Invesco Mortgage Capital Inc.

What they do

The company is primarily focused on investing in, financing and managing mortgage-backed securities and other mortgage-related assets, with the objective of providing attractive risk-adjusted returns primarily through dividends and secondarily through capital appreciation. As of June 30, 2026 it was invested in Agency RMBS, Agency CMBS and to-be-announced securities forward contracts to purchase Agency RMBS, and during the periods presented also in non-Agency CMBS and non-Agency RMBS. It conducts business through its wholly-owned subsidiary IAS Operating Partnership L.P. and is externally managed by Invesco Advisers, Inc., an indirect wholly-owned subsidiary of Invesco Ltd. It has no employees and has elected to be taxed as a REIT, generally required to distribute at least 90% of REIT taxable income annually.

Revenue drivers

• Agency RMBS — Largest portfolio component at $6.0 billion of the $8.2 billion investment portfolio at June 30, 2026; earns net interest income from the spread between asset yields and repurchase agreement borrowing costs.
• Agency TBA — $1.2 billion of the $8.2 billion portfolio at June 30, 2026, held via to-be-announced forward contracts to purchase Agency RMBS.
• Agency CMBS — $0.9 billion of the $8.2 billion portfolio at June 30, 2026; management cites stability, attractive relative valuations and predictable cashflows.
• Net interest spread / carry — Total interest income of $85.4 million against total interest expense of $55.3 million in Q2 2026 on average earning assets of $6,631.0 million and average borrowings of $5,927.7 million.

Recent performance

For Q2 2026, the company reported net income per common share of $0.34 versus a net loss of $0.28 in Q1 2026, and earnings available for distribution per common share of $0.50 versus $0.55 in Q1 2026. Monthly common stock dividends totaled $0.36 per share, unchanged from Q1 2026. Book value per common share was $8.03 at June 30, 2026, compared with $8.08 at March 31, 2026, and economic return was 3.8% versus (3.2)% in Q1 2026. The debt-to-equity ratio was 6.3x versus 6.1x at March 31, 2026, while the economic debt-to-equity ratio was unchanged at 7.5x. Total interest income rose to $85.4 million from $79.6 million in Q1 2026.

Strategy

The company continuously evaluates new investment opportunities to complement its current portfolio by expanding target assets and portfolio diversification. It operates as a levered investor in Agency RMBS, Agency CMBS and Agency TBA, with an economic debt-to-equity ratio of 7.5x at June 30, 2026, and held $548.3 million of unrestricted cash and unencumbered investments. Management is constructive on Agency RMBS and Agency CMBS, citing compelling valuations, moderated interest rate volatility and inflation expectations, contained net issuance, and supportive broad-based investor demand. It maintains REIT qualification by distributing at least 90% of REIT taxable income annually and operates to remain excluded from the Investment Company definition under the 1940 Act. Portfolio management is delegated to the external Manager, Invesco Advisers, Inc., under Board supervision.

Risks

• Interest rate fluctuations — Fluctuations in interest rates could adversely affect the value of investments and derivative financial instruments and cause interest expense to increase, reducing earnings and dividends.
• Leverage and repurchase financing — The strategy involves significant leverage, and the company depends on repurchase agreement financing to acquire target assets; inability to access this funding on acceptable terms could have a material adverse effect on results.
• Prepayment rates — Prepayment rates may adversely affect the value of the investment portfolio, and market conditions may upset the historical relationship between interest rate changes and prepayment trends.
• Spread and market value risk — Spread risk is inherent as a levered investor in target assets, and a decline in the market value of MBS may adversely affect results of operations and financial condition.

Outlook

Management states its outlook for Agency RMBS and Agency CMBS remains constructive, believing valuations remain compelling as interest rate volatility and inflation expectations have moderated from first quarter peaks. It cites favorable supply and demand dynamics, with net issuance expected to be contained and broad-based investor demand supportive. Agency CMBS is viewed as well positioned given attractive risk-adjusted yields, relatively low sensitivity to interest rate fluctuations, and diversification benefits. Management describes these macroeconomic and market technical factors as creating a favorable backdrop for the investment strategy entering the second half of 2026, while noting uncertainty around monetary policy and geopolitical developments persists.