Good day and thank you for standing by. Welcome to the Orchid Island Capital 4th 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 the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. And please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Melissa Alfonso, please go ahead.

Thank you, Dee Dee. Good morning and welcome to the fourth quarter 2025 earnings conference call for Orchid Island Capital. This call is being recorded today, January 30th, 2026. 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 on 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 for the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. 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 Colley. Please go ahead, sir.

Thank you, Melissa, and good morning. I hope everybody's had a chance to download our deck off of our website. As usual, that's what we'll be using for basis of the call today. And again, as usual, I'll just walk you through the deck. I'm joined here today by Jerry Sintes, our controller, and Hunter Haas, our chief financial officer and chief investment officer. Starting on the third page, I'll just kind of give you an outline. Jerry will quickly go through our results and discuss our liquidity position. I'll then go through the market developments, which basically shaped the market that we operated in and the impact that that had on both our results for the fourth quarter and then also our outlook going forward into 2026. Then Hunter will spend some time discussing the portfolio, hedge positions, and so forth, developments during the quarter, positioning in the portfolio as of today. And then we'll have a few concluding remarks. We have some information in the appendices that we want to share with you. And then we will take your questions. So with that, I'll turn it over to Gary.

Thank you, Bob. If we go kind of page five, I'll begin with the financial highlights for the fourth quarter. During the fourth quarter, we earned $103.4 million in net income, which I hope value at the end of the quarter was 7Q3. We paid dividends on total return for the quarter, which takes into account the change in book value and the dividend was 7.8%. Turn now to page six. We'll look at some of the portfolio highlights. During Q4, we had average MBS of 9.5 billion compared to 7.7 billion in Q3. At the end of the year, That quiddity during the quarter, that's a little higher than our historic prepayment speeds for the quarter, or 15.7% compared to Page 7 and 8, or our financial statements.

Thanks, Jerry. I will start with the market developments on Page 10. I always do. The top left, this is the Treasury curve here. This curve is actually a very good place to start because it basically encapsulates what went on during the quarter, recognizing that these three lines just represent snapshots, if you will, of the cash curve as of 9.30, 12.31, and 1.23 or one week ago. In fact, rates were more or less steady throughout the quarter, and rates traded in a very tight range, realized interest rate volatility obviously was in for low, and implied vol in the swap ship market was declining throughout the quarter and really has declined for quite some time. What's behind this? Well, typically economic data, for one, as it comes out, tends to drive interest rate movements. Prior to the quarter, the data was basically considered to be suspect because of well-discussed issues at the various entities that collect the data. And then we had the government shutdown on 10-1. So basically, you went from having suspect data to no data at all. And then when the government reopened, you had very much delayed data that was still considered suspect. So, basically, there was not much to drive interest rates other than geopolitical events, indoor political events, which did, but not meaningfully so. If you look to the right, you can see the swap curve is fairly similar, but it did move more, and that's all swap spreads. And I'll discuss in a few moments why that is, but we basically had swap spreads moving up as in less negative, and that's why you see movement in the curve from the red line up to the blue and the green line. If you look at the spread between the three-month treasury and the 10-year bill, really hasn't changed much for over a year, but there's been movements elsewhere in the curve. Moving on to slide 11, this is very germane to what's going on, the spread of the current coupon mortgage to the 10-year treasury. As you can see, this is a very long look-back period. This goes all the way back to 2010, and the thing that sticks out very obviously is how much we've tightened up late, and especially since year-end. The most recent data point there is last Friday. You can see it's at about 80 basis points. If you look back to the period, say, between the taper tantrum and 13, up until the outbreak of the COVID pandemic, mortgages traded in a very tight range, centered at approximately 75 basis points, say, and we're basically there. And obviously, the most recent development, which just becomes evident on the bottom left, when you just look at these prices, this is, again, the same term we always use. There's a selection of 30-year fixed-rate mortgages, 3%, 4%, 5%, and 6%, and these are normalized prices. So this basically shows you the price movement relative to the starting point at the beginning of the quarter. And as you can see, especially with respect to lower coupons, they had a very good quarter. And then if you kind of try to focus in on what happened around January 8th when the administration announced that the GSEs would be buying up to $200 billion of mortgages, performance was affected. In the case of lower coupons, they went materially higher. In the case of higher coupon sixes, they gave up performance. And the reason – remember, these are TVAs, not polls. And the reason that the higher coupons suffered is simply because the anticipation is that the administration's goal is to lower mortgage rates, increase affordability of housing, which would drive prepayments faster. So, current market pricing as reflected in the roll market for any of the higher coupons, five, five and a half, and six and above, are for very, very fast speeds. And lower coupons did very, very well. Looking to the right, you can see in the roll market, especially the four-roll and the three-and-a-half, they're really much on fire, very strong. And this reflects the relative value trading because these coupons are below par, not going to be such as the prepayments. And if the markets rally, these will be obviously the targets for purchases. So they've done extremely well. So they're technical. They're strong. And that being said, going forward into 2026, to the extent that plays out, and those ones are produced because rates are lower, then the supply will overwhelm the demand, and that probably relative performance will go away, but that very much remains to be seen. Moving on to slide 12, I talked a moment ago about swaption volatility, and you can see that this trend is very, very clear and strong. Past year end, even today, vol continues to decline. The peak that you see there on the top left, that's Liberation Day, early April of 2025. We all knew what happened that day. But vol has done nothing but come off and continues to do so. And if you kind of look at it in a historical context, going on the bottom of the page, we go back to, you know, 10-plus years now, we're pretty much back to the levels that we were at back during the days of the Fed rate suppression regime, when the Fed was using QE to keep rates artificially low. In doing so, obviously, they suppressed volatility. and it was indeed suppressed very low for many years, and we're basically back to those levels. What happens from this point on remains to be seen, but we are in a very low environment, and we know that mortgage is very much susceptible to implied volatility because it affects option values, especially in prepayment models and the like, and with option values very low, then mortgages can do well, and in fact they have. Turning to the next slide, on slide 13, we see a sample of swap spreads. The blue line is a two-year swap, and the purple line is a 10-year. As you can see, going back through the quarter, and really since the second half of the year, these have been moving higher or less negative. Why is that? Well, the Fed announced at the October meeting that they were going to end QT. The market anticipated that. Swap spreads started to move. And then they announced in December they're meeting reserve management program in which they're going to be buying up to 40 billion bills. And so the logic behind that is a recognition on the part of the Fed that as the economy grows, that their balance sheet should grow in proportionate fashion. As a result, they will be growing. So, they're taking out bills, which also helps bring the Fed's treasury holdings in line with the outstanding universe of treasuries, because historically they have non-owned bills, and also has implications for the funding market because bills are an investment option for money market lenders, and to the extent that the Fed is buying them, that allows more funding available for repo, such as ourselves, repo borrowers. Our hedge position, and Hunter will discuss this in greater detail later, but as you can see, we look at our hedge positions from the perspective of DVO-1. That's just our sensitivity of our hedge instruments to movements and rates, and you can see it's very heavily concentrated in swaps, and this is the reason why what we just discussed. We expect that this may continue for some time. Moving on to slide 14, these are the same charts we've had for a while. Now, as you can see, something has changed, but not much. On the top left, the red line is in the mortgage rate, but it's still at 6.38%. And the V-Fi index, while it's higher, it's not high, it's still quite low. And I think if you look on the right-hand chart, you get an idea of why, while mortgages have tightened substantially, and we mentioned that the current coupon mortgage spread to the 10-year Treasury was 80 or 90 basis points. The tenure is about 425, and these spreads and available mortgage rates to borrowers are still north of six. The spread for the borrower, not for mortgage-backed security, but for the borrower is still relatively wide. It is not tight as much as mortgage-backed securities have. As a result, mortgage rates available to borrowers are still close to 200 off the 10-year, and, therefore, refinancing activity, while it's picked up some, is still not particularly high. Chart 15, just basically the same picture I like to show. The red line just shows you the supply of money, M2, and the blue line is just the economy, GDP, and nominal terms. And as the chart implies, the economy is still awash in liquidity. The takeaway from this, I believe, is that it's hard to say that financial conditions are overly tight. And if you look at the economy, the GDP data, retail sales, you know, they've not really weakened precipitously, and this might help explain why that might be. With that, that's the end of my discussion of the macro backdrop. I will turn it over to Hunter to discuss the portfolio. Thanks, Bob.

Now, turning to slide 17, just a few highlights for the quarter. During the quarter, we purchased $3.2 billion of agency-specified pools. The breakdown of the purchases is $892 million in Fannie 5s, $1.5 billion in Fannie 5.5s, $600 million in Fannie 6s, and $283 million in Fannie 6.5s. All these pools had some form of call protection, primarily lower loan balances, loans that were originated in refined-challenged states like New York or Florida, and loans backed by borrowers with low credit scores, high LTVs or high DTIs or the like, some sort of credit impairment that would keep them from being able to refinance as readily as borrowers that didn't have those constraints. On the model yield, our acquisitions were in basically the low 5% range, And we did sell some assets that were yielding mid-fours at the time we sold them. The model yield on – I'm sorry – the repositioning enhanced our carry profile while mitigating our exposure to higher rates and spread widening as the higher coupon mortgages have much less spread duration sensitivity than the lower coupons that we sold. So, slide 18, this is a new chart we just put in to kind of recapture what happened throughout the course of the year. Over the course of 2025, we experienced substantial growth, doubling both our equity base and MBS portfolio. It's important to note that this growth occurred at a time when MBS spreads were at historic wides, allowing us to build a portfolio with strong long-term return potential. The line on the slide shows a time series of the Morgan Stanley Index that tracks zero volatility spread over the Treasury curve for a hypothetical 30-year MBS priced at par. And the green shaded area highlights the timing of our asset purchases during 2025 and into early 2026. Over 75% of the $7.4 billion in acquisitions that we made during the last year and a month or so occurred at a time when the index, when this index was well over 100 basis points. On average, the spread level of all of our purchases was 108 basis points. and that's the weighted average of the Morton Family Index at the time we made the acquisitions, I should say. Turning to slide 19, as you can see, we've talked about this in the past, our portfolio evolution. As Morty spreads tightened throughout the year, we increased our allocation to production and premium coupons, primarily fives through six-and-a-halves. This strategic shift reflects the fact that lower coupon MBS, which carried greater spread sensitivity, i.e. duration, significantly outperformed higher coupon assets during last year. Initially, we executed this sort of strategic portfolio shift through acquisitions, deploying new capital into higher coupons. And then in mid-December, we took a more active portfolio management approach by actually selling lower-yielding 3s, 3.5s, and 4s, reallocating that into higher carry and lower duration and spread duration pools in the 5% to 6.5% range, as I previously discussed. Turning to slide 20, just to make a few quick notes about our funding costs. Our funding cost saw meaningful improvement over the quarter, driven primarily by Federal Reserve policy actions. We benefited from two rate cuts and the Fed's announcement that it would begin purchasing $40 billion in treasuries per month, plus an additional roughly $15 billion tied to MBS paydowns through its Reserve Management Purchase Program. Oregon's average repo rate declined from 4.33% at the beginning of the quarter to 3.98% by quarter end. After the December 10th FOMC meeting, SOFR initially settled into the upper 360s before spiking to 387 into year end. During that time, repo spreads to SOFR also widened, kind of pushing from the mid-teens into the low to mid-20 basis point range. So we've had a little bit of funding pressure going into year-end. Since year-end, the funding environment has improved markedly. SOFR has settled in the 363 to 365 range, and ORCID's repo spreads have trended to the 14 basis point area, call it. So we're kind of on track to turn over the repo book in sort of the 3.8% range going into the next few months, as we don't really expect Fed cuts before the next governor's swarm in. Turning to slide 21, I just want to do an overview of the hedges. Our hedge notional remained relatively stable over the quarter. At the end of the quarter, we were 69% of outstanding repo, just slightly lower than the 70% it was at the end of the third quarter. The unhedged notional portion of the portfolio stands to benefit from a material decline in short-term rates and tighter repo funding spreads as monetary policy continues to ease. As rolls weaken and mortgage spreads tighten, we also adjust our hedges positions by increasing our TBA shorts, primarily in fives through six-and-a-halves. As mortgages tighten, we put on a little bit of basis hedge. It's not material, but, you know, just sort of legging in as we saw mortgages tighten for several months in a row. We added pay fixed swaps on the very front end of the curve, further improving our downside rate protection. Slide 22, in a little more detail, this slide helps visualize the hedge adjustments I just discussed. At the end of the third quarter, we had virtually no outright TBA hedges. The short positions you see here reflected a 15-30s coupon swap we had in place, which we maintained for several months. Now, as shown here, we're outright short five-and-a-halfs and six-and-a-halves, and we put on a small short at fives in early January. On the Treasury hedge side, we continue to reduce our exposure there, and it's reflected in the top-left table, and then as we acquired new specified pools, we hedged them almost entirely with interest rate swaps, and we were focused more on the very front end of the curve. As rates have come down, the duration of the portfolio has shortened, and we put these hedges on at a time when there were still several rate cuts baked into 2026, which has unwinded a little bit since. Net of unwinds that we did during the quarter, we added $950 million two-year pay-fix swaps, $800 million three years, $90 million five years, and $75 million in seven years. The strategy is aimed at locking in, as I said, the market-predicted rate cuts. We'll fine-tune the hedge book to account for the shorter net duration of the portfolio. On slide 23, just going to kind of quickly go over some of the risk metrics in the portfolio. We like to follow these measures. You'll notice the portfolio duration remains low at 2.08. That's a direct result of our higher coupon SKU. which carries less duration exposure than the lower coupon alternatives. The shorter duration profile is a key part of our risk management strategy. It'll perform better in a sell-off or a spread-widening event, which we think could occur. It offers us more defensive positioning than the threes, three-and-a-halfs, and fours, which we sold in December. On the other hand, this profile will benefit less from further tightening, which we actually have seen in January, which is consistent with our modestly lagging performance versus what some of the other – some of the peer group has reported since Trump's announcement in January of one of the GSEs to purchase $200 billion more MBS in their retained portfolios. Also, I just want to note that OAS is shown here. So, for OAS, for fives to six-and-a-halves remains quite attractive in the 50 to 60 basis point range, reflecting our strong call protection in our portfolio. For comparison, when we published the Q2 earnings call deck, the same OAS levels were at least 20 basis points wider. This tightening reflects improved technicals and more constructive tone in agency MBS markets, but also speaks to how well-timed our 2025 purchases were. Slide 24, I'll discuss the interest rate risk profile. You can see we continue to maintain a very flat interest rate profile. You know this portfolio has some negative convexity. This is reflected in the fact that both the plus 50 and minus 50 interest rate shocks show small market losses. It's a natural result of hedging a convex agency MBS asset with more linear instruments like swaps and futures. On December 31st, our DVO-1 stood at $122,000 long. As of now, more recently, it's increased slightly to $178,000. The duration gap also moved modestly throughout the fourth quarter. It was negative 0.07 years at 930, positive 0.12 years at 1231, and currently sits at approximately 0.17 years. Turning to slide 025, prepayment speeds were a major focus during the fourth quarter, especially given a relative underperformance of up-and-coupon TPAs. However, as we've emphasized in the past, ORCIDs is exclusively invested in specified pools with call protection, and this positioning insulated us from the more dramatic impacts seen in the TPA markets. That said, she did turn a little bit higher in the quarter, particularly for sixes and higher coupons, which reduced carry slightly and trimmed yields in those positions. Looking forward, we expect pre-pay speeds to moderate modestly, which would improve carry. We continue to closely monitor in light of the potential threat actions and influence of GSE-related policy headlines that could put a little bit of upward pressure on speeds. But to wrap it up, 2025 was a great year for us. We took advantage of the dislocated market while staying very disciplined with respect to risk and liquidity. We raised capital when spreads were wide, put it to work in production, coupons and protected pools that should deliver great carry with lower interest rate sensitivity. We continue to manage our leverage tightly with the end of the year with a very flat duration profile and our hedging with the most risk, which has continued to be sort sort of into a re-ignition of inflation type of bear-steakening rate shock scenario. Companies like ours get pinched the hardest. So with that, I'll turn it back over to Bob for his concluding remarks.

All right, thanks, Hunter. Thank you very much. Just a couple of things I want to go over. Just kind of spend a few moments just talking about our outlook. Hunter did a very good job of disclosing, discussing how we're positioned in our hedge outlook and so forth. But it seems, even though mortgages have tightened quite a bit, based on what you see in the market and the sentiment in the market, it seems that it could continue, especially if you look at alternative assets available to multi-sector fixed income investors. Investment-based corporate spreads are at or near the tightest levels we've seen since the late 90s, high-yield spreads are tight as well. And there's at least a prospect of the GSEs, you know, becoming more active. I think it's debatable how much $200 billion per year represents in terms of an increase because what we see, their current run rate is not far from that. But in any event, they said they'd become – stay there and become more active. You could see mortgages tighten further from here. And then with respect to just the rate outlook, generally speaking, and, you know, what would be on the horizon that would make you think we're going to see a meaningful change. You know, there isn't anything really there now, although, you know, those are famous last words. So to the extent we kind of stick around here and mortgages continue to grind tighter, the portfolio should do well. You know, everybody in our space has benefited from the benign rate environment in the fourth quarter and really 225 generally. we can concede a continuation of that. And until we get the next black swan event or shock, it should remain a decent environment. Certainly compared to a year ago, mortgages aren't as attractive. But that being said, I don't think it's realistic to think we could see some further tightening. One thing I do want to point out, though, which is, I think, very important, I want to turn your attention to slide seven, and we discussed this. Jerry went over this briefly, but what I want to point out, if you look on slide seven in our balance sheet, you can see that the company basically doubled over the course of the year size-wise. So whether it's shareholders' equity or our total assets, they basically increased by a little over 100%. If you look at the income statement for the year on slide eight, you see that our expenses were up much less than 100%. Now, you could argue that that's somewhat misleading because the growth occurred over the year, and what's more relevant is kind of your run rate at the end of the year, which would be consistent with the current size. That's a valid point. So, if you look at the income statement on the prior page, page seven, for the fourth quarter, you compare the fourth quarter of 25 to the fourth quarter of 24, that should capture the lion's share of that growth, and indeed, our expenses did go up, but certainly far, far less than double, and so now I want to turn your attention to a slide in the appendix, which is, if I can get there, slide 33. In slide 33, this is what we – kind of our expense ratio. So, basically, this is all of our GNA expenses, inclusive of our management fee, in relation to our shareholders' equity. And as you can see, you know, back pre-COVID, we were running into high twos, close to 3%. Then we had the COVID breakout, and then, of course, this prolonged Fed tightening cycle, which forced some deleveraging, and our expense ratio got up over five. But now we're running – our current run rate as of the end of 2025 is 1.7 percent. I'm not going to name names, but we all know that there are two other agency REITs out there that are substantially larger than us, and their expense ratios are not meaningfully below that. So when you get our 10K next month, you will see, for instance, that our management fee did go up, in fact, over the course of the year. but the rest of our G&A expenses only increased very marginally. So we have been controlling expenses and allowing the company to grow, obviously, and this is the byproduct. This is the benefit of that is bringing the expense ratio down so that it just makes the company more profitable on a go-forward basis, all else equal. And then the final thing I want to bring your attention is, given that it's year-end, on slide 42, this information has been lifted right off of our website. And on the bottom of the page, or on the top of the page, you see the dividends for 2024 and 2025. And as you can see, for every month, the dividend was $0.12. The next column, tax, total ordinary dividends, that's basically taxable income-derived dividends. And then the non-dividend distribution in the second-to-last column, that is just the return of capital. So, that basically tells you that in the case of 2024, that 95.2% of our dividends were derived from taxable income, and in the case of 2025, 95.0% were derived from taxable income. So, the dividend was $0.12 per month for the year, and basically we were distributing all of our taxable income. Had the dividend been, say, for instance, 11 cents instead of 12, we would have slightly underdistributed our taxable income and either had to make a special dividend at the end of the year or opted to potentially pay tax on the undistributed earnings. So I just want to bring this to your attention, show you that the dividend policy does reflect current taxable income, both for the 2025 and 2024, and that our dividend in relation to the taxable income is very slightly over-distributed, less than 5% last year and 5% this year. So with that, I will turn the call over to questions, Operator.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. And our first question comes from Mikael Goberman of Citizens. Your line is open.

Hey, good morning, gentlemen. Hope everybody is doing well. How are you, Mikael? Doing well, thank you. A little cold here, but it's all right. A couple of questions. I guess we could start and forgive me if I missed this. I dialed in maybe three or four minutes after 10. Any update on current book value?

I will not give that. We have accrued and reflected a dividend in our current book. So our book is up just ever so slightly, reflective of the dividend. After the dividend accrual, we'd be up, I think, 1.6%. Okay. So we're basically up just slightly. inclusive of the cruel of the dividend. Inclusive of the dividend.

I was wondering if I could get your thoughts on prepays. Going forward, obviously, the CPR went up quarter over quarter, given the portfolio construction, but also prepays with respect to your prepay protected portfolio and what kind of premiums you guys are paying on those prepay protected pools?

I'll say a few words, and then I'll turn it over to Hunter. I would say that the securities in the portfolio, we've tolerated par to slight premiums. You can sell on the charts, you know, five and a half, six, and lesser extent six and a half, but it's mostly five and a half and sixes, and those are modest prepays. We're not paying up for the highest forms of protection. So the premiums have been trying to, you know, mindful to keep the premiums kind of from being too high. I'll turn it over to Hunter, and then I want to say a few words about the prepay outlook beyond the next few months.

Yeah, so over the last couple of years, we've really tried to focus on, I'd say the bulk of our acquisitions have been in just sort of like the first premium coupon or the first discount coupon. and we were, you know, at times able to, you know, even add sevens, you know, using that strategy. So, from a historic cost perspective, we've always been very tight, not getting too far out in the premium land. And we focused really more on kind of the mid-tier call protection. We think that the old low load balance, you know, 85, 110Ks, you know, those are really expensive stories. New York's have gotten pretty expensive. We've been really focused a lot more on sort of leaning into this so-called K-shaped recovery by focusing on more credit-sensitive borrowers. You think that they have a hard time refinancing, buying things like high LTV, first-time homebuyer type of pools. You know, we've focused on GOs, like the state of Florida is great. There's a tax that's punitive for refinancing, but also home price depreciation is really sort of helping out with the portfolio there. So, we've seen very good performance, especially after the Trump announcement about the GSEs. Sort of the knee-jerk reaction was that the higher coupon MBS TBAs didn't perform very well at all. But, you know, once things kind of stabilized, we've really seen good appreciation in all of those specified pool stories underlying those coupons. And as I alluded to in my prepared remarks, we've taken advantage of the fact that roles have weakened in order to shed a little bit of basis exposure because those rolls are so cheap now, it actually makes a little bit of sense to be short the TBA and long the specified pool. So, that's kind of how we're thinking about those. Yep.

Just to add one number to that, if you go on slide 34, and you can do this, I'll just tell you the numbers not to do it right now, but the weighted average current price at year end was basically one or two and a half. So, that would be all in price. By comparison, the price at the end of September was a little over 101. We call it 101 and two ticks. So we shifted the portfolio up in the weighted average coupon at the end of. The third quarter was $5.50. It's now $5.64, so slightly higher. But, of course, the market has moved. So the price is at basically $102.18. Yeah, it's a premium, but we've tried to avoid real high premium.

It's just not that kind of market. I mean, going back to post-COVID, you know, we were buying New York 3s with, like, dollar prices of $1.10 and change, right? So, you know, we just don't have the kind of premium in the marketplace now that owing to kind of the relatively high nature. It will compress earnings to the extent that we see in acceleration and speeds. And – but I think the combination of the call protection we have in the portfolio and the fact that we just don't have huge premiums on is not going to remove the needle too much.

I would just add that if you look at the roll market, you know, five-and-a-half, sixes, and six-and-a-halfs, the speeds implied in those rolls for the next few months are extremely high, you know, 55, 60 CPR. So that's fine for the next few months. But if you kind of step back and look at the balance of the year, I think a number of market participants, ourselves included, don't really think we're going to see a lot more Fed cuts. I think the economy is quite strong. The inflation is good. So let's think about that. So the current Fed funds rate is 364, and the two-year yields like 354. So if you don't think the Fed is going to cut rates much over the next two years, if you really think the two-year should be yielding lower than Fed funds. Second question you might ask is, given that, do you think that, for instance, twos, tens is going to invert? I don't think so. So, the current 10-year is at four and a quarter. If the two-year moves higher, unless that curve flattens, the 10-year should also move higher. So, now the 10-year is going from four and a quarter to whatever, 450. The current mortgage rate available to borrowers is six or low sixes, right? And so if rates are going to go higher over the next year, that rate's not going down unless mortgage rates to borrowers tighten substantially. And I don't know how likely that is. So if you have the available borrowing rate at six, six and a half, pushing up to seven percent, you know, a six percent mortgage-backed security implies basically a seven percent gross whack. You know, that's not that in the money, especially if mortgage rates push to 650 and higher. So are they going to sustain 50 and 60 CPR? I don't know. But I think there's kind of an inconsistency in market pricing between the mortgage dollar roll market and the, say, for instance, market pricing of Fed cuts. They don't seem to jive. Anyway, that's my two cents.

Thank you. That's very helpful. If I can squeeze in one more, I appreciate the good work done on getting expenses down. How much more, you know, available capacity do you guys have for driving that down further going forward, do you think?

Well, it's the – I should probably get you the numbers. Maybe we'll try to work on that for the next quarter. But almost all of the increase in our expenses was management fee. Unfortunately, we don't have detailed line item expenses here. But, you know, from memory, reading through, you know, drafts, non-management fee expenses were only up in the few hundred thousand dollars. So, it's gotten to the point that pretty much it's the management fee, and our marginal management fee is 100 basis points, right? And, you know, our management fee is $250 million. The first layer is up to $250 million, and that's 150 basis points. Then from $250 to $500 is $100 and a quarter, and everything over $500 million is $100. So now every dollar of capital we raise, the marginal management fee is 100 basis points, and the non-management fee expenses are going up very modestly in low percentage points. So, you know, just as we double from here, I don't have to run the numbers, but it's – that trend would continue. I don't know how much lower it goes, but it should be asymptotic towards 1%, right? If the capital were up $500 billion, our management, you know, we have to pay ourselves something. But, I mean, management fee would be basically 100 basis points plus whatever your, you know, audit fee and your legal fee and whatever. So, that's kind of where it could go.

That makes sense. Thank you, guys. Appreciate it.

Thank you. I'm showing no further questions at this time. I'd like to turn it back to Robert Colley for closing remarks.

Thank you, operator. I hope we didn't scare everybody off the call with the length of that answer. But to the extent anybody has call or questions that come up, either because you didn't have time to answer them, ask them now or you didn't listen to the call and you want to catch us later, please feel free to do so. The number in the office is 772-231-1400. Otherwise, we look forward to talking to you at the end of the next quarter.

This concludes today's conference call. Thank you for participating, and you may now disconnect.