Invesco Mortgage Capital (IVR) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Financial Results Management Update and Performance Summary Market pressures led to a (4.8)% economic return and reduced book value, prompting a defensive posture - Market volatility, driven by tariff announcements and fiscal policy concerns, negatively impacted valuations and resulted in a quarterly economic return of (4.8)%[4] - The company reduced its debt-to-equity ratio to 6.5x from 7.1x in the prior quarter, reflecting a more defensive posture due to market uncertainty[4] - As of July 18, 2025, post-quarter end, the estimated book value per common share recovered to a range of $7.99 to $8.31[5] Q2 2025 Key Financial Highlights | Metric | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net Income (Loss) per Common Share | ($0.40) | $0.26 | | Earnings Available for Distribution per Share (Non-GAAP) | $0.58 | $0.64 | | Common Stock Dividend per Share | $0.34 | $0.34 | | Book Value per Common Share (period-end) | $8.05 | $8.81 | | Economic Return | (4.8)% | 2.6% | Key Performance Indicators Q2 2025 reported a $26.6 million net loss and $0.40 loss per share, with an improved non-GAAP effective interest rate margin Q2 2025 vs Q1 2025 Performance | Metric ($ in millions, except per share) | Q2 2025 | Q1 2025 | Variance | | :--- | :--- | :--- | :--- | | Net interest income | $17.7 | $18.8 | ($1.1) | | Net income (loss) to common stockholders | ($26.6) | $16.3 | ($42.9) | | Earnings (loss) per common share (basic) | ($0.40) | $0.26 | ($0.66) | | Earnings available for distribution (Non-GAAP) | $38.2 | $40.0 | ($1.8) | | EAD per common share (Non-GAAP) | $0.58 | $0.64 | ($0.06) | Key Ratios and Margins | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Average net interest rate margin (GAAP) | 0.94% | 0.99% | (0.05)% | | Effective interest rate margin (Non-GAAP) | 3.44% | 3.27% | 0.17% | | Debt-to-equity ratio | 6.5x | 7.1x | (0.6x) | Portfolio and Hedging Activities The MBS portfolio decreased to $5.2 billion, with borrowings reduced to $4.6 billion, while hedging utilized swaps and Treasury futures Investment Portfolio Composition The MBS portfolio decreased to $5.19 billion, primarily 30-year fixed-rate Agency RMBS, with Non-Agency RMBS fully divested MBS Portfolio Breakdown by Fair Value ($ in thousands) | Security Type | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | 30 year fixed-rate pass through | $4,222,203 | $4,974,663 | | Agency-CMO | $71,835 | $73,539 | | Agency CMBS | $891,521 | $890,372 | | Non-Agency RMBS | $— | $7,215 | | Total MBS portfolio | $5,185,559 | $5,945,789 | Borrowings Total borrowings decreased to $4.64 billion, maintaining a stable 4.48% weighted average interest rate and 24-day maturity Borrowings Summary ($ in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Total Amount Outstanding | $4,635,881 | $5,354,561 | | Weighted Average Interest Rate | 4.48% | 4.47% | | Weighted Average Remaining Maturity (days) | 24 | 25 | Hedging Instruments Hedging included $3.5 billion in interest rate swaps and $830 million in short U.S. Treasury futures, with no TBA contracts - The company did not have any To-Be-Announced (TBA) contracts outstanding as of June 30, 2025[16] - The total notional amount of interest rate swaps was $3.5 billion, with a weighted average fixed pay rate of 1.19% and a weighted average maturity of 6.3 years[19] - The company held short positions in U.S. Treasury futures with a total notional amount of $830 million, a decrease from $902.5 million in the prior quarter[21] Capital Activities The company declared a $0.34 per share dividend, issued $2.2 million in common stock, and repurchased $2.3 million of preferred stock - A common stock dividend of $0.34 per share was declared on June 24, 2025[22] - The company sold 282,750 shares of common stock, generating net cash proceeds of $2.2 million[23] - The company repurchased and retired 96,803 shares of its Series C Preferred Stock for a total cost of $2.3 million[24] Consolidated Financial Statements Consolidated statements show a $23.3 million net loss from derivative losses, with total assets and equity decreasing Statements of Operations Q2 2025 reported a $23.3 million net loss, driven by $30.9 million in derivative losses, resulting in a ($0.40) loss per common share Q2 2025 Statement of Operations Highlights ($ in thousands) | Line Item | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net interest income | $17,729 | $18,821 | | Gain (loss) on derivative instruments, net | ($30,916) | ($76,679) | | Total other income (loss) | ($36,184) | $5,479 | | Net income (loss) | ($23,327) | $19,641 | | Net income (loss) to common stockholders | ($26,567) | $16,289 | | Basic earnings (loss) per share | ($0.40) | $0.26 | Statements of Comprehensive Income (Loss) Q2 2025 resulted in a $24.1 million comprehensive loss, with $27.4 million attributable to common stockholders, reversing Q1 income - Comprehensive loss attributable to common stockholders for Q2 2025 was $27.4 million, compared to a comprehensive income of $16.9 million in Q1 2025[33] Balance Sheets Total assets decreased to $5.40 billion and liabilities to $4.69 billion, with equity contracting to $709.4 million Balance Sheet Summary ($ in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $5,400,370 | $5,688,034 | | Repurchase agreements | $4,635,881 | $4,893,958 | | Total Liabilities | $4,690,994 | $4,957,305 | | Total Stockholders' Equity | $709,376 | $730,729 | Non-GAAP Financial Measures Non-GAAP measures like EAD, Effective Interest Metrics, and Economic Debt-to-Equity Ratio offer additional insights into performance - The company uses non-GAAP measures such as Earnings available for distribution, Effective interest expense/income, and Economic debt-to-equity ratio to supplement its GAAP results[38][39] Earnings Available for Distribution (EAD) Q2 2025 EAD decreased to $38.2 million or $0.58 per share, a non-GAAP metric for assessing distributable income capacity Reconciliation of Net Income to EAD ($ in thousands) | Line Item | Q2 2025 | Q1 2025 | | :--- | :--- | :--- | | Net income (loss) to common stockholders | ($26,567) | $16,289 | | Adjustments (Gains/Losses on Investments & Derivatives, etc.) | $64,758 | $23,758 | | Earnings available for distribution | $38,191 | $40,047 | - EAD per common share was $0.58 in Q2 2025, compared to $0.64 in Q1 2025[45] Effective Interest Metrics Non-GAAP effective interest expense was $24.3 million (2.12% cost of funds), yielding $46.4 million effective net interest income and a 3.44% margin GAAP vs. Effective Interest Metrics (Q2 2025) | Metric ($ in thousands) | GAAP | Non-GAAP (Effective) | | :--- | :--- | :--- | | Total interest expense | $52,895 | $24,264 | | Cost of funds | 4.62% | 2.12% | | Net interest income | $17,729 | $46,360 | | Net interest rate margin | 0.94% | 3.44% | Economic Debt-to-Equity Ratio The economic debt-to-equity ratio decreased to 6.5x, matching GAAP due to no TBA positions, reflecting at-risk leverage - The economic debt-to-equity ratio is a non-GAAP measure that includes the implied cost basis of TBA derivatives to provide a view of at-risk leverage[56] - As of June 30, 2025, both the GAAP debt-to-equity ratio and the economic debt-to-equity ratio were 6.5x[57][58] Supplemental Information This section provides corporate details, including REIT status, earnings call information, and average balances of assets and borrowings - The company is a real estate investment trust (REIT) externally managed and advised by Invesco Advisers, Inc[25] - The earnings conference call is scheduled for Friday, July 25, 2025, at 9:00 a.m. ET[26] Average Balances (Q2 2025) | Metric ($ in thousands) | Amount | | :--- | :--- | | Average earning assets | $5,078,921 | | Average borrowings | $4,577,566 |