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]

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 [7] - The total return for Q4 was 7.8%, compared to 6.7% in Q3 [7] 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, reflecting a growth of approximately 27% [8] - The leverage for Q4 remained stable at 7.4%, consistent with Q3 [8] - Liquidity at the end of Q4 was 57.7%, slightly up from 57.1% in Q3 [8] Market Data and Key Metrics Changes - Prepayment speeds increased to 15.7% in Q4 from 10.1% in Q3 [9] - The treasury curve showed low volatility throughout the quarter, with interest rates remaining steady [10][11] - The spread of current coupon mortgages to the ten-year Treasury tightened to about 80 basis points [12][13] Company Strategy and Development Direction - The company focused on acquiring agency specified pools with call protection, targeting par to slight premiums [23][56] - A strategic shift towards higher coupon MBS was noted, with a focus on production and premium coupons [26] - The company aims to maintain a flat duration profile to manage interest rate risk effectively [33] 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 market conditions [39][41] - The company anticipates that prepayment speeds may moderate, which would improve carry [37] - Management highlighted the importance of maintaining a low expense ratio, which currently stands at 1.7% [44] Other Important Information - The company paid dividends of $0.36 during the quarter, maintaining the same rate for the past two years [7] - The average repo rate decreased from 4.33% at the beginning of the quarter to 3.98% by quarter end [20] - The weighted average current price of the portfolio at year-end was $102.5, reflecting a strategic shift in coupon allocation [61] 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 [51][53] Question: Thoughts on prepayments - Management noted that the portfolio is targeted at par to slight premiums, focusing on modest prepayments without overpaying for protection [56][58] Question: Capacity for further expense reduction - Management stated that most expense increases were due to management fees, with non-management expenses rising only modestly, indicating potential for further reduction [70][72]

Financial Data and Key Metrics Changes - In Q4 2025, the company reported a net income of $103.4 million, equating 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 [6] - Stockholder equity at the end of Q4 was approximately $1.4 billion, with dividends paid during the quarter remaining at $0.36 [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) during Q4 was $9.5 billion, 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 the current coupon mortgage to the ten-year Treasury tightened to about 80 basis points, reflecting a significant change since year-end [11] - Prepayment speeds increased to 15.7% in Q4 from 10.1% in Q3 [8] 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 an emphasis on production and premium coupons [26] - The company plans to continue managing leverage tightly while maintaining a flat duration profile to mitigate risks associated with interest rate movements [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 mortgages are not as attractive as a year ago, there is still potential for continued performance improvement [41] - Management highlighted the importance of maintaining a low expense ratio, which has improved to 1.7% at the end of 2025 [44] Other Important Information - The company doubled its equity base and MBS portfolio over the course of 2025, capitalizing on wide MBS spreads [24] - The average repo rate declined from 4.33% at the beginning of the quarter to 3.98% by quarter end, reflecting favorable funding conditions [28] 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 [51][53] Question: Thoughts on prepayment speeds - Management noted that the portfolio is constructed to target modest prepayments and emphasized the focus on mid-tier call protection [56][58] Question: Capacity for further expense reduction - Management stated that most expense increases were related to management fees, with non-management fee expenses rising only modestly, indicating potential for further expense reduction [67][69]