INVESCO MORTGAGE CAPITAL INC

Also, as a reminder, this call is being recorded. Now I would like to turn the call over to Greg Seals in Investor Relations. Mr. Seals, you may begin.

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 Market Capital is not responsible for and does not edit nor guarantee the accuracy of our earnings, teleconference, and transcripts provided by third parties. The only authorized webcasts are located on our website. Again, welcome. Thank you for joining us today.

I'll now turn the call over to IVR CEO, John Anselin. Thanks, Craig. Good morning and welcome to Invesco Mortgage Capital's third quarter earnings call. I'll provide some brief comments before turning the call over to our Chief Investment Officer, Brian Norris, to discuss our portfolio in more detail. Also joining us on the call this morning for Q&A is our President, Kevin Collins, our COO, Dave Lyle, and a recently appointed interim CFO, Mark Gregson. So welcome, Mark. During the quarter, interest rates dropped sharply across the curve as investors reacted to cooling inflation and the potential for slower economic activity signaled by a weakening labor market. These factors also led to a repricing of the market's expectations of future monetary policy. Following the FOMC's initial 50 basis point reduction in its benchmark rate in September, The federal funds futures market reflected an expectation that the target rate would be reduced by an additional 50 to 75 basis points during the balance of 2024, with another 100 to 125 basis points worth of cuts priced into 2025. Against this backdrop, agency mortgages outperformed treasuries during the third quarter. Moderating industry volatility and the steepening of the yield curve spurred demand for agency mortgages with lower coupons performing better than higher coupons as a sharp decline in interest rates mitigated demand for coupons trading at a premium to par. Overall, prepayment speeds remained at very low levels given limited housing activity and elevated mortgage rates. The speeds increased notably on higher coupons in September as the decline in mortgage rates over the summer led to a surge in refinancings in more recent originations. Given the decline in mortgage rates and upward pressure on prepayments, premiums on higher coupon-specified pool collateral increased modestly, while implied volatility via the dollar role market, or implied financing via the dollar role market for TBA investments remained relatively unattractive throughout the quarter. Agency CMDS risk premiums moved modestly wider, increasing their relative value versus agency mortgages. The positive environment for mortgages contributed to a 1.1% increase in book value per common share to $9.37, Combined with our 40 cent common stock dividend, this resulted in an economic return of 5.4% for the quarter. As we enter the fourth quarter, uncertainty around the US elections and the future path of monetary policy has caused a sharp increase in both treasury yields and interest rate volatility, which has put heavy pressure on mortgage valuations. As of last night, our estimated book value is down approximately 5.8% since 9.30. Our debt-to-equity ratio ended the second quarter at 6.1 times, up from 5.6 as of June 30, while our economic debt-to-equity ratio increased from 5.9 times to 6.1 times quarter-over-quarter. As of the end of the quarter, our $5.9 billion investment portfolio primarily consisted of $5.2 billion of agency mortgages and $0.7 billion of agency CMBS. and we continue to maintain a sizable balance of unrestricted cash and unencumbered investments totaling $520 million. For the quarter, earnings available for distribution for common share was 68 cents compared to 86 cents in the second quarter. This decrease primarily reflects reduction in our effective net interest income related to changes in the size and composition of our hedging portfolio. Yesterday, we announced our intention to redeem our Series B preferred shares on December 27th. which will help optimize our capital structure and reduce our dividend obligations going forward. Looking ahead, the recent disinflationary trend in economic data suggests that the Federal Reserve can continue to use monetary policy in the coming months as the need for restrictive monetary policy declines. This easing, combined with the end of the U.S. election cycle, should lead to a steeper yield curve and lower industry volatility, creating a favorable environment for agency mortgage investments. However, if the disinflationary trend reverses and the labor market and economic growth improve, expectations for monetary policy could shift, posing a near-term risk. Additionally, short-term funding pressures into year-end could impact demand for the sector. Despite these near-term risks, we are constructive on the sector as agency mortgage performance stands to benefit from normalization of monetary policy given attractive valuations and supportive supply and demand technicals. We also remain constructive on agency CMBS, as we expect a gradual increase in new issuance to be met with adequate investor demand, as the sector offers value relative to other fixed-income investments, giving us attractive prepayment protection and return profiles. Now I'll turn the call over to Brian to go through the portfolio.