Financial Data and Key Metrics Changes - ARMOUR's Q2 GAAP net loss related to common stockholders was $78.6 million, or $0.94 per common share [4] - Net interest income was $33.1 million, while distributable earnings available to common stockholders were $64.9 million, or $0.77 per common share [4] - The quarter ending book value was $16.9 per common share, with an estimated book value of $16.81 as of July 21 [6] Business Line Data and Key Metrics Changes - ARMOUR raised approximately $104.6 million of capital by issuing about 6.3 million shares of common stock through an at-the-market offering program during Q2 [4] - Since June 30, an additional $58.8 million was raised by issuing approximately 3.5 million shares [5] - Monthly common stock dividends were paid at $0.24 per share, totaling $0.72 for the quarter [5] Market Data and Key Metrics Changes - The 30-year fixed mortgage rate was near 6.75% through late June and early July, dampening refinancing activity [10] - MBS to SOFR spreads widened by approximately 10 basis points quarter over quarter, remaining historically cheap [9] 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 [17] - The company is optimistic about structural demand for MBS improving later in the year due to evolving regulatory clarity and a potential resumption of Fed easing policy [15] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro landscape is influenced by U.S. fiscal sustainability, Fed independence, and trade dynamics, which are expected to weigh on the market for some time [8] - The company believes that a resumption of the Fed cutting cycle this year could reignite liquidity flow into agency MBS [9] Other Important Information - ARMOUR's estimated net portfolio duration is closely managed at 0.46 years, with implied leverage at eight turns [12] - The MBS portfolio remains concentrated in production MBS with ROEs in the 18% to 20% range [13] Q&A Session Summary Question: Managing spread duration risk during volatility - Management expressed comfort with current leverage levels and noted that spreads remain historically attractive, indicating a potential for modestly increasing leverage [20][21] Question: Allocation to higher coupons and best value in the coupon stack - Management remains favorable towards 5.56 coupons, which are currently modeling the highest ROE, while the allocation to higher coupons has declined due to volatility [25][26] Question: Role of long treasury position within the portfolio - The five-year treasury position is used as part of the hedging strategy and as a proxy for Agency CMBS positions, allowing for tactical adjustments based on spread conditions [28][29] Question: Total expenses after fees waived - Management indicated that the higher expenses were due to increased professional fees and do not expect the same run rate going forward [33] Question: Balancing total return versus carry in the hedge portfolio - Management stated that they are positioned for a bullish steepener and are dynamically adjusting hedges based on macroeconomic views [37][38] Question: Expectations for leverage increase - Management noted that they are comfortable modestly increasing leverage given stable liquidity conditions and attractive spreads, while remaining cautious about making large bets [48][52]

Summary of East West Bank Conference Call Company Overview - **Company**: East West Bank - **Industry**: Banking and Financial Services Key Points and Arguments Client Sentiment and Tariff Impact - Clients have been proactive in dealing with tariffs for nearly a decade, indicating a consistent approach to trade dynamics [4][5] - Activity levels among clients have stabilized, contrary to expectations of a decline, providing a solid base for the second quarter [5][6] - Clients are making decisions without waiting for clarity on future tariff changes, demonstrating a readiness to adapt [6][7] Supply Chain Adjustments - Many clients have diversified their supply chains, moving production to locations such as Mexico and the U.S. [10][12] - Clients are shipping inventory to mitigate risks associated with tariffs, indicating a strategic approach to inventory management [11][12] Economic Environment - The broader U.S. consumer demand remains strong, positively influencing client performance and bank operations [13][14] - Employment dynamics in Southern California are positive, contributing to a stable economic output [13] Financial Performance - Deposits and loans have increased modestly quarter over quarter, aligning with the bank's guidance [14] - The bank anticipates NII (Net Interest Income) growth above the higher end of previous guidance due to positive trends in loan and deposit growth [20][21] Loan Growth and Asset Sensitivity - Loan growth is projected at 4% to 6%, with current trends suggesting a potential for higher growth [21][24] - The bank is adjusting its asset sensitivity, moving towards a more balanced approach in response to market conditions [31][32] Commercial and Industrial (C&I) Growth - Growth is observed in sectors such as entertainment and alternative energy, with ongoing investments in these areas [34][35] - Trade finance activity has stabilized, contributing positively to the bank's balance sheet [36] Private Credit and NDFI Loans - The bank views its relationship with private credit firms as more of a partnership rather than competition, focusing on lower leverage opportunities [37][40] - NDFI (Non-Depository Financial Institution) loans are growing, particularly in sectors like solar energy, with a low default risk profile [42][44] Residential Mortgage and Commercial Real Estate (CRE) - Residential mortgage growth remains stable, with consistent new volume added to the balance sheet [46] - The bank is strategically managing its CRE exposure to reduce concentration, focusing on existing profitable relationships [47][48] Efficiency and Growth Strategy - East West Bank maintains a better efficiency ratio than peers due to a straightforward business model focused on core markets [52][53] - The bank is expanding into new markets such as Dallas, Houston, and New York, seeking to capitalize on growth opportunities [55][61] Fee Growth Opportunities - The bank is investing in core treasury deposit services and expanding payment processing capabilities, which are expected to drive fee growth [66][70] Credit Quality and Capital Management - Credit quality remains stable, with no significant deterioration observed despite macroeconomic uncertainties [71][72] - The bank's CET1 ratio stands at 14.3%, indicating a strong capital position, with a cautious approach to buybacks in the current environment [75][76] Additional Important Insights - The bank's focus on tailored solutions for core customers allows for targeted growth strategies without overextending resources [52][53] - The management emphasizes the importance of finding the right talent to drive expansion in new markets [56][58] - The bank remains vigilant and opportunistic regarding capital return strategies, adapting to market conditions as necessary [76][77]