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    Invesco Mortgage Capital Inc. Reports First Quarter 2025 Financial Results

    5/7/25 4:15:00 PM ET
    $IVR
    Real Estate Investment Trusts
    Real Estate
    Get the next $IVR alert in real time by email

    ATLANTA, May 7, 2025 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE:IVR) (the "Company") today announced financial results for the quarter ended March 31, 2025.

    (PRNewsfoto/Invesco Mortgage Capital Inc.) (PRNewsfoto/Invesco Mortgage Capital Inc.)

    • Net income per common share of $0.26 compared to net loss of $0.09 in Q4 2024
    • Earnings available for distribution per common share(1) of $0.64 compared to $0.53 in Q4 2024
    • Common stock dividend of $0.34 per common share compared to $0.40 in Q4 2024
    • Book value per common share(2) of $8.81 compared to $8.92 as of December 31, 2024
    • Economic return(3) of 2.6% compared to (0.5)% in Q4 2024

    Update from John Anzalone, Chief Executive Officer

    "During the first quarter, financial markets reacted negatively to proposed U.S. fiscal and trade policies given concerns they could result in slower economic growth and higher inflation. Despite weaker market sentiment, Agency RMBS performance was largely consistent with Treasuries, with higher coupons modestly outperforming their hedges as longer-dated interest rate volatility trended lower. This resulted in an economic return for the quarter of 2.6%, consisting of our $0.34 dividend per common share and an $0.11 decline in book value per common share.

    "We ended the first quarter with a debt-to-equity ratio of 7.1x, up from 6.7x as of December 31, 2024. At quarter end, our $5.9 billion investment portfolio primarily consisted of $5.0 billion Agency RMBS and $0.9 billion Agency CMBS, and we maintained a sizeable balance of unrestricted cash and unencumbered investments totaling $372 million.

    "Agency RMBS sharply underperformed Treasuries in April given a significant increase in interest rate volatility and deterioration in risk sentiment driven by rapidly evolving U.S. trade policy. Our book value per common share declined as a result and is estimated to be between $7.74 and $8.06(4) as of April 30, 2025. We remain cautious on the near-term outlook for markets given elevated policy uncertainty and will continue to prudently manage our investment portfolio and liquidity position.

    "Our long-term outlook for Agency RMBS is favorable, however, as we expect investor demand to strengthen in higher coupons given attractive valuations, an eventual decline in interest rate volatility, and a steeper yield curve. Finally, while Agency CMBS risk premiums may remain elevated until sentiment in the broader fixed income market improves, limited issuance, strong fundamental performance and stable cash flow profiles should provide favorable support for this sector."

     

    (1) Earnings available for distribution (and by calculation, earnings available for distribution per common share) is a non-Generally Accepted Accounting Principles ("GAAP") financial measure. Refer to the section entitled "Non-GAAP Financial Measures" for important disclosures and a reconciliation to the most comparable U.S. GAAP measure.

    (2) Book value per common share as of March 31, 2025 and December 31, 2024 is calculated as total stockholders' equity less the liquidation preference of the Company's Series C Preferred Stock ($177.9 million as of March 31, 2025 and $180.2 million as of December 31, 2024), divided by total common shares outstanding.

    (3) Economic return for the quarter ended March 31, 2025 is defined as the change in book value per common share from December 31, 2024 to March 31, 2025 of ($0.11); plus dividends declared of $0.34 per common share; divided by the December 31, 2024 book value per common share of $8.92. Economic return for the quarter ended December 31, 2024 is defined as the change in book value per common share from September 30, 2024 to December 31, 2024 of ($0.45); plus dividends declared of $0.40 per common share; divided by the September 30, 2024 book value per common share of $9.37.

    (4) Book value per common share as of April 30, 2025 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 C Preferred Stock ($176.7 million as of April 30, 2025), divided by total common shares outstanding of 65.9 million.

     

    Key performance indicators for the quarters ended March 31, 2025 and December 31, 2024 are summarized in the table below.

    ($ in millions, except share amounts)

    Q1 2025

    Q4 2024

    Variance

    Average Balances (1)

    (unaudited)

    (unaudited)



    Average earning assets (at amortized cost)

    $5,422.6

    $5,440.7

    ($18.1)

    Average borrowings

    $4,930.2

    $4,865.6

    $64.6

    Average total stockholders' equity

    $754.7

    $798.4

    ($43.7)









    U.S. GAAP Financial Measures







    Total interest income

    $73.8

    $76.1

    ($2.3)

    Total interest expense

    $55.0

    $62.4

    ($7.4)

    Net interest income

    $18.8

    $13.7

    $5.1

    Total expenses

    $4.7

    $4.8

    ($0.1)

    Net income (loss) attributable to common stockholders

    $16.3

    ($5.5)

    $21.8









    Average earning asset yields

    5.45 %

    5.60 %

    (0.15) %

    Average cost of funds

    4.46 %

    5.13 %

    (0.67) %

    Average net interest rate margin

    0.99 %

    0.47 %

    0.52 %









    Period-end weighted average asset yields (2)

    5.51 %

    5.42 %

    0.09 %

    Period-end weighted average cost of funds

    4.47 %

    4.80 %

    (0.33) %

    Period-end weighted average net interest rate margin

    1.04 %

    0.62 %

    0.42 %









    Book value per common share (3)

    $8.81

    $8.92

    ($0.11)

    Earnings (loss) per common share (basic)

    $0.26

    ($0.09)

    $0.35

    Earnings (loss) per common share (diluted)

    $0.26

    ($0.09)

    $0.35

    Debt-to-equity ratio

                   7.1x  

                   6.7x  

                   0.4x  









    Non-GAAP Financial Measures (4)







    Earnings available for distribution

    $40.0

    $32.3

    $7.7

    Effective interest expense

    $26.9

    $30.1

    ($3.2)

    Effective net interest income

    $46.9

    $46.0

    $0.9









    Effective cost of funds

    2.18 %

    2.47 %

    (0.29) %

    Effective interest rate margin

    3.27 %

    3.13 %

    0.14 %









    Earnings available for distribution per common share

    $0.64

    $0.53

    $0.11

    Economic debt-to-equity ratio

                   7.1x  

                   6.7x  

                   0.4x  

     

    (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 C Preferred Stock ($177.9 million as of March 31, 2025 and $180.2 million as of December 31, 2024), 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 certain characteristics of the Company's MBS portfolio as of March 31, 2025 and December 31, 2024.





    As of





    March 31, 2025



    December 31, 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 %











    —



    — %



    — %



    369,321



    6.8 %



    4.67 %

    4.5 %











    657,554



    11.1 %



    4.95 %



    658,218



    12.1 %



    4.95 %

    5.0 %











    993,414



    16.7 %



    5.32 %



    836,197



    15.3 %



    5.35 %

    5.5 %











    1,414,961



    23.8 %



    5.58 %



    1,196,335



    22.0 %



    5.59 %

    6.0 %











    1,471,826



    24.8 %



    5.97 %



    1,481,454



    27.2 %



    5.97 %

    6.5 %











    436,908



    7.3 %



    6.16 %



    —



    — %



    — %

    Total 30 year fixed-rate pass-through



    4,974,663



    83.7 %



    5.61 %



    4,541,525



    83.4 %



    5.50 %

    Agency-CMO



    73,539



    1.2 %



    10.02 %



    70,776



    1.3 %



    9.20 %

    Agency CMBS



    890,372



    15.0 %



    4.62 %



    816,147



    15.0 %



    4.59 %

    Non-Agency CMBS



    —



    — %



    — %



    9,836



    0.2 %



    8.91 %

    Non-Agency RMBS



    7,215



    0.1 %



    11.53 %



    7,224



    0.1 %



    11.13 %

    Total MBS portfolio



    5,945,789



    100.0 %



    5.51 %



    5,445,508



    100.0 %



    5.42 %

    The following table summarizes certain characteristics of the Company's borrowings as of March 31, 2025 and December 31, 2024.





    As of

    $ in thousands



    March 31, 2025



    December 31, 2024



    Amount

    Outstanding



    Weighted

    Average

    Interest Rate



    Weighted

    Average

    Remaining

    Maturity (days)



    Amount

    Outstanding



    Weighted

    Average

    Interest Rate



    Weighted

    Average

    Remaining

    Maturity (days)

    Repurchase agreements -

    Agency RMBS



    4,512,054



    4.48 %



    24



    4,112,219



    4.80 %



    29

    Repurchase agreements -

    Agency CMBS



    842,507



    4.46 %



    30



    781,739



    4.77 %



    32

    Total borrowings



    5,354,561



    4.47 %



    25



    4,893,958



    4.80 %



    29

    The following tables summarize certain characteristics of TBAs accounted for as derivatives as of March 31, 2025 and December 31, 2024.

    $ in thousands



    As of March 31, 2025





    Notional Amount



    Implied Cost Basis



    Implied Market

    Value



    Net Carrying Value -

    Asset (Liability)

    6.5% TBA purchase contracts



    400,000



    411,610



    412,448



    838

    6.5% TBA sale contracts



    (400,000)



    (411,391)



    (412,448)



    (1,057)

    Net TBA derivatives



    —



    219



    —



    (219)

     

    $ in thousands



    As of December 31, 2024





    Notional Amount



    Implied Cost Basis



    Implied Market

    Value



    Net Carrying Value -

    Asset (Liability)

    5.5% TBA purchase contracts



    100,000



    99,800



    99,173



    (627)

    5.5% TBA sales contracts



    (100,000)



    (99,194)



    (99,173)



    21

    Net TBA derivatives



    —



    606



    —



    (606)

    The followings tables summarize 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 as of March 31, 2025 and December 31, 2024.

    $ in thousands



    As of March 31, 2025

    Maturities



    Notional

    Amount



    Weighted

    Average Fixed

    Pay Rate



    Weighted

    Average Floating

    Receive Rate



    Weighted

    Average Years to

    Maturity

    Less than 3 years



    1,480,000



    0.54 %



    4.41 %



    2.3

    3 to 5 years



    375,000



    0.39 %



    4.41 %



    4.0

    5 to 7 years



    785,000



    0.72 %



    4.41 %



    5.6

    7 to 10 years



    555,000



    4.14 %



    4.41 %



    9.8

    Greater than 10 years



    445,000



    1.99 %



    4.41 %



    19.5

    Total



    3,640,000



    1.29 %



    4.41 %



    6.4

     

    $ in thousands



    As of December 31, 2024

    Maturities



    Notional

    Amount



    Weighted

    Average Fixed

    Pay Rate



    Weighted

    Average Floating

    Receive Rate



    Weighted

    Average Years to

    Maturity

    Less than 3 years



    1,730,000



    1.06 %



    4.49 %



    2.2

    3 to 5 years



    375,000



    0.39 %



    4.49 %



    4.3

    5 to 7 years



    750,000



    0.57 %



    4.49 %



    5.8

    Greater than 10 years



    410,000



    1.83 %



    4.49 %



    18.9

    Total



    3,265,000



    0.97 %



    4.49 %



    5.3

    The following table summarizes certain characteristics of the Company's futures contracts as of March 31, 2025 and December 31, 2024.





    As of





    March 31, 2025



    December 31, 2024

    $ in thousands



    Notional Amount - Short



    Notional Amount - Short

    10 year U.S. Treasury futures



    400,000



    136,000

    Ultra 10 year U.S. Treasury futures



    315,000



    1,057,000

    30 year U.S. Treasury futures



    187,500



    209,000

    Total



    902,500



    1,402,000

    Capital Activities

    Dividends

    As previously announced on March 25, 2025, the Company declared a common stock dividend of $0.34 per share paid on April 25, 2025 to its stockholders of record as of the close of business on April 7, 2025. The Company declared a Series C Preferred Stock dividend of $0.46875 per share on May 6, 2025 that is payable on June 27, 2025 to its stockholders of record on June 5, 2025.

    Issuances of Common Stock

    During the three months ended March 31, 2025, the Company sold 4,212,057 shares of common stock for net proceeds of $36.0 million through its at-the-market program.

    Repurchases of Preferred Stock

    During the three months ended March 31, 2025, the Company repurchased and retired 90,146 shares of Series C Preferred Stock for a total cost of $2.2 million.

    Portfolio and Liquidity Update as of April 30, 2025

    • Total investment portfolio of $5.1 billion, consisting of 82% Agency RMBS and 18% Agency CMBS
    • Unrestricted cash and unencumbered investments totaling approximately $336 million
    • Debt-to-equity ratio estimated to be 6.4x

    About Invesco Mortgage Capital Inc.

    The Company is a real estate investment trust that primarily focuses on investing in, financing and managing mortgage-backed securities and other mortgage-related assets. The Company 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 Thursday, May 8, 2025, 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 5:00 pm ET on May 22, 2025 by calling:

    866-363-1806 (North America) or 1-203-369-0194 (International)

    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, 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 U.S. securities laws as defined in the Private Securities Litigation Reform Act of 1995, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements include our views on the risk positioning of our portfolio, domestic and global market conditions (including the Agency RMBS, Agency CMBS and residential and commercial real estate markets), the market for our target assets, our financial performance, including our earnings available for distribution, economic return, comprehensive income and changes in our book value, our intention and ability to pay dividends, our ability to continue performance trends, the stability of portfolio yields, interest rates, credit spreads, prepayment trends, financing sources, cost of funds, our leverage, liquidity, capital structure and equity allocation. In addition, words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "projects," "forecasts," and future or conditional verbs such as "will," "may," "could," "should," and "would" 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 you 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.

     

    INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    (Unaudited)





    Three Months Ended

    $ in thousands, except share data

    March 31,

    2025



    December 31,

    2024



    March 31,

    2024













    Interest income

    73,846



    76,110



    68,583

    Interest expense

    55,025



    62,431



    61,580

    Net interest income

    18,821



    13,679



    7,003













    Other income (loss)











    Gain (loss) on investments, net

    82,158



    (187,714)



    (66,153)

    (Increase) decrease in provision for credit losses

    —



    (236)



    (39)

    Equity in earnings (losses) of unconsolidated ventures

    —



    —



    (193)

    Gain (loss) on derivative instruments, net

    (76,679)



    182,556



    93,161

    Other investment income (loss), net

    —



    2



    —

    Total other income (loss)

    5,479



    (5,392)



    26,776

    Expenses











    Management fee – related party

    2,996



    3,172



    2,861

    General and administrative

    1,663



    1,609



    1,796

    Total expenses

    4,659



    4,781



    4,657

    Net income (loss)

    19,641



    3,506



    29,122

    Dividends to preferred stockholders

    (3,341)



    (5,444)



    (5,585)

    Gain (loss) on repurchase and retirement of preferred stock

    (11)



    1



    193

    Issuance and redemption cost of redeemed preferred stock

    —



    (3,535)



    —

    Net income (loss) attributable to common stockholders

    16,289



    (5,472)



    23,730

    Earnings (loss) per share: 











    Net income (loss) attributable to common stockholders











    Basic

    0.26



    (0.09)



    0.49

    Diluted

    0.26



    (0.09)



    0.49

     

    INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

    (Unaudited)





    Three Months Ended

    $ in thousands

    March 31,

    2025



    December 31,

    2024



    March 31,

    2024

    Net income (loss)

    19,641



    3,506



    29,122

    Other comprehensive income (loss):











    Unrealized gain (loss) on mortgage-backed securities, net

    500



    (412)



    (202)

    Reclassification of unrealized (gain) loss on sale of mortgage-backed securities to gain

    (loss) on investments, net

    116



    —



    —

    Reclassification of unrealized loss on available-for-sale securities to (increase) decrease

    in provision for credit losses

    —



    224



    39

    Total other comprehensive income (loss)

    616



    (188)



    (163)

    Comprehensive income (loss)

    20,257



    3,318



    28,959

    Dividends to preferred stockholders

    (3,341)



    (5,444)



    (5,585)

    Gain (loss) on repurchase and retirement of preferred stock

    (11)



    1



    193

    Issuance and redemption cost of redeemed preferred stock

    —



    (3,535)



    —

    Comprehensive income (loss) attributable to common stockholders

    16,905



    (5,660)



    23,567

     

    INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES

    CONDENSED CONSOLIDATED BALANCE SHEETS

    (Unaudited)





    As of

    $ in thousands, except share amounts

    March 31, 2025



    December 31, 2024

    ASSETS







    Mortgage-backed securities, at fair value (including pledged securities of $5,616,874 and

       $5,129,486, respectively; net of allowance for credit losses of $0 and $654, respectively)

    5,945,789



    5,445,508

    Cash and cash equivalents

    42,894



    73,403

    Restricted cash

    138,611



    137,478

    Due from counterparties

    251



    580

    Investment related receivable

    27,315



    24,870

    Derivative assets, at fair value

    2,931



    5,033

    Other assets

    973



    1,162

    Total assets

    6,158,764



    5,688,034

    LIABILITIES AND STOCKHOLDERS' EQUITY







    Liabilities:







    Repurchase agreements

    5,354,561



    4,893,958

    Derivative liabilities, at fair value

    1,767



    627

    Dividends payable

    22,420



    24,692

    Accrued interest payable

    14,273



    32,711

    Collateral held payable

    1,526



    —

    Accounts payable and accrued expenses

    1,418



    1,619

    Due to affiliate

    3,633



    3,698

    Total liabilities

    5,399,598



    4,957,305

    Commitments and contingencies (See Note 12) (1)







    Stockholders' equity:







    Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:







    7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 7,116,513 and

       7,206,659 shares issued and outstanding, respectively ($177,913 and $180,166 aggregate

       liquidation preference, respectively)

    172,101



    174,281

    Common Stock, par value $0.01 per share; 134,000,000 shares authorized; 65,942,495 and

       61,729,693 shares issued and outstanding, respectively

    659



    617

    Additional paid in capital

    4,163,897



    4,127,807

    Accumulated other comprehensive income

    789



    173

    Retained earnings (distributions in excess of earnings)

    (3,578,280)



    (3,572,149)

    Total stockholders' equity

    759,166



    730,729

    Total liabilities and stockholders' equity

    6,158,764



    5,688,034





    (1)

    See Note 12 of the Company's condensed consolidated financial statements filed in Item 1 of the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2025.

     

    Non-GAAP Financial Measures

    The table below shows the non-GAAP financial measures the Company uses to analyze its operating results and the most directly comparable U.S. GAAP measures. The Company believes these non-GAAP measures are useful to investors in assessing its performance as discussed further below.

    Non-GAAP Financial Measure



    Most Directly Comparable U.S. GAAP Measure

    Earnings available for distribution (and by calculation,

    earnings available for distribution per common share)



    Net income (loss) attributable to common stockholders (and

    by calculation, basic earnings (loss) per common share)

    Effective interest expense (and by calculation, effective cost

    of funds)



    Total interest expense (and by calculation, cost of funds)

    Effective net interest income (and by calculation, effective

    interest rate margin)



    Net interest income (and by calculation, net interest rate

    margin)

    Economic debt-to-equity ratio



    Debt-to-equity ratio

    The non-GAAP financial measures used by the Company's management should be analyzed in conjunction with U.S. GAAP financial measures and should not be considered substitutes for U.S. GAAP financial measures. In addition, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of its peer companies.

    Earnings Available for Distribution

    The Company's business objective is to provide attractive risk-adjusted returns to its stockholders, primarily through dividends and secondarily through capital appreciation. The Company uses earnings available for distribution as a measure of its investment portfolio's ability to generate income for distribution to common stockholders and to evaluate its progress toward meeting this objective. The Company calculates earnings available for distribution as U.S. GAAP net income (loss) attributable to common stockholders adjusted for (gain) loss on investments, net; realized (gain) loss on derivative instruments, net; unrealized (gain) loss on derivative instruments, net; TBA dollar roll income; (gain) loss on repurchase and retirement of preferred stock and foreign currency (gains) losses, net.

    By excluding the gains and losses discussed above, the Company believes the presentation of earnings available for distribution provides a consistent measure of operating performance that investors can use to evaluate its results over multiple reporting periods and, to a certain extent, compare to its peer companies. However, because not all of the Company's peer companies use identical operating performance measures, the Company's presentation of earnings available for distribution may not be comparable to other similarly titled measures used by its peer companies. The Company excludes the impact of gains and losses when calculating earnings available for distribution because (i) when analyzed in conjunction with its U.S. GAAP results, earnings available for distribution provides additional detail of its investment portfolio's earnings capacity and (ii) gains and losses are not accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses are reflected in net income whereas other gains and losses are reflected in other comprehensive income. For example, a portion of the Company's mortgage-backed securities are classified as available-for-sale securities, and changes in the valuation of these securities are recorded in other comprehensive income on its condensed consolidated balance sheets. The Company elected the fair value option for its mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in the condensed consolidated statements of operations. In addition, certain gains and losses represent one-time events. The Company may add and has added additional reconciling items to its earnings available for distribution calculation as appropriate.

    To maintain qualification as a REIT, U.S. federal income tax law generally requires that the Company distribute at least 90% of its REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. The Company has historically distributed at least 100% of its REIT taxable income. Because the Company views earnings available for distribution as a consistent measure of its investment portfolio's ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that the Company's board of directors uses to determine the amount, if any, and the payment date of dividends on common stock. However, earnings available for distribution should not be considered as an indication of the Company's taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay, as earnings available for distribution excludes certain items that impact its cash needs.

    Earnings available for distribution is an incomplete measure of the Company's financial performance and there are other factors that impact the achievement of the Company's business objective. The Company cautions that earnings available for distribution should not be considered as an alternative to net income (determined in accordance with U.S. GAAP), or as an indication of the Company's cash flow from operating activities (determined in accordance with U.S. GAAP), a measure of the Company's liquidity, or as an indication of amounts available to fund its cash needs.

    The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to earnings available for distribution for the following periods.



    Three Months Ended

    $ in thousands, except per share data

    March 31,

    2025



    December 31,

    2024



    March 31,

    2024

    Net income (loss) attributable to common stockholders

    16,289



    (5,472)



    23,730

    Adjustments:











    (Gain) loss on investments, net

    (82,158)



    187,714



    66,153

    Realized (gain) loss on derivative instruments, net (1)

    101,516



    (157,864)



    (48,682)

    Unrealized (gain) loss on derivative instruments, net (1)

    3,242



    7,629



    808

    TBA dollar roll income (2)

    1,147



    249



    —

    (Gain) loss on repurchase and retirement of preferred stock

    11



    (1)



    (193)

    Foreign currency (gains) losses, net (3)

    —



    (2)



    —

    Subtotal

    23,758



    37,725



    18,086

    Earnings available for distribution

    40,047



    32,253



    41,816

    Basic income (loss) per common share

    0.26



    (0.09)



    0.49

    Earnings available for distribution per common share (4)

    0.64



    0.53



    0.86





    (1)

    U.S. GAAP gain (loss) on derivative instruments, net on the condensed consolidated statements of operations includes the following components:

     



    Three Months Ended

    $ in thousands

    March 31,

    2025



    December 31,

    2024



    March 31,

    2024

    Realized gain (loss) on derivative instruments, net

    (101,516)



    157,864



    48,682

    Unrealized gain (loss) on derivative instruments, net

    (3,242)



    (7,629)



    (808)

    Contractual net interest income (expense) on interest rate swaps

    28,079



    32,321



    45,287

    Gain (loss) on derivative instruments, net

    (76,679)



    182,556



    93,161

     

    (2)

    A TBA dollar roll is a series of derivative transactions where TBAs with the same specified issuer, term and coupon but different settlement dates are simultaneously bought and sold. The TBA settling in the later month typically prices at a discount to the TBA settling in the earlier month. TBA dollar roll income represents the price differential between the TBA price for current month settlement versus the TBA price for forward month settlement. The Company includes TBA dollar roll income in earnings available for distribution because it is the economic equivalent of interest income on the underlying Agency RMBS, less an implied financing cost, over the forward settlement period. TBA dollar roll income is a component of gain (loss) on derivative instruments, net on the Company's condensed consolidated statements of operations.





    (3)

    Foreign currency gains (losses), net are included in other investment income (loss), net on the condensed consolidated statements of operations.





    (4)

    Earnings available for distribution per common share is equal to earnings available for distribution divided by the basic weighted average number of common shares outstanding.

     

    The table below presents the components of earnings available for distribution for the following periods.



    Three Months Ended

    $ in thousands

    March 31,

    2025



    December 31,

    2024



    March 31,

    2024

    Effective net interest income (1)

    46,900



    46,000



    52,290

    TBA dollar roll income

    1,147



    249



    —

    Equity in earnings (losses) of unconsolidated ventures

    —



    —



    (193)

    (Increase) decrease in provision for credit losses

    —



    (236)



    (39)

    Total expenses

    (4,659)



    (4,781)



    (4,657)

    Subtotal

    43,388



    41,232



    47,401

    Dividends to preferred stockholders

    (3,341)



    (5,444)



    (5,585)

    Issuance and redemption costs of redeemed preferred stock

    —



    (3,535)



    —

    Earnings available for distribution

    40,047



    32,253



    41,816





    (1)

    See below for a reconciliation of net interest income to effective net interest income, a non-GAAP measure.

     

    Effective Interest Expense/Effective Cost of Funds/Effective Net Interest Income/Effective Interest Rate Margin

    The Company calculates effective interest expense (and by calculation, effective cost of funds) as U.S. GAAP total interest expense adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net. The Company views its interest rate swaps as an economic hedge against increases in future market interest rates on its borrowings. The Company adds back the net payments or receipts on its interest rate swap agreements to its total U.S. GAAP interest expense because the Company uses interest rate swaps to add stability to interest expense.

    The Company calculates effective net interest income (and by calculation, effective interest rate margin) as U.S. GAAP net interest income adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net.

    The Company believes the presentation of effective interest expense, effective cost of funds, effective net interest income and effective interest rate margin measures, when considered together with U.S. GAAP financial measures, provides information that is useful to investors in understanding the Company's borrowing costs and operating performance.

    The following table reconciles total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods.



    Three Months Ended



    March 31, 2025



    December 31, 2024



    March 31, 2024

    $ in thousands

    Reconciliation



    Cost of Funds

    / Effective

    Cost of Funds



    Reconciliation



    Cost of Funds

    / Effective

    Cost of Funds



    Reconciliation



    Cost of Funds

    / Effective

    Cost of Funds

    Total interest expense

    55,025



    4.46 %



    62,431



    5.13 %



    61,580



    5.57 %

    Less: Contractual net interest expense 

             (income) on interest rate swaps

              recorded as gain (loss) on

              derivative instruments, net

    (28,079)



    (2.28) %



    (32,321)



    (2.66) %



    (45,287)



    (4.10) %

    Effective interest expense

    26,946



    2.18 %



    30,110



    2.47 %



    16,293



    1.47 %

    The following table reconciles net interest income to effective net interest income and net interest rate margin to effective interest rate margin for the following periods.



    Three Months Ended



    March 31, 2025



    December 31, 2024



    March 31, 2024

    $ in thousands

    Reconciliation



    Net Interest

    Rate Margin /

    Effective

    Interest Rate

    Margin



    Reconciliation



    Net Interest

    Rate Margin /

    Effective

    Interest Rate

    Margin



    Reconciliation



    Net Interest

    Rate Margin /

    Effective

    Interest Rate

    Margin

    Net interest income

    18,821



    0.99 %



    13,679



    0.47 %



    7,003



    (0.05) %

    Add: Contractual net interest income

              (expense) on interest rate swaps

              recorded as gain (loss) on

               derivative instruments, net

    28,079



    2.28 %



    32,321



    2.66 %



    45,287



    4.10 %

    Effective net interest income

    46,900



    3.27 %



    46,000



    3.13 %



    52,290



    4.05 %

    Economic Debt-to-Equity Ratio

    The following table shows the Company's debt-to-equity ratio and the Company's economic debt-to-equity ratio as of March 31, 2025 and December 31, 2024. The Company's debt-to-equity ratio is calculated in accordance with U.S. GAAP and is the ratio of total debt to total stockholders' equity.

    The Company presents an economic debt-to-equity ratio, a non-GAAP financial measure of leverage that considers the impact of the off-balance sheet financing of its investments in TBAs that are accounted for as derivative instruments under U.S. GAAP. The Company includes its TBAs at implied cost basis in its measure of leverage because a forward contract to acquire Agency RMBS in the TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities. Similarly, a contract for the forward sale of Agency RMBS has substantially the same effect as selling the underlying Agency RMBS and reducing the Company's on-balance sheet funding commitments. The Company believes that presenting its economic debt-to-equity ratio, when considered together with its U.S. GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding how management evaluates at-risk leverage and gives investors a comparable statistic to those of other mortgage REITs who also invest in TBAs and present a similar non-GAAP measure of leverage.



    As of

    $ in thousands

    March 31,

    2025



    December 31,

    2024

    Repurchase agreements

    5,354,561



    4,893,958

    Total stockholders' equity

    759,166



    730,729









    Debt-to-equity ratio (1)

    7.1



    6.7

    Economic debt-to-equity ratio (2)

    7.1



    6.7





    (1)

    Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders' equity.

    (2)

    Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis ($219,000 as of March 31, 2025; $606,000 as of December 31, 2024) to total stockholders' equity.

     

    Average Balances

    The table below presents information related to the Company's average earning assets, average earning asset yields, average borrowings and average cost of funds for the following periods:



    Three Months Ended

    $ in thousands

    March 31,

    2025



    December 31,

    2024



    March 31,

    2024

    Average earning assets (1)

    5,422,552



    5,440,662



    4,972,242

    Average earning asset yields (2)

    5.45 %



    5.60 %



    5.52 %













    Average borrowings (3)

    4,930,237



    4,865,582



    4,419,757

    Average cost of funds (4)

    4.46 %



    5.13 %



    5.57 %





    (1)

    Average balances for each period are based on weighted month-end balances.

    (2)

    Average earning asset yields for each period are calculated by dividing interest income, including amortization of premiums and discounts, by average earning assets based on the amortized cost of the investments. All yields are annualized.

    (3)

    Average borrowings for each period are based on weighted month-end balances.

    (4)

    Average cost of funds is calculated by dividing annualized interest expense by average borrowings.

     

     

    Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/invesco-mortgage-capital-inc-reports-first-quarter-2025-financial-results-302449177.html

    SOURCE Invesco Mortgage Capital Inc.

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