Financial Data and Key Metrics Changes - In Q4 2025, the company reported a net income of $103.4 million, translating to $0.62 per share, an increase from $0.53 in Q3 [6] - The book value at the end of Q4 was $7.54, up from $7.33 at the end of Q3, with stockholder equity approximately $1.4 billion [6] - The total return for Q4 was 7.8%, compared to 6.7% for Q3 [6] Business Line Data and Key Metrics Changes - The average mortgage-backed securities (MBS) portfolio was $9.5 billion in Q4, compared to $7.7 billion in Q3, with a year-end balance of $10.6 billion, reflecting a growth of approximately 27% during the quarter [7] - The leverage for Q4 remained at 7.4%, consistent with Q3 [7] - Liquidity at the end of Q4 was 57.7%, slightly up from 57.1% at the end of Q3 [7] Market Data and Key Metrics Changes - Interest rate volatility was low throughout the quarter, with the Treasury curve remaining steady [9][10] - The spread of current coupon mortgages to the ten-year Treasury tightened to about 80 basis points, reflecting a significant change since year-end [11][12] - The market saw strong performance in lower coupon MBS, particularly after the announcement of GSEs buying up to $200 billion of mortgages [13] Company Strategy and Development Direction - The company focused on acquiring agency specified pools with call protection, targeting par to slight premiums [22][56] - A strategic shift towards higher coupon MBS was noted, with a focus on production and premium coupons in the 5%-6.5% range [26][34] - The company aims to maintain a flat duration profile and manage leverage tightly, anticipating potential inflationary pressures [38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for further mortgage tightening, driven by GSE activity and favorable economic conditions [40][41] - The company noted that while expenses increased, they did so at a lower rate than asset growth, leading to a reduced expense ratio [44] - The outlook for prepayment speeds is expected to moderate, which would improve carry for the company [37] Other Important Information - The average repo rate declined from 4.33% at the beginning of the quarter to 3.98% by quarter end, reflecting improvements in the funding environment [28] - The company maintained a stable hedge position, with 69% of outstanding repo hedged, slightly down from 70% in Q3 [29] Q&A Session Summary Question: Current book value update - Management indicated that the current book value is slightly up, inclusive of the dividend accrual, reflecting a 1.6% increase [50][52] Question: Thoughts on prepayments - Management noted that the portfolio is targeted at par to slight premiums, focusing on modest prepayments without overpaying for protection [55][56] Question: Capacity for further expense reduction - Management highlighted that most expense increases were due to management fees, with non-management fee expenses rising modestly, suggesting potential for further reduction [66][68]

Group 1 - The U.S. Federal Reserve concluded an aggressive interest rate hike campaign in August 2023, resulting in mortgage costs reaching the highest level in two decades, aimed at controlling inflation [1] - President Trump has called for quicker interest rate cuts and has instructed representatives to purchase $200 billion worth of mortgage-backed securities (MBSes) to help homeowners [2][4] - The purchase of MBSes is expected to increase their prices and decrease yields, potentially leading to lower mortgage interest rates [3] Group 2 - Existing home sales in the U.S. are near a five-year low, with 529,770 more sellers than buyers reported in November, largely due to elevated interest rates affecting first-time home buyers [6] - Many existing homeowners are locked into lower-rate 30-year mortgages, making it financially unwise for them to move, further reducing market activity [7] - Douglas Elliman, a major real estate brokerage, is positioned to benefit from potential market changes if Trump's plan to lower mortgage rates succeeds, with its stock expected to rise in 2026 [8][9]

The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described under the caption ''Risk Factors'' in our Annual Report on Form 10-K. If a change occurs, ...