Invesco Mortgage Capital : Q1 2026 Invesco Mortgage Capital Inc. Earnings Conference Call

About this update from Invesco Mortgage Capital Inc

Invesco Mortgage Capital Inc. First Quarter 2026 Earnings Call May 1, 2026 Kevin Collins Chief Executive Officer Dave Lyle President Mark Gregson Chief Financial Officer Brian Norris Chief Investment Officer Q1 2026 Results Q1 26 ($0.28) Q4 25 $0.68 Financial Results Investment Allocation Earnings available for distribution per common share 1 $0.55 $0.56 Common stock dividends per share $0.36 $0.36 Book value per common share 2 $8.08 $8.72 Economic return 2 (3.2%) 8.0% Debt-to-equity ratio 6.1x 7.0x Economic debt-to-equity ratio 1 7.5x 7.0x Company Activity Net income (loss) per common share Agency RMBS 70.2% $7.3 billion Agency CMBS 11.9% Agency CMO 1.0% Agency TBA 16.9% Raised $133.6 million, net of issuance costs, through our at-the-market common stock program Repurchased Series C Preferred Stock with a carrying value of $1.6 million Held $493.1 million of unrestricted cash and unencumbered investments at quarter end Earnings available for distribution and economic debt-to-equity ratio are non-GAAP financial measures. Refer to Appendix for additional information Refer to Appendix for additional information Past performance is not a guarantee of future results Macro Environment The yield curve bear flattened as increased inflationary pressures reduced expectations for near-term easing of monetary policy, leading to a sharp reversal in the recent downward trend of interest rate volatility Treasury Yields Money Market Rates 5.5% 5.0% 4.5% 4.0% 3.5% 5.0% 4.5% 4.0% 3.0% 0 yr 5 yr 10 yr 15 yr 20 yr 25 yr 30 yr 3/31/2025 12/31/2025 3/31/2026 3.5% 3/25 6/25 9/25 12/25 3/26 Agency MBS Repo 1 Month SOFR 3 Month SOFR Federal Funds Futures 4.5% Interest Rate Volatility (basis points) 140 4.0% 120 3.5% 100 3.0% 80 2.5% 3/26 9/26 3/27 9/27 3/28 9/28 3/31/2025 12/31/2025 3/31/2026 Current 60 3/25 6/25 9/25 12/25 3/26 3M X 10Y Swaption Volatility 3Y X 10Y Swaption Volatility Agency RMBS Market Agency mortgages performed well in January, supported by the GSE MBS purchase program announcement, but underperformed into quarter end as the Middle East conflict led to increased interest rate volatility Performance vs. Treasuries 1 (basis points) 300 Specified Pool Pay-ups ($200k max, in points) $2.5 200 $2.0 100 $1.5 0 $1.0 (100) (200) 3/25 6/25 9/25 12/25 3/26 Spread to Treasuries 2 (basis points) 150 125 100 75 $0.5 $0.0 3/25 6/25 9/25 12/25 3/26 FNMA 4.5% FNMA 5.0% FNMA 5.5% FNMA 6.0% Dollar Roll Implied Financing Rate 5.5% 4.5% 3.5% 50 3/25 6/25 9/25 12/25 3/26 30 year current coupon hedged performance vs. Treasuries 30 year current coupon zero volatility spread to Treasuries Data as of 3/31/2026 2.5% 3/25 6/25 9/25 12/25 3/26 FN 4.5% FN 5.0% FN 5.5% FN 6.0% 1M SOFR 5 Agency RMBS Investments Coupon Allocation 40% 29.7% 30.1% 28.0% 28.4% 28.9% 29.6% 24.2% 21.2% 20.0% 19.0% 14.8% 13.2% 8.8% 4.1% 30% 20% 10% 0% 3/31/25 12/31/25 3/31/26 Agency RMBS investment portfolio increased 19.1% to $6.3 billion in Q1 2026 Net purchased $1.3 billion during the quarter to invest proceeds from ATM issuance and re-invest paydowns Purchases primarily consisted of Agency TBA securities given their relative attractiveness compared to specified pools during the quarter Agency TBA weighted average coupon of 4.8% Pay-ups on higher coupon specified pools improved given increased demand for prepayment protection 4.5% 5.0% 5.5% 6.0% 6.5% Specified Pool Allocation Q1 2026 specified pool characteristics 12.0% CPR 50% 40% 30% 3/31/25 12/31/25 3/31/26 Weighted average coupon of 5.3% Amortized cost to principal balance ratio of 99.3% Period-end weighted average specified pool pay-up of 1.0 points 39.8% 36.3% 32.8% 30.3% 26.1% 21.0% 19.4% 19.8% 17.7% 16.0% 16.4% 13.3% 11.1% 20% 10% 0% Agency TBA Loan Balance Geographic Location Low Credit Score High LTV Agency RMBS investment portfolio includes specified pools at fair value and Agency TBAs at implied market value Agency CMBS Investments Allocation Agency CMBS investment portfolio of $864 million at quarter end Freddie Multi PCs 20.0% Spread to Treasuries (basis points) 70 $864 million Fannie DUS 80.0% Risk premiums contracted notably as elevated issuance was met with bank and money manager demand Agency CMBS benefits from: Guarantee of principal and interest from the issuing agency or federally chartered corporation Lower sensitivity to interest rate volatility than Agency RMBS given prepayment protection and balloon payments at maturity Favorable financing terms with multiple counterparties 60 50 40 30 3/25 6/25 9/25 12/25 3/26 Fannie DUS 10/9.5 spread data as of 3/31/2026 7 Source: JP Morgan Financing & Hedging Cost of Funds Protection 1 (in billions) $5.4 $5.6 $5.2 $5.3 $4.9 $5.1 $4.5 $4.6 $4.3 $4.4 $6.0 $5.0 $4.0 $3.0 $2.0 $1.0 100% 90% 80% 70% 60% 50% Hedge Portfolio Composition $0.0 Mar-25 Jun-25 Sept-25 Dec-25 Mar-26 Repurchase Agreements Hedge Notional Hedge Ratio (RHS) 40% Maturities 2 Treasury Futures Notional ($ millions) Interest Rate Swap Notional ($ millions) Interest Rate Swap Pay Rate 3 Less than 3 years - 1,675 0.86% 3 to 5 years - 950 0.54% 5 to 7 years - 545 3.66% 7 to 10 years 685 495 3.99% 10+ years 305 450 2.04% Total $990 $4,115 1.66% Financed Agency RMBS and Agency CMBS investments with repurchase agreements across 21 counterparties Hedged 96% of borrowing costs with interest rate swaps and U.S. Treasury futures Debt-to-equity ratio of 6.1x and economic debt-to-equity ratio 4 of 7.5x Chart reflects carrying value of repurchase agreement borrowings and total hedge notional amount of interest rate swaps and U.S. Treasury futures Grouped according to weighted average years to maturity for interest rate swaps and average remaining years to maturity of the delivery basket for U.S. Treasury futures Represents period-end weighted average as of March 31, 2026 Economic debt-to-equity ratio is a non-GAAP financial measure. Refer to Appendix for additional information As of March 31, 2026 As of March 31, 2025 Common Stock Preferred Stock Common Stock Preferred Stock IVR IVR-PC IVR IVR-PC 87.5 million 6.8 million 65.9 million 7.1 million $8.08 $23.36 $7.89 $23.78 $8.08 $25.00 $8.81 $25.00 $0.36 $0.46875 $0.34 $0.46875 17.8% 8.0% 17.2% 7.9% $706 million $170 million $581 million $178 million 81% 19% 77% 23% Capital Structure NYSE Ticker Shares Outstanding Share Price Book Value per share 1 Quarterly Dividends per share Annualized Dividend Yield 2 Stockholders' Equity 3 % Stockholders' Equity Refer to Appendix for further information on book value per common share. Book value per share of preferred stock equals liquidation value per share Calculated as annualized dividend per share divided by period end share price, by class respectively Common stockholders' equity is calculated as total stockholders' equity less liquidation preference of Series C Preferred Stock Appendix - Non-GAAP Financial Information 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 and (gain) loss on repurchase and retirement of preferred stock. The Company may add and has added additional reconciling items to its earnings available for distribution calculation as appropriate. 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 when analyzed in conjunction with its U.S. GAAP results, earnings available for distribution provides additional detail of its investment portfolio's earnings capacity. In addition, certain gains and losses represent one-time events. Furthermore, gains and losses have not been accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses may be reflected in net income whereas other gains and losses may be reflected in other comprehensive income. For example, a portion of the Company's mortgage-backed securities were historically classified as available-for-sale securities, and changes in the valuation of these securities were 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 comprehensive income (loss). 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. 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. Appendix - Reconciliation of GAAP to Non-GAAP Financial Information $ in thousands March 31, 2026 December 31, 2025 Net income (loss) attributable to common stockholders Adjustments: (Gain) loss on investments, net $ (23,121) 54,940 $ 48,243 (22,914) Realized (gain) loss on derivative instruments, net (23,324) 18,863 Unrealized (gain) loss on derivative instruments, net 32,023 (4,354) TBA dollar roll income 4,166 - (Gain) loss on repurchase and retirement of preferred stock 27 30 Earnings available for distribution $ 44,711 $ 39,868 The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to earnings available for distribution: The table below shows the components of earnings available for distribution: Three Months Ended Three Months Ended $ in thousands, except per share data March 31, 2026 December 31, 2025 Net interest income Contractual net interest income (expense) on interest rate swaps recorded as gain (loss) on derivative instruments, net $ 27,048 21,578 $ 21,258 26,396 TBA dollar roll income 4,166 - Total expenses (4,891) (4,565) Dividends to preferred stockholders (3,190) (3,221) Earnings available for distribution $ 44,711 $ 39,868 Earnings available for distribution per common share 1 $ 0.55 $ 0.56 1. 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 Appendix - Definitions Agency CMBS - Commercial mortgage-backed securities ("CMBS") that are guaranteed by a U.S. government agency such as the Government National Mortgage Association or a federally chartered corporation such as the Federal National Mortgage Association ("Fannie" or "FN") or the Federal Home Loan Mortgage Corporation ("Freddie") Agency CMO - Collateralized mortgage obligations ("CMO") created from Agency RMBS pools that divide cash flows into different tranches, where each tranche has a different priority for receiving principal and interest payments. All of our Agency CMOs are interest only securities, which are created by separating the principal and interest payments on the underlying loan pool so that the owner receives cash flows based on the interest payments only Agency RMBS - Residential mortgage-backed securities ("RMBS") that are guaranteed by a U.S. government agency such as the Government National Mortgage Association or a federally chartered corporation such as Fannie or Freddie Agency TBA - To-be-announced securities forward contracts ("TBA") to purchase Agency RMBS Book value per common share - Total stockholders' equity ($876.4 million as of March 31, 2026 and $797.5 million as of December 31, 2025 ) less the liquidation preference of the Company's preferred stock ($169.7 million as of March 31, 2026 and $171.4 million as of December 31, 2025 ), divided by total common shares outstanding (87.5 million as of March 31, 2026 and 71.8 million as of December 31, 2025) CPR - The constant prepayment rate is the standard measure of prepayment speeds, also known as the conditional prepayment rate Dollar roll implied financing rate - The reinvestment rate at which an investor is indifferent between rolling a TBA contract forward and holding MBS Economic debt-to-equity ratio - A non-GAAP financial measure calculated as the ratio of total repurchase agreements ($5.3 billion as of March 31, 2026 and $5.6 billion as of December 31, 2025) and TBAs at implied cost basis ($1.2 billion as of March 31, 2026 and none as of December 31, 2025) to total stockholders' equity ($876.4 million as of March 31, 2026 and $797.5 million as of December 31, 2025) Economic return - Economic return for quarter ended March 31, 2026 is defined as the change in book value per common share from December 31, 2025 to March 31, 2026 of ($0.64) plus dividends declared of $0.36 per common share; divided by the December 31, 2025 book value per common share of $8.72. Economic return for the quarter ended December 31, 2025 is defined as the change in book value per common share from September 30, 2025 to December 31, 2025 of $0.31; plus dividends declared of $0.36 per common share; divided by the September 30, 2025 book value per common share of $8.41 Interest Rate Volatility - The forward-looking expectation of future interest rate volatility based on market pricing of a swaption, which is an option to enter into an interest rate swap at a future date. A 3m x 10yr swaption provides the right to enter into a 10-year interest rate swap starting in 3 months. A 3y x 10y swaption provides the right to enter into a 10-year interest rate swap starting in 3 years Secured Overnight Financing Rate ("SOFR") - A broad measure of the cost of borrowing cash overnight collateralized by Treasury securities Attention : This is an excerpt of the original content. To continue reading it, access the original document here .

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