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Section 1: 10-Q (10-Q)

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Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_______________________________________________ 
FORM 10-Q 
_______________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number 001-34385
400888595_ivrmainimageinblacka07.jpg
Invesco Mortgage Capital Inc.
(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________
Maryland
 
26-2749336
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
1555 Peachtree Street, N.E., Suite 1800,
 

Atlanta,
Georgia
 
30309
(Address of Principal Executive Offices)
 
(Zip Code)
(404) 892-0896
(Registrant’s Telephone Number, Including Area Code) 
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of Each Class
 
Trading Symbol
 
Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share
 
IVR
 
New York Stock Exchange
7.75% Series A Cumulative Redeemable Preferred Stock
 
IVRpA
 
New York Stock Exchange
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock
 
IVRpB
 
New York Stock Exchange
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock
 
IVRpC
 
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
  
Accelerated filer
 
Non-Accelerated filer
 
 
  
Smaller reporting company
 
 
 
 
 
 
Emerging growth company
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
As of October 31, 2019, there were 142,802,293 outstanding shares of common stock of Invesco Mortgage Capital Inc.


Table of Contents


INVESCO MORTGAGE CAPITAL INC.
TABLE OF CONTENTS
 
 
 
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.


Table of Contents


PART I
ITEM 1.
FINANCIAL STATEMENTS
INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
As of
 $ in thousands except share amounts
September 30, 2019
 
December 31, 2018
ASSETS
 
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $21,866,617 and $17,082,825, respectively)
23,599,499

 
17,396,642

Cash and cash equivalents
125,888

 
135,617

Restricted cash
80,086

 

Due from counterparties
10,284

 
13,500

Investment related receivable
72,959

 
66,598

Derivative assets, at fair value
4,127

 
15,089

Other assets
168,480

 
186,059

Total assets
24,061,323

 
17,813,505

LIABILITIES AND EQUITY
 
 
 
Liabilities:
 
 
 
Repurchase agreements
18,072,032

 
13,602,484

Secured loans
1,650,000

 
1,650,000

Derivative liabilities, at fair value
46,381

 
23,390

Dividends and distributions payable
66,974

 
49,578

Investment related payable
1,271,718

 
132,096

Accrued interest payable
29,831

 
37,620

Collateral held payable
1,096

 
18,083

Accounts payable and accrued expenses
2,477

 
1,694

Due to affiliate
9,782

 
11,863

Total liabilities
21,150,291

 
15,526,808

Commitments and contingencies (See Note 14):

 

Equity:
 
 
 
Preferred Stock, par value $0.01 per share; 50,000,000 shares authorized:
 
 
 
7.75% Series A Cumulative Redeemable Preferred Stock: 5,600,000 shares issued and outstanding ($140,000 aggregate liquidation preference)
135,356

 
135,356

7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock: 6,200,000 shares issued and outstanding ($155,000 aggregate liquidation preference)
149,860

 
149,860

7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock: 11,500,000 shares issued and outstanding ($287,500 aggregate liquidation preference)
278,108

 
278,108

Common Stock, par value $0.01 per share; 450,000,000 shares authorized; 142,802,293 and 111,584,996 shares issued and outstanding, respectively
1,427

 
1,115

Additional paid in capital
2,869,650

 
2,383,532

Accumulated other comprehensive income
325,850

 
220,813

Retained earnings (distributions in excess of earnings)
(849,219
)
 
(882,087
)
Total stockholders’ equity
2,911,032

 
2,286,697

Total liabilities and stockholders' equity
24,061,323

 
17,813,505


The accompanying notes are an integral part of these condensed consolidated financial statements.

 
1
 


Table of Contents


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
$ in thousands, except share amounts
2019
 
2018
 
2019
 
2018
Interest Income
 
 
 
 
 
 
 
Mortgage-backed and credit risk transfer securities
194,938

 
160,416

 
581,167

 
456,967

Commercial and other loans
1,353

 
1,672

 
4,419

 
9,945

Total interest income
196,291

 
162,088

 
585,586

 
466,912

Interest Expense
 
 
 
 
 
 
 
Repurchase agreements
112,851

 
81,763

 
332,704

 
210,737

Secured loans
10,413

 
9,490

 
32,815

 
24,888

Exchangeable senior notes

 

 

 
1,621

Total interest expense
123,264

 
91,253

 
365,519

 
237,246

Net interest income
73,027

 
70,835

 
220,067

 
229,666

Other Income (loss)
 
 
 
 
 
 
 
Gain (loss) on investments, net
202,413

 
(207,910
)
 
772,977

 
(404,657
)
Equity in earnings (losses) of unconsolidated ventures
403

 
1,084

 
1,797

 
2,778

Gain (loss) on derivative instruments, net
(177,244
)
 
87,672

 
(723,437
)
 
288,208

Realized and unrealized credit derivative income (loss), net
1

 
4,975

 
5,447

 
8,875

Net loss on extinguishment of debt

 

 

 
(26
)
Other investment income (loss), net
1,005

 
1,068

 
3,041

 
2,010

Total other income (loss)
26,578

 
(113,111
)
 
59,825

 
(102,812
)
Expenses
 
 
 
 
 
 
 
Management fee – related party
8,740

 
10,105

 
27,644

 
30,428

General and administrative
1,862

 
1,673

 
6,119

 
4,954

Total expenses
10,602

 
11,778

 
33,763

 
35,382

Net income (loss)
89,003

 
(54,054
)
 
246,129

 
91,472

Net income (loss) attributable to non-controlling interest

 
(681
)
 

 
1,153

Net income (loss) attributable to Invesco Mortgage Capital Inc.
89,003

 
(53,373
)
 
246,129

 
90,319

Dividends to preferred stockholders
11,107

 
11,107

 
33,320

 
33,320

Net income (loss) attributable to common stockholders
77,896

 
(64,480
)
 
212,809

 
56,999

Earnings (loss) per share:
 
 
 
 
 
 
 
Net income (loss) attributable to common stockholders
 
 
 
 
 
 
 
Basic
0.57

 
(0.58
)
 
1.66

 
0.51

Diluted
0.57

 
(0.58
)
 
1.65

 
0.51


The accompanying notes are an integral part of these condensed consolidated financial statements.

 
2
 


Table of Contents


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
$ in thousands
2019
 
2018
 
2019
 
2018
Net income (loss)
89,003

 
(54,054
)
 
246,129

 
91,472

Other comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net
14,482

 
(40,554
)
 
114,019

 
(220,800
)
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net
(954
)
 
134,280

 
9,072

 
153,406

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense
(5,981
)
 
(6,422
)
 
(17,748
)
 
(19,859
)
Currency translation adjustments on investment in unconsolidated venture
290

 
(1,126
)
 
(306
)
 
(328
)
Total other comprehensive income (loss)
7,837

 
86,178

 
105,037

 
(87,581
)
Comprehensive income (loss)
96,840

 
32,124

 
351,166

 
3,891

Less: Comprehensive (income) loss attributable to non-controlling interest

 
(405
)
 

 
(48
)
Less: Dividends to preferred stockholders
(11,107
)
 
(11,107
)
 
(33,320
)
 
(33,320
)
Comprehensive income (loss) attributable to common stockholders
85,733

 
20,612

 
317,846

 
(29,477
)

The accompanying notes are an integral part of these condensed consolidated financial statements.


 
3
 


Table of Contents


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the three months ended March 31, 2019; June 30, 2019 and September 30, 2019
(Unaudited)
 
 
 
 
 
 
 
 
 
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
(Distributions
in excess of
earnings)
 
Total
Stockholders’
Equity
 
Series A
Preferred Stock
 
Series B
Preferred Stock
 
Series C
Preferred Stock
 
 
 
$ in thousands except share amounts
 
 
 
Common Stock
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance at December 31, 2018
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
111,584,996

 
1,115

 
2,383,532

 
220,813

 
(882,087
)
 
2,286,697

Net income

 

 

 

 

 

 

 

 

 

 
138,790

 
138,790

Other comprehensive income

 

 

 

 

 

 

 

 

 
56,369

 

 
56,369

Proceeds from issuance of common stock, net of offering costs

 

 

 

 

 

 
16,672,000

 
167

 
258,386

 

 

 
258,553

Stock awards

 

 

 

 

 

 
10,501

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 

 

 
(57,720
)
 
(57,720
)
Preferred stock dividends

 

 

 

 

 

 

 

 

 

 
(11,107
)
 
(11,107
)
Amortization of equity-based compensation

 

 

 

 

 

 

 

 
132

 

 

 
132

Balance at March 31, 2019
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
128,267,497

 
1,282

 
2,642,050

 
277,182

 
(812,124
)
 
2,671,714

Net income

 

 

 

 

 

 

 

 

 

 
18,336

 
18,336

Other comprehensive income

 

 

 

 

 

 

 

 

 
40,831

 

 
40,831

Proceeds from issuance of common stock, net of offering costs

 

 

 

 

 

 
521,136

 
5

 
8,149

 

 

 
8,154

Stock awards

 

 

 

 

 

 
6,895

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 

 

 
(57,958
)
 
(57,958
)
Preferred stock dividends

 

 

 

 

 

 

 

 

 

 
(11,106
)
 
(11,106
)
Amortization of equity-based compensation

 

 

 

 

 

 

 

 
130

 

 

 
130

Balance at June 30, 2019
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
128,795,528

 
1,287

 
2,650,329

 
318,013

 
(862,852
)
 
2,670,101

Net income

 

 

 

 

 

 

 

 

 

 
89,003

 
89,003

Other comprehensive income

 

 

 

 

 

 

 

 

 
7,837

 

 
7,837

Proceeds from issuance of common stock, net of offering costs

 

 

 

 

 

 
14,000,000

 
140

 
219,191

 

 

 
219,331

Stock awards

 

 

 

 

 

 
6,765

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 

 

 
(64,263
)
 
(64,263
)
Preferred stock dividends

 

 

 

 

 

 

 

 

 

 
(11,107
)
 
(11,107
)
Amortization of equity-based compensation

 

 

 

 

 

 

 

 
130

 

 

 
130

Balance at September 30, 2019
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
142,802,293

 
1,427

 
2,869,650

 
325,850

 
(849,219
)
 
2,911,032

The accompanying notes are an integral part of these condensed consolidated financial statements.


 
4
 


Table of Contents


INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
For the three months ended March 31, 2018; June 30, 2018 and September 30 2018
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
Attributable to Common Stockholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
Paid in
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
(Distributions
in excess of
earnings)
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interest
 
 
 
Series A
Preferred Stock
 
Series B
Preferred Stock
 
Series C
Preferred Stock
 
 
 
 
$ in thousands except share amounts
 
 
 
Common Stock
 
Total
Equity
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
 
 
Balance at December 31, 2017
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
111,624,159

 
1,116

 
2,384,356

 
261,029

 
(579,334
)
 
2,630,491

 
26,387

 
2,656,878

Net income

 

 

 

 

 

 

 

 

 

 
52,578

 
52,578

 
671

 
53,249

Other comprehensive loss

 

 

 

 

 

 

 

 

 
(127,677
)
 

 
(127,677
)
 
(1,630
)
 
(129,307
)
Stock awards

 

 

 

 

 

 
12,564

 

 

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 

 

 
(46,887
)
 
(46,887
)
 

 
(46,887
)
Common unit dividends

 

 

 

 

 

 

 

 

 

 

 

 
(599
)
 
(599
)
Preferred stock dividends

 

 

 

 

 

 

 

 

 

 
(11,107
)
 
(11,107
)
 

 
(11,107
)
Amortization of equity-based compensation

 

 

 

 

 

 

 

 
127

 

 

 
127

 
2

 
129

Rebalancing of ownership percentage of non-controlling interest

 

 

 

 

 

 

 

 
143

 

 

 
143

 
(143
)
 

Balance at March 31, 2018
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
111,636,723

 
1,116

 
2,384,626

 
133,352

 
(584,750
)
 
2,497,668

 
24,688

 
2,522,356

Net income

 

 

 

 

 

 

 

 

 

 
91,114

 
91,114

 
1,163

 
92,277

Other comprehensive loss

 

 

 

 

 

 

 

 

 
(43,891
)
 

 
(43,891
)
 
(561
)
 
(44,452
)
Stock awards

 

 

 

 

 

 
6,465

 

 

 

 

 

 

 

Common stock dividends

 

 

 

 

 

 

 

 

 

 
(46,890
)
 
(46,890
)
 

 
(46,890
)
Common unit dividends

 

 

 

 

 

 

 

 

 

 

 

 
(598
)
 
(598
)
Preferred stock dividends

 

 

 

 

 

 

 

 

 

 
(11,106
)
 
(11,106
)
 

 
(11,106
)
Amortization of equity-based compensation

 

 

 

 

 

 

 

 
135

 

 

 
135

 
1

 
136

Rebalancing of ownership percentage of non-controlling interest

 

 

 

 

 

 

 

 
141

 

 

 
141

 
(141
)
 

Balance at June 30, 2018
5,600,000

 
135,356

 
6,200,000

 
149,860

 
11,500,000

 
278,108

 
111,643,188

 
1,116

 
2,384,902

 
89,461

 
(551,632
)
 
2,487,171

 
24,552

 
2,511,723

Net Loss