Loading...
01/10 16:33
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a mixed performance with several negative indicators: a loss per share, declining book value, and a negative total return for the quarter. Despite stable dividends and active share repurchase, the market outlook remains volatile with regulatory uncertainties. The Q&A section highlights concerns about capital raising and unclear management responses, further contributing to negative sentiment. While there are some positive aspects like the hedging strategy and leverage adjustments, they are overshadowed by the overall financial decline and market uncertainties, leading to a predicted stock price decline of -2% to -8%.
Loss per share $0.29 per share in Q2 2025 compared to income of $0.18 per share in Q1 2025. Excluding realized and unrealized losses, net income was $0.16 per share, the same as Q1.
Book value per share Decreased from $7.94 at 3/31 to $7.21 at 6/30.
Total return for the quarter Negative 4.66% compared to 2.6% in Q1 2025.
Dividends $0.36 per share in both Q2 and Q1 2025.
Average MBS during the quarter $6.9 billion in Q2 2025 compared to just under $6 billion in Q1 2025.
Leverage ratio 7.3 at 6/30, down from 7.8 at 3/31.
Prepayment speeds 10.1% in Q2 2025 compared to 7.8% in Q1 2025.
Liquidity 54% at 6/30, up from 52% at 3/31.
Financial Performance: Reported a loss of $0.29 per share in Q2 2025 compared to income of $0.18 per share in Q1. Excluding realized and unrealized losses, net income was $0.16 per share, consistent with Q1. Book value decreased from $7.94 per share at 3/31 to $7.21 at 6/30. Total return for the quarter was negative 4.66% compared to 2.6% in Q1.
Portfolio Adjustments: Average MBS during the quarter increased to $6.9 billion from just under $6 billion in Q1. Leverage ratio decreased to 7.3 from 7.8. Prepayment speeds increased to 10.1% from 7.8% in Q1. Liquidity improved to 54% from 52%.
Hedge Strategy: Hedge ratio stood at 73% of the repo balance, with a focus on interest rate swaps (78% of DB01). The company maintained a defensive position with a slight bias towards higher rates and a steeper curve.
Shift in Portfolio Strategy: Repositioned portfolio towards higher coupon specified pools, moving away from a barbell approach to a more concentrated production coupon bias. Weighted average coupon increased to 5.45% from 5.32% in Q1.
Market Positioning: Focused on leveraging attractive spreads in the mortgage market, with production coupon spreads at historically wide levels of 200 basis points over swaps. The company raised $140 million in new equity and deployed it into higher coupon specified pools.
Financial Performance: The company reported a loss of $0.29 per share in Q2 2025, compared to income of $0.18 per share in Q1. Book value decreased significantly from $7.94 to $7.21 per share, and total return for the quarter was negative 4.66%.
Market Volatility: The quarter experienced significant market volatility due to reciprocal tariffs and the passage of a major fiscal bill. This led to forced deleveraging and concerns about the sanctity of the dollar and capital flight from the U.S.
Interest Rate and Swap Spreads: Swap spreads are becoming extremely negative, which impacts hedging costs for levered MBS investors. The steepening U.S. Treasury curve and widening gap between nominal and swap curves create challenges for portfolio management.
Mortgage Market Performance: Despite low volatility, mortgage performance remains weak, with prices continuing to soften. Refinancing activity is at historically low levels due to high mortgage rates and low affordability, which could impact carry and returns.
Regulatory and Fiscal Risks: The market anticipates continued fiscal deficits due to government spending, which could lead to heavy Treasury issuance and further cheapening of nominal Treasuries relative to swap yields. Regulatory uncertainties and tariffs add to the challenges.
Bank Participation in Mortgage Market: Banks, a key buyer of mortgages, have shown minimal growth in holdings, which limits demand and keeps mortgage spreads wide. Regulatory relief and other factors could influence future bank participation but remain uncertain.
Hedging and Leverage Risks: The company’s hedge ratio declined slightly, and mark-to-market hedge losses totaled $0.47 per share. The portfolio shift towards higher coupon assets has shortened duration, but the hedge structure may still face challenges in volatile rate environments.
Investment Environment for Agency RMBS: The investment environment for Agency RMBS remains extremely attractive. Production coupon spreads are currently 200 basis points roughly over swaps, which is a historically wide level that presents a very compelling total return potential even without some sort of catalyst-driven basis recovery.
Portfolio Strategy: The company has shifted towards higher coupon specified pools, offering a lot of carry. The hedge structure is biased towards slightly longer tenors to mitigate the effects of upward interest rate shocks and a steepening curve.
Market Trends and Expectations: Swap spreads are becoming extremely negative, making hedging positions using swaps a very attractive option. The market anticipates continued deficits, heavy treasury issuance, and upward pressure on longer-term rates, which is expected to keep the curve steep.
Funding and Repo Market: Funding has been stable with ample repo counterparties. Spreads are somewhat choppy around period ends but otherwise stable. The company has no issues adding repo counterparties as needed.
GSE Privatization: GSE privatization is not on the immediate horizon. The current administration has indicated maintaining the implicit guarantee of mortgages, which would de-risk the process if it were to occur.
Dividends per share in Q2: $0.36
Dividends per share in Q1: $0.36
Shares repurchased in Q2: 1.1 million shares
Repurchase price: Substantial discount
The earnings call reveals strong financial performance with a significant improvement in net income and book value. The consistent dividend and increased liquidity are positive signs. The Q&A section highlights management's strategic approach to risk and leverage, with an optimistic view on swap spreads. Despite some unclear responses, the overall sentiment is positive, driven by improved financial metrics and effective portfolio management.
The earnings call reveals a mixed performance with several negative indicators: a loss per share, declining book value, and a negative total return for the quarter. Despite stable dividends and active share repurchase, the market outlook remains volatile with regulatory uncertainties. The Q&A section highlights concerns about capital raising and unclear management responses, further contributing to negative sentiment. While there are some positive aspects like the hedging strategy and leverage adjustments, they are overshadowed by the overall financial decline and market uncertainties, leading to a predicted stock price decline of -2% to -8%.
The earnings call presents a mixed picture. Financial performance shows improvement in EPS and net interest income, but book value and total return have declined. The Q&A reveals concerns about economic factors and regulatory issues, with management providing vague responses. Shareholder returns are stable, with dividends maintained and a buyback program in place. Overall, the positive financial metrics are balanced by uncertainties and market challenges, resulting in a neutral sentiment.
The earnings call reveals mixed signals: positive EPS growth and portfolio yield improvements, but concerns over increased leverage and book value decline. The Q&A section highlights unclear management responses, particularly on the duration gap, which may cause investor unease. The dividend remains stable, but the lack of share buybacks and potential supply chain issues pose risks. Overall, these factors balance out to a neutral sentiment, with no clear catalyst for significant stock movement in either direction.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
