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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 June 30, 2020
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
ivr-20200630_g1.jpg
Invesco Mortgage Capital Inc.
(Exact Name of Registrant as Specified in Its Charter)
_______________________________________________
Maryland26-2749336
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
1555 Peachtree Street, N.E., Suite 1800,
Atlanta,Georgia30309
(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 ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareIVRNew York Stock Exchange
7.75% Series A Cumulative Redeemable Preferred StockIVRpANew York Stock Exchange
7.75% Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock IVRpBNew York Stock Exchange
7.50% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock IVRpCNew 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 July 31, 2020, there were 181,327,368 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 amountsJune 30, 2020December 31, 2019
ASSETS
Mortgage-backed and credit risk transfer securities, at fair value (including pledged securities of $1,070,928 and $21,132,742, respectively)
1,584,158  21,771,786  
Cash and cash equivalents270,161  172,507  
Restricted cash1,409  116,995  
Due from counterparties  32,568  
Investment related receivable 14,232  67,976  
Derivative assets, at fair value  18,533  
Other assets (including pledged security of $44,654 as of December 31, 2019)
79,512  166,180  
Total assets 1,949,472  22,346,545  
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements  17,532,303  
Secured loans740,000  1,650,000  
Derivative liabilities, at fair value507  352  
Dividends payable6,339  74,841  
Investment related payable31,500  99,561  
Accrued interest payable167  43,998  
Collateral held payable  170  
Accounts payable and accrued expenses2,606  1,560  
Due to affiliate10,561  11,861  
Total liabilities 791,680  19,414,646  
Commitments and contingencies (See Note 14)
Stockholders' 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; 181,327,368 and 144,256,357 shares issued and outstanding, respectively
1,813  1,443  
Additional paid in capital3,313,801  2,892,652  
Accumulated other comprehensive income106,348  288,963  
Retained earnings (distributions in excess of earnings)(2,827,494) (814,483) 
Total stockholders’ equity1,157,792  2,931,899  
Total liabilities and stockholders' equity1,949,472  22,346,545  
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 June 30,Six Months Ended June 30,
$ in thousands, except share amounts2020201920202019
Interest Income
Mortgage-backed and credit risk transfer securities29,628  200,737  215,164  386,229  
Commercial and other loans545  1,484  1,708  3,066  
Total interest income30,173  202,221  216,872  389,295  
Interest Expense
Repurchase agreements (1)
(1,270) 117,978  77,772  219,853  
Secured loans1,712  11,258  8,358  22,402  
Total interest expense442  129,236  86,130  242,255  
Net interest income29,731  72,985  130,742  147,040  
Other Income (loss)
Gain (loss) on investments, net(306,366) 302,182  (1,061,849) 570,564  
Equity in earnings (losses) of unconsolidated ventures318  702  488  1,394  
Gain (loss) on derivative instruments, net(343) (344,733) (911,122) (546,193) 
Realized and unrealized credit derivative income (loss), net(2,738) (2,438) (35,790) 5,446  
Net gain (loss) on extinguishment of debt3,701    (1,107)   
Other investment income (loss), net731  1,007  1,534  2,036  
Total other income (loss)(304,697) (43,280) (2,007,846) 33,247  
Expenses
Management fee – related party9,793  9,370  20,746  18,904  
General and administrative4,080  1,999  7,181  4,257  
Total expenses13,873  11,369  27,927  23,161  
Net income (loss)(288,839) 18,336  (1,905,031) 157,126  
Dividends to preferred stockholders11,106  11,106  22,213  22,213  
Net income (loss) attributable to common stockholders(299,945) 7,230  (1,927,244) 134,913  
Earnings (loss) per share:
Net income (loss) attributable to common stockholders
Basic(1.80) 0.06  (11.91) 1.08  
Diluted(1.80) 0.06  (11.91) 1.08  
(1)Negative interest expense on repurchase agreements for the three months ended June 30, 2020 consists of $3.2 million of current period interest expense on repurchase agreements and $4.5 million of amortization of net deferred gains on de-designated interest rate swaps. For further information on amortization of amounts classified in accumulated other comprehensive income before we discontinued hedge accounting, see Note 8 - "Derivatives and Hedging Activities" and Note 12 - "Stockholders' Equity".
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
 
Three Months Ended June 30,Six Months Ended June 30,
$ in thousands2020201920202019
Net income (loss)(288,839) 18,336  (1,905,031) 157,126  
Other comprehensive income (loss):
Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net(53,271) 47,188  (239,876) 99,537  
Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net34,782  (121) 71,739  10,026  
Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense(4,503) (5,916) (14,570) (11,767) 
Currency translation adjustments on investment in unconsolidated venture(388) (320) 92  (596) 
Total other comprehensive income (loss)(23,380) 40,831  (182,615) 97,200  
Comprehensive income (loss)(312,219) 59,167  (2,087,646) 254,326  
Less: Dividends to preferred stockholders(11,106) (11,106) (22,213) (22,213) 
Comprehensive income (loss) attributable to common stockholders(323,325) 48,061  (2,109,859) 232,113  

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

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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2020 and June 30, 2020
(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 amountsCommon Stock
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20195,600,000  135,356  6,200,000  149,860  11,500,000  278,108  144,256,357  1,443  2,892,652  288,963  (814,483) 2,931,899  
Cumulative effect of adoption of new accounting principle—  —  —  —  —  —  —  —  —  —  342  342  
Net loss—  —  —  —  —  —  —  —  —  —  (1,616,192) (1,616,192) 
Other comprehensive loss—  —  —  —  —  —  —  —  —  (159,235) —  (159,235) 
Proceeds from issuance of common stock, net of offering costs—  —  —  —  —  —  20,700,000  207  346,819  —  —  347,026  
Stock awards—  —  —  —  —  —  10,000  —  —  —  —  —  
Common stock dividends—  —  —  —  —  —  —  —  —  —  (82,483) (82,483) 
Preferred stock dividends—  —  —  —  —  —  —  —  —  —  (11,107) (11,107) 
Amortization of equity-based compensation—  —  —  —  —  —  —  —  131  —  —  131  
Balance at March 31, 20205,600,000  135,356  6,200,000  149,860  11,500,000  278,108  164,966,357  1,650  3,239,602  129,728  (2,523,923) 1,410,381  
Net loss—  —  —  —  —  —  —  —  —  —  (288,839) (288,839) 
Other comprehensive loss—  —  —  —  —  —  —  —  —  (23,380) —  (23,380) 
Stock awards—  —  —  —  —  —  22,500  —  —  —  —  —  
Common stock dividends—  —  —  —  —  —  16,338,511  163  74,071  —  (3,626) 70,608  
Preferred stock dividends—  —  —  —  —  —  —  —  —  —  (11,106) (11,106) 
Amortization of equity-based compensation—  —  —  —  —  —  —  —  128  —  —  128  
Balance at June 30, 20205,600,000  135,356  6,200,000  149,860  11,500,000  278,108  181,327,368  1,813  3,313,801  106,348  (2,827,494) 1,157,792  

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






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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
For the three months ended March 31, 2019 and June 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 amountsCommon Stock
SharesAmountSharesAmountSharesAmountSharesAmount
Balance at December 31, 20185,600,000  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, 20195,600,000  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, 20195,600,000  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  

The accompanying notes are an integral part of these condensed consolidated financial statements.
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INVESCO MORTGAGE CAPITAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Six Months Ended June 30,
$ in thousands20202019
Cash Flows from Operating Activities
Net income (loss)(1,905,031) 157,126  
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of mortgage-backed and credit risk transfer securities premiums and (discounts), net