INVESCO MORTGAGE CAPITAL INC

Welcome to the Invesco Mortgage Capital Second Quarter 2026 Earnings 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 one on your telethon. As a reminder, this call is being recorded. I would like to turn the call over to Greg Seals in Investor Relations. Mr. Seals, you may begin the call.

Thanks, operator. And to all of you joining us on Invesco Mortgage Capital Second Quarter 2026 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 Finally, Invesco Mortgage Capital is not responsible for and does not edit or guarantee the accuracy of our earnings. Teleconference transcripts 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 IVR CEO Kevin Collins for his comments.

Good morning and welcome to Invesco Mortgage Capital's second quarter earnings call. I'll provide a few 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, David Lyle, and our CFO, Mark Gregson. Before I speak to market developments and our performance for the quarter, I would like to emphasize that our management team remains focused on disciplined investment management, prudent risk-taking, and delivering attractive risk-adjusted returns for our shareholders. We believe our platform is differentiated by deep expertise in agency mortgage markets, strong risk management, and access to extensive resources, market insights, and the global perspectives of Invesco. These advantages, combined with the longstanding counterparty relationships, can enhance our ability to source the finance and to hedge investments, position us well to navigate challenging markets, market environments, and capitalize on attractive opportunities. Importantly, our portfolio remains concentrated in agency RMVFs along with the meaningful allocation of agency CMVFs. These sectors continue to offer compelling risk-adjusted values supported by attractive carry, strong liquidity, and the credit protection provided by agency guarantees. Now turning to market developments, the second quarter was characterized by improving financial conditions despite some periodic balance of volatility driven by geopolitical developments in the Middle East and by shifting expectations for monetary policy. Brazilian economic growth, strong labor markets, and an elevated inflation contributed to a bear flattening of the U.S. Treasury yield curve as short-term interest rates rose more than longer-dated yields amid growing expectations that the FOMC's next policy move would be a hike rather than a cut. Although the second quarter was characterized by higher interest rates and more restrictive monetary policy expectations, It's important to note that interest rate volatility declined notably from March levels, while inflation expectations moderated despite ongoing uncertainty surrounding energy prices. Two-year break-evens fell sharply to 2% a quarter end from 3.25% at the end of the first quarter, and these developments supported risk assets broadly, and they contributed to higher coupon agency RBSL performance relative to U.S. Treasuries. Our agency RMVFs and TVA investments perform well, driven by attractive carry and contracting risk premiums, and our agency CMVFs continue to provide notable stability, supported by attractive relative valuations and predictable cash flows. Against this backdrop, we generated an economic return of 3.8%, consisting of monthly dividends of 12 cents per share and a modest decline in book value per share of six-tenths of a percent. We're estimating book value quarter to date is down roughly 2.5%, which backs out our accrued dividend given recent mortgage underperformance. So at quarter end, our economic debt-to-equity ratio remained unchanged, and our $8.2 billion investment portfolio consisted of $6 billion of agency RBS, $1.2 billion of agency TVA, and $0.9 billion of agency CABS. We also maintained a sizable balance of unrestricted cash and unencumbered investments, totaling $548.3 million. Our earnings available for distribution declined from $0.55 in the first quarter to $0.50 in the second quarter, and as of quarter end, we hedged 97% of our borrowing costs with interest rate swaps and U.S. Treasury futures. Regarding capital activities, we raised approximately $118 million during the quarter and more than $250 million year-to-date, enabling us to meaningfully expand our investment portfolio and capitalize on attractive opportunities across the agency mortgage market. We're encouraged by the growth of the company, which has enhanced our scale, its improved operating efficiency, and its reduced expenses on a per share basis. In addition, we believe our larger equity base and our increased market capitalization will improve the liquidity profile of our common stock, which should ultimately broaden our appeal to investors and support long-term shareholder value. As we continue to grow, We believe these benefits, combined with our disciplined investment approach, position us to generate attractive returns and create value for shareholders over time. So entering the third quarter, we remain constructive, yet measured, in our outlook for agency RMVS and agency CVS as attractive valuations and supportive market fundamentals are balanced against ongoing uncertainty surrounding monetary policy, as well as inflation and geopolitical developments. Despite these uncertainties, as interest rate volatility and inflation expectations have moderated from their first quarter piece. Supply and demand dynamics remain favorable as constrained net supply continues to be absorbed by broad-based investor. Additionally, we believe a sustained de-escalation of geopolitical tensions in the Middle East will likely benefit our target assets through reduced volatility, but also through an improved risk sentiment. Agency CBS is also well positioned supported by its attractive risk adjusted yields, its relatively low sensitivity to interest rate fluctuations, and its diversification benefits. Taking together these macroeconomic and market technical factors create a supportive backdrop for our investment strategy as we enter the second half of 2026. Further, we believe our capital structure and our financing profile provide us with flexibility needed to pursue opportunities while navigating continued uncertainty surrounding monetary policy, economic growth, and geopolitical developments. Away from market developments and our outlook, we remain committed to providing our investors with monthly financial summaries and paying monthly dividends to enhance transparency, deliver more consistent cash flows to income-oriented investors, and to strengthen investor engagement. So to summarize, we believe our team, our capital structure, our investment portfolio, we're all well positioned for the future. So looking ahead, we're excited to Thanks, Kevin, and good morning to everyone listening to the call.