INVESCO MORTGAGE CAPITAL INC

Welcome to the Invesco Mortgage Capital Second Quarter 2021 Investor Conference Call. All participants are in a listen-only mode until the question and answer session. At that time, to ask a question, please press star 1 on your telephone keypad. As a reminder, this call is being recorded. Now, I would like to turn the call over to Jack Bateman, Investor Relations. Mr. Bateman, you may begin your call.

Thank you, and welcome to the Invesco Mortgage Capital second quarter 2021 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 discussion of these risks and uncertainties, please see the risks described in our most recent annual report on Form 10-K and subsequent refilings with the SEC. Invesco makes no obligation to update any forward-looking statements. 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 2021 Earnings Presentation link under Investor Relations. Again, welcome, and thank you for joining us today. I'll now turn the call over to Jonathan.

Good morning, and welcome to Invesco Mortgage Capital's second quarter earnings call. I'll 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 earnings available for distribution for the second quarter came in at $0.10 per share. As we noted in our press release, we've replaced the term core earnings with earnings available for distribution. This is in keeping with changing industry conventions and does not reflect in change in how the measure is calculated. Despite an extremely challenging quarter for agency mortgages, earnings available for distribution continue to be supported by strong dollar rolls, relatively slow prepayment speeds on our specified pool collateral, and a more favorable reinvestment environment. During the quarter, we made progress in rebalancing our capital structure by redeeming all $140 million of our Series A preferred stock and raising an additional $145.9 million of common equity. The portfolio remains predominantly agency-focused, with 92% of our equity and 99% of our assets allocated to agency mortgages. Our liquidity position remains strong, as we held $651 million of unrestricted cash and unencumbered investments at quarter end. Agency mortgages sharply underperformed during the quarter as elevated net supply, reduced demand from commercial banks, persistent prepayment concerns, and an increased likelihood that the Federal Reserve's timeline for reducing asset purchases would be accelerated more than offset steady Fed demand. Our book value performance reflected this underperformance, ending the quarter down 12 percent to $3.21. Looking ahead, many of the headwinds that the mortgage basis faced during the second quarter remain intact. Prepayment speeds moderated during the quarter but remain elevated, and the lower interest rate environment at quarter end should keep prepayments near historic highs over the coming months. Increases in inflation across many parts of the economy keep the uncertainty around the Fed's plan to taper its asset purchases at a heightened level. While these factors remain challenging, we expect that the recent widening of spreads – along with a favorable funding environment through both traditional repo and via dollar rolls to continue to help support the earnings power of our portfolio over the coming quarters. I'll stop here and let Brian go through the portfolio.