ATLANTA, Aug. 10, 2015 /PRNewswire/ -- Invesco
Mortgage Capital Inc. (NYSE: IVR) today reported that its
previously issued consolidated financial statements as of and for
the years ended December 31, 2013 and
2014 and the interim consolidated financial statements as of and
for the quarter ended March 31, 2013
and all subsequent quarters through the quarter ended March 31, 2015, need to be restated and should no
longer be relied upon. The restatements are due to an error
in the GAAP accounting treatment for certain of the company's
assets – specifically, credit risk transfer securities issued by
government-sponsored enterprises (GSE CRTs) and interest-only
strips of residential mortgage-backed securities that are
guaranteed by a U.S. government agency (Agency MBS IOs).
The company determined that these assets should be viewed for
GAAP accounting purposes as hybrid financial instruments which
require that a portion of the changes in fair value of such assets
be reflected in "income" rather than "other comprehensive income,"
and a portion of interest received from such assets to be
classified as "derivative income" rather than "interest
income."
The company does not believe that the restatements will impact
the company's previously reported book value, economic return,
operating expenses, leverage ratios, taxable income or
comprehensive income (loss) attributable to common
stockholders. Likewise, the restatements are not expected to
impact the company's business strategy or its qualification as a
REIT.
The company expects to report book value per diluted common
share* for the second quarter of 2015 of $18.62. Additionally, the company
anticipates reporting economic return+ for the three
months and six months ended June 30,
2015 of -1.5% and 3.7%, respectively. The company also
anticipates reporting a total debt-to-equity ratio++ of
6.9x as of June 30, 2015.
The company intends to file its second quarter Form 10-Q on or
before August 17, 2015. The
Company intends to file a comprehensive 2014 Form 10-K/A (including
amended financial information for the periods of March 31, 2013 through December 31, 2014) and first quarter 2015 Form
10-Q/A shortly prior to filing its second quarter Form 10-Q.
Earnings call scheduled for August 18,
2015
Members of the investment community and the general public are
invited to listen to the company's second quarter 2015 earnings
conference call to be held on Tuesday,
August 18, 2015, at 9:00 am
ET, by calling one of the following numbers:
North America Toll
Free:
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888-942-8507
|
International:
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415-228-4839
|
Passcode:
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Invesco
|
|
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An audio replay will
be available until 5:00 pm ET on September 1, 2015 by
calling:
|
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866-369-3652 (North
America) or 203-369-0244 (International).
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Additional Information Regarding the Restatement of Financial
Statements
In the fourth quarter of 2013, the company began investing in
GSE CRTs issued by the Federal National Mortgage Association
(Fannie Mae) and the Federal Home Loan Mortgage Corporation
(Freddie Mac). The company applied what it believed to be
appropriate accounting guidance (FASB ASC 320 Investments – Debt
Securities or "ASC 320") to its GRE CRT assets as reported in its
consolidated financial statements. Based on discussions with
peer companies and third party advisors commencing in late
June 2015, the company initiated a
thorough review of its GAAP accounting treatment of GSE CRTs.
Following the review, management determined that it should have
applied the guidance of FASB ASC 815 – Derivatives and Hedging or
"ASC 815." Under ASC 815, changes in fair value of the
embedded credit derivative will be recorded in "other income" on
the consolidated statement of operations, instead of in "other
comprehensive income" on the consolidated balance sheet.
The company accounts for Agency MBS IOs in which we invest under
ASC 320. As an extension of its review of the accounting for
GSE CRTs, the company broadened its inquiry to include a
comprehensive review of its accounting treatment of its
securities. As part of this review, management concluded it
should have been applying the guidance of ASC 815 with respect to
Agency MBS IOs. Accordingly, changes in the fair value of Agency
MBS IOs will be recorded in "other income" on the consolidated
statement of operations, instead of in "other comprehensive income"
on the consolidated balance sheet. Management has
determined that the embedded interest derivative cannot be reliably
valued as a stand-alone instrument and therefore will record the
entire Agency MBS IO change in fair value in the consolidated
statement of operations in accordance with ASC 815.
As a result of applying these changes, the company's previously
reported GAAP net income (loss) and balance sheets will change.
The company intends to amend its annual report on Form 10-K
for the year ended 2014 (which will include amendments to financial
data for the years ended December 31,
2013 and 2014 and the quarters ended March 31, 2013 through December 31, 2014) and its quarterly report on
Form 10-Q for the quarter ended March
31, 2015. The Company intends to file such amended
reports prior to filing its second quarter Form 10-Q. The
company will file today with the U.S. Securities and Exchange
Commission (SEC) a Form 12b-25 for an extension until August 17, 2015, to complete and file its Form
10-Q for the quarter ended June 30,
2015.
Additional details regarding the GAAP guidelines and the
restatements are available in the Form 8-K filed today by the
company with the SEC.
About Invesco Mortgage Capital Inc.
Invesco Mortgage Capital Inc. is a real estate investment trust
that focuses on financing and managing residential and commercial
mortgage-backed securities and mortgage loans. Invesco Mortgage
Capital Inc. is externally managed and advised by Invesco Advisers,
Inc., a subsidiary of Invesco Ltd. (NYSE: IVZ), a leading
independent global investment management firm. Additional
information is available at www.invescomortgagecapital.com.
Disclosures About Forward-Looking Statements
This Press Release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
and is intended to be protected by the safe harbor provided
therein. These statements are based on the current beliefs and
expectations of the company's management and are subject to
significant risks and uncertainties. The above statements
regarding the expected impact and amounts of the restatement, the
anticipated timing of our SEC filings and the estimated financial
results for the second quarter of 2015 constitute forward-looking
statements that are based on our current expectations. The actual
impact and amounts and the detailed presentation of the
restatements will be included in our upcoming SEC filings after we
have completed our work on the restatements and our independent
registered public accounting firm has completed its audit of our
consolidated financial statements for the years ended December 31, 2013 and 2014. There can be no
assurance that the final impact and the amounts of the restatements
will not differ materially from estimates that are described in
this Press Release or that any other information set forth herein
will not change materially before we file our restated consolidated
financial statements.
Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause our
actual results, as well as our expectations regarding materiality
or significance, the restatements' quantitative effects, the
effectiveness of our disclosure controls and procedures, material
weaknesses in internal control over financial reporting, the timing
of the filing of our SEC reports and our estimated financial
results for the second quarter of 2015, to differ materially from
those in the forward-looking statements. These factors include,
among other things, the risk that additional information may arise
from the preparation of our restated financial statements, that our
internal control over financial reporting may be inadequate or have
weaknesses of which we are not currently aware or which have not
been detected and/or that we fail to satisfy certain covenants
relating to financial statement delivery obligations and
representations regarding the company's financial statements
contained in our financing agreements. The company does not
undertake to update the forward-looking statements to reflect the
impact of circumstances or events that may arise after the date of
the forward-looking statements. For a discussion of a variety of
risk factors affecting our business and prospects, see "Item 1A —
Risk Factors" and "Item 7—Management's Discussion and Analysis of
Financial Condition and Results of Operations" in our Annual Report
on Form 10-K for the year ended December 31,
2014, as supplemented by the reports we have filed since the
2014 10-K, which have been filed with the SEC and are available on
our website (www.invescomortgagecapital.com) and on the SEC's
website (www.sec.gov).
* Book value per diluted common share is calculated
as total equity less the liquidation preference of our Series A
Preferred Stock ($140.0 million) and
Series B Preferred Stock ($155.0
million); divided by total common shares outstanding plus
Operating Partnership Units convertible into shares of common stock
(1,425,000 shares).
+ Economic return for the quarter ended
June 30, 2015 is defined as the
change in book value per diluted common share from March 31, 2015 to June 30,
2015 of ($0.75); plus
dividends declared of $0.45 per
common share; divided by the March 31,
2015 book value per diluted common share of $19.37. Economic return for the six months ended
June 30, 2015 is defined as the
change in book value per diluted common share from December 31, 2014 to June
30, 2015 of ($0.20); plus
dividends declared of $0.90 per
common share; divided by the December 31,
2014 book value per diluted common share of $18.82.
++ Debt-to-equity ratio is calculated as the
ratio of total debt (sum of repurchase agreements, secured loans,
asset-backed securities issued by securitization trusts and
exchangeable senior notes) to allocated equity.
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SOURCE Invesco Mortgage Capital Inc.