Financial Data and Key Metrics Changes - The company's book value per share increased by 5% from $19.25 in the prior quarter to $20.21 as of December 31, 2025 [23] - Economic return for Q4 was 8.6%, bringing the full-year economic return to 20.2% [23][24] - Earnings Available for Distribution (EAD) per share rose by $0.01 to $0.74, exceeding the dividend for the quarter [24] - Economic leverage ratio decreased to 5.6x, down from the previous quarter [25] Business Line Data and Key Metrics Changes - Agency portfolio ended 2025 at $93 billion, increasing by nearly $6 billion quarter-over-quarter and $22 billion year-over-year [9] - Residential credit portfolio reached $8 billion, up $1.1 billion quarter-over-quarter [13] - Mortgage Servicing Rights (MSR) portfolio increased to $3.8 billion, a $280 million increase quarter-over-quarter [17] Market Data and Key Metrics Changes - Fixed income markets showed strong performance, with the U.S. aggregate bond index registering the highest total return since 2020 [7] - The yield curve steepened as short-term yields fell while long-term yields rose modestly [7] - Swap spreads widened due to a shift from Quantitative Tightening to balance sheet expansion by the Fed [8] Company Strategy and Development Direction - The company aims to increase capital allocation to residential credit and MSR while maintaining agency as the anchor of the portfolio [21][77] - The non-QM market is expected to grow, providing competitive advantages in loan selection and execution [20] - The company plans to remain patient and opportunistic in capital allocation, focusing on diversified housing finance strategies [22] Management's Comments on Operating Environment and Future Outlook - The macroeconomic environment remains solid, with the labor market showing signs of softness but limited layoffs [5][6] - Management expressed confidence in the durability of the swaps market as a hedge and the overall strength of the diversified housing finance model [32][21] - Risks include global fiscal issues and potential complacency in asset markets, which could lead to increased volatility [60][61] Other Important Information - The company raised $560 million of common equity in Q4, totaling $2.9 billion for the year [9] - The efficiency ratio improved to 1.31% for Q4, with a full-year ratio of 1.42% [27] Q&A Session Summary Question: Update on mark-to-market book values - The book value was up 4%, inclusive of dividend accrual, with a slight increase noted after the call [30] Question: Portfolio returns and comfort level with dividends - The company expects mid-teens returns and feels confident about the dividend's safety for 2026 [31][32] Question: MSR portfolio insulation from lower interest rates - The company is set up to be active in the current coupon MSR market and expects origination to pick up [36][40] Question: Impact of G-fee cuts on prepayment environment - A G-fee cut on purchase loans is seen as appropriate, but broad cuts could damage the MBS market [46] Question: Attractiveness of raising capital in different spread environments - Wider spreads are more attractive for raising capital, but current stability provides confidence [51][52] Question: Risks that could change the low-risk environment - Global fiscal issues and asset market euphoria are noted as significant risks [60][61] Question: Opportunities in low-coupon MBS - The valuation on low-coupon MBS is tight, and better ways to manage risk are available [67] Question: Likelihood of GSE portfolio caps being increased - Uncertainty remains regarding the increase of portfolio caps, with no clear answer available [82]