INVESCO MORTGAGE CAPITAL INC

Welcome to Invesco Mortgage Capital Inc's first quarter 2022 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, please press star followed by one on your phone. As a reminder, this call is being recorded. Now I'd 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 2022 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. 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 risk, 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 2022 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 fourth 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, our President, Kevin Collins, our CFO, Lee Fegley, and our COO, Dave Lyle. The first quarter was characterized by continuation of the challenging market conditions that we saw in the fourth quarter of 2021. as the Federal Reserve responded to surging inflation by increasing the Fed funds rate and signaling potential further policy tightening through a reduction of its balance sheet. The yield curve bear flattened during the quarter as the market priced in more aggressive rate increases by the FOMC. During April, the yield curve has flattened further and interest rates moved higher as the market responded to inflation prints not seen in decades. Given the increased interest rate volatility, flatter curve, and potentially more aggressive balance sheet reduction by the Fed, mortgages significantly underperformed during the quarter, posting their worst performance since the GFC. This underperformance led to a decline in our book value of 28.5% during the quarter, as the lower coupons that make up the bulk of the Fed's holdings underperformed the broader market, and the payoffs on specified pool collateral fell as mortgage rates rose above 5%. Our book value declined an additional 13% during April as the spread widening in agency mortgages continued. Despite the negative performance, our liquidity position remained strong as we held $665 million of unrestricted cash and unencumbered investments at year-end. While this environment was very difficult for mortgage valuations, positively, earnings available for distribution remained supported by slowing prepay speeds attracted dollar rolls and higher yields on new investments and came in at 12 cents per share. Looking ahead, we remain cautious on mortgages in the near term as the market weighs the possibility of more aggressive balance sheet reductions by the Fed. As a result, we are continuing to reduce leverage and rotate to higher coupon mortgages. Longer term, we expect the environment for mortgage valuations to improve as wider spreads on agency mortgages compare favorably to other sectors, attracting crossover buyers and higher rates will lead to further reductions in prepayment rates and a decline in net supply. So I'll stop here and let Brian go through the portfolio.