INVESCO MORTGAGE CAPITAL INC

Welcome to the Invesco Mortgage Capital, Inc.' 's first quarter 2021 investor conference call. All participants will be in a listen-only mode until the question and answer session. At that time, to ask a question, press the star followed by the one on your telephone. As a reminder, this call is being recorded. Now, I would like to turn the call over to Jack Bateman in investor relations. Mr. Bateman, you may begin.

Thank you and welcome to the Invesco Mortgage Capital first quarter 2021 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 guarantees. They involve risks, uncertainties, and assumptions, and there can be no assurance that actual results will not differ materially from our expectations. For discussion of these risks and uncertainties, please see the risks described in our most recent annual report on Form 10-K and subsequent filings with 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 Q1 2021 earnings presentation link under investor relations. Again, welcome and thank you for joining us today. I'll now turn the call over to John Angelo. 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 Chief Investment Officer, Brian Norris, to discuss the current portfolio in more detail. Also joining us on the call to participate in the Q&A are our President, Kevin Collins, our CFO, Lee Fegley, and our COO, Dave Lyle. I'm pleased to announce that court earnings came in at $0.11 per share for the quarter, exceeding our recently increased dividend of $0.09 per share and a penny better than last quarter. The increased core run rate reflects the benefit of having our portfolio fully reallocated to an agency-focused strategy, as well as a successful deployment of $161 million of common equity that we raised during the quarter. Our book value was down 5.4% for the quarter to $365 per share. The decrease in book value reflected the underperformance of lower-coupon mortgages, as well as the repricing of payups on specified pool collateral. which fell as the market priced in slower prepayment speeds as mortgage rates increased. The combination of the increased dividend and the decline in book value produced an economic return of negative 3.1% for the quarter, compared to increases of 11% and 13.5% during the third and fourth quarters of 2020, respectively. Our cumulative economic return since June 30, 2020, was 22.1%. During the quarter, optimism around the prospects for increased economic activity was driven by the potential impact of stimulus programs, the continued rollout of vaccinations, and the significant decline in new infections. While this renewed optimism was supportive of many risk markets through the quarter, fixed income investors began pricing in the potential for higher inflation. In fact, we saw price increases across commodities as well as in broader inflation gauges during the quarter. And Treasury break-even rates, which reflect the market's expectation of future inflation, reached multi-year highs. These inflation fears led to sharp increases in both rate volatility and in the long end of the yield curve. These factors contributed to the underperformance of lower coupon agency mortgages during the quarter, despite continued strong demand from the Fed. While a steeper curve in slowing prepayment speeds contribute to a better environment for prospective ROEs, These factors also caused repricing of payups on specified pool collateral as the value of prepayment protection decreased. Brian will get into the details in a minute, but we ended the quarter with 99% of our assets and 91% of our equity invested in agency mortgages, reflecting the completed reallocation of the portfolio. Our liquidity position remained strong as we had $693 million of unrestricted cash and unencumbered assets at quarter end. As we look out over the next several quarters, we expect demand from the Federal Reserve and commercial banks to be supportive of valuations despite relatively tight spreads, elevated interest rate volatility, and an increase in net supply. Our focus on active management and security selection when purchasing specified pool collateral helps to mitigate these risks, and we believe a steeper yield curve, slowing prepayment speeds, and an attractive funding environment should improve agency mortgage ROEs. I'll stop here and let Brian go through the portfolio.