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 Data and Key Metrics Changes - For Q1, the company earned $0.18 per share compared to $0.07 in Q4 [5] - Book value at March 31 was $7.94 per share compared to $8.09 at December 31 [5] - Total return for the quarter was 2.6% unannualized compared to 0.6% for Q4 [5] - Liquidity at March 31 was 52.2% compared to 52.9% at December 31 [7] Business Line Data and Key Metrics Changes - The average portfolio was just under $6 billion compared to $5.3 billion in Q4 [6] - The leverage ratio at March 31 was 7.8 compared to 7.3 at December 31 [6] - Prepayment speeds were 7.8% in Q1 compared to 10.5% for Q4 [6] Market Data and Key Metrics Changes - The market moved to price in three or more Fed cuts by the end of the year [11] - Swap spreads moved meaningfully negative late in the quarter and into April [14] - The spread of the current coupon mortgage to the ten-year has widened significantly [16] Company Strategy and Development Direction - The company raised capital during the quarter and deployed it into higher coupon, shorter duration assets [24] - The strategy includes using longer duration hedges to mitigate exposure to declining swap spreads [24] - The company is focused on maintaining liquidity and is prepared to raise capital if necessary [76] Management's Comments on Operating Environment and Future Outlook - The management expressed uncertainty due to market volatility driven by tariffs and inflation [55] - The expectation is for slower growth and potential Fed eases, which could lead to a steeper yield curve [58] - The company is positioned with a skew towards higher coupon, shorter duration assets, which should work well in the current environment [59] Other Important Information - The company declared and paid dividends of $0.36 per share for each quarter [5] - The management acknowledged a mistake in the initial earnings release regarding the breakdown of earnings per share [9] Q&A Session Summary Question: What is the duration gap at the end of the quarter and to date? - The duration gap is very narrow, with a DV01 basis of $13, remaining about the same as of now [62][63] Question: Where do you see gross ROE sitting today? - The gross ROE is estimated to be around 20%, with high volatility in swaps [73] Question: How are you looking at dividend issuance and buybacks? - The company is cautious about buybacks due to stock trading close to book value and may consider raising capital for liquidity [76][78] Question: Will the 2025 dividend be 100% taxable income? - It is uncertain at this point, but the taxable income has been right on top of the distribution year to date [91][93] Question: Thoughts on the Rocket Mortgage and Nationstar deal? - The deal may increase prepayment speeds and impact the convexity of the mortgage universe negatively [99][100]