Q3 2025 Orchid Island Capital Inc Earnings Call

Melissa Alfonso: Good day, and thank you for standing by. Welcome to the Orchid Island Capital Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star one-one on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star one-one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Melissa Alfonso. Please go ahead.

Speaker #2: Good day and thank you for standing by . Welcome to the Orchid Island Capital third Quarter 2020 Earnings Conference Call . At this time , all participants are in a listen only mode .

Speaker #2: After the speakers presentation , there will be a question and answer session . To ask a question during this session , you will need to press star one one on your telephone .

Speaker #2: You will then hear an automated message advising you your hand is raised . To withdraw your question , please press star one one again .

Speaker #2: Please be advised that today's conference is being recorded . I would now like to hand the conference over to your first speaker today , Melissa Alfonso .

Speaker #2: Please go ahead .

[Company Representative]: Good morning and welcome to the Third Quarter 2025 Earnings Conference Call for Orchid Island Capital. This call is being recorded today, October 24th, 2025. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available and the management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K.

Speaker #3: Good morning , and welcome to the third quarter 2020 Earnings Conference call for Orchid Island Capital . This call is being recorded today , October 24th , 2025 .

Speaker #3: At this time , the company would like to remind the listeners that statements made during today's conference call relating to manage that are not historical facts are forward looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 .

Speaker #3: Listeners are cautioned that such forward-looking statements are based on information currently available and management's good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements.

Speaker #3: Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K.

[Company Representative]: The company assumes no obligation to update such forward-looking statements to reflect actual results, changes in assumptions, or changes in other factors affecting forward-looking statements. Now, I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.

Speaker #3: The company assumes no obligation to update such forward looking statements to reflect actual results , changes in assumptions or changes in other factors affecting forward looking statements .

Speaker #3: Now , I would like to turn the conference over to the company's chairman and chief Executive Officer , Mr. Robert Cauley , please go ahead , sir .

Robert Cauley: Thanks, Melissa. Good morning. I hope everybody's doing well, and I hope everybody's had a chance to download our deck. As usual, that's what we will be focusing on this morning. As usual, I'll throw on page three just to give you an outline of what we'll do. The first thing we'll do is have our Controller, Jerry Sintes, go over our summary financial results. I'll then walk through the market developments and try to discuss what happened in the quarter and how that affected us as a levered mortgage investor. I will turn it over to Hunter. He'll go through the portfolio characteristics and our hedge positions and trading activity. We'll kind of go over our outlook going forward. We'll turn it over to the operator and you for questions. With that, turning to slide five, Jerry.

Speaker #4: Thanks, Melissa. Good morning. I hope everybody is doing well, and I hope everybody has had a chance to download our deck.

Speaker #4: As usual, that's what we will be focusing on this morning. And also, as usual, on page three, just to give you an outline of what we'll do.

Speaker #4: The first thing we'll do is have our controller , Jerry , go over our summary financial results . I'll then walk through the market developments and try to discuss what happened in the quarter and how that affected us as a levered mortgage investor .

Speaker #4: Then , Hunter , I will turn it over to Hunter . He'll go through the portfolio characteristics and our hedge positions and trading activity .

Speaker #4: And then we'll kind of go over our outlook going forward. And then we'll turn it over to the operator for your questions.

Speaker #4: So with that turning to slide five . Jerry . Thank you Bob . So on slide five we'll go over to financial highlights real quickly for Q3 .

Jerry Sintes: Thank you, Bob. On slide five, we'll go over the financial highlights real quickly. For Q3, we report net income of $0.53 a share compared to $0.29 loss in Q2. Book value at 9/30 was $7.33 compared to $7.21 on June 30. Q3 total return was 6.7% compared to negative 4.7% in Q2. We had a $0.36 dividend for both quarters. On page six, our average portfolio balance was $7.7 billion in Q3 compared to $6.9 billion in Q2. Our leverage ratio at 9/30 was 7.4 compared to 7.3 at 6/30. Prepayment speeds were 10.1% for both Q3 and Q2. Our liquidity was 57.1% at 9/30, up from 54% at June 30. With that, I'll turn it back over to Bob.

Speaker #4: We reported net income of $0.53 a share compared to a $0.29 loss in Q2. Book value at September 30 was $7.33, compared to $7.21 on June 30.

Speaker #4: Q3 . Total return was 6.7% compared to negative 4.7% in Q2 , and we had a 36 cent dividend for both quarters . On page six , our average portfolio balance was 7.7 billion in Q3 , compared to 6.9 billion in Q2 .

Speaker #4: Our leverage ratio at 930 was 7.4 , compared to 7.3 at 630 . Prepayment speeds were 10.1% for both Q3 and Q2 , and our liquidity was 57.1% at 930 , up from 54% at June 30th .

Speaker #4: I'll turn it back over to Bob . Thanks , Jared . I'll start on slide nine with market developments . What you see here on the top , left and right are basically the cash treasury curve on the left .

Robert Cauley: Thanks, Jerry. I'll start on slide nine with market developments. What you see here on the top left and right are basically the cash Treasury curve on the left and the surplus swap curve on the right. There are three lines in each. The red line just represents the curve on June 30th. The green line is as of 9/30, and then the blue line is as of last Friday. On the bottom, we just have the three-month Treasury bill versus the 10-year note. What I want to point out, basically, the curve is just slightly steeper for the quarter, just reflecting the fact that with the deterioration of the labor market, the market's pricing in Fed cuts, and so the front end of the curve has moved.

Speaker #4: And the swap curve on the right. There are three lines; the red line represents the curve as of June 30th. The green line is as of September 30th.

Speaker #4: And then the blue line is as of last Friday . And on the bottom we just have the three month Treasury bill versus the ten year tenure note .

Speaker #4: So, I want to point out that, basically, the curve is slightly steeper for the quarter, just reflecting the fact that, with the deterioration in the labor market, the market is pricing in Fed cuts.

Speaker #4: And so the front end of the curve has moved up . If you look at basically the movements on these two lines , and it's the same for both from the red to the green line , I just reflects the deterioration of labor market .

Robert Cauley: If you look at basically the movements on these two lines, and it's the same for both, from the red to the green line, that just reflects the deterioration of the labor market. Ironically, the way the quarter started, the first event of the quarter was really on the 4th of July when President Trump signed into law the One Big Beautiful Bill Act. Initially, the market sold off, 10-years point slip. Sold off by about 25 basis points. At the end of July, at the Federal Open Market Committee meeting, the Chairman was actually fairly hawkish. That was on July 30th. Quickly, on the 1st of August, the non-farm payroll number came out and was weak, but also it was very meaningful downward revisions. That kind of started a string of events which started to paint a very clear picture of a deteriorating labor market.

Speaker #4: Ironically , the way the quarter started , the first event of the quarter was really on the 4th of July when President Trump signed a new law , being one big , beautiful bill act .

Speaker #4: And initially , the market sold off ten years point , sold off by about 25 basis points . And at the end of July , at the Federal Open Market Committee meeting , the chairman was actually fairly hawkish .

Speaker #4: That was on July 30th . But then quickly on the 1st of August , the non-farm payroll number came out . It was weak , but also it was very meaningful .

Speaker #4: Downward revisions . And that kind of started a string of events which started to paint a very clear picture of a deteriorating labor market .

Robert Cauley: The QCEM, which are the revisions to prior payroll written numbers through the first quarter of 2025, were much more negative than expected. In fact, ADP, the last two months, were negative. That changed the picture. That changed the way the Fed looked at the world. The market started to price in Fed easing, and that's what you've seen here. What you've seen between the green and the blue line, so to speak, is what's happened since the end of the quarter. Basically, the government shut down. Absent today's data, we basically have had very little data to go on. You see really what would be described as just a graph for yield. There are a few securities that offer a yield north of 4%. The long end of the Treasury curve has seen pretty good performance quarter to date. The bid continues.

Speaker #4: The qce , which are the revisions to prior payroll numbers through the first quarter of 2025 , were much more negative than expected .

Speaker #4: And then , in fact , ADP , the last two months were negative . So that changed the picture . That changed the way the fed looked at the world .

Speaker #4: And then the market started to price in fed easing . And that's what you've seen here which you've seen between the green and the blue line so to speak , is what's happened since the end of the quarter .

Speaker #4: Basically , the government shutdown absence , today's data . We basically have had very little data to go on . And basically you see really what would be described as just a graph for yield .

Speaker #4: There are few securities that offer a yield north of 4% . And the long end of the Treasury curve has seen pretty good performance .

Speaker #4: Quarter to date . The bid continues . In fact , that's even present in the investment grade corporate market , where in spite of the fact that credit spreads are very tight , you're still seeing strong demand .

Robert Cauley: In fact, that's even present in the investment-grade corporate market where, in spite of the fact that credit spreads are very tight, you're still seeing strong demand. It's probably just because there's a lack of alternative investments that you can buy with that kind of a yield. If I had to summarize it, from our perspective, it was actually a net, very quiet quarter. Rates were essentially unchanged. Importantly, vol was down. I'll get to that more in a minute. Of course, the Fed's in place. A steepening curve and low interest rate volatility are always good for mortgage investors. Turning to slide 10, on the top, you see the current coupon mortgage spread to the 10-year. On the bottom, we have two charts that just give you some indication of mortgage performance.

Speaker #4: And it's probably just because there's a lack of alternative investments that you can buy with that kind of yield. But I guess if I had to summarize it from our perspective, it was actually a net, a very quiet quarter.

Speaker #4: Rates were essentially unchanged . And importantly , Vol was down . And I'll get to that more in a minute . And then of course the Fed's in place a steepening curve a low interest rate volatility always good for mortgage investors .

Speaker #4: Turning to slide ten . On the top you see the current coupon mortgage spread to the ten year . And then on the bottom we have two charts that just kind of give you some indication of mortgage performance .

Robert Cauley: The 10-year Treasury is the typical benchmark people look at when they think of a current coupon mortgage or to appraise mortgage attractiveness. This makes it look like the, you know, the luster's off the rose to a large extent because, for instance, if you look at where we were in May of 2023, that spread was 200 basis points, and it's halved since then. It's 100. I think you have to keep in mind that the 10-year Treasury is a great benchmark over very long periods of time, but the current coupon mortgage does not have a duration anywhere close to the 10-year. In fact, it's about half. Most street shops use a hedge ratio for the current coupon. Somewhere around in here, we have a five-year or five or half of the 10-year. A more appropriate benchmark might actually be a five-year Treasury. Of course, swaps.

Speaker #4: The ten year Treasury is a typical benchmark benchmark . People look at when they think of a current on mortgage or kind of appraise mortgage attractiveness , and this makes it look like the the luster is off the rose to a large extent , because if , for instance , if you look at where we were in May of 2023 , that spread was 200 basis points and it's halved since then .

Speaker #4: It's 100 . But I think you have to keep in mind that the ten year Treasury is a great benchmark over a very long period of time , but the current coupon mortgage does not have a duration anywhere close to the ten year .

Speaker #4: In fact, it's about half; most street shops either hedge ratio for the coupon somewhere around an area of five years or five or half the tenure.

Speaker #4: So a more appropriate benchmark might actually be a five year Treasury . And of course , swaps . We have some charts in the appendix .

Robert Cauley: We have some charts in the appendix. For instance, if you look on page 27 and you look at the spread of the current coupon mortgage to the seven-year swap in particular, I'm just going to go there now if you don't mind. On slide 27, I just want to give you a more accurate picture of what we're looking at. The blue line there just represents the spread to the seven-year swap. That's kind of the center point for our hedges. This is a three-year look at it. I just want to point out that if you look at this chart, you see that we're currently at the low end of the range, but we're still in the range. With respect to the 10-year, we've broken through that. I think that just reflects the fact that the curve is modestly steep.

Speaker #4: For instance , if you look on page 27 and you look at the spread of the current coupon mortgage to the seven year swap , in particular , and I'm just going to go there .

Speaker #4: Now , if you don't mind , but on slide 27 , I just want to give you a more accurate picture of what we're looking at .

Speaker #4: The blue line there just represents the spread to the seven year swap . That's kind of the center point for our hedges . And this is a three year look back .

Speaker #4: And I just want to point out that if you look at this chart, you see that we're currently at the low end of the range, but we're still in the range.

Speaker #4: Whereas with respect to the tenure, we've broken through that. I think that just reflects the fact that the curve is modestly steep and you're basically benchmarking a five-year asset against a ten-year benchmark.

Robert Cauley: You're basically benchmarking a five-year asset against a 10-year benchmark, so it looks like it's tightening when, in fact, it really isn't. The other thing I would point out too, and we've talked about this in the past as well, if you look at slide 28, I think this is important because what this shows are the dollar amount of holdings of mortgages. The red line represents the Federal Reserve, and of course, they're going through QT, so that number just continues to decline. The blue line is holdings by banks, and they are the largest holder of mortgages that there are. You can see this line, how it's increasing. It's very, very modest. In fact, what we hear, most of their purchases are just in structured product, floater, and the like. I think until they get meaningfully involved, mortgages are not going to scream tighter.

Speaker #4: And so it looks like it's tightening , when in fact it really , really isn't . And the other thing I would point out to , and we've talked about this in the past as well , if you look at slide 28 , I think this is important because what this shows are the dollar amount of holdings of mortgages .

Speaker #4: The red line represents the Federal Reserve, and of course, they're going through Q2. So that number just continues to decline.

Speaker #4: But the blue line is holdings by bank . And they are the largest holder of mortgages . There are . You can see this line while it's increasing is very very modest .

Speaker #4: In fact, what we hear is that most of their purchases are just instructor product floaters and the like. I think until they get meaningfully involved, mortgages are not going to scream tighter.

Robert Cauley: There is still some attractiveness, if you will, in the mortgage market. I suspect that that's going to stay, as I said, until the banks get involved. If you look at the bottom left, you kind of see the performance. As you saw, we did tighten. If you look at this chart on the left, this one I show every time, it's normalized prices for four select coupons. All you do is you take the price at the beginning of the period, you set it to 100. You can see most of them move upward, was in early September. The reason I point this out is if you think of it this way, with the banks absent, the marginal buyer of mortgages are basically either money managers or REITs.

Speaker #4: So there is still some attractiveness , if you will , in the mortgage market . And I suspect that that's going to stay as I said , until the banks get involved .

Speaker #4: If you look at the bottom left , you kind of see the performance . And as you saw , we did tighten . And if you look at this chart on the left , this one I show every time , it's normalized prices for for select coupons .

Speaker #4: So all you do is you take the price at the beginning of the period , you set it to 100 , and you can see most of the move upward was in early September .

Speaker #4: And the reason I point this out is , if you think of it this way , the with the banks absent , the more marginal buyer mortgages are basically their money managers or REITs .

Robert Cauley: What we saw around that period were, in addition to the prolific ATM issuance by REITs, we also saw two preferred offerings by some of our peers and a secondary by another of ours. Those were kind of chunky issuances. I think that's what drove that kind of spike tighter. If you were to look at the spread of our current coupon mortgage to the five-year Treasury, you see a spike down right around that date. It was over about a two-week period. Since then, we've kind of plateaued, so mortgages have still retained some attractive carry. Hunter's going to get into that in more detail. I don't want to rain on his grade, but I just wanted to point out that mortgages, while we had a good quarter, they're still reasonably attractive. On the right, you see the dollar roll market. Generally, dollar rolls are impacted by anticipated speeds.

Speaker #4: And what we saw around that period were in addition to the prolific ATM issuance by rates , we also saw two preferred offerings by some of our peers .

Speaker #4: And a secondary by another of ours. So those were kind of chunky issuances. I think that's what drove that kind of spike tighter.

Speaker #4: If you were to look at the spread of our current coupon mortgage to the five-year Treasury, you would see a spike down right around that date; it lasted over about a two-week period.

Speaker #4: But since then we've kind of plateaued . And so mortgages have still retained some attractive carry . Hunter's going to get into that in more detail .

Speaker #4: I don't want to rain on his parade , but I just wanted to point out that mortgages , while we had good quarter , they're still reasonably attractive .

Speaker #4: On the right . You see , the dollar roll market generally , dollar rules are impacted by anticipated speeds . With the rally in the market .

Robert Cauley: With the rally in the market, that's become a big issue. I will just point out one of these. If you look at that little orange line, again, this is like a one-year look back. That orange line represents the Fannie Six roll. You can see towards the end, as we enter September with the rally, that roll's come way off. The market's pricing in extremely high speeds. As a result, specified pools, which are the beneficiary of their call protection and perform well in a rally, have done extremely well. The cash window list that would come out every month in October this month, they did very, very well. I suspect they will probably continue to do so going forward. The next chart on page 11, again, this is very relevant for us as a levered mortgage investor since we're short prepayment options.

Speaker #4: That's become a big issue . And I will just point out one of these . If you look at that little orange line again , this is like a one year look back that orange line represents the Fannie six roll .

Speaker #4: And you can see towards the end as we entered September with the rally that rules come way off and the market's pricing in extremely high speeds .

Speaker #4: And as a result, spec pulls, which are the beneficiaries of their protection and perform well in a rally, have done extremely well.

Speaker #4: The cash window list that would come out every month . In October this month , they did very , very well . And I suspect they will probably continue to do so .

Speaker #4: Going forward . The next chart on page 11 . Again , this is very relevant for us is a levered mortgage investor . Since we're short prepayment options .

Robert Cauley: You can see on the top, this is just normalized vol. This is a proxy for volatility in the interest rate market. The spike there, which was in early April, that was Liberation Day. You can see since then, it's done nothing but come down, and continue to come down. In fact, if you look at the bottom chart, this is the same thing, but with a much longer look-back period. You can see the spike there around March of 2020. That was the onset of COVID. Obviously, a very volatile event. The immediate after that, you had extremely strong QE on the part of the Federal Reserve buying treasuries and mortgages. It's kind of like a rate suppression environment where they're buying up everything and driving rates down, which is the byproduct of that is that they drive volatility down.

Speaker #4: And you can see on the top, this is just normalized volatility. This is a proxy for volatility in the interest rate market. The spike there, which was in early April, was Liberation Day.

Speaker #4: And you can see since then it's done nothing but come down and continue to come down . In fact if you look at the bottom chart , this is the same thing , but with a much longer lookback period , and you can see the spike there around March of 2020 .

Speaker #4: That was the onset of COVID. So, obviously, a very volatile event. But in the immediate aftermath of that, you had extremely strong buying on the part of the Fed, purchasing Treasuries and mortgages.

Speaker #4: So it's kind of like a rate suppression environment where they're buying up everything and driving rates down , which is a byproduct of that , is that they drive volatility down .

Robert Cauley: As you can see on the right, we're getting near those levels. Now, not only that means that rates are going to zero, but what we are seeing is interest rate vol being pushed down. I think part of what's behind this is the fact that we all know that next year, the Federal Reserve chairman is going to be replaced when his term ends in May. In all likelihood, that's going to be by someone who's pretty dovish. The market expects kind of a very dovish outlook for Fed funds and rates in general. Of course, to the extent that that happens, and who's to say that it will, but it would also continue to be supportive for us as a levered agency in the U.S. markets because mortgages, you would think, would continue to do well in that environment.

Speaker #4: And as you can see on the right, we're getting near those levels. Now, I don't think that means rates are going to zero.

Speaker #4: What we are seeing is that interest rates are being pushed down. I think part of what's behind this is the fact that we all know that next year, the Fed Chairman is going to be replaced when his term ends in May.

Speaker #4: In all likelihood, that's going to be by someone who's pretty dovish. So the market expects kind of a very dovish outlook for Fed funds and rates in general.

Speaker #4: And of course , the extent that that happens . And who's to say that it will . But it would also continue to be supportive for us as levered agency MBS markets because mortgages you would think would continue to do well in that environment .

Robert Cauley: Turning to slide 12, this is a relatively important slide because this really is focused on the funding markets. This is what's really become a hot topic, if you will. What we see on the left are just swap spreads by tenor. If you'll notice, in the case of the purple one, which is the 10-year, and the green one, which is the 7-year, they've all kind of turned up. In other words, they're less negative. We would say they're widening, even though it seems counterintuitive because the spread to the cash treasury is actually getting narrower, but it is what it is. What happened here was that the Chairman recently, in a public comment, mentioned that the end of quantitative tightening (QT) was in the next few months. Most of the market participants were expecting that in the first, if not the second quarter of 2026. That was news.

Speaker #4: Turning to slide 12 . This is a relatively important slide . Because this really is focused on the funding markets . And this is what's really become a hot topic , if you will .

Speaker #4: So what we see on the left are just swap spreads by tenor . And if you'll notice in the case of the purple one , which is the ten year and the green one , which is the seven year , they've all kind of turned up .

Speaker #4: And in other words , they're less negative . So we would say they're widening , even though it seems counterintuitive . There's the spread to the cash treasuries actually getting narrower .

Speaker #4: But it is what it is. What happened here was that the chairman recently, in a public comment, mentioned that the end of Q3 was in the next few months.

Speaker #4: Most of the market participants were expecting that in the first, if not the second quarter of 2026. So that was news.

Robert Cauley: More importantly, what we've seen since, especially this month, is that SOFR has traded outside of the 25 basis point range for Fed funds, which is between 4% and 4.25%. In fact, it's been consistently well outside that range, which points to potential funding issues. The Federal Reserve will, in all likelihood, address that and quite possibly at their meeting next week. What that means if they end QT is that the runoff in their portfolio, which we saw in that chart in the appendix, is going to stop. It'll just plateau. What they'll likely do, and I don't know this, of course, with certainty, but I suspect it's the case that treasury paydowns will be reinvested back into treasuries and mortgage paydowns, since they don't want to hold mortgages long term, will also be reinvested in the treasuries, probably more so in bills.

Speaker #4: And more importantly , what we've seen since , especially this month , is that Sofr has traded outside of the 25 basis point range for fed funds , which is between 4 and 4.25% .

Speaker #4: In fact, it's been consistently well outside that range, which points to potential funding issues. And the Fed will in all likelihood address that.

Speaker #4: And quite possibly at their meeting next week with that means if they end Q2 , is that the runoff in their portfolio , which we saw in that chart in the appendix , is going to stop .

Speaker #4: It'll just plateau . But they'll likely do . And I don't know this , of course , with certainty , but I suspect is the case .

Speaker #4: That Treasury paydowns will be reinvested back into treasuries and mortgage paydowns since they don't want to hold mortgages long term . We'll also be invested , reinvested into treasuries , probably more so than bills .

Robert Cauley: What that means then is going forward, given that the government is running large deficits, is that the Federal Reserve will become a buyer of treasuries. As a result, the cash treasuries will not continue to cheapen as they have, and swap spreads, which have gotten really negative, have gone the other way. That just reflects the anticipation by the market that the Federal Reserve as a buyer of treasuries is going to keep issuance in check and keep issuance from flooding the market and driving spreads wider and term premium higher. That is significant for us because if you look at the right-hand chart, this is our hedge positions pie chart, obviously by DV01. In other words, the sensitivity of our hedges to movements in rates. As you can see, 73.1% of our hedges are in swaps by DV01.

Speaker #4: And what that means then is, going forward, given the government is running large deficits, is that the treasurer that the Fed will become a buyer of treasuries as a result?

Speaker #4: The cash treasuries will not continue to cheapen as they have in swap spreads, which have gotten really negative, have gone the other way.

Speaker #4: And that just reflects the anticipation by the market that the Fed, as a buyer of Treasuries, is going to keep issuance in check and prevent flooding the market, which would drive spreads wider in term premium higher.

Speaker #4: And that is significant for us because if you look at the right hand chart , this is our hedge positions . Pie chart obviously by Dv01 .

Speaker #4: In other words , the sensitivity of our hedges to movements in rates . And as you can see , 73.1% of our hedges are in swaps by Dv01 .

Robert Cauley: Obviously, this movement has been beneficial to us to the extent it continues. Of course, it will continue to be beneficial. In fact, I just looked at swap spreads before I came in on the call today. If you look at pretty much every tenor outside of three years, every one of them on a one, three, and six-month look-back is at their wides. Absolutely pegged 100% of the wides. That's a significant movement. That being said, as we did mention, there have been some issues with the funding market with SOFR being outside of the range, and funding spreads to SOFR have been a little bit elevated. We typically used to be in the mid-teens. It's there to the high teens now.

Speaker #4: So, obviously, this movement has been beneficial to us to the extent it continues. Of course, it will continue to be beneficial.

Speaker #4: In fact , I just looked at swap spreads before I came in on the call today . And if you look at pretty much every tenor outside of three years , every one of them on a one , three and six month lookback as at their wide , absolutely pegged 100% of the wide .

Speaker #4: So that's a significant movement . That being said , as we did mention , there has been some issues with the funding market with sulfur being outside the range and spreads funding spreads to sulfur have been a little bit elevated .

Speaker #4: We typically used to be in the mid-teens . It's there to the high teens now , but the fact that the fed is very much on top of this is a good for us , because it means they're going to be attentive to it and keep us from repeating what we saw .

Robert Cauley: The fact that the Federal Reserve is very much on top of this is good for us because it means they're going to be attentive to it and keep us from repeating what we saw, for instance, in 2019. The next slide is 13, refinancing activity. This kind of paints a very benign picture, frankly. I just want to talk about it. If you look at the top left, you can see the mortgage rates and the red line and the refi index. While rates have come down some, the refi index has bumped up. It's not much. If you look at the left axis, you can see, you know, we were at a 5,000 level in December of 2020, and we're far below that. The second chart on the right just shows primary and secondary spreads, and they've just been very choppy.

Speaker #4: For instance , in 2019 , the next slide is 13 refinancing activity in this kind of paints a very benign picture . Frankly , I just want to talk about it .

Speaker #4: If you look at the top left , you can see the mortgage rates and the red line and the refi index . And while rates have come down some , the refi index has bumped up .

Speaker #4: It's not much . In fact , if you look at the left axis , you can see we were at a 5000 level in December of 2020 , and we're far below that .

Speaker #4: The second chart on the right just shows primary , secondary spreads , and they've just been very choppy . There's really not a story to be told from that .

Robert Cauley: There's really not a story to be told from that. What I want to focus on is the bottom chart. What this shows is the percentage of the mortgage universe that's in the money. That's the gray shaded area. Then you have the refi index. As you can see on the right-hand side of this chart, there's some gray area there, but it's very modest. Again, it paints a very benign picture, but it's misleading. The reason it is so is because this is the entire mortgage universe. Most of the mortgages in existence today, or a large percentage of them, were originated in the immediate years after COVID. They had very low coupons, one and a half, two, two and a half, three. They're out of the money.

Speaker #4: But what I want to focus on is the bottom chart . And what this shows is the percentage of the mortgage universe that's in the money .

Speaker #4: That's the gray shaded area . And then you have the index . And as you can see on the right hand side of this chart , that this is there's some gray area there , but it's very modest .

Speaker #4: So again, it paints a very benign picture, but it's misleading. And the reason it is so is because this is the entire mortgage universe.

Speaker #4: Most of the mortgages in existence today are a large percentage of them . Were originated in the immediate years after Covid . So they had very low coupons one and a half to two and a half , three , and they're out of the money .

Robert Cauley: If you were to do the same chart for just 2024 and 2025 originated mortgages, it would be an entirely different picture. It would be a much higher percentage of the mortgage universe in the money. It'd probably be north of 50%. Since we as investors in this space and like our peers, we own a fair number of 2024 and 2025 originated mortgages. In fact, we own, to some extent, somewhat of a barbell in the sense that most of our discounts are very old. Most of our newer mortgages, you know, the higher coupons are lower wall. That really means security selection is important. In a moment here, I will turn the call over to Hunter. He will talk about what we've done in that regard in great depth. I just want to point out this picture that this chart is somewhat misleading.

Speaker #4: But if you were to do the same chart for just 2024 and 2025 originated mortgages, it would be entirely different.

Speaker #4: It would be a much higher percentage of the mortgage universe in the money. Probably would be north of 50. And since we, as investors in this space, and like our peers, we own a fair number of 2024 and 2025 originated mortgages.

Speaker #4: In fact , we own to some extent somewhat of a barbell in the sense that most of our discounts are very old and most of our newer mortgages , you know , the higher coupons are lower wallet .

Speaker #4: And so that really means security . Selection is important . And in a moment here , I will turn the call over to Hunter and he will talk about what we've done in that regard in great depth .

Speaker #4: But I just want to point out this picture that this chart is somewhat misleading . Before I turn it over to Hunter , as always , I'd like to just say a bit about slide 14 .

Robert Cauley: Before I turn it over to Hunter, as always, I'd like to just say a bit about slide 14. It's a very simple picture. There are two lines on this chart. The blue line just represents GDP in dollars, and the red line is the money supply. What it points out is the continuing fact that the government or fiscal policy, if you will, is still very stimulative. The government is running deficits between $1.5 trillion and $2 trillion. That's in excess of 5% of GDP. The takeaway is that in spite of what might be happening with respect to tariffs or the weakness in the labor market or geopolitical events, the government is supplying a lot of stimulus to the economy. You can't forget that looking forward. That's probably why, in spite of the tariffs, among other reasons, obviously, why the economy really has not weakened materially.

Speaker #4: It's very simple picture . There are two lines on this chart . The blue line just represents GDP in dollars and the red line is the money supply .

Speaker #4: And what it points out is the continuing fact that the government or fiscal policy , if you will , is still very sensitive .

Speaker #4: The government is running deficits between one and a half and $2 trillion . That's in excess of 5% of GDP . And the takeaway is that in spite of what might be happening with respect to tariffs or the weakness in the labor market or geopolitical events , the government is supplying a lot of stimulus to the economy .

Speaker #4: And you can't forget that looking forward . And that's probably why , in spite of the tariffs , among other reasons , obviously , but while the economy really has not weakened materially , and with that , I will turn it over to Hunter .

Robert Cauley: With that, I will turn it over to Hunter. Thanks, Bob. I'd like to talk to you a little bit about how our portfolio of assets evolved over the course of the quarter, our experience in the funding markets, our current risk profile, how our portfolio is impacted by uptick in prepayments, and give a little bit of my outlook, I suppose, going forward. Coming out of a volatile second quarter, we took advantage of an attractive entry point by raising $152 million in equity capital and deploying it fully during the quarter. The investing environment allowed us to buy agency MBS at historically widespread levels. During the second half of the quarter, equity raises slowed, but the assets we purchased in the third quarter were tightened sharply during that second half of the third quarter.

Speaker #4: Thanks , Bob . I'd like to talk to you a little bit about how our portfolio of assets evolved over the course of the quarter , our experience in the funding markets , our current risk profile , how our portfolio is by uptick in prepayments and give a little bit of an my outlook , I suppose going forward .

Speaker #4: So, coming out of a volatile second quarter, we took advantage of an attractive entry point by raising $152 million in equity capital and deploying it fully during the quarter.

Speaker #4: The investing environment allowed us to buy agency RMS at historically widespread levels during the second half of the quarter. During the second half of the quarter, equity raising slowed, but the assets we purchased in the third quarter tightened sharply during that.

Speaker #5: Second half of the of the of the third quarter as discussed on our last earnings call , our focus has been on 30 year , five and a half sixs and to a lesser extent , six and a half coupons .

Robert Cauley: As discussed on our last earnings call, our focus has been on 30-year five and a half, sixes, and to a lesser extent, six and a half coupons. Those didn't tighten quite as much as the belly coupons, but we feel like they offer superior carry potential going forward. The portfolio remains 100% agency RMBS with a heavy tilt towards call protected specified pools. These pools help insulate the portfolio from adverse payment behavior and reinforce the stability of our income stream. Newly acquired pools this quarter all had some form of prepayment protection. 70% were backed by credit-impaired borrowers like low FICO scores or loans with high GSE mission density scores. 22% were from states experiencing home price depreciation or where refi activity is structurally hindered. Those pools were predominantly Florida and New York geographies. 8% were loan balance pools of some flavor.

Speaker #5: And those didn't tighten quite as much as the belly coupons , but we feel like they offer superior carry potential going forward . The portfolio remains 100% agency arms with a heavy tilt towards call protected specified pools .

Speaker #5: These pools help insulate the portfolio from adverse prepayment behavior and reinforce the stability of our income stream. Newly acquired pools this quarter all had some form of prepayment protection.

Speaker #5: 70% were backed by credit impaired borrowers like low Fico scores or loans with high GSE density scores . 22% were from states experiencing home price depreciation or where refi activity is structurally hindered .

Speaker #5: Those pools were predominantly Florida and New York geographies . 8% were loan balance pools . Some flavor as a result of these investments , our weighted average coupon increased from 545 to 553 .

Robert Cauley: As a result of these investments, our weighted average coupon increased from 5.45 to 5.53. The effective yield rose from 5.38 to 5.51, and our net interest spread expanded from 2.43 to 2.59. Across the broader portfolio, pool characteristics remain very diverse and defensive towards prepays. Exposure, 20% of the portfolio now is backed by credit-impaired borrowers, 23% Florida pools, 16% New York pools, 13% investor property pools, and 31% have some form of loan balance story, if you will. We had virtually no exposure to generic or worse-to-deliver mortgage securities, and we were net short TBAs at 9:30. Overall, we improved the carry and prepayment stability of our portfolio while maintaining conservative leverage posture and staying entirely within the agency MBS universe. Turning to slide 17, you can see a visual representation of what I just discussed.

Speaker #5: The effective yield rose from 538 to 551 , and our net interest spread expanded from 243 to 259 . Across the board . The broader portfolio pool characteristics remain very diverse and defensive towards Prepays exposure .

Speaker #5: 20% of the portfolio now is backed by credit impaired borrowers , 23% Florida Florida pools 16% . New York pools 13% . Investor property pools and 31% have some form of loan bowel story , if you will .

Speaker #5: We have virtually no exposure to generic or, worse, to deliver mortgage securities, and we were net short TBAs at 930 overall. We improved the carry over the carry and prepayment stability of our portfolio while maintaining a conservative leverage posture and staying entirely within the agency.

Speaker #5: MBS universe . Turning to slide 17 . You can see sort of visual representation of what I just discussed . You can clearly see the shift in the graphs .

Robert Cauley: You can clearly see the shift in the graphs, the concentration building in the five and a half and six coupon buckets across the three graphs. These production coupons remain the core of our portfolio and continue to offer the best carry profile in the current environment. Now I'd like to discuss a little bit about the funding markets. The repo lending market continues to function very well, and Orchid maintains capacity well in excess of our needs. That said, we've observed friction building in the funding markets, particularly during the weeks of heavy Treasury bill issuance and settlement. These dynamics have led to spikes in overnight SOFR and the triparty GC rates relative to the interest paid by the Federal Reserve on reserve balances, particularly around settlement dates. This is largely attributable to declining reserve balances and continued heavy bill issuance.

Speaker #5: The concentration building and the five and a half and six coupon buckets across the three graphs . These production coupons remain the core of our portfolio and continue to offer the best carry profile in the current environment .

Speaker #5: Now , I'd like to discuss a little bit about the funding markets , the repo lending market continues to function very well , and orchid maintains capacity well in excess of our needs .

Speaker #5: That said, we've observed friction building in the funding markets, particularly during the weeks of heavy Treasury bill issuance and settlement.

Speaker #5: These dynamics have led to spikes in overnight sofr and the tripartite GC rates relative to the interest paid by the Federal Reserve on a reserve balances , particularly around settlement dates .

Speaker #5: This is largely attributable to declining reserve balances and continued heavy bill issuance . Orchid typically funds through the term markets , which has helped insulate us from some of the overnight volatility , but still , term pricing has been impacted .

Robert Cauley: Orchid typically funds through the term markets, which has helped insulate us from some of the overnight volatility, but still, term pricing has been impacted. We borrowed at roughly SOFR plus 16 basis points for most of the year, but in recent weeks, that spread has drifted up a couple of basis points, say SOFR plus 18 more recently. Looking ahead, we expect the Federal Reserve to end quantitative tightening (QT) potentially as early as next week's meeting and begin buying Treasury bills through renewed temporary market operations. If and when this occurs, it should provide positive tailwind for our repo funding costs, especially if it's paired with further rate cuts by the FOMC. This would help with the continued expansion of our net interest margin. Just wanted to make a brief note about this chart on this page. It might seem a little bit counterintuitive.

Speaker #5: We borrowed a roughly sulfur plus 16 basis points for most of the year , but in recent weeks , that spread has drifted up a couple of basis points , so for plus 18 more recently , looking ahead , we expect the fed to end Q2 potentially as early as next week's meeting .

Speaker #5: And begin buying Treasury bills through renewed temporary market operations . If , if and when this occurs , it should provide positive tailwind for our repo funding costs , especially if it's paired with further rate cuts by the FOMC .

Speaker #5: This would help with the continued expansion of our net interest margin. I just wanted to make a brief note about this chart on this page.

Speaker #5: It might seem a little bit counterintuitive . The blue line on the chart represents our economic cost of funds . This metric , as you can see , is ticked slightly higher in spite of the fact that rates are coming down .

Robert Cauley: The blue line on the chart represents our economic cost of funds. This metric, as you can see, has ticked slightly higher in spite of the fact that rates are coming down. This is really due to the fact that, as we've grown, there's a diminishing impact of our legacy hedges on the broader portfolio. Recall that this metric, economic cost of funds, includes the cumulative mark-to-market effect of legacy hedges. It's sort of akin to the rate paid on taxable interest expense with the deferred hedge deductions factored in. On the other hand, the red line, which has been moving lower, represents our actual repo borrowing costs with no hedging effects. As the Federal Reserve cuts rates, any unhedged repo balances will benefit directly from this decline.

Speaker #5: Then this is really due to the fact that , as we've grown , there's a there's a diminishing impact of our legacy hedges on the broader portfolio .

Speaker #5: So recall that the that this this metric economic cost of funds includes the cumulative mark to market effect of legacy hedges . So it's sort of akin to the rate paid on taxable interest expense with with the deferred hedge deductions factored in .

Speaker #5: On the other hand , the red line , which has been moving lower , represents our actual repo borrowing costs with no hedging effects as the fed cuts rates , any unhedged repo balances will benefit directly from this decline .

Robert Cauley: As of June 30th, 27% of our repo borrowings were unhedged, and that increased to 30% more recently, modestly enhancing the potential benefit to lower funding rates. Turning to slides 19 and 20, speaking of hedges. On September 30th, Orchid Island Capital's total hedge notional stood, as I said, at $5.6 billion, covering about 70% of our repo funding liabilities. Interest rate swaps totaled $3.9 billion, covering roughly half the repo balance with a weighted average pay fixed rate of 3.31% and an average maturity of 5.4 years. Swap exposure is split between intermediate and longer dated maturities, allowing us to maintain protection further out the curve while taking advantage of lower short-term funding costs. Short futures positions totaled at $1.4 billion, comprised primarily of SOFR, five-year, seven-year, and 10-year Treasury futures, as well. I'm sorry.

Speaker #5: As of June 30th , 27% of our repo borrowings were unhedged , and that increased to 30% . More recently , modestly enhancing the benefit to lower our potential benefit to lower funding rates .

Speaker #5: Turning to slide 19 and 20 . Speaking of hedges , on September 30th , Orchid's total hedge notional stood as I said , 5.6 billion , covering about 70% of our repo funding liabilities .

Speaker #5: Interest rate swaps totaled 3.9 billion , covering roughly half the repo balance , with a weighted average pay fixed rate of 3.31% and an average maturity of 5.4 years .

Speaker #5: Swap exposure is split between intermediate and longer-dated maturities, allowing us to maintain protection further out the curve while taking advantage of lower short-term funding costs.

Speaker #5: Short futures positions totaled 1.4 billion , comprised primarily of Sofr five year , seven year , and ten year Treasury futures as well .

Speaker #5: I'm sorry , Sofr five year , ten year , seven year Treasury futures , as well as a very small position in swap futures on a mark to market basis .

Robert Cauley: SOFR, five-year, 10-year, seven-year Treasury futures, as well as a very small position in interest rate swap futures. On a mark-to-market basis, our blended swap and futures hedge rate was 3.63% at 6/30 and 3.56% at 9/30. You can think of this metric as the rate we would pay if all of our hedges had a market value of zero at each respective quarter-end, a par rate, if you will. Our short TBA positions totaled $282 million, all of which were, I think, Fannie five and a halves. A portion of this short is really part of a bigger trade where we're long 15-year fives and short 30-year five and a halves, so a 15/30 swap structured to provide protection against rising rates in a spread-widening environment.

Speaker #5: Our blended swaps and futures hedge rate was 3.63 at 6:30 and 3.56 at 9:30. You can think of this metric as the rate we would pay if all of our hedges had a market value of zero at each respective quarter-end, apart rate, if you will.

Speaker #5: Our short positions totaled 282 million , all of which were , I think five and a half's . A portion of this short is really part of a bigger trade where we're long 15 year , fives and short 30 year , five and a half .

Speaker #5: So, a 1530 swap structured to provide protection against rising rates in a spread-widening environment. The remainder of the short position was just executed in conjunction with some pool purchases late in the quarter, following a period where spreads had tightened materially.

Robert Cauley: The remainder of the short position was just executed in conjunction with some pool purchases late in the quarter, following a period where spreads had tightened materially. We didn't want to take the basis exposure quite yet. Orchid held no swaptions during the quarter, which was fortuitous because there was a sharp decline in volatility. At June 30th, approximately 27% of our repo borrowings were unhedged. That figure increased to 30% by September 30th. This increase reflects the impact of the market rally and the corresponding shorter asset durations, which allowed Orchid to carry a higher unhedged balance while maintaining minimal interest rate exposure. In other words, this shift does not indicate that the portfolio is less hedged. In fact, at June 30th, our duration gap was negative 0.26 years, and by September 30th, it had grown to negative 0.07 years. This still highlights a very flat interest rate profile.

Speaker #5: So we didn't want to take the basis exposure quite yet . Orchid held no swaptions during the quarter , which was fortuitous because there's a sharp decline in volatility .

Speaker #5: At June 30th , approximately , as I mentioned , 27% of our repo borrowings were unhedged . That figure increased to 30% by September 30th .

Speaker #5: This increase reflects the impact of the market rally and the corresponding shorter asset durations , which allowed orchid to carry a higher unhedged balance while maintaining minimal interest rate exposure .

Speaker #5: In other words , this shift doesn't not indicate that the portfolio is less hedged . In fact , that June 30th , our duration gap was -0.26 years , and by September 30th it had grown to -0.07 years .

Speaker #5: So still highlights a very flat interest rate profile . Speaking of which , slides 21 and 22 get a real sense of our interest rate sensitivity .

Robert Cauley: Speaking of which, slides 21 and 22, you get a real pitch sense of our interest rate sensitivity. Orchid's agency RMBS portfolio remains well balanced from a duration standpoint, with the overall rate exposure very tightly managed. Our modeled rate shock showed that a plus 50 basis point increase in rates, we would estimate, would result in a 1.7% decline in equity, while a 50 basis point decrease would reduce equity by 1.2%. It's very low interest rate sensitivity, at least on a model basis. The combination of higher coupon assets and intermediate to long-term, longer dated hedges reflect our continued positioning that guards against rising rates and a steepening curve. This positioning is grounded in our view that a weakening economy and lower rates across the curve, while potentially introducing short-term volatility, should be positive for agency MBS and the broader sector in general.

Speaker #5: Orchid's agency Rmbs portfolio remains well balanced from a duration standpoint , with overall rate exposure very tightly managed . Our managed excuse me , our modeled rate shock showed that a plus 50 basis point increase in rates would estimate .

Speaker #5: We estimate would result in a 1.7% decline in equity , while 50 basis point decrease would reduce equity by 1.2% . So again , it's very low interest rate sensitivity , at least on a model basis .

Speaker #5: The combination of higher coupon assets and intermediate to long term longer dated hedges reflect our continued positioning that guards against a rising rates and a steepening curve .

Speaker #5: This this positioning is grounded in our view that a weakening economy and lower rates across the curve while potentially introducing short term volatility should be positive for agency MBS and the broader sector in general .

Robert Cauley: As such, environments are often accompanied by stress in equity and credit markets, and investors often seek safety in fixed income and REIT stocks. Conversely, if the economy remains strong or inflation proves sticky, we would expect a corresponding rise in rates and a basis widening in the belly of the coupon stack, with outperformance shifting to shorter duration, high coupon assets, which are currently lagging due to prepayment exposure. That's a perfect segue to slide 23, where we talk about our prepayment experience. This has been something that we've largely glossed over for the past couple of years, other than a brief period of time following a 10-year brief run at 360 last September. In the third quarter, including the September speeds released in early October, Orchid experienced a very favorable prepayment outcome across the portfolio. Lower coupons continue to perform exceptionally well.

Speaker #5: As such, environments are often accompanied by stress in equity and credit markets, and investors often seek safety in fixed income and REIT stocks.

Speaker #5: Conversely , if the economy remains strong or inflation proves sticky , we would expect to corresponding rise in rates and a basis widening in the belly of the coupon stack with performance shifting to shorter duration high coupon assets , which are currently lagging due to prepayment exposure .

Speaker #5: And that's perfect . Segue to slide 23 , where we talk about our prepayment experience . This has been something that we've largely glossed over for the past couple of years , other than a brief period of time following a ten year brief run at 360 last September .

Speaker #5: In the third quarter , speeds released in the third quarter , including the September speeds released in early October , orchid experienced a very favorable prepayment outcome across the portfolio .

Speaker #5: Lower coupons continue to perform exceptionally well . Three three and a half and fours paid at 7.2 , 8.3 and 8.1 CPR compared to TBA deliverables significantly slower at four and a half , 2.9 and 0.74 and a half and fives paid 11 and seven and a half CPR for the quarter versus 2.3 and 1.9 on comparable deliverables among our low premium assets , which are five and a half largely throughout most of the quarter , these were largely in line with the deliverables .

Robert Cauley: Threes, three and a halves, and fours paid at 7.2, 8.3, and 8.1 CPR compared to the TBA deliverables, significantly slower at 4.5, 2.9, and 0.7. Four and a halves and fives paid 11 and 7.5 CPR for the quarter versus 2.3 and 1.9 on comparable deliverables. Among our low premium assets, which are five and a halves largely throughout most of the quarter, these were largely in line with the deliverables. 6.2 was our experience, 6.2 CPR versus 5.9. However, in the most recent month, generic five and a half jumped up to 9 CPR while our portfolio held steady at 6.3, really underscoring the benefit of pool selection and the relatively low wall of the portfolio. In the premium space, sixes and six and a halves paid 9.5 and 12.2 CPR for the quarter compared to 13.8 and 29.5 on TBA deliverables.

Speaker #5: 6.2 was our experience , 6.2 CPR versus 5.9 . However , in the most recent month , generic five and a half jumped up to nine CPR .

Speaker #5: While our portfolio held steady at 6.3%, it really underscores the benefit of pool selection and the relatively low wall of the portfolio and premium space.

Speaker #5: Six and a half , six and six and a half paid 9.5 and 12.2 CPR for the quarter , compared to 13.8 and 29.5 on TBA .

Speaker #5: Deliverables as refi activity spiked in September , the various forms of call protection embedded in our portfolio produced very sharp divide . The and the most recent month , six has paid our six is paid 9.7 versus 27.8% for the generics , and our six and a half paid 13.9 versus a 42.8 CPR on the generics .

Robert Cauley: As refi activity spiked in September, the various forms of call protection embedded in our portfolio produced a very sharp divide, though. In the most recent month, our sixes paid 9.7 versus 27.8% for the generics, and our six and a halves paid 13.9 versus a 42.8 CPR on the generics. You can really see the benefit and potential carry above and beyond TBA for those coupons. Overall, the quarter's results highlight our disciplined pool selection, where call protection and more call-protected specified collateral continue to deliver materially better prepaid behavior than the TBA deliverable, as I mentioned. Just a few concluding remarks from me. In summary, we experienced a sharp rebound in the third quarter, more than offsetting the mark-to-market damage done during the volatile Liberation Day widening in the second quarter.

Speaker #5: So you can really see the benefit and potential carry above and beyond TPA . For those coupons . Overall , the quarter was the quarter's results highlight our disciplined pool selection where call protection , what we call protected specified collateral , continues to deliver materially better prepaid behavior than the TBA deliverable .

Speaker #5: As I mentioned , just a few concluding remarks for me . In summary , we experienced sharp rebound in the third quarter more than offsetting the mark to market damage done during the volatile Liberation Day widening in the second quarter .

Robert Cauley: Orchid successfully raised $152 million during the quarter and deployed the proceeds into approximately $1.5 billion of high-quality specified pools. The pools were acquired at historically wide spread levels, the most certain meaningful driver of increased earning power for the portfolio in the coming quarters. While our skew towards high coupon specified pools and bear steepening bias resulted in slight underperformance relative to our peers with more exposure to belly coupons, we remain highly constructive on our current asset and hedge blend. We believe our positioning will continue to deliver great carry and be more resilient in a sell-off, particularly given our call protection and limited convexity exposure. Looking ahead, we're very positive on the investment strategy.

Speaker #5: Orchid successfully raise 152 million during the quarter and deployed the proceeds into approximately 1.5 billion of high quality specified pools . The pools were acquired at historically widespread levels and will serve meaningful driver of increased earning power for the portfolio in the coming quarters .

Speaker #5: While our skew towards high coupon specified pools and bear steepening bias resulted in slight underperformance relative to our peers , with more exposure to belly coupons , we remain highly conservative constructive on our current asset and hedge blend .

Speaker #5: We believe our positioning will continue to deliver great carry and B and be more resilient in the sell off , particularly given our call protection and limited convexity exposure .

Speaker #5: Looking ahead , we're very positive on on the investment strategy . As I have mentioned , several factors that could provide significant tailwinds to agency NBS market and our portfolio for the quarters ahead are continued .

Robert Cauley: I mentioned several factors that could provide significant tailwinds to the agency RMBS market and our portfolio for the quarters ahead: the continued Fed rate cuts, the anticipated end of QT, a renewed Treasury open market operations to help stabilize the repo and bill markets, potential expansion of GSE retained portfolios, a lighthouse and Treasury Department that are openly supportive of tighter mortgage spreads. We also continue to see strong participation from money managers and the REITs, as Bob alluded to. There's a potential for banks to reenter the markets more meaningfully as funding and regulatory capital conditions improve. Taken together, we believe the current opportunity in agency RMBS is still among the most attractive in recent memory, and we're well positioned to capitalize on that. With that, I'll turn it over to Bob. Thanks, Hunter. Great job.

Speaker #5: Fed rate cuts . The anticipated the anticipated end of QE , a renewed Treasury open market operations to help stabilize the repo and build markets potential expansion of GSE retained portfolios , a white House and Treasury Department that are openly supportive of tighter mortgage spreads .

Speaker #5: We also continue to see strong participation from money managers and the REITs. As Bob alluded to, there's a potential for banks to reenter the markets more meaningfully as funding and regulatory capital conditions improve.

Speaker #5: Taken together , we believe current opportunity and agency MBS is still among the most attractive in recent memory , and we're well positioned to capitalize on that .

Speaker #5: With that, I'll turn it over to Bob.

Speaker #4: Thanks . Great job . Just a couple of concluding remarks , and then we'll turn it over to questions . Basically , just to reiterate kind of our outlook , I think that it's kind of hard to say where we go from here , from terms of the market , the economy .

Robert Cauley: Just a couple of concluding remarks, and then we'll turn it over to questions. Basically, just to reiterate kind of our outlook. I think that it's kind of hard to say where we go from here in terms of the market and the economy. I think that we're possibly at a crossroads. On the one hand, we've seen a lot of labor market weakness, and it's gotten the Fed's attention, and they appear ready to cut rates, which could lead to a prolonged low-rate environment. We also see a lot of resiliency in the economy, very strong growth. Consumer seems to be in decent shape. As I mentioned, the government's running large deficits. Plus, you have the benefits of AI and the CapEx buildout, all that tied into the one big beautiful bill and the very favorable tax components of that.

Speaker #4: I think that we're possibly at a crossroads . On the one hand , we've seen a lot of labor market weakness , and it's gotten the Fed's attention and they appear ready to cut rates , which could lead to a prolonged low rate environment .

Speaker #4: But we also see a lot of resiliency in the economy . Very strong growth . Consumer seems to be in decent shape . And as I mentioned , you know , the government is running large deficits .

Speaker #4: Plus you have the benefits of AI and the CapEx build out all that tied into the one big beautiful bill in a very favorable tax components of that .

Robert Cauley: I think the market could, and the economy could go either way. The important thing is, as Hunter alluded to, that the way the portfolio is constructed with the high coupon bias, with hedges that are a little further out the curve, and the call-protected nature of the securities we own, I think that we can do well in either. For instance, if we do stay in a low-rate environment and speeds stay high, we have very adequate call protection. To the extent that the opposite occurs and the economy re-strengthens and we start going into a higher-rate environment, we have most of our hedges further out the curve, and we have higher coupon securities that would do well in the sense they would have enhanced carry in that environment.

Speaker #4: So I think the market in the economy could go either way . But the important thing is , is Hunter alluded to is that the way the portfolio is constructed with the high coupon bias , with hedges that are a little further out the curve and the call protected nature of the securities , we own , I think that we can do well in either .

Speaker #4: So , for instance , if we do stay in a low rate environment and stay high , we have very adequate call protection to the extent that the opposite occurs and the economy restrengthens .

Speaker #4: As we start going into a higher rate environment, we have most of our hedges further out the curve, and we have higher coupon securities.

Speaker #4: That would do well in the sense that we would have enhanced carry in that environment . So I guess one final comment is that we do expect now , especially after the data today , that the fed will likely cut a few times and over the course of the next few months , we're probably going to potentially adjust our hedges to try to lock in some of that lower funding and maybe add a little upgrade protection , because we think if the fact the fed does ease a few times , that in all likelihood the move after , that's a hike .

Robert Cauley: I guess one final comment is that we do expect now, especially after the data today, that the Fed will likely cut a few times. Over the course of the next few months, we're probably going to potentially adjust our hedges to try to lock in some of that lower funding and maybe add a little up-rate protection because we think if the fact the Fed does ease a few times, that in all likelihood, the move after that is a hike. With all that said, we will now turn the call over to questions.

Speaker #4: So with all that said , we will now turn the call over to questions .

Melissa Alfonso: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment while we compile our Q&A roster. Our first question is going to come from the line of Jason Weaver with JonesTrading Institutional Services. Your line is open. Please go ahead.

Speaker #2: Thank you. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced.

Speaker #2: To withdraw your question , please press star one one again . One moment while we compile our Q&A roster . Our first question is going to come from the line of Jason Weaver , with Jones trading .

Speaker #2: Your line is open . Please go ahead .

Jerry Sintes: Hi, guys. Good morning. Congrats on the results in this quarter and the growth. I guess first, given the relatively consistent leverage and even greater liquidity now, as well as, you know, sort of the positive developments that you mentioned in the prepared remarks, especially lower vol, is there anything particular on the horizon, macro-wise, that you'd be looking for to change overall risk positioning, maybe like notably, like maybe leaning more into leverage?

Speaker #6: Hi , guys . Good morning . Congrats on the results this quarter and the growth I guess first , given the relatively consistent leverage and even greater liquidity now , as well as sort of the positive results that you in the prepared remarks , especially lower vol , is there anything particular on the horizon , macro wise , that you'd be looking for to change overall risk positioning ?

Speaker #6: Maybe, like, notably, leaning more into leverage?

Robert Cauley: As I kind of said at the end, we could with leverage. Like I said, if there's two paths I see the market following, one is where we kind of stay where we are. The Federal Reserve continues to cut, rates stay low. In that environment, we're going to benefit, obviously, from the first few rate cuts because the percentage of our funding that is hedged is on the low side. I think in the event that we do see that, as I mentioned, I think we'll probably look to lock that in, and if we do so, we probably would be comfortable taking the leverage up some.

Speaker #4: Well , as I kind of said at the end , I don't know , we could with leverage . I mean , like I said , there's two paths .

Speaker #4: I see the market falling. You know, one scenario is where we kind of stay where we are. The Fed continues to cut rates and remains low in that environment.

Speaker #4: You know, we're going to benefit, obviously, from the first few rate cuts because the percentage of our funding that is hedged is on the low side.

Speaker #4: I think in the event that we do see that , as I mentioned , I think we'll probably look to lock that in .

Speaker #4: And if we do so , we probably would be comfortable taking the leverage up some to the extent the market and the economy rebounds and we see a strengthening , which I think is very possible .

Robert Cauley: To the extent the market and the economy rebounds and we see a strengthening, which I think is very possible, I'm frankly, I would say I would take the under on the number of rate cuts between now and the end of next year. I would say we would not be taking leverage up. We would be looking to kind of protect ourselves, one, lock in funding and then look to protect ourselves on the asset side from extension and, you know, rate sell-off impact on mortgage prices.

Speaker #4: Frankly, I would say I would take the under on the number of rate cuts between now and the end of next year.

Speaker #4: Then I would say we would not be taking leverage up. We would be looking to kind of protect ourselves. One, lock in funding, and then look to protect ourselves on the asset side from extension.

Speaker #4: And , you know , rate sell off impact on mortgage prices . Yeah .

Jerry Sintes: Yeah. Got it. Thanks. That's helpful. Then second, referencing the remarks on the high coupon spec pools you've purchased just as of late, do you have any view on payups upside potential here, especially if we see more refi momentum growing?

Speaker #6: Got it . Thanks . That's helpful . And then second , referencing the remarks on the high coupon spec pools you've purchased just as of late , do you have any view on pay ups , upside potential here , especially if we see more refi momentum growing ?

Robert Cauley: We've really seen payups ratchet higher in the beginning part of this quarter. This most recent cycle of the GSEs, we saw payups increase sharply. A lot of that is attributable to the fact that there were people who were long TBAs as kind of a strategy when the roll markets were more healthy. That carry from those rolls has just completely evaporated. You've seen people who might have had heavier concentrations in TBAs really be forced to dive in and start buying everything they could find to supplement that income. We, fortunately, didn't have that problem, and most of the spec pools we bought were really kind of the first half of the quarter. That's just to reiterate that point. I mentioned we had the spike tighter in mortgages in early September. I forgive you if you mentioned this, I missed it.

Speaker #5: We've really seen pay ups ratchet and higher in in the beginning part of this quarter , this this most recent cycle , the GSEs , you know , we saw perhaps increase sharply a lot of that is attributable to the fact that there were people who were long tbas as kind of a strategy when the when the markets were more healthy and that that carry from those roles is just completely evaporated .

Speaker #5: And so you've seen people who might have had heavier concentrations in Tbas really be forced to dive in and just , you know , start buying everything they could find to , to , to supplement that income .

Speaker #5: We fortunately didn't have that problem. Most of the pools we bought were really kind of the first half of the quarter.

Speaker #5: So yeah .

Speaker #4: That’s just reiterating that point. I mentioned we had the spike tighter in mortgages that came in early September. And I forgive you if you mentioned this; I missed it.

Robert Cauley: Of the capital we raised in the quarter, 70% of that was deployed before then. We benefited from that. Also, we talked about this at the end of the second quarter. At that time, the weighted average price of the portfolio was basically par. It was like $99.98. Most of what we added, all of what we added, were to higher coupons. That being said, the average price of the portfolio now is a little over $101, $101 and 7. Our average payoff is 33 ticks. While we've been adding call protection, we're not paying up for the highest quality. Frankly, we don't think that it's been warranted. Not to get too into the weeds of what we've done, but we've gotten, as you saw in our realized prepayment speeds, very good performance out of those securities without having to pay extremely exorbitant payups.

Speaker #4: But of the capital we raised in the quarter , 70% of that was deployed before then . So we benefited from that . And then also I just , you know , we talked about this at the end of the second quarter .

Speaker #4: At that time , the weighted average price of the portfolio was basically it was like 99.98 . And most of what we added , all of what we added were to higher coupons .

Speaker #4: But that being said, the average price of the portfolio now is a little over 101, 101.7, and our average payout is 33 ticks.

Speaker #4: So while we've been adding call protection , we're not paying up for the highest quality . Frankly , we don't think that it's been warranted not get too into the weeds of what we own , but we've gotten , as you saw in our realized prepayment speeds , very good performance out of those securities without having to pay , you know , extremely exorbitant pay ups .

Robert Cauley: I don't know that we're ever going to get back to where we were in 2020 or 2021 just by comparison. Back then, our higher coupon, New York, whatever coupon they were, the payups were multiple four and five points. I don't know that we're going to see that anytime soon, but we've done quite well without having to go anywhere near those kind of levels.

Speaker #4: I don't know that we're ever going to get back to where we were , like in 20 or 21 , just by comparison .

Speaker #4: You know , back then , our higher coupon New York , whatever . You know , coupon . They were the payoffs were multiple four and five points .

Speaker #4: I don't know that we're going to see that anytime soon , but it's you know , we've done quite well without having to go anywhere near those kind of levels .

Jerry Sintes: Thanks for that. I appreciate the time, guys.

Speaker #6: Thanks for that. I appreciate the time, guys.

Robert Cauley: Yep.

Speaker #7: Yep .

Melissa Alfonso: Thank you. One moment for our next question. Our next question will come from the line of Eric Hagen with BTIG. Your line is open. Please go ahead.

Speaker #2: Thank you. And one moment for our next question. Our next question will come from the line of Eric Hagan with BTIG.

Speaker #2: Your line is open. Please go ahead.

[Analyst]: Hey, thanks. Good morning, guys.

Speaker #8: Hey , thanks . Good morning guys . You guys . have hey good morning . I think you guys have kind of talked a little bit around it , but , you know , are there scenarios where dollar roll specialness would return to the market in a more meaningful way ?

Robert Cauley: Eric, hey, you guys have.

[Analyst]: Hey, good morning. I think you guys have kind of talked a little bit around it, but you know, are there scenarios where dollar roll specialists would return to the market in a more meaningful way? How do you feel like specialists would affect trading volume and kind of market?

Speaker #8: How do you how do you feel like specialness would affect , like trading volume and kind of market dynamics overall ? Overall going forward ?

Operator: dynamics overall, going forward.

Speaker #7: Excuse me .

Melissa Alfonso: Sorry about that. I don't know that. I mean, we saw that really in spades back in the early days of QE when the Federal Reserve was buying everything. I don't think we're going to see QE. In fact, it's been made pretty clear by the Federal Reserve that when they reinvest paydowns with respect to mortgages, they're only going to be buying treasuries and probably bills. I don't know. I don't really see the specialness of the roll market coming back in a big way. We've historically not been big players in that regard, as you probably know. I don't see it as a core. One, I don't think it's likely to happen, and two, it's never been a core element of our strategy.

Speaker #4: Sorry about that . I don't know that . I mean , we saw that in really in spades back in the early days of QE when the fed was buying everything .

Speaker #4: I don't think we're going to see QE. In fact, it's been made pretty clear by the Fed that when they reinvest data with respect to mortgages, they're only going to be buying Treasuries.

Speaker #4: And probably bills. So, I don't know; I don't really see the specialness of the market coming back in a big way. You know, we've historically not been big players in that regard.

Speaker #4: As you probably know . So I don't see it as a core one . I don't think it's like it happened in two .

Speaker #4: I don't it's never been a core element of our strategy .

Operator: No.

Speaker #5: No , it's I think as long as , you know , especially in the upper coupons , that's really being driven by fear of , of of prepayments .

Melissa Alfonso: I think as long as they're, you know, especially in the upper coupons, that's really being driven by fear of prepayments and their speeds that are being delivered into these, the worst to deliver rules that are being delivered in the TBAs are pretty bad here. I would expect them to continue to be so for the next couple of months. I think it's going to stay depressed, at least in that space, until we pop out of this. You'll either pop out of this rate environment that we're in now, trim back towards the top or middle of the recent rate range, or until rates move meaningfully lower. I think we're kind of at a spot here where it's not going to see too much in the roll space.

Speaker #5: And their speeds that are being delivered into these worst to deliver pools that are being delivered in the Cbas are pretty bad here .

Speaker #5: So I would expect them to continue to be so for the next couple of months . So I think it's going to stay depressed , at least in that space , until we pop out of this .

Speaker #5: We either pop out of this rate environment that we're in now , so trim back towards the top or middle of the recent rate range or , you know , until rates move meaningful , meaningfully lower .

Speaker #5: But I think we're kind of at a spot here where you're not going to see too much in the real space.

Operator: Okay. Yeah, that's interesting. Can you talk through some of the, you know, what the supply and availability for longer dated repo looks like right now? I mean, do you see that as like an effective hedge for the Federal Reserve not cutting as much as what's currently anticipated?

Speaker #8: Okay . Yeah . That's interesting . Can you talk through some of the you know , what the supply and availability for longer dated repo looks like right now ?

Speaker #8: I mean, do you see that as an effective hedge for the Fed not cutting as much as what's currently anticipated?

Melissa Alfonso: We'd like to be doing so. We've looked into it a lot. Unfortunately, the spreads are just too wide. We've done some, and we will continue to do so. As Hunter mentioned, you know, we were historically in the mid-teens. We're approaching the higher teens, but you're getting above that when you start going out in terms. We have done some just to try to lock in as much as we can, and we do it opportunistically. For instance, you know, if we were to see, let's say, the government reopens and you get some heinous, you know, non-farm payroll number in the market, you know, prices in seven or eight cuts, that's when we try to do those things. I would opportunistically.

Speaker #4: Would we like to be doing . So we've looked into it a lot . Unfortunately , the spreads are just too wide . We've done some and we will continue to do so , but as Hunter mentioned , you know , we were historically in the mid-teens .

Speaker #4: We're posting the higher teens , but you're getting above that when you start going out in term . So we have done some just to try to lock in as much as we can , and we do it opportunistically .

Speaker #4: So , for instance , if we were to see , let's say the government reopens and you get some heinous , you know , non-farm payroll number in the market , you know , prices in 7 or 8 cuts , that's when we try to do those things .

Speaker #4: So I would opportunistically .

Operator: Yeah. It's been, it's been, Eric, it's been more effective to do in futures space for us. We do so from time to time. I think I alluded to the fact that we have a pretty good chunk of the portfolio that is unhedged right now. We can certainly have room to move in and do some shorter dated, short futures, you know, in the first year or two of the first couple of years of the curve or, you know, some kind of a swap or something like that with a relatively low duration. We joke around that the repo lenders are always, you know, very quick to price in hikes and very reluctant to price in cuts.

Speaker #5: Yeah , it's been it's been it's been more effective to do in future space for us . And we've we've we do so from time to time .

Speaker #5: I think I alluded to the fact that we have a pretty good chunk of the portfolio that is unhedged right now. So, we can certainly have room to move in and do some shorter-dated short futures.

Speaker #5: You know , in the first year or two of the first couple of years of the curve or , or some kind of a swap or something like that with a relatively low duration .

Speaker #5: But we joke around that the repo lenders are always , you know , very quick to price in hikes and very reluctant to price in cuts .

Operator: That's been kind of the experience that's kept us from, and you just think about it, you know, the dynamics of what usually happens when the Federal Reserve gets involved and, you know, has to cut five or six times. It usually coincides with a credit market rolling over or a weakening economy. Those are not particularly comfortable environments for repo lenders.

Speaker #5: So that's been kind of the experience that's kept us from. And you just think about it. You know, the dynamics of what usually happens when the Fed gets involved and has to cut five or six times.

Speaker #5: It's usually coincident with a credit market rolling over or a weakening economy. And you know, there are not particularly comfortable environments for repo lenders.

Melissa Alfonso: Gotcha, guys. Thank you so much.

Speaker #8: Got you guys . Thank you so much , sir .

[Company Representative]: Thank you, sir.

Robert Cauley: Thank you. One moment for our next question. Our next question will come from the line of Mikhail Goberman with Citizens JMP Securities. Your line is open. Please go ahead.

Speaker #2: Thank you . And one moment for our next question . Our next question will come from the line of Mikhail Guberman with citizens JMP .

Speaker #2: Your line is open. Please go ahead.

Operator: Hey, good morning, guys. Hope everybody's doing well.

Speaker #9: Hey. Good morning, guys. Hope everybody's doing well.

Melissa Alfonso: Hey, Mikhail.

Speaker #4: Hey , Mikhail .

Speaker #7: Hey .

[Company Representative]: Hey.

Speaker #9: Hey , you guys talk about call protection . About what percentage would you say of your portfolio is covered with call protection and if rates were to go down , say , 50 basis points in a sharp manner .

Operator: Hey, you guys talk about call protection. About what % would you say of your portfolio is covered with call protection if rates were to go down, say, 50 basis points in a sharp manner?

Melissa Alfonso: Almost 100% of the portfolio has some form of call protection. We have little pockets of low, what we call a kind of lower pay-up stories, so like LTV, that sort of thing. We're still constructive on those in spite of the fact that they're relatively low pay-up, low in terms of pay-up. We have a housing market that's under pressure, and borrowers going out, it's difficult for borrowers with high LTVs to turn around a refi at every opportunity. They will ultimately be able to do so, but it's not very cost-effective for them. It's not the lowest-hanging fruit, I guess, the more generic stuff is. Almost all of it is.

Speaker #5: Almost 100% of the portfolio is has some form of protection . We have little pockets of low what we call lower pay up stories like LTV , that sort of thing .

Speaker #5: We're still constructive on those in spite of the fact that they're relatively low pay , in terms of payout . But you know , we have a housing market that's under pressure and , you know , borrowers going out , it's difficult for borrowers with high LTV to turn around and refi at every opportunity .

Speaker #5: They will ultimately be able to do so . But it's not very cost effective for them . And so a little , you know , it's not the lowest hanging fruit , I guess the more generic stuff is so yeah , almost all of it is .

Melissa Alfonso: We have some stuff that we keep around just in case we have a dramatic spread wiping, some really low pay-up pools that we use if we ever have to get in a situation where we need to quickly reduce leverage by just delivering something in the TBA. The rest of the portfolio has got some form. Most of it's been working out really well for us. As far as the rally, as I mentioned, our weighted average price at the end of the quarter was a little over 101. I think the average coupon is still high five, so it's premium. It's in the money, but it's not so extreme. Another 50 basis points rally gets you, obviously, like a north of the six, which is like a 102 or 3 price. They're going to be faster.

Speaker #5: We have a some stuff that we keep around just in case we have a dramatic spread wiping some really low pay ups , pools that that we use .

Speaker #5: You know , if we ever have a situation where we need to quickly reduce leverage by just delivering something into TBA , but the rest of the portfolio has got some form , and most of it's been working out really well for us .

Speaker #4: And as far as the rally, as I mentioned, our weighted average price at the end of the quarter was a little over 101.

Speaker #4: I think the average coupon is is still high five . So we're it's premium , it's in the money , but it's not it's not so extreme .

Speaker #4: So another 50 basis point rally gets you you know obviously like a north of six which is like a 102 or 3 price .

Speaker #4: So they're going to be faster . But with the call protection we have , I don't think the premium amortization is going to be so detrimental .

Melissa Alfonso: With the call protection we have, I don't think the premium amortization is going to be so detrimental. In fact, I think our premium amortization for this quarter was very, very modest. It would uptick, obviously, from there. It's nothing like, for instance, what we saw in the immediate aftermath of COVID when those numbers were very, very large.

Speaker #4: In fact , I think our premium amortization for this quarter was very , very modest . So it would uptick from there . But it's nothing like , for instance , what we saw in the immediate aftermath of Covid when those numbers were very , very large .

Operator: Yeah.

Speaker #4: Yeah .

Melissa Alfonso: As we bounced around kind of this rate range, where we have, you know, bought the more expensive, I guess, or the higher quality stories, has been kind of in that first discount space. The rationale there is just they're relatively cheap at that point in time. When rates were a little bit higher, fives were, you know, 98, 99 handle. We bought a lot of New York fives in the very beginning part of the quarter where rates were a little bit higher. Those will do very well if we continue to rally.

Speaker #5: As we bounced around kind of this rate range where we have , you know , bought the more expensive , I guess , or the higher quality stories has been kind of in that first discount space .

Speaker #5: And the rationale there is just there relatively cheap at that point in time . So like when rates were a little bit higher , fives were , you know , 98 , 99 handle .

Speaker #5: We bought a lot of New York Fives in the very beginning part of the quarter, where rates were a little bit higher.

Speaker #5: And so those will do very well as if we continue to rally.

Operator: That's helpful. Thank you very much. If I can ask one about the, flesh out your comments a bit about the hedge portfolio. If swap spreads were to widen back out, how much benefit do you guys see to the portfolio?

Speaker #9: That's helpful. Thank you very much. And if I can ask one about the hedge portfolio, could you flesh out your comments a bit?

Speaker #9: If swap spreads were to widen back out, how much benefit do you see to the portfolio?

Melissa Alfonso: You said wide out. They've been widening, right? I know it's unusual.

Speaker #4: You said, "Why not?" Like they've been widening, right? I know it's unusual.

Operator: Yes, they continue to widen.

Speaker #9: If they continue . If they continue to widen . Yeah . .

Melissa Alfonso: Yes. Continue to benefit from that. Yeah. I mean, it's, I don't know if we have a dollar amount on it, but it was, you know, if you look at it, it's around $2 million DV01. You can think of it in those terms. Yeah. For instance, the long end is at negative 50. Let's say you went to 40, obviously, you know, something like that. I don't know how much further you can go, though, because you could argue that the market's really priced in the end of quantitative tightening and the Federal Reserve stepping in to reinvest paydowns in the treasuries. I think in order for that to happen, you'd almost have to take quantitative easing, meaningful quantitative easing, not just reinvesting paydowns. You know, I wouldn't 100%. So $2 million DV01, if you get another 10 bps, what is that in dollars?

Speaker #4: Yes . Continue to benefit from that . Yeah I mean it's I don't know if we have a dollar amount on it , but it was you know , if you look at .

Speaker #5: Around $2 million DV01. So you can think of it in those terms.

Speaker #4: Yeah .

Speaker #5: So .

Speaker #4: Like for instance , like the long end is like a -50 . So let's say you went to 40 , obviously something like that or I don't know how much further you can go though , because you could argue that the markets are priced in the end of Q2 and the fed stepping in to reinvest paydowns into treasuries .

Speaker #4: I think in order for that to happen , you'd almost have to see QE meaningful QE , not just not just reinvesting Paydowns , but I what Hunter said .

Speaker #4: So, a $2 million bonus if you get like another ten bips. You know, what is that in... it's, you know, something like $0.15 or something like that, or $0.12.

Melissa Alfonso: Something like $0.15 or something like that or $0.12. Yeah, a book.

Speaker #4: Yeah . A bulk .

Operator: Fair enough. If I could just squeeze in, any update on current book value, month to date?

Speaker #9: Fair enough. And if I could just squeeze in any update on current book value month to date.

Melissa Alfonso: It is up a hair, basically. We don't audit that number every day because we get a dollar amount every day. It's up very, very modestly for quarter end.

Speaker #4: It is up a hair, basically. You know, we don't audit that number every day. We just get a dollar amount every day.

Speaker #4: It's up very , very modestly for quarter end .

Operator: Gotcha. Thanks so much, guys, as always. Take care.

Speaker #9: Gotcha . Thanks so much guys . As always take care .

Melissa Alfonso: Yep.

Speaker #7: Yep, yep. Thank you.

[Company Representative]: Yep.

Melissa Alfonso: Thank you.

Robert Cauley: Thank you. I would now like to hand the conference back over to Robert Cauley for any further remarks.

Speaker #2: Thank you. I would now like to hand the conference back over to Robert Cauley for any further remarks.

Melissa Alfonso: Thank you, operator. Thank you, everybody, for taking the time. As always, to the extent anybody has any questions that come up after the call or you don't get a chance to listen to the call live and you wish to reach out to us, we are always available. The number here is 772-231-1400. Otherwise, we look forward to speaking to you at the end of the fourth quarter. Have a great weekend. Thank you. Bye.

Speaker #4: Thank you . Operator . Thank you , everybody , for taking the time , as always , to extent anybody has any questions that come up after the call or you don't get a chance to listen to the call live and you wish to reach out to us .

Speaker #4: We are always available . The number here is seven , seven , 22311400 . Otherwise , we look forward to speaking to you at the end of the fourth quarter and I'll have a great weekend .

Speaker #4: Thank you . Bye .

Robert Cauley: This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.