INVESCO MORTGAGE CAPITAL INC

Welcome to Invesco's Mortgage Capital IMC Second Quarter 2020 Investors Conference Call. All participants are in a listen-only mode until the question and answer session. At that time, please press star followed by the one on your telephone. As a reminder, this call is being recorded. Now, I would like to turn over the call to Jack Bateman in Investor Relations. Mr. Bateman, you may begin the call. Thank you.

Thank you, and welcome to the Investor Mortgage Capital second quarter 2020 earnings call. The management team and I are delighted you 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 guaranteed. 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 risks described in our most recent annual report on Form 10-K and subsequent filings of the SEC. Invesco 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 Q2 2020 Earnings Presentation link under Investor Relations. Again, welcome and thank you for joining us today. I'll now turn over the call to John Anzalone. John?

Okay, thank you. Good morning and welcome to Invesco Mortgage Capital second quarter earnings call. I will give some brief comments before turning the call over to our Chief Investment Officer Brian Norris to discuss the current portfolio in more detail. The second quarter was an eventful one. In the beginning of the quarter, the financial markets were still in the midst of an unprecedented liquidity event as economic activity shut down to combat the COVID-19 pandemic. As we noted in our last update, This triggered dislocations across the structured security space that impacted our ability to meet margin calls. In response to the crisis, we took a number of steps to increase our liquidity position while reducing leverage. Over the course of the quarter, we sold 6.9 billion of investments and repaid 6.3 billion of repurchase agreements. We also reduced our secured loans by 610 million. We elected to hold $1.6 billion of mostly non-agency CMBS and GSC credit risk transfer paper that would benefit as market conditions improved. On slide three of the deck, you can see a breakdown of the composition and credit quality of these holdings as of 6-30. Slide four provides more details about our response to the dislocations in the financial markets that we saw at the end of March. Our immediate goals were to reduce our exposure to mark-to-market financing and credit assets, to increase liquidity and to retain credit assets that we felt were poised to benefit as markets recovered. To that end, we were successful in eliminating our credit repo entirely. At quarter end, we only had 740 million of secured financing left, and we've continued to reduce that number in July. This led to a decrease in leverage to 0.6 times at 630. We improved our liquidity position, increasing our cash and unencumbered assets by $585 million to $825 million. Finally, the credit assets that we retained have benefited from the market recovery, and we have used proceeds from further sales to begin to invest back into agency assets. I'll wrap on slide five. As we move forward into the second half of the year, our goal is to restore meaningful court earnings for our shareholders. This would involve redeploying capital away from our credit positions as we make opportunistic sales into agency mortgages, which will provide income generation and liquidity. On the credit side, we'll continue to look for opportunities and not rely on short-term mark-to-market financing to generate an attractive return. I'll stop here and let Brian discuss the current portfolio and our growth-forward strategy in more detail.