Invesco Mortgage Capital Inc. First Quarter 2021 Earnings Call
May 6, 2021
John Anzalone | Kevin Collins | Lee Phegley | David Lyle | Brian Norris |
Chief Executive Officer | President | Chief Financial Officer | Chief Operating Officer | 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 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 residential and commercial real estate market), the ongoing spread and the economic and operational impact of the COVID-19 pandemic, the market for our target assets, our financial performance, including our core earnings, 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
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.
All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This is not to be construed as an offer to buy or sell any financial instruments and should not be relied upon as the sole factor in an investment making decision. As with all investments there are associated inherent risks. Please read all financial material carefully before investing. The opinions expressed herein are based on current market conditions and are subject to change without notice.
Invesco Mortgage Capital Inc.
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Q1 2021 Results
Investment Allocation(1)
Agency
RMBS
$10.799% billion
Credit
Portfolio
1%
Equity Allocation
Agency
RMBS
91%
$1.5 billion
Credit
Portfolio
9%
- Financial results
- Net loss per common share of $0.09
- Core earnings per common share(2) of $0.11
- Book value per common share of $3.65 at quarter end
- Dividend per common share of $0.09
- Economic return of (3.1%)
- Investment activity
- Invested proceeds from capital raises into Agency RMBS specified pools and TBAs
- Held $693 million of unrestricted cash and unencumbered investments at quarter end
- Increased investment in Agency RMBS specified pools by $0.9 billion to $9.0 billion
- Decreased investment in TBAs by a notional amount of $200 million to $1.5 billion
- Agency RMBS includes specified pools at fair value and TBAs at implied cost. Credit portfolio includes non-Agency CMBS, non-Agency RMBS, a commercial loan and investments in joint ventures.
- Core earnings per common share is a non-GAAP financial measure. Refer to page 10 for additional detail. Past performance is not a guarantee of future results.
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Macro Environment
Financial markets continued to be influenced by the COVID-19 pandemic, as massive monetary stimulus led to a steeper yield curve, attractive funding rates and muted volatility
Treasury Yields
3.0% | 3.0 % | |||||
2.0% | 2.0 % | |||||
1.0% | 1.0 % | |||||
0.0% | 0.0 % | |||||
0 yr | 5 yr | 10 yr | 15 yr | 20 yr | 25 yr | 30 yr |
3/31/2020 | 12/31/2020 | 3/31/2021 |
Money Market Rates
0.4% | 0.4% | |||||||
0.3% | 0.3% | |||||||
0.2% | 0.2% | |||||||
0.1% | 0.1% | |||||||
0.0% | 0.0% | |||||||
7/20 | 8/20 | 9/20 | 10/20 | 11/20 | 12/20 | 1/21 | 2/21 | 3/21 |
Q1 | Agency MBS Repo | 1 Month Libor | OIS 3 Months | 3 Month Libor |
Volatility | US Bank and Federal Reserve MBS Holdings | ||||||||||||||||
($ trillions) | |||||||||||||||||
50 | 80 | 2.8 | 2.8 | ||||||||||||||
40 | 60 | 2.6 | 2.6 | ||||||||||||||
30 | 2.4 | 2.4 | |||||||||||||||
40 | |||||||||||||||||
20 | 2.2 | 2.2 | |||||||||||||||
10 | 20 | 2.0 | 2.0 | ||||||||||||||
0 | 0 | 1.8 | 1.8 | ||||||||||||||
7/20 | 8/20 | 9/20 | 10/20 | 11/20 | 12/20 | 1/21 | 2/21 | 3/21 | 7/20 | 8/20 | 9/20 | 10/20 | 11/20 | 12/20 | 1/21 | 2/21 | 3/21 |
Q1 | CBOE SPX Volatility Index (VIX) | ML Option Volatility Estimate Index (RHS) | Q1 | US Bank MBS Holdings | FOMC Agency MBS Holdings |
Data as of 3/31/21
Sources: Bloomberg and JP Morgan
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Agency RMBS Market
Significant Fed and commercial bank demand tightened spreads despite historically fast prepayment speeds and modestly weaker TBA dollar roll market
Agency MBS Performance vs. Swaps (bps) | Specified Pool Payups | ||
(150k Max, in Points) | |||
300 | 300 | 6.0 | 6.0 |
250 | 250 | ||
200 | 200 | ||
150 | 150 | 4.0 | 4.0 |
100 | 100 | ||
50 | 50 | ||
0 | 0 | ||
-50 | -50 | 2.0 | 2.0 |
-100 | -100 | ||
-150 | -150 | ||
-200 | -200 | 0.0 | 0.0 |
7/20 | 8/20 | 9/20 | 10/20 | 11/20 | 12/20 | 1/21 | 2/21 | 3/21 | 7/20 | 8/20 | 9/20 | 10/20 | 11/20 | 12/20 | 1/21 | 2/21 | 3/21 | |
MBS 2% | MBS 2.5% | MBS 3% | Q1 | FNMA 30yr 2% MLB | FNMA 30yr 2.5% MLB | FNMA 30yr 3% MLB | ||||||||||||
Generic Prepayment Speeds (CPR) | Dollar Roll Implied Financing Rate | |||||||||||||||||||||||
60 | 60 | 3% | 3% | |||||||||||||||||||||
50 | 50 | |||||||||||||||||||||||
40 | 40 | 1% | 1% | |||||||||||||||||||||
30 | 30 | |||||||||||||||||||||||
20 | 20 | -1% | -1% | |||||||||||||||||||||
10 | 10 | |||||||||||||||||||||||
0 | 0 | -3% | -3% | |||||||||||||||||||||
1/20 | 2/20 | 3/20 | 4/20 | 5/20 | 6/20 | 7/20 | 8/20 | 9/20 | 10/20 | 11/20 | 12/20 | 1/21 | 2/21 | 3/21 | 7/20 | 8/20 | 9/20 | 10/20 | 11/20 | 12/20 | 1/21 | 2/21 | 3/21 | |
Q1 | FNMA 30Y 2% | FNMA 30Y 2.5% | FNMA 30Y 3% | Q1 | FNMA 2% | FNMA 2.5% | FNMA 3% |
Data as of 3/31/21
Sources: Bloomberg and JP Morgan
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Invesco Mortgage Capital Inc. published this content on 06 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 May 2021 12:14:04 UTC.