INVESCO MORTGAGE CAPITAL INC

Welcome to the Invesco Mortgage Capital IMC First Quarter 2020 Investors Conference Call. All participants will be in a listen-only mode until the question and answer session. At that time, to ask a question, please press star followed by the one on your phone. As a reminder, this call is being recorded. Now, I would like to turn the call over to Brandon Burke with Investor Relations. Mr. Burke, you may begin the call.

Thank you and welcome to Invesco Mortgage Capital's first quarter 2020 earnings call. The management team and I are delighted you've joined us and we look forward to sharing with you our prepared remarks and conducting a question and answer session. Before turning the call over to our CEO, John Anzalone, I wanted to provide a reminder that statements made in this conference call and the related presentation may include forward-looking statements which reflect management's expectations about future events and our overall plans and performance. These forward-looking statements are made as of today and are not guarantees. They involve risks, uncertainties, and assumptions, and there can be no assurance that actual results will not differ materially from our expectations. For a discussion of these risks and uncertainties, please see the risk described in our most recent annual report on Form 10-K and subsequent filings with the SEC. The VSCO makes no obligation to update any forward-looking statement. We may also discuss non-GAAP financial measures during today's call. Reconciliations of these non-GAAP financial measures may be found at the end of our earnings presentation. To view the slide presentation today, you may access our website at InvescoMortgageCapital.com and click on the Q1 2020 earnings presentation link under investor relations. Again, welcome and thank you for joining us today. And I'll turn the call over to John Anzalone. John.

Good morning and welcome to Invesco Mortgage Capital's first quarter earnings call. I will give some brief comments before turning the call over to our president and head of commercial credit, Kevin Collins, who will provide greater detail on our current portfolio. and our Chief Investment Officer, Brian Norris, who will expand on our go-forward strategy. Before getting started, I'd like to acknowledge the entire team at Invesco who have put in countless hours managing through this crisis and doing it with the added difficulty of working remotely. There is no way that we would be in the position we are in today without their efforts, so thank you to the entire team. I'd also like to acknowledge the support of both our Board of Directors and the senior management at Invesco who have provided all of the resources necessary to get through this crisis. Towards the end of the first quarter, the onset of the COVID-19 pandemic and the economic shutdown left in its wake caused unprecedented volatility and dislocations throughout the financial markets. Even with rates rallying significantly, prepaid protected specified pool agency mortgage-backed securities significantly underperformed. as agency paper was being sold for cash settled at levels below TBA prices. The structured securities credit markets were hit particularly hard, as liquidity was severely impacted and valuations became distressed. Despite IVR's relatively strong liquidity position coming into the crisis, we sold assets as margin calls accelerated across all of our asset classes. In late March, we decided to discontinue selling our holdings into a deeply distressed market to meet margin calls. So, we suspended margin payments and entered forbearance negotiations with our lenders. Ultimately, we were able to capitalize on improving market conditions to pay off our repo counterparties rather than entering into an onerous comprehensive forbearance agreement. While we are providing information as of 3.31 on Slides 3 and 4 for informational purposes, That snapshot was taken in the middle of our delivering. It does not reflect the portfolio today. Slide six gives a picture of the portfolio as of May 31st. As you can see from the pie chart, our $1.6 billion securities portfolio consists of predominantly non-agency CMBS and residential credit positions. 540 million of that total is unencumbered. The only borrowings we have left are secured federal home loan bank advances of 837 million, which are collateralized by high-quality AAA and AA-rated CMBS. As of 5-31, we estimate that our book value is between 265 and 315 per share, reflecting the continued delivering that took place post-quarter end. Currently, we are holding a credit portfolio with modest leverage that we believe has potential to drive book value upside as credit markets continue to recover. Going forward, our strategy is to reinvest proceeds from these future credit sales into what will become an increasingly agency-focused portfolio. Currently, the outlook for agency mortgages is quite attractive, with strong support from the Fed and an attractive funding environment. This is in contrast to the non-agency credit market, where the pandemic has revealed new risks to the strategy and the cost and stability of short-term mark-to-market funding are not attractive. We believe that we will be able to generate attractive ROEs in coming quarters as we redeploy into the agency strategy. I'll stop here and let Kevin give some details on the credit portfolio.