INVESCO MORTGAGE CAPITAL INC

Welcome to Invesco Mortgage Capital Inc's fourth 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, 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 Matt Seitz in investor relations. Mr. Seitz, you may begin the call.

Thanks, operator, and to all of you joining us on Invesco Mortgage Capital's quarterly earnings call. In addition to today's press release, we have provided a presentation that covers the topics we plan to address today. The press release and presentation are available on our website, Invescomortgagecapital.com. This information can be found by going to the investor relations section of the website. Our presentation today will include forward-looking statements and certain non-GAAP financial measures. Please review the disclosures on slide two of the presentation regarding these statements and measures as well as the appendix for the appropriate reconciliations to GAAP. Finally, Invesco Mortgage Capital is not responsible for and does not edit nor guarantee the accuracy of our earnings teleconference transcript provided by third parties. The only authorized webcasts are located on our website. 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 Investable Mortgage Capital's fourth quarter earnings call. I'll get 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, and our COO, Dave Lyle. Financial conditions began to ease during the fourth quarter, despite a pair of 75 basis point increases to the Fed Fund's target rate as investors began to anticipate an end to the FOMC's tightening cycle. While still at elevated levels, inflation, as seen through the CPI and PPI indices, is well below its recent highs and has begun to ease. Risk markets responded favorably, As equity markets improved, most credit spreads tightened and volatility measures moderated. After facing the most challenging environment in over a decade during the first three quarters of 2022, mortgage performance rebounded during the fourth quarter and into the first quarter of 2023, with current coupon agencies outperforming treasuries as interest rate volatility came off its recent highs. For the quarter, IVR's earnings available for distribution remains strong, coming in at $1.46 versus $1.39 last quarter. A rotation into higher yielding, higher coupon mortgages, in addition to substantial hedging of borrowing costs with interest rate swaps, drove this increase in EAD. Over the coming quarters, we expect EAD to continue to be supported as our repo hedge ratio remains elevated as forward starting swaps come online. Importantly, these hedges provide benefit for the long term, as the average maturity of our swap book is over seven years. ROEs on new investments have also been a positive contributor to EAD as the wider spreads on new purchases are attractive, and we enjoy the benefit of having retained low coupon legacy swaps. While mortgage performance has been positive since the beginning of the fourth quarter, both interest rates and mortgage markets have remained volatile. Book value was largely unchanged in the fourth quarter and combined with our 65-cent dividend resulted in an economic return of approximately 5%. Given strong performance to begin 2023, book value has improved by approximately 4% since year end through February 17th. Our economic leverage remained unchanged during the quarter, finishing at 5.3 times. At quarter end, substantially all of our $4.8 billion investment portfolio was invested in agency RMBS, and we maintain a sizable balance of unrestricted cash and unencumbered investments totaling $528 million. While mortgage valuations look attractive given a relatively wide spread, particularly in higher coupons, our outlook for mortgages remains somewhat cautious. Mortgage performance has been highly correlated with changes in short-dated interest rate volatility, We expect volatility to remain elevated while the near-term path of Fed funds remains uncertain. Once the Fed's path becomes clear, mortgages should enjoy significant tailwinds as volatility falls. I'll stop here, and Brian will go through the portfolio.