Oct 23, 2026 earnings call — Rates sell-off, hedge changes, and buybacks
Q3 net loss of $0.90 per share and book value fell to $6.02 per share.
Revenue $0.1B (est $0.1B) · EPS $-0.90 (est $0.29)
Key quotes
"I think we stabilized. We saw evidence of that last week."
"We also took the hedge coverage from a pretty high 91% going into the quarter to 99%."
"At the same time, we repurchased 6.62 million shares since the end of the second quarter, taking advantage of the substantial discount to book in the stock while maintaining a competitive expense ratio and avoiding dilutive equity issuance."
Analyst Q&A 3
Stock buybacks versus buying assets
Q (Douglas Harter · BTIG): He asked how the book value update reflects accrued earnings or the accrued dividend, and how the company decides between buying back stock at a discount versus buying additional assets.
A: The book value update was 4.5% through yesterday and it reflects accrual of earnings and the dividend—an economic return number. Management said the stock trading below 80% of book made buybacks attractive; they repurchased 6.6 million shares and did about 1.7 million in the fourth quarter when the stock was very cheap. They plan a mix of reinvesting paydowns, possibly adding assets, and continuing buybacks depending on what looks more attractive.
"It reflects the accrual of the earnings, the dividend." — Robert Cauley (CEO·CHAIR)
Dividend coverage and swap trade
Q (Jason Weaver · JonesTrading): He asked how comfortable management is with the $0.30 dividend level and to explain the 15/30 swap trade and whether part of it was a pure spread hedge.
A: They said they are quite comfortable with the $0.30 pay rate because portfolio earnings and taxable earnings are essentially in line with the dividend, updated through October. The swap was a relative value trade: long 15-year 5.5s versus a smaller amount of 30-year 6s, it tightened about 10 ticks and was unwound; they also covered a TBA short by selling pools, which bolstered cash and lowered leverage. If current market conditions and portfolio mix hold, they are comfortable maintaining the current dividend level.
"We expect at the end of the year that the taxable earnings versus the dividend is going to be very close." — Robert Cauley (CEO·CHAIR)
Leverage level and capital use
Q (Mikhail Goberman · Citizens JMP): He asked about the target leverage ratio going forward and whether they will manage leverage around an 8x–8.5x range while continuing buybacks.
A: Leverage was high at quarter end but has come down; management said it is still north of 8x with the last number seen at 8.26x and another reported level of 8.12x. They are comfortable maintaining that leverage now because hedge-book changes and signs of mortgage recovery support it; they intend to retain portfolio size, reinvest paydowns, possibly add assets, and buy back stock if it trades meaningfully below 80% of book, but they will not sell shares at the current discount.
"I don't have today's number, but the last one I saw was 8.26x." — Robert Cauley (CEO·CHAIR)