Financial Data and Key Metrics Changes - ARMOUR's Q3 GAAP net income available to common stockholders was $156.3 million, or $1.49 per common share, with net interest income of $38.5 million [3] - Distributed earnings available to common stockholders was $75.3 million, or $0.72 per common share, reflecting a total economic return of 7.75% for the quarter [3][4] - Quarter-end book value increased to $17.49 per common share, up 3.5% from June 30th and 2.8% from August 8th [3] Business Line Data and Key Metrics Changes - ARMOUR raised approximately $99.5 million of capital by issuing about 6 million shares of common stock through an at-the-market offering program [4] - The company repurchased 700,000 shares of common stock through its repurchase program during Q3 [5] Market Data and Key Metrics Changes - The Federal Reserve resumed its easing cycle with a 25 basis point cut in September, leading to a decline in Treasury yields and tightening of agency MBS spreads by roughly 20 basis points [7][8] - Aggregate portfolio prepayment rates rose to 9.6 CPR in October, a 19% increase from the Q3 average of 8.1 CPR [11] 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 [15] - The company aims to pay an attractive and stable dividend over the medium term, with a current monthly dividend of $0.24 per share [5][6] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment has become more uncertain due to the federal government shutdown, but they expect continued easing bias from the Fed to redirect liquidity into agency MBS [8][9] - The company anticipates structural demand for agency mortgage-backed securities to strengthen, supported by regulatory clarity around banking reform [13] Other Important Information - ARMOUR's portfolio is entirely invested in agency mortgage-backed securities, agency commercial MBS, and U.S. Treasuries, with a net duration of 0.2 years and applied leverage of 8.1 times [10] - The company executed a $300 million overnight underwritten bought deal in August, contributing to an increase in book value [14] Q&A Session Summary Question: Current returns on incremental investments and hedge choices - Management expects hedged ROEs in the 16%-18% range, slightly lower than previous quarters due to tight mortgage spreads [18] Question: Outlook for swap spreads and mortgage spreads on an OIS basis - Swap spreads are expected to normalize, providing a tailwind for the portfolio as a more effective hedge for MBS [20][21] Question: GSE deregulation and its implementation - Management indicated that various levers could be pulled to reduce borrower rates, but balancing GSE attractiveness as an investment is also a priority [24][25] Question: Interest rate volatility and potential hedging strategies - Management discussed using swaptions and asset selection to manage volatility, with a focus on low optionality assets [31][32] Question: Economic net interest margin outlook - Future trends depend on the portfolio and Fed rate cuts, with a current focus on maintaining a strong portfolio [36][37] Question: MBS spreads and Fed rate cuts - Management believes that a pause in the easing cycle could lead to volatility, but actual cuts may unlock bank demand for MBS [41][43] Question: Stock buyback valuation - The stock buybacks occurred at around $14.40 per share, with management committed to being active on both sides of the equity account [45]

Financial Data and Key Metrics Changes - ARMOUR's Q3 GAAP net income available to common stockholders was $156.3 million, or $1.49 per common share, with net interest income at $38.5 million [3] - Distributed earnings available to common stockholders was $75.3 million, or $0.72 per common share, reflecting a total economic return of 7.75% for the quarter [3][4] - Quarter-end book value increased to $17.49 per common share, up 3.5% from June 30th and 2.8% from August 8th [3] Business Line Data and Key Metrics Changes - ARMOUR raised approximately $99.5 million of capital by issuing about 6 million shares through an at-the-market offering program [4] - The company repurchased 700,000 shares of common stock through its repurchase program during Q3 [5] Market Data and Key Metrics Changes - The Federal Reserve implemented a 25 basis point cut in September, with expectations for two additional cuts by year-end, creating a favorable environment for agency MBS [7][8] - Treasury yields declined, agency MBS spreads tightened by roughly 20 basis points, and volatility fell to its lowest level since 2022 [7] 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 [15] - The company aims to pay an attractive and stable dividend, with a current monthly dividend of $0.24 per share [5][6] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment has become more uncertain due to the federal government shutdown, but they expect continued structural demand for agency mortgage-backed securities [8][13] - The company anticipates that regulatory clarity around banking reform and a resumed easing cycle will serve as catalysts for high-quality liquid assets like mortgage-backed securities [13] Other Important Information - ARMOUR's portfolio is entirely invested in agency mortgage-backed securities, agency commercial MBS, and U.S. Treasuries, with a net duration of 0.2 years and applied leverage of 8.1 times [10] - The aggregate portfolio prepayment rates rose to 9.6 CPR in October, a 19% increase from the third-quarter average of 8.1 CPR [11] Q&A Session Summary Question: Current returns on incremental investments and hedge choices - Management expects hedged ROEs in the 16% to 18% range, slightly lower than previous quarters due to tight mortgage spreads [18] Question: Outlook for swap spreads and mortgage spreads on an OIS basis - Swap spreads are expected to normalize, providing a tailwind for the portfolio as a more effective hedge for MBS [20][21] Question: GSE deregulation and its impact on borrower rates - Management indicated that various levers could be pulled to reduce borrower rates, but there is a balance to maintain GSE attractiveness [24][25] Question: Interest rate volatility and its future evolution - Management believes that while short-term volatility may occur, medium-term volatility is expected to decline as the Fed continues normalization [32] Question: Economic net interest margin outlook - The future of the economic net interest margin will depend on the portfolio and the pace of Fed rate cuts [36][37] Question: MBS spreads and Fed rate cuts - Management noted that a pause in the easing cycle could lead to volatility, but actual cuts may unlock bank demand for MBS [42][43] Question: Stock valuation during capital raising and buyback transactions - The stock buybacks occurred at around $14.40 per share, and management is committed to being active on both sides of the equity account [45]

Financial Data and Key Metrics Changes - The book value per share decreased by 3% from the prior quarter to $18.45, while earnings available for distribution per share increased by $0.01 to $0.73, exceeding the dividend for the quarter [20][21] - The economic return for Q2 was 0.7%, marking the seventh consecutive quarter of positive economic returns, with a year-to-date economic return of 3.7% and total shareholder return exceeding 10% [9][20] - The investment portfolio yield increased to 5.41% from 5.23% in the prior quarter, while average repo rates decreased to 4.53% [21][22] Business Line Data and Key Metrics Changes - The Agency portfolio's market value rose to nearly $80 billion, a 6% increase quarter-over-quarter, with a $4.5 billion growth in notional terms [10][11] - The residential credit portfolio remained stable at $6.6 billion in market value, with Onslow Bay achieving record securitization activity of $3.6 billion across seven transactions [13][14] - The Mortgage Servicing Rights (MSR) portfolio ended the quarter unchanged at $3.3 billion, with solid performance metrics including a three-month CPR of 4.6% and serious delinquencies unchanged at 50 basis points [17][18] Market Data and Key Metrics Changes - The U.S. economy is projected to grow at around 1% annualized for the first half of the year, with an unemployment rate of 4.1% [6][8] - Inflation is expected to run at the slowest level in the past three quarters, with the Fed anticipated to deliver two interest rate cuts in 2025 [7][8] - Agency MBS spreads widened by 5 to 10 basis points during the quarter, despite improvements in market sentiment [9][10] Company Strategy and Development Direction - The company aims to maintain a strong focus on the agency sector while strategically growing its residential credit and MSR portfolios [18] - The management is optimistic about the agency sector fundamentals and potential catalysts for improvement, including GSE reform [12][18] - The company has diversified its funding sources significantly, enhancing liquidity and operational flexibility [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to cover and potentially out-earn the dividend for the remainder of the year, citing a conducive environment for achieving close to the dividend yield [28][29] - The company is well-positioned to navigate macroeconomic uncertainties, with a focus on managing rate risk and maintaining low leverage [34][40] - The outlook remains positive, with expectations for continued strong risk-adjusted returns in the current environment [18][19] Other Important Information - The company raised over $750 million of accretive capital in Q2, predominantly deployed in the agency sector, leading to a modest increase in leverage to 5.8 turns [9][10] - The MSR portfolio's valuation improved modestly due to a steepening yield curve and lower implied volatility [17][18] Q&A Session Summary Question: Update on book value quarter to date - The pre-dividend accrual book was up about 0.5%, indicating a 1.5% economic return [27] Question: Comfort level with the dividend - Management expressed confidence in covering the dividend, with expectations to out-earn it for the remainder of the year [28] Question: Managing the portfolio through volatility - The company maintained a good liquidity position and managed exposure carefully, allowing leverage to drift higher while focusing on rate risk [33][34] Question: Expectations for GSE reform - Management expects GSE reform to be prioritized, which could create opportunities for the company in the origination space [56] Question: Demand for Agency MBS - Demand from fixed income funds has been strong, with expectations for MBS spreads to tighten even without additional demand from banks [75][76] Question: Outlook for residential credit issuance - The company anticipates robust issuance in the second half of the year, tracking to be the highest since 2021 [81] Question: Impact of tariffs on inflation - Management acknowledged that inflation will pass through due to tariffs, but they remain optimistic about achieving the expected Fed cuts [92][96]

Financial Data and Key Metrics Changes - The book value per share decreased by 3% from the prior quarter to $18.45, while earnings available for distribution per share increased by $0.01 to $0.73, exceeding the dividend for the quarter [19][20] - The economic return for Q2 was 0.7%, bringing the year-to-date economic return to 3.7% [7][20] - The net interest spread excluding PAA increased to 1.47% in Q2 compared to 1.24% a year ago, and the net interest margin excluding PAA was 1.71% in Q2 compared to 1.58% in Q2 2024 [21] Business Line Data and Key Metrics Changes - The Agency portfolio ended the quarter at nearly $80 billion in market value, up 6% quarter over quarter, with a growth of approximately $4.5 billion in notional terms [9][10] - The residential credit portfolio remained relatively unchanged at $6.6 billion in market value, with Onslow Bay achieving its highest quarterly securitization activity to date, closing $3.6 billion across seven transactions [12][13] - The MSR portfolio ended the quarter unchanged at $3.3 billion in market value, with solid fundamental performance and a three-month CPR of 4.6% [15][16] Market Data and Key Metrics Changes - The U.S. economy is expected to grow around 1% annualized for the first half of the year, with an unemployment rate marginally lowered to 4.1% [5][6] - Inflation is likely to have run at the slowest level in the past three quarters, with the Fed expected to deliver two interest rate cuts in 2025 [6][7] - Agency MBS spreads widened by 5 to 10 basis points on the quarter, despite a positive reversal in sentiment towards risk assets [7][9] Company Strategy and Development Direction - The company remains optimistic about the agency sector, citing sound fundamentals and potential catalysts for improvement in Agency MBS technicals [11] - The focus is on further building out flow servicing relationships and expanding subservicing and recapture partnerships to capitalize on MSR opportunities [17] - The company plans to strategically grow its residential credit and MSR portfolios while maintaining a flexible investment approach with low leverage and ample liquidity [17] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment has shown resilience, with a balanced labor market and muted layoffs, affirming the Fed's wait-and-see stance [5][6] - The company expects to be overweight in agency investments due to historically attractive spread levels, while also anticipating growth in residential credit and MSR portfolios [17] - Management expressed confidence in covering and potentially out-earning the dividend for the remainder of the year, given the current economic return [27][28] Other Important Information - The company raised over $750 million of accretive capital in Q2, predominantly deployed in the agency sector, with leverage increasing modestly to 5.8 turns [8] - The company has diversified its funding sources significantly, with non-mark-to-market capacity growing from $150 million to $1.9 billion [22][23] Q&A Session Summary Question: Update on book value quarter to date - The book value was up about 0.5% pre-dividend accrual, indicating a 1.5% economic return [26] Question: Comfort level with the dividend - Management expressed confidence in covering the dividend, expecting to out-earn it for the remainder of the year [27][28] Question: Managing the portfolio through volatility - Management was comfortable allowing leverage to rise due to a strong liquidity position and focused on managing rate exposure [32][34] Question: Dynamics of the credit portfolio - The quality of the credit portfolio is high, with proactive measures taken to tighten credit standards [45][46] Question: Expectations for GSE reform - Management expects GSE reform to be prioritized now that the tax bill is completed, which could create opportunities for the company [56] Question: Demand for Agency MBS - Demand from fixed income funds has been strong, and the company expects MBS spreads to tighten even without additional demand from banks [76][77]

Financial Data and Key Metrics Changes - The company reported a GAAP net loss applicable to common stockholders of $9.3 million or $0.29 per diluted share for Q1 2025 [6][16] - Book value per common share decreased to $3.58 from $3.82 at the end of Q4 2024 [7][17] - NAV declined approximately $7.5 million or 3.2% relative to December 31 [7] Business Line Data and Key Metrics Changes - The MSR portfolio had an unpaid principal balance (UPB) of $17 billion and a market value of approximately $227 million, representing about 44% of equity capital [10] - The RMBS portfolio accounted for approximately 39% of equity capital, with a weighted average three-month CPR of 5.8% [10][12] - EAD attributable to common stockholders was $5.4 million or $0.17 per share, benefiting from dollar roll income [16] Market Data and Key Metrics Changes - Interest rates ended the quarter at 4.25%, approximately 30 basis points lower quarter over quarter [5] - Prepayment speeds for the MSR portfolio averaged approximately 4.1%, down modestly from the previous quarter [11] - RMBS portfolio's net interest spread was 3.55%, higher than the prior quarter [12] Company Strategy and Development Direction - The company plans to deploy capital into Agency RMBS and select MSRs while maintaining strong liquidity and prudent leverage [8] - The management is closely monitoring the macro environment and tariff situation to stress the portfolio for various scenarios [8] - The company aims to improve its expense ratio and capital structure over time by managing operating expenses [8] Management's Comments on Operating Environment and Future Outlook - Management expressed that rates will continue to be highly reactive to global political agendas and domestic economic data [6] - The uncertainty in the market has led the company to position its portfolio more neutrally to withstand daily volatility [6] - Future EAD is expected to trend lower due to the maturation of a significant hedge that previously contributed to EAD [16][53] Other Important Information - The company completed its first full quarter as an integrated, internally managed mortgage REIT [7] - Operating expenses for the quarter were $3.8 million, reflecting a decline due to the elimination of the management fee [17] - The Board declared a dividend of $0.15 per common share for Q1 2025, paid in cash on April 30 [18] Q&A Session Summary Question: What would it take for the company to allocate more to the RMBS portfolio? - Management indicated that all reinvestment income has been directed towards MBS, and significant changes would require selling a portion of the MSR [20][24] Question: Is there any movement in GSE reform affecting capital allocation? - Management stated it is too early to tell, and the market has not fully priced in the potential changes regarding GSE reform [25][29] Question: Can you provide a book value update for Q2? - The company reported a NAV down about 3.7% in April, leading to a 7% book value per share before any dividends [36] Question: How much of the EAD in Q1 was due to the roll-off of expenses associated with internalization? - Approximately $0.02 of EAD in Q1 was attributed to internalization and G&A savings [51] Question: What are the general thoughts on MSR pricing and supply post the Rocket Cooper deal? - Management noted that volumes have been lower and there have not been substantial changes in pricing dynamics in the market [50] Question: Are there opportunities in spec pools within the builder buy-down space? - Management has seen builder buy-downs but has not focused on them for the portfolio, preferring to keep pay-ups modest [44]

Financial Data and Key Metrics Changes - For Q1 2025, the company reported a GAAP net loss applicable to common stockholders of $9.3 million, or $0.29 per diluted share, compared to a comprehensive loss of $2.6 million, or $0.08 per diluted share [6][15]. - The book value per common share decreased to $3.58 from $3.82 at the end of Q4 2024, reflecting a decline of approximately 6.3% [7][17]. - The NAV was down approximately $7.5 million, or 3.2%, relative to December 31, 2024 [7]. Business Line Data and Key Metrics Changes - The MSR portfolio had an unpaid principal balance (UPB) of $17 billion and a market value of approximately $227 million, representing about 44% of equity capital [11]. - The RMBS portfolio accounted for approximately 39% of equity capital, with a weighted average three-month CPR of 5.8%, slightly up from 5.7% in the previous quarter [12][13]. - Prepayment speeds for the MSR portfolio averaged approximately 4.1%, down modestly from the previous quarter, while RMBS prepayment speeds remained low [12]. Market Data and Key Metrics Changes - Interest rates ended the quarter at 4.25%, approximately 30 basis points lower quarter over quarter, but volatility increased due to tariff announcements [5][6]. - The company noted that mortgage performance was mixed, with higher coupon mortgages outperforming lower coupon mortgages [10]. Company Strategy and Development Direction - The company plans to deploy capital into Agency RMBS and select MSRs, focusing on strong risk-adjusted return profiles while maintaining liquidity and prudent leverage [9]. - Management emphasized the importance of closely managing operating expenses to improve the expense ratio and capital structure over time [8]. Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about ongoing macroeconomic uncertainty and the potential for elevated rates until clear macro policy is established [10][11]. - The company is cautious regarding GSE reform, indicating that current market assumptions about government guarantees may not be well-defined [27][29]. Other Important Information - The company declared a dividend of $0.15 per common share for Q1 2025, paid on April 30, 2025 [18]. - Operating expenses for the quarter were reported at $3.8 million, benefiting from the elimination of management fees [17]. Q&A Session Summary Question: What would it take for the company to allocate more to the RMBS portfolio? - Management indicated that all reinvestment income has been directed towards MBS, and significant changes would require selling a portion of the MSR portfolio [23]. Question: Is there any movement in GSE reform affecting market pricing? - Management stated it is too early to tell, noting that while there have been movements at the GSEs, specific plans regarding government guarantees remain undefined [27][29]. Question: Can you provide a book value update for Q2? - The company reported a NAV down about 3.7% in April, leading to an estimated 7% book value per share before any dividends [36]. Question: How much of the EAD in Q1 was due to the roll-off of internalization expenses? - Approximately $0.02 of EAD in Q1 was attributed to savings from internalization and G&A [52]. Question: What are the general thoughts on MSR pricing and supply post-Rocket Cooper deal? - Management noted that volumes have been lower than the previous year, and no substantial changes in pricing dynamics have been observed [51].

Financial Data and Key Metrics Changes - The recurring earnings in Q1 2025 increased to a level consistent with the company's dividend of $0.20 per share, reflecting a strategic portfolio restructuring initiated two years ago [6][7] - Earnings Available for Distribution (EAD) per share rose to $0.20 in Q1 2025 from $0.16 in Q4 2024, while quarterly EPS contribution from adjusted net interest income increased to $0.40 per share, up from $0.36 in the prior quarter [12][16] - GAAP book value and adjusted book value per share increased to $9.37 and $10.43 respectively, representing a 1% increase compared to the end of 2024 [16] Business Line Data and Key Metrics Changes - Agency RMBS investments now account for over 50% of company assets, with approximately $1.5 billion purchased in Q1 2025, nearly four times more than the previous quarter [10][17] - In the residential credit sector, $397 million of whole loans were purchased, with a focus on bridge loans and rental loans [18][19] - The portfolio recourse leverage ratio decreased to 0.5 times from 1.1 times, reflecting successful securitizations in the residential loan sector [9][16] Market Data and Key Metrics Changes - The market experienced spread widening in Agency RMBS and residential credit, with current coupon agency spreads widening from 135 basis points to 143 basis points in Q1 2025 [22][23] - As of April 2025, adjusted book value is estimated to be down approximately 1.5% [38] Company Strategy and Development Direction - The company aims to maintain a strong focus on Agency RMBS while also exploring opportunities in residential credit, particularly BPL rental loans [20][40] - The strategic shift towards more liquid agency RMBS is intended to enhance flexibility in capital allocation depending on market conditions [21][22] - The company plans to leverage its platform for service fee income in the near term, while continuing to optimize expected returns from its agency portfolio [8][12] Management's Comments on Operating Environment and Future Outlook - Management noted that the geopolitical situation may lead to further market volatility, but they are prepared to deploy liquidity at attractive levels [20][21] - The company does not foresee immediate impacts from GSE reform on its activities, indicating a cautious approach to potential changes in the mortgage market [32][33] - Management expressed confidence in the ability to generate recurring income to support the current dividend, despite a challenging economic outlook [27] Other Important Information - The company recognized net unrealized gains of $118.2 million during the quarter, primarily from higher valuations in the agency RMBS portfolio [14] - General and administrative expenses increased slightly due to non-recurring employee severance costs related to restructuring initiatives [15] Q&A Session Summary Question: Impact of GSE reform on business and mortgage market - Management indicated that GSE reform could lead to higher mortgage rates and liquidity issues, but does not expect significant influence on activities in the near to medium term [32][33] Question: Update on book value performance in Q2 - As of April month-end, adjusted book value is estimated to be down approximately 1.5% [38] Question: Capital allocation strategy amidst market volatility - Management confirmed a continued focus on Agency RMBS and BPL, with a preference for BPL rental over BPL bridge loans [40][41] Question: Timing surrounding mezzanine and multifamily investments - The 10% payoff rate mentioned was year-to-date as of early April, with expectations for continued resolutions in the multifamily mezzanine portfolio [43] Question: Future capital allocation preferences - Management expressed a preference for Agency RMBS in the near term, while remaining flexible to shift focus based on market conditions [45]

Financial Data and Key Metrics Changes - The recurring earnings in Q1 2025 increased to a level consistent with the company's dividend of $0.20 per share, reflecting a strategic portfolio restructuring initiated two years ago [6][7] - Earnings Available for Distribution (EAD) per share rose to $0.20 in Q1 2025 from $0.16 in Q4 2024, while quarterly EPS contribution from adjusted net interest income increased to $0.40 per share, up from $0.36 in the prior quarter [12][13] - GAAP book value and adjusted book value per share increased to $9.37 and $10.43 respectively, representing a 1% increase compared to the end of 2024 [17] Business Line Data and Key Metrics Changes - Agency RMBS investments now account for over 50% of company assets, with approximately $1.5 billion of Agency RMBS purchased in Q1 2025, nearly four times more than the previous quarter [11][18] - In the residential credit sector, $397 million of whole loans were purchased, with a focus on bridge loans and rental loans [19][20] - The portfolio recourse leverage ratio decreased to 0.5 times from 1.1 times, reflecting successful securitizations in the residential loan sector [10][17] Market Data and Key Metrics Changes - The market experienced spread widening in Agency RMBS and residential credit, with current coupon agency spreads widening from 135 basis points to 143 basis points [22] - As of April 2025, adjusted book value is estimated to be down approximately 1.5% [38] Company Strategy and Development Direction - The company aims to maintain a strong focus on Agency RMBS while also exploring opportunities in residential credit, particularly BPL rental loans [21][41] - The strategic shift towards more liquid agency RMBS is intended to enhance flexibility in capital allocation depending on market conditions [21][22] - The company has reduced its JV equity exposure to less than 1% of the overall portfolio, indicating a shift in investment strategy [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for additional revenue generation through service fee income and highlighted the importance of operational efficiencies in supporting dividend coverage [8][12] - The company anticipates continued market volatility but is prepared to deploy liquidity into attractive investment opportunities as they arise [21][22] - Management does not foresee significant impacts from potential GSE reforms in the near to medium term [33][34] Other Important Information - The company recognized net unrealized gains of $118.2 million during the quarter, primarily from higher valuations in the agency RMBS portfolio [14] - General and administrative expenses increased slightly due to non-recurring employee severance costs related to restructuring initiatives [16] Q&A Session Summary Question: Impact of FHFA and GSEs changes on business - Management discussed potential GSE reforms, indicating that it could lead to higher mortgage rates and liquidity issues, but does not expect significant changes in the near term [33][34] Question: Update on book value performance in Q2 - As of April 2025, adjusted book value is estimated to be down approximately 1.5% [38] Question: Capital allocation strategy amidst market volatility - Management confirmed a continued focus on Agency RMBS and BPL, with a preference for BPL rental over BPL bridge loans [40][41] Question: Timing surrounding mezzanine and multifamily investments - The 10% payoff rate mentioned was year-to-date as of early April, with expectations for continued resolutions in the multifamily mezzanine portfolio [44] Question: Future capital allocation preferences - Management expressed a preference for Agency RMBS in the near term but acknowledged the potential for shifts depending on market conditions [46]

Financial Data and Key Metrics Changes - The book value at December 31 was $14.47 per common share, down from $14.93 on September 30, resulting in a flat quarterly economic return [6][17] - The company incurred a comprehensive loss of $1.6 million or $0.03 per weighted average common share in Q4 [18] - Net interest expense decreased by $7.4 million in Q4 due to lower RMBS borrowing balances [18] - The economic return for the full year of 2024 was 7.0 percent [17] Business Line Data and Key Metrics Changes - Net servicing income was $168 million, slightly down from Q3 due to lower float income [19] - The servicing assets showed a gain of $82.5 million in Q4 after a loss of $133.4 million in Q3 [20] - The weighted average note rate in the MSR portfolio was 3.46%, with mortgage rates around 7% [11] Market Data and Key Metrics Changes - The 10-year treasury yield increased by 79 basis points to finish at 4.57% [7] - The 2-year treasury yield increased by 60 basis points to 4.24% [7] - The overall prepayment rates for 30-year agency RMBS rose to 6.9% CPR, reflecting a lagged effect from lower rates in Q3 [30] Company Strategy and Development Direction - The company is focused on a hedged MSR-centric strategy to generate stable cash flows [14] - A direct-to-consumer origination platform was launched to maintain the servicing portfolio through recapture of underlying mortgage loans [11] - The company aims to expand its second lien loan offerings to borrowers [13] Management's Comments on Operating Environment and Future Outlook - Management expects mortgage rates to remain above 6% in the intermediate term, which may keep housing activity muted [9] - The company believes that its MSR portfolio will benefit from the success of servicing and originations [11] - Management expressed optimism about the stability of returns and the potential for attractive levered returns in 2025 and beyond [35] Other Important Information - The company serviced $212 billion UPB of MSR across 861,000 loans, with $58 billion UPB serviced for third-party clients [10] - The economic debt to equity ratio decreased slightly to 6.5 times [26] - The MSR portfolio was valued at $202 billion UPB at December 31, reflecting a slight increase in price multiple to 5.9 times [31][32] Q&A Session Summary Question: How has the book performed so far in the quarter? - Management indicated that total return is estimated to be up between 1.5% to 2% as of the previous night [38] Question: How does the lower leverage level impact earnings power? - Management stated that overall debt to economic ratio is just one measure and that the mix of assets supports stable returns [39][40] Question: What is the outlook for Agency MBS spreads this year? - Management expressed a positive outlook for mortgage spreads, noting a more controlled response since November [46][49] Question: Any thoughts on potential GSE reform? - Management indicated they do not have more information than the market regarding GSE reform and its implications [54] Question: Can you discuss the differences between EAD and static return range? - Management explained that the static return is a mark-to-market basis, while EAD reflects the purchase price and can create timing distortions [60][62] Question: Are there new financing counterparties for the MSR portfolio? - Management noted that the depth of the market for MSR financing continues to grow with new entrants [70][71] Question: How have costs changed in response to rate cuts? - Management stated that financing costs have decreased as the Fed has cut rates, impacting both MSR and RMBS sides [73]