Third Quarter 2025 Earnings Call Invesco Mortgage Capital Inc. October 31, 2025 John Anzalone Kevin Collins Mark Gregson David Lyle Brian Norris Chief Executive Officer President Chief Financial Officer Chief Operating Officer Chief Investment Officer Cautionary Notice Regarding Forward-Looking Statements This 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 ...

Financial Data and Key Metrics Changes - Year-to-date shareholder returns were 20% as of last Friday's close, 23% over the last year, and nearly 72% over the last three years with dividends reinvested [4] - Total economic return for the quarter was 10.3% and 11.5% year-to-date, reflecting disciplined management of Agency RMBS [4] - The common equity market cap is now above $1.8 billion, indicating growth in investor trust [5] Business Line Data and Key Metrics Changes - Net interest income continues to trend upward due to new investments with attractive yields, with over $130 million of gains on the portfolio in the third quarter [8] - The portfolio has grown over 50% larger since the beginning of the year and is 10% larger since the end of the second quarter [9] Market Data and Key Metrics Changes - Agency mortgages offered wide spreads to Treasuries and interest rate swaps, with implied volatility declining early in the quarter [11] - The agency current coupon yield declined from nearly 5.75% to nearly 5%, leading to a sharp increase in the refinance index [12] Company Strategy and Development Direction - The company aims to build a resilient platform at the intersection of capital markets and housing finance, focusing on risk discipline and liquidity management [4] - A new office in New York City is being opened to attract talent and strengthen business partnerships [10] Management's Comments on Operating Environment and Future Outlook - The operating environment remains complex with vulnerabilities due to persistent inflation and geopolitical factors [5] - The Federal Reserve is committed to bringing rates down to more neutral levels, but uncertainty in the rate path is significant [6] - The company is prepared for potential surprises in the market, emphasizing a deliberate growth strategy [7] Other Important Information - The company has raised $254 million in new capital in the third quarter and $776 million year-to-date, allowing for capital growth at a premium to book value [9] - The company is focused on disciplined risk management and liquidity to weather future volatility, with liquidity at over $1 billion [9] Q&A Session Summary Question: Current ROEs and dividend implications - ROEs in Agency RMBS remain in the high teens net of hedging costs, with gross in the mid-20s on a large percentage of the coupon stack [23] Question: Update on book value - Estimated book value is $1,271 net of the dividend accrual as of Friday's close [25] Question: Mortgage spreads and historical context - Mortgage spreads are still in the top quartile of the widest levels when compared to interest rate swaps [29] Question: Demand side outlook for GSEs - GSE holdings of Agency MBS could increase, with the capacity to add as much as $450 billion under current agreements [36] Question: Impact of implied volatility on hedging strategy - The company is looking at pockets of cheap volatility to stabilize the duration of the portfolio [41] Question: Market's reaction to volatility themes - The market has reacted to increased certainty in policy outcomes, but the company remains prepared for unexpected events [45]

Financial Data and Key Metrics Changes - Year-to-date shareholder returns were 20% as of last Friday's close, and 23% over the last year, with nearly 72% returns over the last three years when dividends are reinvested [6] - Total economic return for the quarter was 10.3% and 11.5% year-to-date, reflecting disciplined management of Agency RMBS [6] - The common equity market cap surpassed $1.8 billion, indicating broadening trust from individuals and institutions [7] - Estimated book value was $12.71 net of the dividend accrual as of Friday's close [31] Business Line Data and Key Metrics Changes - Net interest income continues to trend upward due to new investments with attractive yields, with over $130 million in gains on the portfolio in the third quarter [12][13] - The portfolio has grown over 50% larger since the beginning of the year and is 10% larger since the end of the second quarter [14] Market Data and Key Metrics Changes - Agency mortgages offered wide spreads to treasuries and interest rate swaps, with nominal spreads remaining wide [16] - The GSEs have the capacity to add up to $450 billion under current stock purchase agreements, which could increase demand for Agency MBS [44] Company Strategy and Development Direction - The company aims to build a resilient platform at the intersection of capital markets and housing finance, focusing on risk discipline and liquidity management [5] - The strategy includes a deliberate bias towards lower coupons, which are expected to outperform as mortgage rates decline [17] - The company is opening a new office in New York City to attract talent and strengthen market position [15] Management's Comments on Operating Environment and Future Outlook - The operating environment remains complex, with vulnerabilities due to persistent inflation and geopolitical factors [7] - The Federal Reserve is committed to bringing rates down to more neutral levels, but uncertainty in the rate path is significant [8] - The company is prepared for potential surprises in the private credit market, emphasizing a deliberate growth strategy [10] Other Important Information - The company has raised $254 million in new common equity capital in the third quarter, bringing year-to-date new capital growth to $776 million [13][17] - The company continues to focus on disciplined risk management and liquidity to weather future volatility [14] Q&A Session Summary Question: Where do you see incremental spreads and current ROEs? - ROEs in agency RMBS remain in the high teens net of hedging costs, with gross in the mid-twenties for a large percentage of the coupon stack [29] Question: Can we get an update on book value quarter to date? - Estimated book value is $12.71 net of the dividend accrual as of Friday's close [31] Question: Can you discuss the demand side outlook for agencies? - GSE holdings of Agency MBS could increase, with the capacity to add significant amounts under current agreements [44] Question: How are you thinking about swap spreads? - The federal deficit is a major factor, and while spreads could go more negative, there is a buffer at current levels [38] Question: What are the implications of lower volatility on your hedging strategy? - Lower volatility allows for the repurchase of options that were short in a levered mortgage position, stabilizing the portfolio's duration [48] Question: Do you see opportunities to pick up alpha within the coupon stack? - There are tremendous opportunities across the coupon stack, allowing for flexibility beyond the current coupon [60]

Financial Data and Key Metrics Changes - Year-to-date shareholder returns were 20% as of last Friday's close, 23% over the last year, and nearly 72% over the last three years with dividends reinvested [4] - Total economic return for the quarter was 10.3% and 11.5% year-to-date, reflecting disciplined management of Agency RMBS [4] - The common equity market cap is now above $1.8 billion, indicating growth in investor trust [5] - Estimated book value is $1,271 net of the dividend accrual as of Friday's close [24] Business Line Data and Key Metrics Changes - Net interest income continues to trend upward due to new investments with attractive yields, with over $130 million of gains on the portfolio in the third quarter [9] - The portfolio has grown over 50% larger since the beginning of the year and is 10% larger since the end of the second quarter [10] Market Data and Key Metrics Changes - Agency mortgages offered wide spreads to Treasuries and interest rate swaps, with nominal spreads remaining wide [12] - The agency current coupon yield declined from nearly 5.75% to nearly 5%, leading to a sharp increase in the refinance index [13] - GSE holdings of Agency MBS could potentially increase, with the capacity to add as much as $450 billion under current agreements [32] Company Strategy and Development Direction - The company focuses on building a resilient platform at the intersection of capital markets and housing finance, emphasizing risk discipline and liquidity management [4] - The strategy includes opportunistic investing and focused value creation, with a deliberate bias towards lower coupons expected to outperform [12][15] - The company is opening a new office in New York City to attract talent and enhance business partnerships [11] Management's Comments on Operating Environment and Future Outlook - The operating environment remains complex, with vulnerabilities due to persistent inflation and geopolitical factors [5] - The Federal Reserve is committed to bringing rates down to more neutral levels, but uncertainty in the rate path is significant [6] - The company is prepared for potential surprises in the market and remains focused on strengthening its market position [8] Other Important Information - The company raised $254 million in new capital in the third quarter, bringing year-to-date new capital growth to $776 million [10] - The liquidity at quarter end was over $1 billion, representing over 50% of total equity [10] Q&A Session Summary Question: Where do you see incremental spreads and current ROEs? - ROEs in Agency RMBS remain in the high teens net of hedging costs, with gross in the mid-20s on a large percentage of the coupon stack [22] Question: Can we get an update on book value quarter to date? - Estimated book value is $1,271 net of the dividend accrual as of Friday's close [24] Question: Can you elaborate on mortgage spreads being wide relative to history? - Mortgage spreads are still in the top quartile of the widest levels when compared to interest rate swaps [27] Question: What is the potential for GSEs as a player on the demand side? - GSE holdings of Agency MBS could increase, with a capacity to add as much as $450 billion under current agreements [32] Question: How are you thinking about the hedging strategy with lower volatility? - The company is looking to repurchase options that are inherently short in a levered mortgage position, focusing on pockets of cheap volatility [36] Question: Why has the market shrugged off volatility themes? - There is more certainty in the market due to policy commitments from the Fed and clearer policy outcomes from the administration [40]

Core Insights - Chimera Investment Corporation reported a decline in earnings available for distribution to $0.39 per diluted share, missing analysts' estimates by approximately 15% [1] - GAAP earnings per diluted share fell to $0.17, down from $0.41 in Q2 2024, while GAAP interest income revenue increased to $201.3 million [1] Financial Performance - Non-GAAP EPS for Q2 2025 was $0.39, below the estimate of $0.46, but up 5.4% from $0.37 in Q2 2024 [2] - GAAP EPS decreased by 58.5% year-over-year from $0.41 in Q2 2024 [2] - Economic net interest income (Non-GAAP) was $69.1 million, down 4.5% from $72.4 million in Q2 2024 [2] - The GAAP book value per share decreased to $20.91, with a modest economic return of 0.5% [7] Business Overview - Chimera specializes in investing in residential mortgage assets, focusing on generating income from a diversified asset portfolio [3] - The company invests primarily in mortgage-backed securities and residential mortgage loans, while also managing risk and regulatory compliance [3][4] Strategic Initiatives - The company is expanding its investment in Agency residential mortgage-backed securities, which increased from 3.7% of the portfolio at year-end 2024 to 18.2% by June 30, 2025, valued at approximately $2.68 billion [5] - Loans held for investment decreased from 88.0% to 74.6% of the book, while non-Agency RMBS allocations slightly dropped [6] - The company is pursuing acquisitions, including HomeXpress Mortgage Corporation, to enhance its origination capabilities [5][10] Risk Management - Cash reserves increased to $250 million, and secured financing agreements rose to $4.56 billion, indicating a focus on maintaining high liquidity [9] - GAAP leverage increased to 4.5x, reflecting larger Agency MBS positions, while serious delinquencies in the reperforming loan portfolio remained steady at 8.9% [10] Outlook - Management did not provide explicit financial guidance but indicated a focus on deploying recently unlocked capital, with 30% to 40% already invested early in Q3 2025 [14] - Key risks include rising market leverage and increasing non-QM delinquency rates, which may impact future performance [15]

Financial Data and Key Metrics Changes - The economic return for the quarter was negative 4.8%, consisting of a $0.34 dividend per common share and a $0.76 decline in book value per common share [7] - The debt to equity ratio decreased from 7.1x at the end of March to 6.5x at the end of June, indicating a more defensive posture due to elevated near-term uncertainty [7] - As of July 18, 2025, the estimated book value per common share is between $7.99 and $8.31, reflecting a slight recovery in performance [8][25] Business Line Data and Key Metrics Changes - The Agency RMBS portfolio decreased by 15% quarter over quarter as the company managed risk amid trade policy uncertainty [18] - The allocation to Agency CMBS increased from 15% at the end of Q1 to just over 17% as of June 30, 2025, due to the decline in the Agency RMBS portfolio [20] Market Data and Key Metrics Changes - Interest rates declined across the front end of the Treasury yield curve during Q2, while long-term rates increased, reflecting expectations for accommodative policy from the FOMC [6][11] - The two-year Treasury yield declined by 16 basis points, while the thirty-year yield increased by 20 basis points, leading to the steepest two-thirty spread in nearly 3.5 years [11][12] Company Strategy and Development Direction - The company maintains a cautious near-term outlook but is optimistic about the long-term demand for Agency mortgages due to attractive valuations and stabilization in interest rate volatility [8][25] - The focus remains on specified pools with predictable prepayment behavior, particularly in lower loan balance collateral [18] Management's Comments on Operating Environment and Future Outlook - Management noted that financial conditions were volatile in Q2 but ended modestly accommodative, with expectations for two rate cuts by year-end and additional cuts in 2026 [5][25] - The company believes that further easing of monetary policy will lead to a steeper yield curve and a decline in interest rate volatility, supporting long-term demand for agency mortgages [25] Other Important Information - The company’s liquidity position is strong, providing a cushion for potential market stress while allowing for capital deployment as the investment environment improves [25] - The financing market for Agency CMBS remains robust, with no concerns about deterioration during a widening event [62] Q&A Session Summary Question: How does the company view the relative risk versus reward for high coupon RMBS? - The company believes that spreads reflect the risk accurately and has reduced exposure to higher coupon RMBS due to their sensitivity to interest rate volatility [29][30] Question: What is the company's comfort level on leverage? - The company is comfortable with its current leverage, which is lower than in Q1, and does not feel the need to increase leverage to meet return goals [33][34] Question: What is the outlook for swap spreads and the mix of hedges? - The company anticipates that swap spreads will widen, which would be beneficial, and is currently at maximum allocation to interest rate swaps [37][38] Question: What are the views on core earnings and dividends? - The company expects ROEs to remain attractive, supporting the current dividend without significant changes in the near term [41][45] Question: How does the company feel about CMBS spreads when the Fed cuts rates? - The company is comfortable with the financing market for Agency CMBS and expects spreads to tighten as the Fed cuts rates [60][62]

Financial Performance - The company reported a net loss of $0.40 per common share for Q2 2025, compared to a net income of $0.26 per common share in Q1 2025 [8] - Earnings available for distribution per common share was $0.58 in Q2 2025, down from $0.64 in Q1 2025 [8] - The common stock dividend per share remained at $0.34 [8] - Book value per common share decreased to $8.05 from $8.81 [8] - The company's economic return was -4.8% for Q2 2025, compared to 2.6% in Q1 2025 [8] Investment Portfolio - Agency RMBS comprised 81.4% of the investment portfolio, totaling $5.2 billion [8] - Agency CMBS represented 17.2% of the portfolio [8] - The Agency RMBS investment portfolio decreased by 15.1% to $4.2 billion in Q2 2025 [27, 31] Capital Structure and Financing - The company issued $2.2 million of common stock under the at-the-market program [10] - The company repurchased Series C Preferred Stock with a carrying value of $2.3 million [10] - The debt-to-equity ratio was 6.5x at the end of Q2 2025, compared to 7.1x in Q1 2025 [8, 40] - The company hedged 94% of borrowing costs with interest rate swaps and U S Treasury futures [40]

Core Viewpoint - Invesco Mortgage Capital Inc. reported a challenging second quarter in 2025, with a significant economic return of (4.8)%, driven by market volatility and a decline in book value per share, despite maintaining a consistent dividend payout. Financial Performance - The company experienced a net loss attributable to common stockholders of $26.6 million, translating to a loss per share of $0.40, compared to a net income of $16.3 million and earnings per share of $0.26 in Q1 2025 [10][11]. - Total interest income decreased to $70.6 million from $73.8 million in Q1 2025, while total interest expense also fell to $52.9 million from $55.0 million, resulting in a net interest income of $17.7 million, down from $18.8 million [9][10]. - The average earning assets at amortized cost decreased to $5,078.9 million from $5,422.6 million, and average borrowings also declined to $4,577.6 million from $4,930.2 million [9]. Portfolio and Valuation - As of June 30, 2025, the company’s investment portfolio was valued at $5.2 billion, comprising $4.3 billion in Agency RMBS and $0.9 billion in Agency CMBS, with a debt-to-equity ratio of 6.5x, down from 7.1x at the end of Q1 2025 [3][10]. - The estimated book value per common share as of July 18, 2025, is projected to be between $7.99 and $8.31, reflecting a cautious near-term outlook for Agency RMBS but a favorable long-term outlook due to expected investor demand [4][10]. Dividends and Capital Activities - The company declared a common stock dividend of $0.34 per share, consistent with the previous quarter, to be paid on July 25, 2025 [22]. - During the quarter, the company sold 282,750 shares of common stock for net cash proceeds of $2.2 million and repurchased 96,803 shares of Series C Preferred Stock for $2.3 million [23][24]. Economic Return and Non-GAAP Measures - The economic return for the quarter was calculated as the change in book value per common share of ($0.76) plus dividends declared of $0.34, resulting in an economic return of (4.8)%, compared to a positive return of 2.6% in Q1 2025 [6][10]. - Earnings available for distribution per common share decreased to $0.58 from $0.64 in Q1 2025, indicating a decline in the company’s ability to generate income for distribution [10][43].

Financial Data and Key Metrics Changes - ARMOUR's Q2 GAAP net loss related to common stockholders was $78.6 million, or $0.94 per common share [4] - Net interest income was $33.1 million, while distributable earnings available to common stockholders were $64.9 million, or $0.77 per common share [4] - The quarter ending book value was $16.9 per common share, with an estimated book value of $16.81 as of July 21 [6] Business Line Data and Key Metrics Changes - ARMOUR raised approximately $104.6 million of capital by issuing about 6.3 million shares of common stock through an at-the-market offering program during Q2 [4] - Since June 30, an additional $58.8 million was raised by issuing approximately 3.5 million shares [5] - Monthly common stock dividends were paid at $0.24 per share, totaling $0.72 for the quarter [5] Market Data and Key Metrics Changes - The 30-year fixed mortgage rate was near 6.75% through late June and early July, dampening refinancing activity [10] - MBS to SOFR spreads widened by approximately 10 basis points quarter over quarter, remaining historically cheap [9] Company Strategy and Development Direction - ARMOUR's strategy focuses on growing and deploying capital thoughtfully during spread dislocations while maintaining robust liquidity and dynamically adjusting hedges for disciplined risk management [17] - The company is optimistic about structural demand for MBS improving later in the year due to evolving regulatory clarity and a potential resumption of Fed easing policy [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro landscape is influenced by U.S. fiscal sustainability, Fed independence, and trade dynamics, which are expected to weigh on the market for some time [8] - The company believes that a resumption of the Fed cutting cycle this year could reignite liquidity flow into agency MBS [9] Other Important Information - ARMOUR's estimated net portfolio duration is closely managed at 0.46 years, with implied leverage at eight turns [12] - The MBS portfolio remains concentrated in production MBS with ROEs in the 18% to 20% range [13] Q&A Session Summary Question: Managing spread duration risk during volatility - Management expressed comfort with current leverage levels and noted that spreads remain historically attractive, indicating a potential for modestly increasing leverage [20][21] Question: Allocation to higher coupons and best value in the coupon stack - Management remains favorable towards 5.56 coupons, which are currently modeling the highest ROE, while the allocation to higher coupons has declined due to volatility [25][26] Question: Role of long treasury position within the portfolio - The five-year treasury position is used as part of the hedging strategy and as a proxy for Agency CMBS positions, allowing for tactical adjustments based on spread conditions [28][29] Question: Total expenses after fees waived - Management indicated that the higher expenses were due to increased professional fees and do not expect the same run rate going forward [33] Question: Balancing total return versus carry in the hedge portfolio - Management stated that they are positioned for a bullish steepener and are dynamically adjusting hedges based on macroeconomic views [37][38] Question: Expectations for leverage increase - Management noted that they are comfortable modestly increasing leverage given stable liquidity conditions and attractive spreads, while remaining cautious about making large bets [48][52]

Financial Data and Key Metrics Changes - The company's market capitalization as of June 30 is over $1,500,000,000, representing nearly 50% growth since June 2024 [8] - Net interest income continues to trend upwards as new investments with attractive yields are added to the portfolio [10] - The portfolio has grown to $14,000,000,000, which is 25% larger since the end of the first quarter and over 50% larger than the same time last year [12] Business Line Data and Key Metrics Changes - The company raised $560,000,000 of new capital this year, allowing it to continue raising capital at a premium to book value [11] - The portfolio's liquidity at quarter end was $891,000,000, or 55% of total equity, indicating a strong liquidity position [12] Market Data and Key Metrics Changes - Agency mortgage-backed securities (MBS) continue to offer attractive returns, with ROEs on newly acquired positions ranging from the mid-teens to low 20% [19] - Mortgages remain extremely cheap relative to corporate bonds, with a mixed technical picture in the medium term affecting spread tightening [20] Company Strategy and Development Direction - The company is focused on raising capital, deploying it into historically cheap investments, and managing its portfolio carefully through volatile periods [7] - A strategic increase in leverage from 7.4% to 8.3% was executed as the policy environment became more supportive [17] - The company is building a world-class operating platform by bringing several functions in-house to achieve scale and retain institutional knowledge [13] Management's Comments on Operating Environment and Future Outlook - Management highlighted the importance of a proactive approach to navigating market volatility and uncertainty [16] - The current environment is viewed as highly favorable for long-term capital deployment, with wide agency MBS spreads allowing for historic returns [23] - Management expressed confidence in the company's positioning to capitalize on market dynamics and generate strong risk-adjusted returns [23] Other Important Information - The company has appointed Michael Angelo as the chief legal officer and corporate secretary, bringing relevant experience from various financial institutions [5] Q&A Session Summary Question: Can you talk about the leverage range you're targeting? - Management indicated that leverage has been flexed down when the risk environment does not warrant incremental risk, and they are currently at a level that reflects a return to normal [29][30] Question: What are the conditions that might require other investors to be more active in the mortgage-backed space? - Management noted that banks would likely return when they see actual Fed rate cuts, while money managers have been overweight mortgages relative to corporates [40][41] Question: What are your thoughts on swap spreads and their future? - Management stated that current swap spreads are attractive, providing a large margin of safety, and they expect to continue generating strong returns despite potential fluctuations [46][48] Question: How do you view the coupon allocation between pools versus TBAs? - Management explained that they are working into a larger pool position, which offers more certainty in cash flows and is expected to be as attractive as thirty-year RMBS [62][63] Question: Can you provide an overview of the returns on Agency CMBS relative to RMBS? - Management highlighted that Agency CMBS offers a stable economic return profile and is being considered for its compelling return potential in the current market [60][62]