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Good morning, ladies and gentlemen. Welcome to the Invesco Mortgage Capital Inc.s' Investor Conference Call. All participants will be on a listen-only mode until the question and answer session. (Operator Instructions) As a reminder, this call is being recorded. Now I would like to turn the call over to the speakers for today: Richard King, Chief Executive Officer; John Anzalone, Chief Investment Officer, and Lee Phegley, Chief Financial Officer. Mr. King, you may now begin.

Good morning, everybody Welcome to the Third Quarter 2014 Invesco Mortgage Capital Earnings Call. Our management team believes we can deliver optimal shareholder value over the long-term by producing a high level of current income to shareholders generated through core earnings and passed along in the form of dividends. We believe we can deliver book value stability over the long run by managing risk appropriately. We very much like the way we are positioned now having spent 2013 and 2014 advancing our strategic objectives, repositioning the company toward credit and away from interest rate risks. As shown in the financial highlights on Slide 3 of the presentation, in the third quarter, we earned core earnings per share of $0.44. Over the last three quarters, we reported core earnings of $0.46 in the first quarter, $0.50 in the second quarter and $0.44 now the third quarter. The third quarter was on the lower end of our core earnings run rate, due to factors such as temporary higher prepay rates in the summer and some drag from things that should improve earnings in the long run like moving assets off of a repo, so that we could collateralized advances and investing the proceeds of the preferred offering. We currently core running in the middle of the 44 to 50 range and we have reduced risk as well. Our leverage is lower, our interest rate risk is lower as a result of our asset strategy and funding strategy, both of which are much more balanced. As a result, our book value volatility has been reduced a great deal and our earnings should be more stable going forward. In the second quarter, our book value was down $0.64 per share, about 3% to $19.16 per share. That due to spread softness primarily in July…

Thanks, Rich. Thanks, again, to everyone joining us on the call today. I will start on Slide 7, with the portfolio update. As you can see on the chart, we continue to make great progress toward our goal of reducing IVR's exposure to interest rate risk and increasing our exposure to high quality credit. In fact, agencies now make up less than 50% of our total assets and our exposure to longer duration, lower coupon agencies is under 12%. While wider spreads on credit have negatively impacted book value, the flipside is that spread volatility creates buying opportunities. We took advantage of those opportunities by increasing our exposure the legacy non-agencies, credit risk transfer bonds and senior classes and CMBS. We closed two more jumbo prime securitizations during the quarter and expect to close two more in the fourth quarter. We also closed two more CRE loans during the third quarter and expect to make additional investments in that space during the fourth quarter. These moves has left us with a very manageable interest rate exposure with our duration GAAP in a half year range while the empirical duration has been very close to zero. Over the course of the past few quarters, our book value has shown almost no correlation to rates. With fundamentals continuing to look at in both, the residential and commercial spaces, we very much prefer to put money to work in newly issued well-underwritten credit assets. Let's take a look closer look at each sector starting with agencies on Slide 8. The bar chart on the upper-right of Slide 8, gives us a very good depiction of the evolution of our agency book. Hybrid arms now make up nearly a third of the book, up from less than 10% a year ago. Less than a…

(Operator Instructions)

Operator do you have any questions in the queue?

The first question is from Nick Agarwal from Wells Fargo.

Good morning, guys. Thanks for taking my questions. I was curious; you guys have done a good job shifting the investment portfolio more towards the credit side, and as we continue to see slower HPA. I was just curious on your thoughts if we continue to see that incur. If we went to zero or negative, what would be sort of your philosophy towards that asset class?

Okay. First of all just on home prices, you know, we have been saying all year long that we expected the year-over-year rate to be 5% this year and that is about where we are and we really believe that home prices are going to continue to increase in mid-single-digit kind of range. There really aren't conditions existing that would drive home prices lower as [owners] plan homes affordability high. There is still some positive momentum in prices. Having said that, I mean, we have obviously a great deal of flexibility in terms of our portfolio and our ability to move assets around. If we believed home prices were going to falling, we certainly would reduce holdings and mortgage credit.

Yes. I would add that, I mean, the quality of the underwriting that is happening right now is extremely high, so even if we saw a modest decline in HPA, I think, we are pretty comfortable that our collateral will hold up against that. It's not like it was in 2006 or 2005 or something like that.

Sure. Okay. Then I think in the past, you had targeted about 25% of your equity capital in various silo strategies. Can you give me sense of where you are in the equity allocation?

Right. I would say, our target might be a little too strong of a word. We kind of put some upper limits on where we would go and in various sectors, especially the newer initiatives, but we are very happy with where the portfolio is positioned. The point was to find the best risk-adjusted returns. I think, we believe we are positioned very well. We continue to look for opportunities in CRE loans and the risk sharing space and securitization of single-family residential, non-agency. You know, we don't have absolute targets. We are really just deploying capital where we see the best opportunities. At present, we have recently seen the best opportunities in the CMBS space and the GSC CRT space.

Okay. Lastly, I thought that you mentioned that you did two jumbo transactions. I think that was up from one and the size seems to be increasing. Is that sort of the size that you did in third quarter? What you expect in the fourth quarter. Then, also what you think is driving the increase. Is it spreads better or the banks pull back a little bit. Can you give me sense of what is happening there?

Yes. In the third quarter, we did consolidate two deals. We expect to participate in two deals in the fourth quarter as well and close two. The spreads in that market widened out a bit, especially on thirty-year collateral maybe a 0.5 point, so that may slow things down a little bit, because you did have all throughout 2014 spreads on non-agency or tightening versus agency. On the hybrid space, where we have done more recent deals, you really haven't seen much change in pricing.

Okay. Then the size that you are expecting is roughly the same of third quarter or is that more along the size of the second quarter?

I think it is about the same size.

It is in the ballpark.

Okay. All right, guys, thank you.

The next question is from Douglas Harter from Credit Suisse.

Hi. This is Matthew Freedman calling in for Doug Harter. I was wondering if the capital from the preferred stock has been fully redeployed.

Yes.

Thank you.

(Operator Instructions) So far there are no further questions.

Okay, operator. We will stop there. I just want to thank everybody for listening today.