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Invesco Mortgage Capital Inc. (IVR)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 GAAP EPS was $0.74, a clear beat versus Wall Street consensus EPS of $0.58*, while Earnings Available for Distribution (EAD) per share held flat at $0.58; revenue also beat with actual $57.94m* vs $45.40m* consensus .
  • Book value per common share rose 4.5% q/q to $8.41 and economic return was +8.7% (BV +$0.36 plus $0.34 dividend), reflecting stronger Agency RMBS performance and a tailwind from swap spreads reversing part of Q2 tightening .
  • Leverage ticked up modestly to 6.7x (from 6.5x) and the Company raised $36.1m via ATM while repurchasing 89,223 preferred shares, continuing capital structure optimization .
  • Management remains constructive on Agency RMBS (lower rate vol, steeper curve), sees balanced near‑term risks after recent outperformance, and highlighted expected demand support from anticipated bank regulatory capital changes .
  • Near-term stock reaction catalysts: consensus EPS beat, BV up q/q, and public update that estimated BV as of Oct 24, 2025 was $8.31–$8.65 .
    Values marked with an asterisk (*) are retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • Book value per share increased 4.5% q/q to $8.41 and economic return was +8.7% in Q3, driven by strong Agency RMBS performance and swap spread tailwinds; CEO: “These factors led to a 4.5% increase in book value… and… resulted in a positive economic return of 8.7%” .
  • Funding costs improved at period-end (weighted average cost of funds 4.35% vs 4.48% in Q2), and effective net interest income was stable ($46.8m vs $46.4m), supporting dividend coverage .
  • Liquidity and flexibility: $423m of unrestricted cash and unencumbered investments at quarter end; portfolio scaled to $5.7B with $4.8B Agency RMBS and $0.9B Agency CMBS .

What Went Wrong

  • Margins compressed sequentially: average net interest margin fell to 0.90% (from 0.94% in Q2) and effective interest rate margin declined to 3.28% (from 3.44%) .
  • Elevated prepayment risk in higher coupons after mortgage rates declined ~50 bps; CIO flagged faster refi response in September and expected speeds to ease in November, underscoring premium price sensitivity .
  • Repo market pressure emerged late Q3 with modest spread widening; CIO noted balance-sheet squeeze and the Fed’s QT-end move as a response, highlighting funding environment vigilance .

Financial Results

Core financials and per-share metrics (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Interest Income ($USD Millions)$73.846 $70.624 $72.916
Net Interest Income ($USD Millions)$18.821 $17.729 $17.614
Net Income Attrib. to Common ($USD Millions)$16.289 ($26.567) $50.208
EPS (Basic) ($USD)$0.26 ($0.40) $0.74
Earnings Available for Distribution ($USD Millions)$40.047 $38.191 $39.026
EAD per Common Share ($USD)$0.64 $0.58 $0.58
Average Net Interest Rate Margin (%)0.99% 0.94% 0.90%
Effective Interest Rate Margin (%)3.27% 3.44% 3.28%
Book Value per Common Share ($USD)$8.81 $8.05 $8.41
Debt-to-Equity (x)7.1x 6.5x 6.7x
Dividend per Common Share ($USD)$0.34 $0.34 $0.34

Year-over-year snapshot

MetricQ3 2024Q3 2025
Net Interest Income ($USD Millions)$7.510 $17.614
EPS (Basic) ($USD)$0.63 $0.74
Average Net Interest Rate Margin (%)0.01% 0.90%
Effective Interest Rate Margin (%)3.28% 3.28%

Segment/Portfolio Breakdown

MetricQ2 2025Q3 2025
Total MBS Portfolio ($USD Thousands)$5,185,559 $5,749,238
Agency RMBS ($USD Thousands; % of Portfolio)$4,222,203; 81.4% $4,778,759; 83.1%
Agency CMBS ($USD Thousands; % of Portfolio)$891,521; 17.2% $899,519; 15.7%
Agency-CMO ($USD Thousands; % of Portfolio)$71,835; 1.4% $70,960; 1.2%
Period-end Weighted Avg Yield (Total MBS) (%)5.46% 5.42%

KPIs and capital actions

KPIQ2 2025Q3 2025
Average Earning Assets ($USD Millions)$5,078.9 $5,382.2
Average Borrowings ($USD Millions)$4,577.6 $4,889.8
Effective Net Interest Income ($USD Millions)$46.4 $46.8
Effective Cost of Funds (%)2.12% 2.14%
Period-end Weighted Avg Cost of Funds (%)4.48% 4.35%
Total Borrowings (Repo) ($USD Thousands)$4,635,881 $5,150,081
Cash & Cash Equivalents ($USD Thousands)$59,396 $58,539
Unrestricted Cash + Unencumbered Investments ($USD Millions)$362 $423
ATM Common Shares Issued (#)282,750 4,638,385
Preferred Shares Repurchased (#)96,803 89,223

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per Common Share ($)Q3 2025$0.34 (Q2) $0.34 (declared Sept 24; paid Oct 24) Maintained
Book Value per Common Share (Estimate) ($)As of Oct 24, 2025N/A$8.31–$8.65 Updated disclosure
Debt-to-Equity (x)Quarter-end stance6.5x (Q2) 6.7x (Q3) Slightly higher
Portfolio Mix (narrative)OngoingRMBS overweight; CMBS for diversification Constructive RMBS; CMBS maintained Maintained narrative

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Monetary policy & volatilityQ1: Policy uncertainty, lower long‑dated vol ; Q2: Tariff shock, vol spike then decline Fed cut 25bps in Sep and again; QT ending; vol declined notably Easing policy; sustained lower vol
Swap spreads & hedgingQ2: Swap spreads tightened sharply; swaps ~80% of hedges Spreads widened (tailwind); hedge ratio down to ~85% with more Treasury futures Normalizing, supportive
Funding (repo)Q2: Funding stable; haircuts unchanged Late‑Q3 repo pressure; QT end likely in response Watch for stabilization
Agency RMBS performanceQ2: Underperformed early, recovered; focus on higher coupons Strong performance amid lower vol; specified pool payouts improved Positive carry, balanced risk
PrepaymentsQ2: Lower loan balance stories favored Faster refi response in Sept; speeds >10 CPR; expected moderation in Nov Transient uptick; managed via pool selection
Agency CMBS positioningQ2: Maintained allocation; ROEs low/mid teens Offers risk-adjusted yields with less rate sensitivity; allocation held Diversification role intact
Regulatory capitalLimited in prior quartersAnticipated bank capital rule changes could boost RMBS/CMBS demand Potential secular demand tailwind
Dividend/ROEQ2: Dividend covered by earnings; leverage prudent Levered gross returns in upper teens; dividend to book yield supported Carry supportive

Management Commentary

  • CEO: “These factors led to a 4.5% increase in book value per common share to $8.41 at quarter end, and… resulted in a positive economic return of 8.7% for the quarter.”
  • Strategic stance: “We remain constructive on Agency RMBS… [and] Agency CMBS continues to offer attractive risk‑adjusted yields and diversification benefits… Lastly, we believe anticipated changes to bank regulatory capital rules would increase demand…” .
  • Capital and positioning: “Debt‑to‑equity ratio was 6.7x… $5.7 billion investment portfolio consisted of $4.8 billion Agency RMBS and $0.9 billion Agency CMBS… unrestricted cash and unencumbered investments totaling $423 million.” .
  • Post‑quarter update: “As of last night’s close, we estimate book value was up approximately 1.5% since quarter end.” .
  • Hedging: “Swap spreads… unwinding a portion of the tightening… serving as a tailwind… we maintain our preference for interest rate swaps over U.S. Treasury futures.” .

Q&A Highlights

  • Hedge mix and curve view: Team reduced steepener exposure and shifted hedges to the front end; still lightly long model duration due to premium pool mix; preference for swaps remains .
  • Returns and dividend: Levered gross returns in upper teens; net returns mid‑teens, supportive of dividend-to-book yield; modest compression observed in October post‑Fed meeting .
  • Capital actions: Preferred buybacks small and opportunistic; common issuance at discount paused; buybacks only if persistent discount and fewer accretive opportunities .
  • Relative value: Agency RMBS ROE remains more attractive; Agency CMBS offers diversification with lower rate sensitivity; allocation maintained .
  • Funding and CMBS: Repo markets for Agency CMBS remain robust even in widening events; expect CMBS spreads to tighten with Fed cuts, tracking lower coupon RMBS with lower beta .

Estimates Context

MetricQ2 2025 ConsensusQ2 2025 ActualQ3 2025 ConsensusQ3 2025 Actual
EPS (Primary) ($USD)0.573*0.58 0.580*0.58
EPS – # of Estimates6*—5*—
Revenue ($USD)$46.21m*($18.46m)*$45.40m*$57.94m*
Revenue – # of Estimates1*—1*—
  • Q3 2025: EPS beat (actual vs 0.58* consensus) and revenue beat (actual $57.94m* vs $45.40m*), consistent with stronger Agency RMBS marks and swap spread tailwinds .
    Values marked with an asterisk (*) are retrieved from S&P Global.

Key Takeaways for Investors

  • Clear beat on GAAP EPS with flat EAD/share; the combination of BV accretion and maintained dividend is supportive for near‑term sentiment .
  • Carry remains attractive: levered gross returns in upper teens and effective net interest income stable, though margins compressed sequentially; watch spread/vol dynamics .
  • Portfolio skew to Agency RMBS with specified pools mitigates prepayment risk, but premium price exposure increases sensitivity to rate rallies; monitor CPR trends .
  • Funding watch: late‑Q3 repo pressures emerged; QT end should help, but continued stabilization is a tactical driver for spread performance .
  • Hedge alpha: swap spread normalization is a tailwind after Q2 tightening; mix shifting slightly toward Treasury futures but swaps remain preferred .
  • Governance/capital: small preferred buybacks and prior ATM raises continue to lower cost of capital and support scale without stressing leverage (now 6.7x) .
  • Trading lens: catalysts include further Fed easing, lower rate vol, and any confirmation of rising bank demand for RMBS/CMBS under anticipated capital rules—positive for sector multiples .