2025 | As of December 31, 2024 | | :--- | :--- | :--- | | Debt-to-equity ratio (GAAP) | 7.1x | 6.7x | | Economic debt-to-equity ratio (Non-GAAP) | 7.1x | 6.7x | Other Information This section provides general company information, earnings call details, and average balance sheet metrics Company and Earnings Call Information Invesco Mortgage Capital Inc. is a REIT managed by Invesco Advisers, with Q1 2025 earnings call details provided - The company is a REIT externally managed by Invesco Advisers, Inc., focusing on investing in mortgage-backed securities and other mortgage-related assets[25] - An earnings call was scheduled for 9:00 a.m. ET on May 8, 2025, with access details provided for investors and the public[26] Average Balances Q1 2025 average earning assets and borrowings show shifts in yields and costs of funds compared to prior periods Average Balances and Yields/Costs | ($ in thousands) | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Average earning assets | 5,422,552 | 5,440,662 | 4,972,242 | | Average earning asset yields | 5.45 % | 5.60 % | 5.52 % | | Average borrowings | 4,930,237 | 4,865,582 | 4,419,757 | | Average cost of funds | 4.46 % | 5.13 % | 5.57 % |