IVR

Image source: The Motley Fool. Friday, July 31, 2026 at 5:00 a.m. ET Chief Executive Officer - Kevin Collins Chief Investment Officer - Brian Norris President - David Lyle Chief Financial Officer - Mark Gregson Investor Relations - Greg Seals Operator: Welcome to the Invesco Mortgage Capital Second Quarter 2026 Earnings Call. [Operator Instructions] 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. Greg Seals: Thanks, operator, and to all of you joining us on Invesco Mortgage Capital's 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 2 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 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's CEO, Kevin Collins, for his comments. Kevin Collins: 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 a 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 long-standing counterparty relationships that enhance our ability to source to 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 RMBS, along with the meaningful allocation to Agency CMBS. These sectors continue to offer compelling risk-adjusted value supported by attractive carry, strong liquidity and 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. Resilient economic growth, strong labor markets and an elevated inflation contributed to the bear-flattening of the U.S. treasury yield curve as short-term interest rates rose more than the 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. The 2-year breakeven fell sharply to 2% at 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 RMBS outperformance relative to U.S. treasuries. Our Agency RMBS and TBA investments performed well, driven by attractive carry and contracting risk premiums and our Agency CMBS contributed -- and our Agency CMBS 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 $0.12 per share and a modest decline in book value per share of 0.6%. Our estimated book value quarter-to-date is down roughly 2.5%, which that dollar 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 RMBS, $1.2 billion of Agency TBA and $0.9 billion of Agency CMBS. 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, it's improved operating efficiency and it's 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 RMBS and Agency CMBS 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, we believe valuations for our target assets remain compelling as interest rate volatility and inflation expectations have moderated from their first quarter peaks. Supply and demand dynamics remain favorable as constrained net supply continues to be absorbed by broad-based investor demand. Additionally, we believe the sustained deescalation of geopolitical tensions in the Middle East will likely benefit our target assets through reduced volatility, but also through improved risk sentiment. Agency CMBS is also well positioned, supported by its attractive risk-adjusted yields, its relatively low sensitivity to interest rate fluctuations and its diversification benefits. Taken 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 and 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 are all well positioned for the future. So looking ahead, we're excited to leverage our core competencies in Agency MBS and to continue delivering attractive outcome for our investors. So now I'll turn the call over to Brian to go through our portfolio and our performance for the quarter in greater detail. Brian Norris: Thanks, Kevin, and good morning to everyone listening to the call. I'll begin on Slide 5, which provides detail on interest rates over the past year. As Kevin noted in his opening remarks, the treasury yield curve bear flattened in the second quarter as expectations for near-term monetary policy shifted from easing to tightening. Approximately 1/3 of the flattening occurred in the last 2 weeks of the quarter in response to new Federal Reserve Chairman, Kevin Warsh's first FOMC meeting as the ensuing statement and press conference were more hawkish than initially anticipated. The Chairman sought to cement a tough stance on inflation, emphasizing the price stability portion of the Fed's mandate over that of employment. Financial markets responded accordingly, pricing in tighter near-term monetary policy and lower future inflation expectations as inflation breakevens declined quarter-over-quarter. Conversely, treasury yields ended the quarter near their highest levels since early 2025, resulting in 30-year mortgage rates near 6.5% at quarter end and further limiting housing activity as affordability remains challenged. Positively, interest rate volatility recovered from the sharp Iran conflict-driven increase in March, supporting agency mortgage valuations. Lastly, funding markets remained stable throughout the quarter as lending capacity for our target assets remained ample and financing spreads over SOFR largely unchanged in the low teens. Slide 6 provides more detail on the Agency MBS markets over the past year, with the second quarter highlighted in gray. Despite the bear flattening move in treasury yields, both Agency RMBS and CMBS spreads tightened over the quarter, consistent with the improved tone in financial conditions and risk sentiment. Although the entire 30-year coupon stack outperformed treasury hedges during the quarter, the outperformance was more pronounced in higher coupons, which were primarily supported by the decline in volatility and constructive supply and demand dynamics. Net supply and Agency RMBS remained muted with year-to-date issuance of just $81 billion through June. On the demand front, investor interest remained broad-based with overseas investors, banks, money managers and mortgage REITs all increasing their allocations during the quarter. Demand from Fannie Mae and Freddie Mac continued to underwhelm initial expectations, however, as their combined retained portfolios were little changed during the second quarter. The 2 entities still have over $100 billion of additional capacity under their portfolio caps, providing some comfort for investors with the expectation that the GSEs could provide support if valuations were to soften materially. The dollar roll market for higher coupon agency TBAs benefited from favorable technical conditions with implied financing rates for production coupons remaining below 1-month SOFR for much of the quarter, enhancing levered return potential. These constructive supply and demand dynamics also supported the Agency CMBS sector, where issuance volumes moderated during the second quarter, while robust demand from banks, money managers and mortgage REITs contributed to modestly tighter spreads. Higher mortgage rates, however, weighed on specified pool payups and higher coupons as refinancing activity remains subdued and demand for prepayment protection softened accordingly. Despite this near-term pressure, we continue to view prepayment protection obtained through carefully selected specified pools particularly in premium priced holdings as an attractive investment for mortgage investors and an effective tool for mitigating the convexity risk inherent in Agency Mortgage portfolios. Slide 7 summarizes the changes in our portfolio over the course of the second quarter. Our portfolio increased 12.4% quarter-over-quarter as we invested proceeds from ATM issuance. Most of our net purchases occurred in specified pools focused across collateral stories in 30-year 4.5% through 6% coupons. In our view, the decline in specified pool pay-ups during the second quarter created a compelling opportunity to add exposure at more attractive valuations as we continue to prioritize income protection in the portfolio, with nearly 85% of the portfolio allocated to securities with some form of prepayment protection via specified pools and Agency CMBS. Levered gross returns on higher coupon specified pools hedged with swaps were in the mid- to high-teens with the current coupon spread to the 5- and 10-year SOFR blend ending the quarter at 143 basis points. Modest widening in July has improved those returns into the high teens as of today. Given the growth in specified pools within the portfolio, our allocation to Agency TBA and Agency CMBS declined modestly from 16.9% to 14.7% in Agency TBA and 11.9% to 11.1% in Agency CMBS. Both remain core holdings in our portfolio despite the decline in allocations with Agency TBA continuing to provide attractive levered gross returns in the high teens as implied financing rates persist near or below 1-month repo rates and production coupons. Agency CMBS spreads tightened modestly during the quarter, largely performing in line with lower coupon Agency RMBS and continue to provide notable stability to the portfolio. Despite limited new purchases, we continue to believe the Agency CMBS offers many benefits, mainly through its inherent prepayment protection and fixed maturities, which reduce our sensitivity to interest rate volatility. Levered gross returns are in the low double digits and remain consistent with lower coupon Agency RMBS, while financing capacity has been robust as we continue to fund our positions with multiple counterparties at attractive levels. We will continue to monitor the sector for opportunities to increase our allocation to the extent the relative value between Agency CMBS and lower coupon Agency RMBS is attractive, recognizing the overall benefits as the sector diversifies risks associated with Agency RMBS. Slide 8 details our funding book at quarter end. Repurchase agreements collateralized by our Agency RMBS and Agency CMBS investments increased from $5.3 billion to $6.2 billion as we funded most of our net purchases via repo, while the total notional of our hedges increased from $4.9 billion to $6 billion. Excluding the implied funding via our Agency TBA allocation, we kept our hedge ratio elevated at 97% given the increased uncertainty regarding the path of monetary policy. In addition, we continue to maintain significant liquidity with approximately $550 million of cash and unencumbered investments at quarter end, equating to 55% of our total equity. Slide 9 provides detail on our hedge book at quarter end. The composition of our hedges remain weighted towards interest rate swaps with 79% of our hedges consisting of interest rate swaps on a notional basis and 65% on a dollar duration basis. Swap spreads widened 2 to 4 basis points during the quarter, serving as a modest tailwind for our performance. We remain comfortable focusing the majority of our hedges and interest rate swaps as we believe swap spreads are historically tight and offer an attractive hedge profile relative to treasury futures. Slide 10 is a new addition to the presentation and provides our model-based estimates of book value sensitivity to instantaneous shocks in interest rates and mortgage spreads. Looking first at the table at the top of the slide, we reduced our duration gap from approximately 1/2 year to 1/4 year, reflecting a more cautious stance on the direction of interest rates. While this chart assumes a parallel shift in the yield curve, the more significant market development during the second quarter was a pronounced flattening of the yield curve with 2-year treasury rates rising nearly 40 basis points, while the 10-year rose 15 basis points, which was a headwind for our performance. On the bottom table, the impact of changes in mortgage OAS is largely unchanged quarter-over-quarter as our portfolio leverage remains consistent. We continue to view current leverage at levels of 9x debt to common equity as appropriate in this environment of elevated uncertainty. To conclude our prepared remarks, the management team remains committed to delivering exceptional investment performance for our shareholders. We are pleased with the performance of our Agency MBS portfolio through a challenging backdrop as the combination of higher coupon Agency RMBS and our Agency CMBS position has performed well. We are also excited about the recent growth of the company, recognizing the significant benefits this growth has for our shareholders through the efficient deployment of proceeds into attractive investments, lower expenses per share and better liquidity for our stock. Although elevated risks in the Middle East and the path of monetary policy may create near-term volatility in mortgage valuations, we continue to believe the medium- to long-term outlook for our target assets remains constructive, supported by favorable supply and demand dynamics. Additionally, our liquidity position remains ample, providing substantial cushion to withstand additional market stress, while maintaining the flexibility to capitalize on opportunities in our target assets as the investment environment improves. Thank you for your continued support for Invesco Mortgage Capital, and now we will open the line for Q&A. Operator: Our first question comes from Marissa Lobo with UBS. Ameeta Lobo Nelson: On the book value move in the second quarter, could you talk to us about the attribution of that decline? How much was spread moves on lower coupons versus hedge performance versus the ATM issuance? Brian Norris: Sure, Marissa. It's Brian. Yes, thanks for the question. Yes, as we mentioned, our higher coupon agency mortgages performed pretty well. Agency CMBS also modestly tightened on the quarter. I think our slight book value decline can be attributed to a couple of different factors. We have a modestly positive duration gap, which served -- which as interest rate growth on the quarter was a little bit of slight detractor. And then also maybe the modest flattening of the yield curve also had a minor impact on portfolio. As far as ATM issuance, yes, I mean, we are issuing relatively close to par. So it's a modest impact to book value as well. Ameeta Lobo Nelson: Got it. And just thinking about the pace of ATM issuance, what is the remaining capacity? And what should we look for in Q3 given your current portfolio growth targets and the spread environment? Kevin Collins: Sure. Yes. Thanks for your question, Marissa. So yes, as you know, we raised roughly $118 million in Q2, all [indiscernible] at ATM at levels close to book value and that at a pretty steady run rate. We'll look to continue to do that to the extent that we can do so responsibly and where it makes sense. Just given the low cost associated with our ATM, we think it's a clear benefit to our stockholders, continue focus around looking to reduce our fixed cost per share and improve liquidity in our stock to the extent that we can. So our plan is to look for windows of opportunity to do that in the weeks ahead and the quarters ahead. Operator: Our next question comes from Trevor Cranston, Citizens JMP. Trevor Cranston: A follow-up question on the ATM. Can you give any update on capital that may have been raised in July so far? And if so, where you guys have been deploying that within the coupon stack? Kevin Collins: Yes. We continue to look for opportunities to do that and deploy capital. It's been, as I said, prior levels close to book value where we've been able to do that and kind of held our portfolio composition steady to what we were doing in Q2. Brian Norris: Yes, Trevor, it's Brian. I would also just add, I mean, we do include share count in our monthly updates that will be forthcoming as well. And then also, as far as deployment of proceeds, it's been still kind of in that higher coupon range, 30-year 5 through, 6s primarily. And again, as I mentioned in my opening remarks, I think specified pool valuations have become more attractive relative to TBA, just given the softness in pay-ups that we've seen into higher rates. And so I think moving forward, if this environment were to persist, then that would be where we would deploy most assets. Trevor Cranston: Got it. Okay. That's helpful. And then one question, looking at Slide 6 on dollar roll financing. There's been quite an improvement in financing on 6s in particular. Can you guys just talk about what you think has been driving that improvement, particularly on the 6 coupon dollar roll financing? Brian Norris: Yes, Trevor, that was -- as you can see a pretty significant squeeze on the coupon there at the end of the quarter. That did -- if we were to extend that chart another week or so, it kind of bounced back into a more reasonable range. So -- but there is -- like I said, there's pretty strong supply and demand technicals going on in that coupon. That coupon tends to be one that CMO desks participate in the most to create floaters and inverse IO and those kind of things. So I think in particular, maybe there was a large money manager or something of that nature, putting a bit of a squeeze on that coupon, but it has bounced back to a more reasonable level. We still think it's like we said, dollar roll financing is still fairly attractive in those higher coupons. So we like the allocation that we have there. But yes, that's a bit of an unusual kind of thing that happened at the end of the quarter. Operator: Our next question comes from Doug Harter with BTIG. Douglas Harter: Hoping you could talk a little bit about your expectations for kind of the shape of the yield curve, direction of rates under Chair Warsh and kind of how you think you're positioned and kind of what you're watching for in case you might need to change any of that hedging strategy? Brian Norris: Doug, it's Brian. Yes, certainly, we've had 2 very different responses or reactions to the 2 Fed meetings under Chair Warsh. I mentioned what happened in June. But just a couple of days ago, we've had a pretty significant steepening move as the -- I guess, the press conference was certainly more dovish than expectations. So I think for the most part, our house view is that the Fed will be on hold in monetary policy for the foreseeable future. But I think also the kind of the renewed geopolitical risks that we've seen over the last few weeks could or does make that outlook a bit more cloudy than it otherwise would have been. So there's certainly a chance that there could be a hike in the latter half of 2026. But again, our house view is that they'll be keeping monetary policy on hold for the foreseeable future. Douglas Harter: Great. And with less forward guidance from Warsh, kind of how does that impact kind of how you think about volatility, how you think about risk positioning? Is there anything that, that changes? Brian Norris: Sure. It does, yes. Our expectations are that volatility, particularly in the front end, will increase or it has increased. And that tends to be a bit of a headwind for agency mortgages. And I really think that's why you've seen some modest widening over the last month or 1.5 months in mortgages. And so I think current coupon spread to the 5- and 10-year SOFR blend was 143 basis points at quarter end, and it's more like 150 basis points now. So we've seen, call it, 7 basis points of widening since quarter end. And I think that's largely a reflection of the potential increased volatility, both due to reduced forward guidance or the elimination of forward guidance and also the renewed kind of Middle East risks that we've seen. So as far as putting a spread range on that, I think we're towards the wider end. In March of this year, we kind of hit the 160s area as the Middle East conflict really started to escalate. And so I think that's probably a pretty good estimate of where we could get at the widest moments here, if we were to kind of continue to see those risks escalate. But right now, we're at, call it, 150 basis points. And I think, again, there's more room for tightening, I think, just based on how much -- how supportive the supply and demand technicals are... Kevin Collins: That's worth noting as well, Doug, that just given a more uncertain path of monetary policy, we have kept our hedge ratio at the high level at 97% at quarter end. Operator: Our next question comes from Jason Weaver with JonesTrading. Jason Weaver: Just one for me. It looks like net economic investment spread is vulnerable to additional swap roll-off ahead over the next several quarters. How do you see the EAB run rate evolving from there just on that factor? And also when the Board set dividend policy, approximately how far out are they looking? Kevin Collins: Yes. So thanks for your question. Yes, certainly something that we're mindful of as we think about our hedge portfolio. I think the important point here is to really note that we're evaluating the dividend each quarter in context to the EAD because I assume that's where a lot of people's thinking goes, and we're evaluating that each quarter based on current earnings as well as expected earnings, our portfolio composition and market opportunities. So just to get out in front of it, I do think at present, we believe our dividend is competitive. It's in line with long-term levered Agency MBS returns, which we talked about being important for us. It's also well covered at this point by the EAD. But I think as was noted as our hedge portfolio changes, that will be impacted. But I think the way we think about it overall, to summarize is that we believe that we have a dividend that's supported by the long-term earnings power of our portfolio, and that's how we think about it conceptually. Operator: Our next question comes from Jason Stewart with Compass Point. Jason Stewart: Following up on Doug's question about curve shape. And I guess if you're in a camp where the Fed is on hold, you can make the argument that you'll see a steeper curve and more upside potential in and mortgage rates. If we follow that logic, one, disagree if you do? And two, how do you think about premium at risk or spec pools in that environment? Do they still offer compelling values? And I think you touched a little bit on convexity profile, but maybe dig a little bit more into which subsectors are a focal point, which ones you're avoiding, how are you thinking about overall premium at risk? Brian Norris: Yes. Jason, the first answer is, yes, we would agree that if the Fed is on hold, we would expect to see some steepening in the yield curve. So that's the first part. And I guess the second part is more about specified pools. Our weighted average payups at quarter end was about [ 28 ]-- so that equates to about $50 million of market value. So that -- if they all went to 0, that's about the impact would be. But I think this kind of also goes into kind of what we've talked about in the past about the deliverability of generic collateral and the value of specified pools. In the current environment, we would agree that specified pool payups could soften. But as we mentioned, we think that's a pretty compelling opportunity to add because we do think that going forward, the valuations of generic collateral will continue to deteriorate and for a number of reasons. I think obviously, loan balance has continued to increase, which makes them more susceptible to refinance activity. And then also with the proliferation of more technology in the refinancing process. We think that, that makes specified pool selection significantly more important. And that's kind of what our bread and butter is. And so that's what we're going to stick to, particularly, as we said, as those payoffs kind of soften and provide attractive opportunities to add in the current environment, I think that will serve us well as we move forward. I think we've seen it even over the last couple of years, just how much technology has improved the refinancing process and how much quicker the impact is felt. We saw it last fall and again in February of this year. And so I think to a certain extent, loan balance continues to be a significantly important aspect. So choosing lower loan balances that are less impacted. We like the first-time homebuyer story as well. But I think away from loan balance, we like being relatively well diversified across the collateral stories. So whether that be geography or high LTV or low FICO and first-time homebuyer, those are all things that we're kind of looking at on a relative value basis. Jason Stewart: Okay. I guess first-time homebuyer would be in this bucket, but are there any new -- without giving away sort of, I guess, your secret sauce on where you're focused on deploying capital. Are there any new spec pool stories that are being developed that are interesting? Brian Norris: Yes. I wouldn't -- as far as being added to the portfolio yet, no. But we're obviously certainly continuing to kind of look at things. So there's nothing that I would point to right off the bat, other than -- I mean, first-time homebuyer can be included in all of those buckets. It's typically in kind of a high LTV bucket. So that's something that we've been finding quite attractive here lately. Operator: Our last question comes from Marissa Lobo with UBS. Ameeta Lobo Nelson: I just had a quick follow-up on how you're thinking about using swaps versus treasuries for hedging in this rate environment? Brian Norris: Marissa, yes, so we're still very comfortable with most of our hedge book being in interest rate swaps. So again, that's kind of been in the 75% to 80% range on a notional basis. And so yes, I think going forward, we see -- we saw a modest improvement in swap spreads during the second quarter. But year-to-date, they're still a little bit tighter. So we still feel like that, that's a pretty attractive entry point to use for our hedge book. Operator: Thank you. At this time, I'll turn the call back over to the speakers. Kevin Collins: Thanks to everyone that joined our call this morning. We appreciate your interest in Invesco Mortgage Capital and look forward to connecting in the quarters ahead. Operator: Thank you. And that does conclude today's conference. We thank you for your participation. At this time, you may disconnect your lines. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Performance was driven by attractive carry and contracting risk premiums in higher coupon Agency RMBS, despite a bear-flattening yield curve. The company generated a 3.8% economic return, supported by declining interest rate volatility and moderating inflation expectations from first-quarter peaks. Management attributed a modest 0.6% book value decline to a positive duration gap and yield curve flattening, which acted as slight headwinds. Strategic growth was prioritized through the ATM program, raising $118 million in Q2 to expand the portfolio while reducing fixed expenses on a per-share basis. The portfolio remains heavily concentrated in Agency RMBS and CMBS, sectors management believes offer superior liquidity and credit protection via agency guarantees. Operational efficiency improved as the larger equity base enhanced the liquidity profile of common stock and broadened investor appeal. Management maintains a 'constructive yet measured' outlook, balancing favorable supply-demand technicals against geopolitical risks and monetary policy uncertainty. The company's house view assumes the Federal Reserve will remain on hold for the foreseeable future, though a potential hike in late 2026 remains a possibility. The hedge ratio is being maintained at an elevated 97% to mitigate risks associated with the elimination of forward guidance by the Federal Reserve. Future capital deployment will prioritize higher coupon specified pools (30-year 5% through 6%) where valuations have become more attractive relative to TBA. Management expects increased volatility in the front end of the curve, which may serve as a near-term headwind for agency mortgage valuations. The duration gap was reduced from approximately 1/2 year to 1/4 year to reflect a more cautious stance on interest rate direction. Geopolitical tensions in the Middle East are identified as a primary source of potential market stress and volatility escalation. Management highlighted the 'proliferation of technology' in refinancing as a structural risk, making specified pool selection critical for mitigating convexity. The transition to monthly dividends and financial summaries is intended to enhance transparency and strengthen engagement with income-oriented investors. The decline was primarily due to a modestly positive duration gap during a period of rising rates and a flattening yield curve. Higher coupon mortgages and Agency CMBS actually performed well, partially offsetting these macro headwinds. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Issuance is conducted at levels close to book value to responsibly grow the equity base and improve stock liquidity. The primary goal is to reduce fixed costs per share and capitalize on high-teen levered return opportunities in the current market. Management expects higher volatility due to the elimination of forward guidance and a focus on price stability over employment. The company is positioned for a potential steepening of the yield curve if the Fed remains on hold as expected. The dividend is currently well-covered by Earnings Available for Distribution (EAD) and aligned with long-term levered Agency MBS returns. Management acknowledges that as the hedge portfolio evolves, they will evaluate the dividend quarterly based on the portfolio's long-term earnings power. Management believes generic collateral will deteriorate in value as higher loan balances become more susceptible to tech-driven refinancing. They are focusing on 'first-time homebuyer' stories and high LTV buckets to provide superior prepayment protection.

Interested in Invesco Mortgage Capital Inc? Here are five stocks we like better. Invesco Mortgage Capital delivered a 3.8% economic return in the second quarter, supported by $0.12-per-share monthly dividends, while book value per share declined 0.6%. The investment portfolio grew 12.4% to $8.2 billion after the company raised approximately $118 million through its at-the-market equity program. New investments focused on specified pools of 30-year Agency RMBS, with nearly 85% of the portfolio in securities offering prepayment protection. Management maintained a constructive but cautious outlook for Agency RMBS and CMBS, citing attractive valuations, lower rate volatility, and supportive market conditions. The company ended the quarter with 97% of borrowing costs hedged and $548.3 million in unrestricted cash and unencumbered investments. Invesco Mortgage Capital (NYSE:IVR) reported a 3.8% economic return for the second quarter of 2026, supported by monthly dividends of $0.12 per share and a modest 0.6% decline in book value per share. The mortgage real estate investment trust said its agency mortgage-backed securities holdings benefited from attractive carry and tighter risk premiums during the quarter. Chief Executive Officer Kevin Collins said the company entered the third quarter with a constructive but measured outlook for Agency residential mortgage-backed securities, or RMBS, and Agency commercial mortgage-backed securities, or CMBS. He cited appealing valuations, moderated interest-rate volatility and inflation expectations, and supportive supply-and-demand conditions, while acknowledging ongoing uncertainty surrounding monetary policy and geopolitical developments. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now Invesco Mortgage Capital’s investment portfolio totaled $8.2 billion at quarter-end, including $6 billion of Agency RMBS, $1.2 billion of Agency to-be-announced, or TBA, securities, and $0.9 billion of Agency CMBS. The portfolio grew 12.4% from the first quarter as the company invested proceeds raised through its at-the-market equity issuance program. The company raised approximately $118 million during the second quarter and more than $250 million year to date. Collins said the capital issuance has expanded the company’s investment capacity, improved operating efficiency, reduced expenses on a per-share basis, and could improve the liquidity profile of its common stock over time. → Microsoft Just Flipped the AI Spending Narrative Overnight “We’ll look to continue to do that to the extent that we can do so responsibly and where it makes sense,” Collins said in response to an analyst question about future ATM issuance. He said the company will seek windows to issue shares near book value while maintaining a focus on reducing fixed costs per share and improving stock liquidity. Chief Investment Officer Brian Norris said new investments were concentrated in specified pools of 30-year Agency RMBS with coupons ranging from 4.5% to 6%. The company viewed lower specified-pool prepayments during the quarter as an opportunity to add exposure at more favorable valuations. Nearly 85% of the portfolio was allocated to securities with prepayment protection through specified pools and Agency CMBS. Agency TBA exposure declined to 14.7% of the portfolio from 16.9% in the first quarter. Agency CMBS exposure declined to 11.1% from 11.9%, although management described the sector as a core portfolio holding. → Carrier Earnings Could Send the Stock to a New All-Time High Management said the Treasury yield curve bear flattened during the second quarter, as short-term rates increased more than longer-term yields amid shifting expectations for Federal Reserve policy. Norris said roughly one-third of the curve flattening occurred during the final two weeks of the quarter following Federal Reserve Chairman Kevin Warsh’s first Federal Open Market Committee meeting, which markets viewed as more hawkish than expected. Treasury yields ended the quarter near their highest levels since early 2025, while 30-year mortgage rates approached 6.5%, according to Norris. Higher rates continued to constrain housing activity, but interest-rate volatility declined from its March levels and helped support agency mortgage valuations. Agency RMBS and CMBS spreads tightened during the quarter despite the rise in Treasury yields. Higher-coupon Agency RMBS outperformed Treasury hedges, aided by lower volatility and favorable technical conditions. Year-to-date Agency RMBS issuance totaled $81 billion through June, which Norris described as muted, while demand came from overseas investors, banks, money managers, and mortgage REITs. Management said that mortgage spreads had widened modestly since quarter-end, reflecting expectations for increased front-end rate volatility and renewed Middle East risks. Norris said the current-coupon spread to a blend of five- and 10-year SOFR rates had widened to about 150 basis points from 143 basis points at quarter-end. He noted that spreads reached the 160-basis-point range in March as Middle East conflict risks escalated. The company maintained an economic debt-to-equity ratio of about 9 times at quarter-end. Repurchase agreements financing Agency RMBS and CMBS investments rose to $6.2 billion from $5.3 billion in the prior quarter, while hedge notional increased to $6 billion from $4.9 billion. Invesco Mortgage Capital hedged 97% of its borrowing costs using interest-rate swaps and U.S. Treasury futures. Interest-rate swaps accounted for 79% of hedges on a notional basis. Norris said the company remains comfortable emphasizing swaps because it views swap spreads as historically tight and attractive relative to Treasury futures. The company finished the quarter with $548.3 million of unrestricted cash and unencumbered investments, representing approximately 55% of total equity. Management said the liquidity position provides flexibility to withstand market stress and pursue new investment opportunities. Earnings available for distribution declined to $0.50 per share in the second quarter from $0.55 per share in the first quarter. Collins said the board evaluates the dividend each quarter based on current and expected earnings, portfolio composition, and market opportunities. He said management believes the current dividend is competitive, supported by the portfolio’s long-term earnings power, and covered by current earnings available for distribution. On the book value decline, Norris said higher-coupon Agency mortgages and Agency CMBS performed well, but the company’s modestly positive duration gap was a slight detractor as rates increased. Yield-curve flattening also had a minor impact, while ATM issuance close to book value had a modest effect. Invesco Mortgage Capital Inc (NYSE: IVR) is a real estate investment trust that specializes in investing in U.S. residential mortgage-backed securities. The company's portfolio is weighted toward agency-guaranteed RMBS issued or guaranteed by U.S. government-sponsored enterprises such as Fannie Mae, Freddie Mac and Ginnie Mae. By focusing on collateral backed by federal agencies, Invesco Mortgage Capital seeks to generate attractive returns while managing credit risk through securities that carry explicit or implicit government guarantees. To enhance its portfolio yield, the company employs leverage through repurchase agreements, warehouse facilities and debt financing. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Invesco Mortgage Capital Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

ATLANTA, July 30, 2026 /PRNewswire/ -- Invesco Mortgage Capital Inc. (NYSE: IVR) (the "Company") today announced financial results for the quarter ended June 30, 2026. Net income per common share of $0.34 compared to net loss of $0.28 in Q1 2026 Earnings available for distribution per common share(1) of $0.50 compared to $0.55 in Q1 2026 Monthly common stock dividends totaling $0.36 per share, unchanged from Q1 2026 Book value per common share(2) of $8.03 compared to $8.08 as of March 31, 2026 Economic return(3) of 3.8% compared to (3.2)% in Q1 2026 Debt-to-equity ratio of 6.3x compared to 6.1x as of March 31, 2026 Economic debt-to-equity ratio(1) of 7.5x, unchanged from March 31, 2026 Update from Kevin Collins, Chief Executive Officer "During the second quarter of 2026, financial conditions improved despite periodic bouts of volatility driven by geopolitical developments in the Middle East and shifting expectations for monetary policy. While U.S. Treasury yields moved higher amid resilient economic growth and elevated inflation, interest rate volatility declined notably from March levels, and investor risk sentiment improved during the quarter. Against this backdrop, our target assets generated positive returns in excess of Treasuries, supported by attractive carry and favorable supply and demand dynamics. "Our Agency RMBS and TBA investments performed well despite rising interest rates and a more restrictive monetary policy outlook. Our Agency CMBS continued to provide notable stability, supported by attractive relative valuations and predictable cashflows. Economic return for the quarter was 3.8%, driven by attractive carry and contracting risk premiums across our Agency MBS portfolio. "At quarter end, our $8.2 billion investment portfolio consisted of $6.0 billion Agency RMBS, $1.2 billion Agency TBA, and $0.9 billion Agency CMBS. Our economic debt-to-equity ratio was unchanged at 7.5x, and we maintained a sizable balance of unrestricted cash and unencumbered investments totaling $548.3 million. "Our outlook for Agency RMBS and Agency CMBS remains constructive. While uncertainty surrounding monetary policy and geopolitical developments persists, we believe valuations remain compelling as interest rate volatility and inflation expectations have moderated from their first quarter peaks. Supply and demand dynamics remain favorable as net issuance is expected to be contained, and broad-based investor demand remains supportive. Agency CMBS is also well positioned, supported by its attractive risk-adjusted yields, relatively low sensitivity to interest rate fluctuations, and diversification benefits. Taken together, these macroeconomic and market technical factors create a favorable backdrop for our investment strategy as we enter the second half of 2026." Key performance indicators for the quarters ended June 30, 2026 and March 31, 2026 are summarized in the table below. Portfolio Composition The following table summarizes certain characteristics of the Company's investment portfolio including TBAs as of June 30, 2026 and March 31, 2026. The following table summarizes certain characteristics of the Company's borrowings as of June 30, 2026 and March 31, 2026. The following tables summarize certain characteristics of the Company's interest rate swaps whereby the Company pays fixed interest rates and receives floating interest rates based on the secured overnight financing rate as of June 30, 2026 and March 31, 2026. The following table summarizes certain characteristics of the Company's U.S. Treasury futures contracts as of June 30, 2026 and March 31, 2026. Capital Activities Dividends During the three months ended June 30, 2026, the Company declared monthly common stock dividends totaling $0.36 per share and a Series C Preferred Stock dividend of $0.46875 per share. Issuances of Common Stock During the three months ended June 30, 2026, the Company issued 14,847,506 shares of common stock for net proceeds of $118.0 million through its at-the-market program. Repurchases of Preferred Stock During the three months ended June 30, 2026, the Company repurchased and retired 47,222 shares of Series C Preferred Stock with a carrying value of $1.1 million. About Invesco Mortgage Capital Inc. The Company is a real estate investment trust that primarily focuses on investing in, financing and managing mortgage-backed securities and other mortgage-related assets. The Company is externally managed and advised by Invesco Advisers, Inc., a registered investment adviser and an indirect wholly-owned subsidiary of Invesco Ltd., an independent global investment management firm. Earnings Call Members of the investment community and the general public are invited to listen to the Company's earnings conference call on Friday, July 31, 2026, at 9:00 a.m. ET, by calling one of the following numbers: North America Toll Free: 888-982-7409International: 1-212-287-1625Passcode: Invesco An audio replay will be available until 5:00 pm ET on August 14, 2026 by calling: 866-363-1806 (North America) or 1-203-369-0194 (International) The presentation slides that will be reviewed during the call will be available on the Company's website at www.invescomortgagecapital.com. Cautionary Notice Regarding Forward-Looking Statements This press release, the related presentation and comments made in the associated conference call, may include statements and information that constitute "forward-looking statements" within the meaning of the U.S. securities laws as defined in the Private Securities Litigation Reform Act of 1995, and such statements are intended to be covered by the safe harbor provided by the same. Forward-looking statements include our views on the risk positioning of our portfolio, domestic and global market conditions (including the Agency RMBS, Agency CMBS and residential and commercial real estate markets), the market for our target assets, our expected financial performance, including our earnings available for distribution, economic return, comprehensive income and changes in our book value, our intention and ability to pay dividends, our ability to continue performance trends, the stability of portfolio yields, interest rates, spreads, prepayment trends, financing sources, cost of funds, our anticipated leverage, liquidity, capital structure and equity allocation. In addition, words such as "believes," "expects," "anticipates," "intends," "plans," "estimates," "projects," "forecasts," and future or conditional verbs such as "will," "may," "could," "should," and "would" as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements. Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. There can be no assurance that actual results will not differ materially from our expectations. We caution investors not to rely unduly on any forward-looking statements and urge you to carefully consider the risks identified under the captions "Risk Factors," "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K for the year ended December 31, 2025, which may be updated by subsequently filed quarterly reports on Form 10-Q or current reports on Form 8-K, and which are available on the Securities and Exchange Commission's website at www.sec.gov. All written or oral forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice. We expressly disclaim any obligation to update the information in any public disclosure if any forward-looking statement later turns out to be inaccurate. Non-GAAP Financial Measures The table below shows the non-GAAP financial measures the Company uses to analyze its operating results and the most directly comparable U.S. GAAP measures. The Company believes these non-GAAP measures are useful to investors in assessing its performance as discussed further below. The non-GAAP financial measures used by the Company's management should be analyzed in conjunction with U.S. GAAP financial measures and should not be considered substitutes for U.S. GAAP financial measures. In addition, the non-GAAP financial measures may not be comparable to similarly titled non-GAAP financial measures of its peer companies. Earnings Available for Distribution The Company's business objective is to provide attractive risk-adjusted returns to its stockholders, primarily through dividends and secondarily through capital appreciation. The Company uses earnings available for distribution as a measure of its investment portfolio's ability to generate income for distribution to common stockholders and to evaluate its progress toward meeting this objective. The Company calculates earnings available for distribution as U.S. GAAP net income (loss) attributable to common stockholders adjusted for (gain) loss on investments, net; realized (gain) loss on derivative instruments, net; unrealized (gain) loss on derivative instruments, net; TBA dollar roll income and (gain) loss on repurchase and retirement of preferred stock. The Company may add and has added additional reconciling items to its earnings available for distribution calculation as appropriate. By excluding the gains and losses discussed above, the Company believes the presentation of earnings available for distribution provides a consistent measure of operating performance that investors can use to evaluate its results over multiple reporting periods and, to a certain extent, compare to its peer companies. However, because not all of the Company's peer companies use identical operating performance measures, the Company's presentation of earnings available for distribution may not be comparable to other similarly titled measures used by its peer companies. The Company excludes the impact of gains and losses when calculating earnings available for distribution because when analyzed in conjunction with its U.S. GAAP results, earnings available for distribution provides additional detail of its investment portfolio's earnings capacity. In addition, certain gains and losses represent one-time events. Furthermore, gains and losses have not been accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses may be reflected in net income whereas other gains and losses may be reflected in other comprehensive income. For example, a portion of the Company's mortgage-backed securities were historically classified as available-for-sale securities, and changes in the valuation of these securities were recorded in other comprehensive income on its condensed consolidated balance sheets. The Company elected the fair value option for its mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in the condensed consolidated statements of comprehensive income (loss). To maintain qualification as a REIT, U.S. federal income tax law generally requires that the Company distribute at least 90% of its REIT taxable income annually. Because the Company views earnings available for distribution as a consistent measure of its investment portfolio's ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that is used to determine the amount, if any, of dividends on common stock. However, earnings available for distribution should not be considered as an indication of the Company's taxable income, a guaranty of its ability to pay dividends or as a proxy for the amount of dividends it may pay, as earnings available for distribution excludes certain items that impact its cash needs. Earnings available for distribution is an incomplete measure of the Company's financial performance and there are other factors that impact the achievement of the Company's business objective. The Company cautions that earnings available for distribution should not be considered as an alternative to net income (determined in accordance with U.S. GAAP), or as an indication of the Company's cash flow from operating activities (determined in accordance with U.S. GAAP), a measure of the Company's liquidity, or as an indication of amounts available to fund its cash needs. The table below provides a reconciliation of U.S. GAAP net income (loss) attributable to common stockholders to earnings available for distribution for the following periods: The table below presents the components of earnings available for distribution for the following periods: Effective Interest Expense/Effective Cost of Funds/Effective Net Interest Income/Effective Interest Rate Margin The Company calculates effective interest expense (and by calculation, effective cost of funds) as U.S. GAAP total interest expense adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net. The Company views its interest rate swaps as an economic hedge against increases in future market interest rates on its borrowings. The Company adds back the net payments or receipts on its interest rate swap agreements to its total U.S. GAAP interest expense because the Company uses interest rate swaps to add stability to interest expense. The Company calculates effective net interest income (and by calculation, effective interest rate margin) as U.S. GAAP net interest income adjusted for contractual net interest income (expense) on its interest rate swaps that is recorded as gain (loss) on derivative instruments, net. The Company believes the presentation of effective interest expense, effective cost of funds, effective net interest income and effective interest rate margin measures, when considered together with U.S. GAAP financial measures, provides information that is useful to investors in understanding the Company's borrowing costs and operating performance. The following table reconciles total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods: The following table reconciles net interest income to effective net interest income and net interest rate margin to effective interest rate margin for the following periods: Economic Debt-to-Equity Ratio The following table shows the Company's debt-to-equity ratio and the Company's economic debt-to-equity ratio as of June 30, 2026 and March 31, 2026. The Company's debt-to-equity ratio is calculated in accordance with U.S. GAAP and is the ratio of total debt to total stockholders' equity. The Company presents an economic debt-to-equity ratio, a non-GAAP financial measure of leverage that considers the impact of the off-balance sheet financing of its investments in TBAs that are accounted for as derivative instruments under U.S. GAAP. The Company includes these types of TBAs at implied cost basis in its measure of leverage because a forward contract to acquire Agency RMBS in the TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities. Similarly, a contract for the forward sale of Agency RMBS has substantially the same effect as selling the underlying Agency RMBS and reducing the Company's on-balance sheet funding commitments. The Company believes that presenting its economic debt-to-equity ratio, when considered together with its U.S. GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding how management evaluates at-risk leverage and gives investors a comparable statistic to those of other mortgage REITs who also invest in TBAs and present a similar non-GAAP measure of leverage. Average Balances The table below presents information related to the Company's average earning assets, average earning asset yields, average borrowings and average cost of funds for the following periods: Greg Seals,Investor Relations404-439-3323 View original content to download multimedia:https://www.prnewswire.com/news-releases/invesco-mortgage-capital-inc-reports-second-quarter-2026-financial-results-302839451.html

This article first appeared on GuruFocus. Book Value Decline: Decreased by 7.9% to $8.08 at quarter end. Economic Return: Negative 3.2% for the quarter. Economic Debt-to-Equity Ratio: Increased to 7.5 turns from 7 turns at the beginning of the year. Investment Portfolio: $7.3 billion, consisting of $5.2 billion Agency RMBS, $1.2 billion Agency TBA, and $0.9 billion Agency CMBS. Unrestricted Cash and Unencumbered Investments: Totaling $493.1 million. Earnings Available for Distribution: Declined from $0.56 in Q4 2025 to $0.55 in Q1 2026. Hedge Coverage: 96% of borrowing costs hedged with interest rate swaps and US Treasury futures. Preferred Equity Reduction: Reduced to less than 20% of total equity. Warning! GuruFocus has detected 7 Warning Signs with SEM. Is IVR fairly valued? Test your thesis with our free DCF calculator. Release Date: May 01, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Invesco Mortgage Capital Inc (NYSE:IVR) has a well-positioned capital structure to support long-term success, with plans to selectively access the ATM for raising common stock when beneficial to shareholders. The company has successfully reduced preferred equity to less than 20% of total equity, reducing costs and benefiting returns for common stockholders. Invesco Mortgage Capital Inc (NYSE:IVR) has transitioned to monthly dividend distributions, aligning better with income investors' cash flow needs and providing regular financial updates. The company's Agency CMBS investments performed well, providing stability and outperforming Agency RMBS across the coupon stack for the quarter. Invesco Mortgage Capital Inc (NYSE:IVR) maintains a sizable balance of unrestricted cash and unencumbered investments totaling $493.1 million, ensuring ample liquidity to withstand market stress and deploy capital as opportunities arise. The company's book value declined by 7.9% to $8.08 at quarter end, resulting in an economic return of negative 3.2% for the quarter. Increased geopolitical tensions, higher energy prices, and renewed inflation concerns led to increased interest rate volatility, negatively impacting risk assets and Agency RMBS valuations. The economic debt-to-equity ratio increased to 7.5 turns from 7 turns, reflecting a decline in book value per share and a more constructive outlook on Agency RMBS. Earnings available for distribution declined modestly from $0.56 in the fourth quarter of last year to $0.55 in the first quarter. The company faced challenges in the first quarter due to escalating geopolitical tensions and increased interest rate volatility, leaving the sector vulnerable to further bouts of volatility. Q: On the equity issuance this quarter, can you speak a little to the timing of those raises and how you're thinking about future ATM activity? A: Kevin Collins, CEO: We raised nearly $134 million net of issuance costs in Q1 through our ATM, timed steadily throughout the quarter. We plan to selectively access the ATM to raise common stock when it benefits shareholders, as it is the most efficient mechanism for raising capital. Responsible growth reduces fixed costs per share and improves stock liquidity. Q: On risk management, can you speak to some of the decisions made for the portfolio during the volatile period in March? A: Brian Norris, CIO: The improved environment for agency mortgages over the past 10-11 months gave us confidence that March's volatility would pass. We raised ATM throughout the first quarter, allowing us to absorb volatility without selling assets, and invested at wider levels during the volatility. Q: What is the plan for the TBA position? Is it a structural hold or a placeholder for rolling into specified cash pools over time? A: Brian Norris, CIO: TBAs have a structural place in the portfolio. Currently, our allocation is heavier due to their attractiveness. While we prefer specified pools for a more durable return profile, we are comfortable with the current TBA dollar roll markets and plan to maintain the allocation. Q: How are you thinking about the range for spreads and the risks of breaking out on either side of that range? A: Brian Norris, CIO: Mortgage spreads relative to swaps are attractive, though not as much as in previous years with higher volatility. We could see further spread tightening, potentially from wider swap spreads rather than tighter mortgage spreads versus treasuries. Q: How do the GSEs acting as a backstop buyer of MBS impact your thinking on leverage? A: Brian Norris, CIO: The GSEs, particularly Fannie Mae, acted as a backstop in March, adding $18 billion. This reduces spread volatility and gives us more comfort, allowing leverage to drift higher without selling assets. The outperformance in April brought leverage back down to a more normal long-term run rate. Q: Can you discuss the balance between using longer-dated swaps and treasury hedges given the negative swap spreads? A: Brian Norris, CIO: While longer-dated swaps offer more negative spreads, they add more volatility. We prefer reducing swap spread volatility by hedging with swaps at the front end of the curve (0-10 years) and using treasury futures for longer durations. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Invesco reported a book value decline of 7.9% to $8.08 and an economic return of -3.2% for Q1, driven by higher interest-rate volatility and wider agency MBS spreads, while economic debt-to-equity rose to 7.5x. The firm ended the quarter with a $7.3 billion portfolio (including $5.2 billion of Agency RMBS) and increased TBA exposure to about 17%, with Agency RMBS up 19% QoQ and over 80% of assets carrying some prepayment protection. Management hedged roughly 96% of borrowing costs (about 81% of hedges in swaps), said swap‑spread tightening was a modest headwind, but noted early Q2 technicals improved with book value up ~2% and plans to selectively access the ATM after raising nearly $134 million net in Q1. Interested in Invesco Mortgage Capital Inc? Here are five stocks we like better. Invesco Mortgage Capital (NYSE:IVR) reported a first-quarter 2026 book value decline and negative economic return as interest-rate volatility increased and agency mortgage spreads moved wider, while management emphasized a more constructive backdrop for agency mortgages early in the second quarter. Chief Executive Officer Kevin Collins opened the call by highlighting his transition into the CEO role and the retirement of former CEO John Anzalone after a 17-year tenure with the company. Collins also noted President David Lyle’s recent appointment and said the leadership team shares a commitment to “disciplined investment management, to consistent performance, strong governance, and expanded investor engagement.” → Corning Beats Q1 Estimates but Drops 9% on Guidance Miss Collins said the company remains focused on agency mortgages, pointing to core competencies in Agency RMBS as well as Agency CMBS. He also cited the resources of Invesco, the company’s external manager, including macroeconomic and policy insights and counterparty relationships that support sourcing, financing, and hedging. Collins described the first quarter as a “more challenging market environment” following a strong recovery in agency MBS valuations in the second half of 2025. He said tighter financial conditions were driven by rising geopolitical tensions, higher energy prices, renewed inflation concerns, and increased interest-rate volatility that pushed U.S. Treasury yields higher. Short-term yields rose more than longer-dated yields, which Collins attributed to reduced expectations for near-term policy easing. → Meta Posted Its Best Sales Growth Since 2021—So Why Did Shares Fall? Collins added that inflation expectations rose during the quarter, noting that two-year TIPS breakevens increased to approximately 3.25% by quarter end from about 2.3% at the start of the year. He said these dynamics weighed on risk assets and contributed to higher-coupon Agency RMBS underperformance relative to Treasuries. While he said the company’s Agency MBS and Agency CMBS investments “performed…quite well,” the quarter was pressured by increased Agency RMBS risk premiums and “notable swap spread tightening.” As a result, Collins said book value declined 7.9% to 8.08% at quarter end. Including dividends of $0.12 per month, the company delivered an economic return of -3.2% for the quarter. He also said the company’s economic debt-to-equity ratio increased to 7.5x from 7.0x at the beginning of the year, largely reflecting the book value decline and a more constructive outlook entering the second quarter. → Is Oracle Undervalued as Cloud Growth Accelerates? Chief Investment Officer Brian Norris provided additional market context, saying interest-rate volatility rose in the quarter as policy expectations shifted. He noted the 10-year Treasury traded in a 50-basis-point range, reaching a low of 3.94% on Feb. 27 and closing the quarter at 4.32%. Norris said expectations for two Fed cuts in 2026 at the beginning of the year were “largely priced out in March,” contributing to a yield-curve flattening. He also said repo markets for the company’s assets were “remarkably stable,” with financing readily available. Collins said the company ended the quarter with a $7.3 billion investment portfolio comprised of: $5.2 billion of Agency RMBS $1.2 billion of Agency TBA $0.9 billion of Agency CMBS He also said the company maintained $493.1 million of unrestricted cash and unencumbered investments. Earnings available for distribution declined modestly to $0.55 from $0.56 in the prior quarter, Collins said. Norris said the Agency RMBS portfolio increased 19% quarter-over-quarter as the company invested proceeds from common stock ATM issuance. He added the company sold a “modest allocation” to 6.5% coupons early in the quarter due to increased prepayment risk tied to efforts to reduce mortgage rates, while purchases were “primarily focused in 4.5% through 5.5% coupons.” Norris said Agency TBA securities represented the majority of quarterly purchases as the company sought to benefit from attractive dollar-roll economics, increasing the TBA allocation to approximately 17% of the total portfolio. Despite that increase, he said the portfolio continued to emphasize prepayment protection, with over 80% allocated to securities with some form of protection, including over $5 billion specified pool Agency RMBS and nearly $900 million of Agency CMBS. On Agency CMBS, Norris said risk premiums tightened in January and remained resilient later in the quarter, with the Agency CMBS position “providing stability in times of stress” and outperforming Agency RMBS across the coupon stack. He said levered gross returns in Agency CMBS were in the “low double digits.” Collins said the company hedged 96% of borrowing costs at quarter end with interest-rate swaps and U.S. Treasury futures. Norris said repurchase agreements collateralized by Agency RMBS and Agency CMBS decreased to $5.3 billion from $5.6 billion, while total hedge notional increased to $5.1 billion from $4.9 billion. He attributed the higher hedge ratio primarily to the increased TBA allocation. Norris said the hedge book remained weighted toward swaps, with 81% of hedges in interest-rate swaps on a notional basis, and swap spread tightening during the quarter created a “modest headwind” to performance. He said the company remained comfortable keeping most hedges in swaps because spreads were “relatively tight” and swaps offered an attractive hedge profile versus Treasury futures. Management pointed to improved conditions early in the second quarter. Collins said Agency mortgages performed well as risk sentiment improved and interest-rate volatility moderated. He noted two-year TIPS breakevens had fallen to below 3% and said book value had improved by approximately 2% since quarter end, a figure Norris reiterated during Q&A. Looking ahead, Collins said Agency RMBS net issuance should remain “manageable,” with steady GSE demand and potentially increased bank participation supported by Basel capital framework proposals that improve the capital efficiency of high-quality mortgage assets. He said wider spreads relative to the prior quarter provided more attractive entry points. Collins also said Agency CMBS continued to offer attractive risk-adjusted yields and diversification benefits despite elevated supply. Collins additionally highlighted balance sheet actions and shareholder alignment initiatives. He said the company reduced preferred equity to “less than 20%” of total equity, which he said reduced costs and benefited common stockholder returns. He also noted the company’s move from quarterly to monthly dividend distributions, which he said better aligns with income investors and provides “monthly touch points” around key metrics. During Q&A, Collins said the company raised nearly $134 million net through its at-the-market equity program in the first quarter, with issuance “pretty steadily” across the period. He said the company plans to “selectively access the ATM” when it provides a clear benefit to shareholders, calling the ATM the most efficient mechanism for raising capital and saying “responsible growth” can reduce fixed cost per share and improve stock liquidity. On risk management, Norris said the company did not sell assets during the March volatility and instead invested “at wider levels” as volatility occurred. Asked about the role of TBAs, Norris said they have a structural place in the portfolio and provide liquidity, adding that while the allocation was at the higher end of what the firm would be comfortable with due to attractive dollar-roll conditions, the near-term plan was to keep the allocation where it is. Discussing the role of the GSEs, Norris said Fannie Mae acted as a backstop in March and that the GSEs added about $35 billion to their retained portfolios in the first quarter, including $18 billion in March. He said that reduced spread volatility and gave the company more comfort to let leverage “drift higher” in March without selling assets, though he noted April outperformance brought leverage back closer to the beginning-of-year level. Invesco Mortgage Capital Inc (NYSE: IVR) is a real estate investment trust that specializes in investing in U.S. residential mortgage-backed securities. The company's portfolio is weighted toward agency-guaranteed RMBS issued or guaranteed by U.S. government-sponsored enterprises such as Fannie Mae, Freddie Mac and Ginnie Mae. By focusing on collateral backed by federal agencies, Invesco Mortgage Capital seeks to generate attractive returns while managing credit risk through securities that carry explicit or implicit government guarantees. To enhance its portfolio yield, the company employs leverage through repurchase agreements, warehouse facilities and debt financing. The article "Invesco Mortgage Capital Q1 Earnings Call Highlights" was originally published by MarketBeat.

Performance was primarily impacted by increased Agency RMBS risk premiums and notable swap spread tightening, which outweighed the stability provided by Agency CMBS investments. Management attributed the 7.9% decline in book value to a volatile market environment driven by rising geopolitical tensions, higher energy prices, and renewed inflation concerns. The company intentionally allowed its economic debt-to-equity ratio to increase to 7.5 turns, reflecting a more constructive outlook on Agency RMBS valuations entering the second quarter. Strategic portfolio adjustments included selling 6.5% coupons to mitigate prepayment risks and refocusing purchases on 4.5% through 5.5% coupons. The transition to a monthly dividend distribution was implemented to better align with the cash flow needs of income investors and provide more frequent financial touchpoints. Management emphasized that the current capital structure, with preferreds reduced to approximately 20% of total equity, lowers costs and enhances returns for common stockholders. Management expects Agency RMBS net issuance to remain manageable, supported by steady demand from GSEs and anticipated increases in bank participation. The company anticipates that a reduction in geopolitical tensions would provide additional support for risk assets and potentially moderate interest rate volatility. The investment strategy will continue to favor specified pools with lower loan balances due to their superior predictability of future cash flows and inherent prepayment protection. Management intends to selectively utilize the ATM program to raise common stock when it provides a clear benefit to shareholders by reducing fixed costs per share. The company remains positioned to deploy ample liquidity into target assets as the investment environment improves, viewing near-term risks as balanced. A significant leadership transition occurred with Kevin Collins assuming the CEO role following John Anzalone's retirement after a 17-year tenure. The GSEs announced a 200 billion mortgage purchase program in January, which initially ignited sharp valuation increases before the effect faded due to a lack of further details. Swap spread tightening acted as a modest performance headwind during the quarter, though management remains comfortable with interest rate swaps as a primary hedge. Geopolitical developments in the Middle East are identified as a primary driver of near-term interest rate market vulnerability and potential volatility. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. The company raised 134 million net in Q1 to position the capital structure for long-term success and reduce fixed costs per share. Management views the ATM as the most efficient mechanism for raising capital and will continue to use it selectively when beneficial to shareholders. TBA securities currently represent a higher-than-normal allocation due to attractive dollar roll markets and the liquidity they provide for efficient leverage shifts. While management prefers the durable return profile of specified pools, they intend to maintain the current TBA allocation in the near term while it remains accretive. GSEs acted as a critical backstop in March, adding 35 billion to their portfolios, which reduced spread volatility and provided management the comfort to let leverage drift higher without selling assets. Management noted that the GSEs still have approximately 117 billion in capacity under their current cap, providing a supportive technical tailwind. Management is focusing swap hedges on the front end of the curve (0-10 years) to reduce swap spread volatility, despite more negative spreads in the 30-year tenor. Treasury futures are being utilized for longer-dated hedges to avoid the significant spread duration risks associated with long-dated swaps. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Image source: The Motley Fool. Friday, May 1, 2026 at 9 a.m. ET Chief Executive Officer — Kevin Collins President — David Lyle Chief Investment Officer — Brian Norris Chief Financial Officer — Mark Grexson Kevin Collins: Good morning, and welcome to Invesco Mortgage Capital Inc.’s first quarter 2026 earnings call. I will 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 are our President, David Lyle, and our CFO, Mark Grexson. I am very excited to assume the role of Chief Executive Officer of Invesco Mortgage Capital Inc., and I would like to thank and congratulate our retiring CEO, John Anzalone, for his 17-year tenure with the company. John began his service as our CIO at the time of our IPO back in 2009, and he spent the past nine years as CEO, leading the company through a range of market environments and its transition more recently to an agency-focused strategy. John, please know our entire team is grateful for your leadership. I would also like to congratulate Dave on his recent appointment as President. Dave, Brian, and I have all worked very closely with John since IVR’s inception, and we are looking forward to building on our positive momentum alongside Mark, our CFO. Importantly, we share a commitment to disciplined investment management, consistent performance, strong governance, and expanded investor engagement. We believe our current team, capital structure, and investment portfolio are well positioned for the future. Looking ahead, we are excited to leverage our core competencies in Agency RMBS and Agency CMBS to continue delivering attractive outcomes for our investors. In addition to our team’s long track record and experience managing residential and commercial agency mortgages, we benefit from the insights of the global investment manager, which inform our views on macroeconomic conditions, interest rate dynamics, policy developments, and broader market risks. Our deep counterparty relationships enhance our ability to source, finance, and hedge attractive investment opportunities, and we believe these advantages differentiate us from our peers. Our entire management team remains committed to fully leveraging the resources and capabilities of Invesco. During the first quarter, we operated in a more volatile market environment, following the strong recovery in agency MBS valuations experienced in 2025. Financial conditions tightened as rising geopolitical tensions, higher energy prices, and renewed inflation concerns drove increased interest rate volatility and pushed U.S. Treasury yields higher across the curve. Short-term yields rose more sharply than longer-dated yields, largely reflecting a pullback in expectations for near-term monetary policy easing. At the same time, inflation expectations moved higher, with 2-year TIPS breakevens rising to approximately 3.25% by quarter end, up from about 2.3% at the beginning of the year. These dynamics weighed on risk assets broadly and resulted in higher-coupon RMBS underperformance relative to Treasuries, although our Agency CMBS investments performed well during the quarter. The benefit was outweighed by increased Agency RMBS risk premiums and notable swap spread tightening. Against this backdrop, book value declined by 7.9% to $8.08 at quarter end, which, when combined with our dividends of $0.12 per month, resulted in an economic return of negative 3.2% for the quarter. In the context of evolving market conditions, our economic debt-to-equity ratio increased to 7.5 turns as of quarter end from 7 turns at the beginning of the year, largely reflecting the decline in book value per share and our more constructive outlook on Agency RMBS as we entered the second quarter. At quarter end, our 7.3 billion investment portfolio consisted of 5.2 billion Agency RMBS, 1.2 billion Agency TBA, and 900 million Agency CMBS, and we maintained a sizable balance of unrestricted cash and unencumbered investments totaling 493.1 million. Earnings available for distribution declined modestly from $0.56 in the fourth quarter of last year to $0.55 in the first quarter. As of quarter end, we hedged 96% of our borrowing costs with interest rate swaps and U.S. Treasury futures. Entering the second quarter, agency mortgages have performed well as risk sentiment improved and interest rate volatility moderated. While near-term inflation concerns remain elevated, they have eased somewhat, with 2-year TIPS breakevens now below 3%, suggesting a modest stabilization in inflation expectations. As a result, our book value has improved by approximately 2% since the end of the first quarter. Looking ahead, we believe a further reduction in geopolitical tensions would likely provide additional support for risk assets. From a supply and demand perspective, Agency RMBS net issuance should remain manageable. The GSEs continue to provide steady demand, and bank participation is likely to increase. We have also taken steps to strengthen our capital structure, including actions that reduced our preferreds to approximately 20% of our total equity, which has reduced costs and benefited returns for common stockholders. We have taken steps to deepen alignment with investors, including transitioning this year from quarterly to monthly dividend distribution. We have received positive feedback that our capital structure positions us competitively within the sector and that our monthly dividend approach better aligns the cash flow needs of income investors while providing important monthly touch points regarding our key financial metrics. With that, I will now turn the call over to Brian Norris to discuss the portfolio in more detail. Brian Norris: Thanks, Kevin, and good morning to everyone listening to the call. I would like to begin by congratulating John on his well-deserved retirement, and Kevin and Dave on their newly appointed roles. The four of us have worked closely together for nearly 20 years, including the almost 17 years since IVR’s IPO in June 2009. I am very excited for John as he enters the next phase of his life, and I would like to express my sincere gratitude for his immeasurable contributions to IVR over the past 17 years. These transitions illustrate the advantages of our relationship with Invesco, our external manager, given the vast resources and deep bench from which our team benefits. Kevin and Dave bring a wealth of experience, consistency, and familiarity to their new roles, and I have no doubt that they, along with Mark and I, have all the resources necessary to continue the strong momentum that IVR has enjoyed in recent years. I am extremely excited for the future of IVR as we embark on the next chapter in our company’s leadership. Turning to financial markets on Slide 4, interest rate volatility moved notably higher during the first quarter as expectations for near-term monetary policy shifted amid concerns regarding AI’s impact on employment in February to the inflationary impact of the conflict in the Middle East in March. The 10-year Treasury yield traded in a 50 basis point range, closing at a low of 3.94% on February 27 before closing sharply higher at 4.43% on March 27 and finishing the quarter at 4.32%. As depicted in the chart on the lower left, two cuts to Fed funds were anticipated for 2026 at the beginning of the year. Those expectations were largely priced out in March amid escalating oil prices and a robust economy that showed little sign of impact from the conflict. This led to a flattening of the yield curve as 2-year yields ended the quarter 32 basis points higher while 30-year yields increased just 7 basis points. Positively, as shown in the upper right chart, repo markets for our assets have been remarkably stable despite broader market volatility, with financing readily available and spreads over 1-month SOFR remaining within a tight range. Slide 5 provides more detail on the agency mortgage market. The sector enjoyed a strong start to the quarter as the positive momentum from 2025 carried over into the new year, aided by low interest rate volatility, a steeper yield curve, and supportive supply and demand technicals. Although the GSEs had been adding to their retained portfolios throughout the second half of 2025, the announcement of a 200 billion mortgage purchase program on January 8 ignited a sharp response as investors rushed to get ahead of the program, leading to significantly higher valuations and lower mortgage rates in a matter of days. However, the move tighter in spreads faded the rest of January and into February as further details on the program were scarce, yet the prescribed presence of the GSEs as a buyer in the market was a clear indication that the supportive supply and demand technicals are on even stronger footing in the coming months and quarters. As interest rate volatility increased in February and March, agency mortgage performance continued to wane, but the resulting underperformance was much more orderly than in previous episodes of market stress in recent years. Lower coupons fared best in this environment, outperforming Treasury hedges for the quarter despite the volatility. Meanwhile, higher coupons lagged throughout the period, initially due to investor concerns on prepayment risk given the administration’s focus on mortgage rates, and subsequently because of their elevated sensitivity to interest rate volatility as compared to lower coupons. Positively, pay-ups improved during the quarter, offsetting some of the underperformance of higher coupons relative to lower coupons, given increased investor demand for additional prepayment protection and premium dollar-price bonds. We continue to believe that owning prepayment protection via carefully selected specified pools, particularly in premium-priced holdings, remains an attractive opportunity for mortgage investors and helps mitigate convexity risks inherent in agency mortgage portfolios. In addition to the GSEs, bank and overseas demand also improved in the quarter, providing additional support for the sector, while money managers and mortgage REITs were also steady contributors. The supply and demand technicals improved the economics for the dollar roll market, with most coupons enjoying attractive implied financing rates. Although this dynamic faded for conventional coupons in the latter half of the quarter, dollar rolls on production coupon Ginnie Mae TBA remained quite attractive, with implied financing rates well below 1-month SOFR. Slide 6 details our Agency RMBS investments as of March 31. Our portfolio increased 19% quarter-over-quarter as we invested proceeds from common stock ATM issuances. We sold our modest allocation to 6.5% coupons early in the quarter as efforts to reduce mortgage rates increased prepayment risk in our holdings, while purchases were primarily focused in 4.5% through 5.5% coupons. The decline in our 6% allocation was a result of paydowns and the overall growth in the portfolio, as we had limited trading activity in that coupon during the quarter. Agency TBA securities represented the majority of our purchases in the quarter as we sought to benefit from the attractive environment in the dollar roll market, ultimately increasing our allocation to approximately 17% of the total portfolio. Despite the increase in our TBA allocation, our total portfolio continues to benefit from significant prepayment protection, with over 80% of the portfolio allocated to securities with some form of prepayment protection via over 5 billion of specified pool Agency RMBS and nearly 900 million of Agency CMBS. We continue to favor specified pools with lower loan balances given their superior predictability of future cash flows, while we remain well diversified across collateral stories, with limited changes during the quarter. Leveraged returns on Agency RMBS hedged with swaps remain attractive, with the current coupon spread to a 5- and 10-year SOFR blend ending the quarter near 165 basis points, 25 basis points wider than year end and equating to levered gross returns in the high teens. April’s outperformance has since narrowed the spread by 10 basis points, with levered returns remaining attractive in the mid to upper teens. Slide 7 provides detail on our Agency CMBS portfolio. Risk premiums tightened meaningfully in January, consistent with Agency RMBS spreads, and also proved resilient amid the sharp increase in interest rate volatility in the latter half of the quarter, only modestly widening in February and March. Our Agency CMBS position performed in line with expectations, providing stability in times of stress and outperforming Agency RMBS across the coupon stack for the quarter. Despite the lack of new purchases, we continue to believe Agency CMBS offers many benefits, mainly through its inherent prepayment protection and fixed maturities, which reduce our sensitivity to interest rate volatility. Leveraged gross returns are in the low double digits and remain consistent with lower-coupon Agency RMBS, while financing capacity has been robust as we continue to fund our positions with multiple counterparties at attractive levels. We will continue to monitor the sector for opportunities to increase our allocation to the extent the relative value between Agency CMBS and Agency RMBS is attractive, in order to provide additional stability to the portfolio, recognizing the overall benefits as the sector diversifies risks associated with Agency RMBS. Slide 8 details our funding and hedge book at quarter end. Repurchase agreements collateralized by our Agency RMBS and Agency CMBS investments decreased from 5.6 billion to 5.3 billion, as most of our purchases during the quarter were in Agency TBA, while the total notional of our hedges increased from 4.9 billion to 5.1 billion. Our hedge ratio increased from 87% to 96%, primarily due to the increased allocation to Agency TBA. The composition of our hedges remained weighted toward interest rate swaps, with 81% of our hedges consisting of interest rate swaps on a notional basis and 65% on a dollar-duration basis. Swap spreads tightened during the quarter, creating a modest headwind in performance. Despite the recent tightening, we remain comfortable maintaining the majority of our hedges in interest rate swaps, as we believe swap spreads are relatively tight and offer an attractive hedge profile relative to Treasury futures. To conclude our prepared remarks, the sector experienced a more challenging environment in the first quarter as a supportive trend of moderating financial market volatility reversed amid escalating geopolitical tensions. While higher-coupon agency mortgage valuations recovered a portion of their first-quarter underperformance in April, developments in the Middle East conflict will continue to drive interest rate markets in the near term, leaving the sector somewhat vulnerable to headlines and further bouts of increased volatility. Positively, the supply and demand environment for the sector is at its most supportive in a number of years, with money managers, mortgage REITs, banks, overseas investors, and the GSEs providing more than enough demand to absorb net supply, both organic and runoff from the Fed balance sheet. This supportive environment has resulted in, and should continue to result in, reduced spread volatility from the levels experienced in recent years, reducing the risk of a more significant or more protracted dislocation. Lastly, our liquidity position remains ample, providing substantial cushion to withstand additional market stress while also allowing sufficient capital to deploy into our target assets as the investment environment improves. While we view near-term risks as balanced, we believe agency mortgages are poised to perform well as geopolitical tensions moderate and their impact on the U.S. economy becomes more clear. Thank you for your continued support of Invesco Mortgage Capital Inc. We will now open the call for questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press 1. You will be prompted to record your name. To withdraw your question, you may press 2. Again, press 1 to ask a question. One moment, please, for our first question. Our first question comes from Marissa Lobo with UBS. Your line is open. You may ask your question. Analyst: Thank you, and good morning. On the equity issuance this quarter, can you speak to the timing of those raises and how you are thinking about future ATM activity? Kevin Collins: Yes, sure. We raised nearly 134 million net of issuance costs in Q1 through our ATM. Those were timed pretty steadily throughout the quarter. Our capital structure is now well positioned to support IVR’s long-term success, but we do plan to selectively access the ATM to raise common stock when it provides a clear benefit to our shareholders. We continue to think that the ATM is the most efficient mechanism for raising capital. Lastly, I would emphasize that responsible growth reduces our fixed cost per share and improves liquidity in our stock, all of which we think are beneficial for the company. Analyst: Got it. Thank you. And just on risk management, can you speak to some of the decisions that were made for the portfolio during the volatile period in March, and would you describe upcoming periods of volatility as a trading opportunity or a reduction in your risk-taking? Brian Norris: Good morning, Marissa. The improved environment for agency mortgages that we have seen over the past 10 to 11 months gave us more comfort that the volatility we saw in March would pass and that mortgage valuations or spreads would be much less volatile than, for example, what we saw last April and in previous episodes. We were able to raise ATM throughout the first quarter, which allowed us to absorb some of that volatility as well. We did not sell assets as a result of the increased volatility, and we were able to invest and put money to work at wider levels as that volatility occurred. Operator: Our next question comes from Jason Weaver with JonesTrading. Your line is open. You may ask your question. Jason Weaver: Good morning, and congrats to Kevin and David on the elevations, and thanks to John on his transition after a long tenure. First, I was curious about the plan for the TBA position. Is this a structural, hold part of the portfolio, or more of a placeholder for rolling into specified cash pools over time? Brian Norris: Hey, Jason. Good morning. TBAs certainly have a place in the portfolio structurally. Right now, because they are so attractive, our allocation is at the higher end of what we would be comfortable with. Naturally, our inclination is to own more specified pools, as that is a more durable return profile, but we are very comfortable with where TBA dollar roll markets are, and we think it is quite attractive. At least in the near term, our plan is to keep that allocation where it is. In addition, agency TBAs offer increased liquidity for the portfolio, allowing us to shift leverage as we see fit in a very efficient manner. So structurally, they do have a place in the portfolio as long as they are not punitive from a return perspective. Jason Weaver: Thanks. I see the swap book maturity termed out a bit, particularly in the five-year bucket. Was that largely a function of rolling down from the shorter duration 6.5% into the 5% to 5.5% coupons? Brian Norris: The swap maturities were rolling down the curve themselves. Moving from 6.5s into lower coupons would actually require us to extend hedges, and that was done through a mixture of both Treasury futures and swaps. We tend to own a bit more longer-duration Treasury hedges than we do in swaps, with a lot of our swaps at the front end of the curve. Jason Weaver: One more, if I may. Do you have an updated book value quarter-to-date? Brian Norris: We are up about 2% since the end of the quarter. Operator: Thank you. Our next question comes from Doug Harter with BTIG. Your line is open. You may ask your question. Doug Harter: Thanks. Following up on the risk-reward, how are you thinking about the range we are likely to be in for spreads, and how should we think about the risks that we either break out on the high end or the low end of that range? Brian Norris: Hey, Doug, and welcome back. Mortgage spreads, particularly relative to swaps, are quite attractive. They are not quite as attractive as they were in previous years when volatility was much higher, but in the current environment, they are attractive. We could see a little bit of further spread tightening. That could come from wider swap spreads as opposed to necessarily tighter mortgage spreads versus Treasuries, because from a mortgage-to-Treasury basis, valuations are fair to slightly tight. In the mortgage-to-swap basis, there is some room for compression. Operator: Thank you. Again, if you would like to ask a question, please press 1. Our next question comes from Trevor Cranston. Your line is open. You may ask your question. Trevor Cranston: Thanks. Can you talk about how the GSEs performing as a backstop buyer of MBS impacts your thinking on leverage, and if having a lower level of downside risk equates to being willing to run at a higher leverage level going forward? And then I have a follow-up on hedging. Brian Norris: Sure, Trevor. Good morning. In March, we did see Fannie Mae come in and act as that backstop; they added, I believe, 18 billion in March alone. The GSEs added about 35 billion to their retained portfolios in the first quarter, and they still have about 117 billion left under their current cap. While they are much more opportunistic than the Fed during times of QE, and more selective on coupons and collateral stories, they certainly helped absorb a lot of the volatility in March. That reduces spread volatility and gives us more comfort. We did let leverage drift higher in March without selling assets because we felt more comfortable in this environment, and we will continue to be that way. The outperformance in April has brought leverage back down closer to where we were at the beginning of the year, which is probably a more normal long-term run rate for us, and we feel very comfortable from a liquidity and risk perspective there. Trevor Cranston: On the hedge portfolio, you mentioned that a lot of the longer-tenor hedges are in the Treasury bucket currently. How do you think about the balance between swap spreads being more negative further up the curve and potentially using longer-dated swaps to capture some of the negative swap spreads versus the liquidity of using Treasury hedges on that part of the curve? Brian Norris: Definitely, swap spreads for us, particularly in the 30-year portion of the curve, are quite negative, near negative 80 basis points, whereas in the front end like 5s and 10s they are more like negative 30 to negative 45. Longer-dated swaps are more attractive from a negative spread perspective, but you also get a lot of spread duration out there, so modest changes will add more volatility to the portfolio. Given that mortgage spreads versus swaps across the curve are still very attractive, we are more comfortable reducing swap spread volatility by hedging with swaps at the front end of the curve, call it between zero and ten years, as opposed to going out as far as 30 years. We do own some 30-year swaps, but to the extent that we hedge out there, it is mostly in Treasury futures. Operator: Thank you. I will now turn the call back over to management for closing remarks. Kevin Collins: With no other questions, we appreciate everyone’s interest in Invesco Mortgage Capital Inc., and we look forward to future engagement. Operator: Thank you. That concludes today’s conference. We thank you for your participation. At this time, you may disconnect your line. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Invesco Mortgage (IVR) Q1 2026 Earnings Transcript was originally published by The Motley Fool