Orchid Island Capital, Inc.
For the period ended Jun 30, 2025. Filed Jul 25, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Jul 25, 2025
ORC$4.94-1.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-04-25.
0001437749-25-013109
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-07-25.
0001437749-25-023505
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 134 previous paragraphs and 137 current paragraphs.
91 unchanged; 31 reworded; 15 added; 12 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 55 previous and 55 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
Net (Loss) Income Summary
Current report
During thesix months ended June 30, 2025, we earned net interest incomeof $42.9 million, consisting of $173.4 millionof interest income from RMBS assets, offset by $130.5 millionof interest expense on borrowings. For the comparable period ended June 30, 2024, we incurred $3.2 millionof net interest expense, consisting of $101.9 millionof interest income from RMBS assets offset by $105.1 millionof interest expense on borrowings. The $71.5 million increase in interest income was due to a 35 basis point ("bps")increasein the yield on average RMBS, combined with a $2.4 billion increasein average RMBS. The $25.4 million increasein interest expense was due to a 117 bps decreasein the average cost of funds, combined with a $2.3 billion increase in average outstanding borrowings.
Current report
On an economic basis, our interest expense on borrowings for thesix months ended June 30, 2025 and 2024 was $88.7 millionand $48.1 million, respectively, resulting in $84.7 million and $53.9 millionof economic net interest income, respectively.
Current report
We had average outstanding borrowings of $6.1 billion and $3.9 billion and total interest expense of $130.5 million and $105.1 million for the six months ended June 30, 2025 and 2024, respectively. Our average cost of funds was 4.26% for the six months ended June 30, 2025, compared to 5.43% for the comparable period in 2024. The $25.4 million increase in interest expense was due to the 117 bps decrease in the average cost of funds, combined with a $2.3 billion increase in average outstanding borrowings during the six months ended June 30, 2025, as compared to the comparable period in 2024.
Current report
Our economic interest expense was $88.7 million and $48.1 million for the six months ended June 30, 2025 and 2024, respectively. There was a 40 bps increase in the average economic cost of funds to 2.89% for the six months ended June 30, 2025, from 2.49% for the six months ended June 30, 2024.
Current report
The start of the second quarter of 2025 was extremely turbulent and re-set the trajectory for all domestic markets. The trigger event was the announcement of the list of what were termed “reciprocal” tariffs introduced by President Trump on April 2 nd, “Liberation Day.” While the implementation of the reciprocal tariffs – the most significant in percentage terms - was paused for 90 days a week later on April 9 th, tariff-related developments remained the dominant driver of markets and the economic outlook. The pause in implementation of the reciprocal tariffs was intended to allow time for the administration to negotiate and execute trade agreements with the various trading partners of the United States. The deadline for finalizing such deals is not far off, and to date not many deals have been reached. There remains considerable uncertainty in the market regarding what will happen when the pause period ends and there are countries that have yet to reach a deal with the U.S. In the interim, statements regarding the negotiations and potential additional tariffs made by the President and members of his cabinet have been frequent and generally impacted markets when they occurred. However, a sense of “headline fatigue” has settled over the markets and successive statements seem to have a diminishing impact.
Current report
Over the course of the quarter, the focus of the administration shifted from purely tariff-related matters to passage of the President’s highest legislative priority. What became known as the One Big Beautiful Bill Act (“the Act”) was signed into law by the President on July 4 th. The Act made permanent most of the tax legislation originally enacted in 2017 as part of the Tax Cuts and Jobs Act of 2017, with minor revisions. Importantly, the Act is likely to be stimulative for the economy and not likely to reduce pressure on the fiscal deficit in the near term. The fiscal deficit has been a growing concern for markets as funding needs continue to escalate, putting upward pressure on treasury yields. Growing fiscal deficits are also a global issue, as most advanced economies in the world are similarly situated.
Current report
Economic developments during the second quarter continued to confound market participants, as the anticipated slowdown triggered by the tremendous uncertainty introduced by the administration’s tariffs has yet to appear. To date, any meaningful impact on goods inflation resulting from the tariffs has yet to materialize as well, although the data for June, released in July, did show modest upward pressure on goods prices. It is likely that the continued deficits run by the federal government, as they have since the Covid-19 outbreak, continue to buttress the economy and prevent a likely economic slowdown from occurring. The key metrics the Fed focuses on – namely, the jobs market and inflation data – continue to suggest there is no urgent need for them to ease monetary policy. Job growth, while not robust, remains above the level considered adequate to hold the unemployment rate steady, which has occurred, and inflation data remains above the Fed’s target level with the ultimate impact of the tariffs likely yet to come. Public comments by the Fed chair and most – but not all – members of the FOMC reflect the notion it would be prudent for the Fed to continue to watch the incoming economic data before determining when and by how much to adjust policy.
Current report
Interest rate developments followed a similar pattern to the economic developments described above. The initial reaction to the tariff announcement in early April was for the Treasury curve to steepen, as the front end of the curve moved lower in yield, consistent with anticipated interest rate cuts by the Fed as the economy slowed in response to the coming trade war. Yields on longer maturity Treasuries initially moved lower as well but then quickly reversed and moved higher in anticipation of significantly higher inflation driven by the impact of the tariffs on goods prices. There was also the fear that reserve status of the dollar and Treasuries might be imperiled, and the risk premium associated with owning Treasuries, particularly long-maturity securities, would increase.
Current report
Over the course of April, the yield of the 2-year Treasury declined from 3.885% on March 31, 2025, to 3.605% on April 30, 2025, the lowest yield for the year. The yield of the 10-year Treasury moved from 4.207% on March 31, 2025, to 3.997% on April 4 th, but then moved considerably higher, eventually to 4.601% in late May. The spread between the 2-year and 10-year Treasuries increased from approximately 30 bps at the end of the first quarter of 2025 to approximately 50 bps by the end of April. It generally remained around 50 bps for the balance of the quarter. At the end of April, market pricing for the Fed funds rate reflected over 4 cuts of 25 bps by the end of 2025.
Current report
Over the balance of the second quarter of 2025, Treasury yields remained volatile on a daily basis, responding to frequent public comments regarding tariffs and trade negotiations by the administration, but the spread between the 2-year and 10-year Treasuries remained fairly stable at around 50 bps. The yields on the 2-year and 10-year Treasuries both traded in approximately 20 bps ranges individually but were highly correlated with one another over the same period. On the other hand, market pricing for the Fed Funds rate changed after April as the administration’s focus shifted towards the Act and the economic data failed to live up to market expectations. Jobs and economic growth data remained fairly stable, and the inflation data did not reflect significant pressure from the tariffs. By the end of the second quarter, the market was only expecting a little over 2.5 twenty-five bps reductions of the Fed Funds rate. The number of cuts continues to decline and current market pricing is for less than two cuts of 25 bps by year end.
Current report
The market turmoil associated with the introductions of the reciprocal tariffs was nearly as severe as the initial days of the Covid-19 outbreak. Prices for any assets with risk associated with them were sold and levered investors were forced to sell to meet margin calls. Agency MBS, given their typical high liquidity and minimal risk, were also sold as investors generally sold what they could in an effort to minimize realized losses. This period lasted until the pause in implementation of the reciprocal tariffs was announced on April 9 th, but losses sustained across markets were substantial and the confidence in the status of the dollar and Treasuries was shaken. Spreads on Agency RMBS to comparable duration Treasuries, and especially to comparable duration swaps, increased by over 30 bps in early April and came withing approximately 10 bps of the extremes seen at the end of the Fed’s 525 bps tightening cycle in late 2023. Spreads to swaps have not recovered much of the widening since early April and are only approximately 15 bps lower currently. As the market anticipates continued elevated levels of Treasury issuance going forward, and the government runs fiscal deficits at or near $2 trillion per year, swap rates have continued to decline relative to nominal Treasury yields. As a result, swap spreads have become progressively more negative, and spreads of Agency RMBS to swaps have increased. Swaps are a primary instrument used by the Company to hedge, and while this development has hurt the performance of our hedges and portfolio over the course of the second quarter, it has increased the potential returns associated with investing in new Agency RMBS.
Current report
The second quarter of 2025 was a very turbulent period for financial markets, with two large catalysts driving the volatility. The initial shock, and clearly the larger of the two, was reciprocal tariffs announced by the Trump administration against essentially every trading partner of the United States. This announcement was expected, but the magnitude of the tariffs greatly exceeded market expectations. After the announcement, market conditions resembled those following the outbreak of Covid-19, if only slightly less severe. A week later, the administration announced a pause in implementation of the tariffs for 90 days and markets slowly recovered some semblance of stability. The markets expected a slowdown in economic activity and accelerated inflation as trade wars unfolded. The Fed was expected to be forced to lower rates by 100 bps or more by year end and the Treasury curve steepened. While market conditions remained volatile for the balance of the quarter, the market slowly grew less affected by subsequent developments on the tariff front and most risk assets recovered fully, to a large extent driven by the second catalyst.
Current report
The second catalyst emerged as the administration’s focus shifted to their highest legislative objective, the Act. The beneficial impact of the Act on the economy drove expectations as the market became somewhat immunized to tariff developments, especially as the feared surge in inflation failed to materialize, at least to date. In conjunction with this shift in market perception, the incoming economic data proved resilient and expectations for Fed rate cuts continued to subside and get pushed further into the future. Notably for the Company, while risk assets generally recovered from the severe turmoil early in the second quarter, the Agency RMBS sector did not fully recover, as least versus comparable duration hedges, resulting in negative excess returns for the quarter.
Current report
As the third quarter unfolds, the trend of strong risk asset performance and resilient economic data continues. The inflation data has begun to show some impact from the tariffs, but the economy appears sufficiently resilient to absorb them, certainly benefiting from continued fiscal stimulus (large fiscal deficits), the unfolding benefits of artificial intelligence, progress on trade negotiations, and a very pro-business administration as evidenced by the Act. The Agency RMBS market continues to languish, although returns available in the market remain elevated. The Company has significantly increased its capital base year-to-date to take advantage of these favorable investment opportunities, while maintaining leverage levels below historical levels.
Removed paragraphs (12)
Previous report
Net Income Summary
Previous report
The first quarter of 2025 was essentially a continuation of the fourth quarter of 2024, at least for the first two months or so. Incoming economic data continued to reflect robust economic activity and a healthy labor market – casting additional doubt on the need for any easing of monetary policy on the part of the Fed. This was consistent with the slow reversal in the outlook for Fed monetary policy that began not long after their initial 50 basis point cut in September of 2024. The economic data was consistent with an economy that was clearly not slowing or a threat to enter a contraction soon. Further, inflation data was stubbornly still above the Fed’s 2% target range and increasing slightly, which was consistent with behavior exhibited during the first quarter of recent years. Public comments by Fed officials clearly indicated the Fed was willing to be patient and content to watch the evolution of incoming economic data going forward before making any further adjustments to policy.
Previous report
During the years following the COVID-19 pandemic in 2020, fiscal and monetary policies were very pro-cyclical and led to elevated levels of inflation and fiscal deficits. The combined effects of the pro-growth policies led the equity markets higher. However, another major development that occurred – in this case predominantly in 2024 – was the emergence of a new technology related to artificial intelligence (“AI”). The potential impact of this technology on the economy was immense and led to even greater gains in the market prices generally and in particular of the stock prices of the companies involved, leading to record valuations. In early 2025 a competing technology emerged in China that appeared to deliver the same performance as domestic technologies but at a substantially lower cost. This led to considerable weakness in the U.S. domestic stock market and AI tech companies in particular – the leaders of the previous equity market record performance. In addition, incoming economic data began to soften later during the first quarter of 2025, and readings on consumer sentiment began to decline sharply.
Previous report
In March of 2025, the Trump administration introduced the first of several tariffs. The administration indicated there was more to come in the near future, and market expectations for growth and inflation began to erode quickly. Sentiment was further depressed when some incoming economic data was consistent with stagflation – the combination of slowing economic growth and inflation.
Previous report
In early April, the Trump administration announced substantial additional new tariffs on what was termed “Liberation Day” – the magnitude and extent of which were far in excess of market expectations. The impact of the announcements was severe. Risk assets of all kinds were sold, and price declines were substantial. Even more troubling, safe haven assets such as U.S. Treasury securities declined in price just as severely. De-leveraging occurred as investors sold assets to raise cash, causing valuations to plunge further. Volatility in interest rates and equities surged and market functioning deteriorated. More significantly, fear grew that the new tariffs were so extreme that the trade wars they would likely trigger could materially alter the existing global trade regime and jeopardize the supremacy of the U.S. dollar and U.S. Treasury securities as the reserve currency and benchmark risk free asset, respectively. Fortunately, before market functioning could deteriorate further, the Trump administration announced a 90 day pause before implementing the reciprocal tariffs – the most extreme tariffs announced – to allow time for trade partners to negotiate modifications to the tariffs. As the second quarter continues, there remains substantial uncertainty about how events will unfold surrounding the tariffs and global trade, and their impact on the markets and the Company.
Previous report
The pivot in market outlook for Fed monetary policy that occurred during the fourth quarter of 2024 and led to interest rates rising steadily continued into the first quarter of 2025. The yield on the 10-year T-Note was close to 3.6% in September of 2024 just after the Fed lowered the Fed Funds rate by 50 basis points at the September meeting of the FOMC. However, yields began to rise steadily not long thereafter as economic data was not consistent with an economy on the verge of a recession and inflation was stubbornly above the Fed’s 2% target. By late 2024, the yield on the 10-year T-Note was over 4.6% and close to 4.8% in early January of 2025. Over the course of the balance of the first quarter of 2025, interest rates gradually declined as sentiment indicators declined to levels not seen in several years, triggered by declines in U.S. equity markets – albeit off of record high levels – persistent inflation and expectations economic growth was about to slow. The economic data itself over this period was mixed – labor markets were weakening slowly, manufacturing activity was improving slightly but off of very low levels, and the service sector was slowing, but off of robust levels.
Previous report
Towards the end of the first quarter, the yield on the 10-year T-Note was trading between 4.15% and 4.30%. At this point in the quarter stagflation fears were emerging. The yield on the 2-year T-Note followed a similar path over this period. When expectations for substantial additional Fed easing were high late in the third quarter of 2024 the 2-year T-Note yield was approximately 3.6% before rising steadily over the course of the fourth quarter of 2024 and through February of 2025 to a yield of between 4.2% and 4.4%. This range was essentially level with the Fed Funds level – implying the market did not expect monetary policy changes over the next two years. As sentiment readings declined late in the first quarter the 2-year T-Note yield declined towards 4.0% and so far during the second quarter the yield has ranged between 3.7% and 4.0%.
Previous report
With the severe market turmoil triggered by the Trump administration's tariff announcements, the market now anticipates the Fed will have to lower monetary policy by approximately 75 basis points by the end of 2025, as the market now expects the tariffs to trigger a growth slowdown if not outright recession in 2025. During the week of April 4th, the yield on the 10-year T-Note rose by approximately 50 basis points – one of the largest one-week increases ever.
Previous report
As a proxy for the performance of the Agency RMBS market during the first quarter of 2025, the spread of the 30-year, fixed rate current coupon to the 10-year T-Note traded in a narrow range throughout the first quarter of 2025 of between 120 and 130 basis points. When the Trump administration announced substantial additional tariffs on April 2, 2025, risk assets of all types came under tremendous selling pressure as deleveraging occurred, even with Agency RMBS. The spread of the current coupon then expanded to over 140 basis points, and to almost 180 basis points versus the 5-year T-Note. This spread to the 5-year T-Note was generally less than 150 basis points during the first quarter of 2025 but came within 12 basis points of the peak spread it reached in the fall of 2023 – its highest level since the COVID-19 onset in March of 2020.
Previous report
The outlook for the U.S. economy, interest rates and monetary policy – all critical factors impacting the markets the Company invests its capital in – began to change late in the first quarter and so far in the second quarter of 2025. However, the performance of the Company for the first quarter of 2025 was impacted by market conditions prior to this change. Conversely, the outlook for the Company going forward will be impacted by events that occurred recently.
Previous report
While economic data and events generally are never uniformly stable or consistent, the first quarter of 2025 was relatively uneventful. Interest rates were generally range bound, and volatility was low for most of the quarter. These are ideal conditions for a levered investment strategy in Agency RMBS. Accordingly, the Company and the Agency RMBS market generated attractive returns for the period. The Company’s stock also traded well during the quarter – at least until the last week of the quarter. The Company was able to take advantage of the calm conditions and price performance of its common stock and raise additional capital, generally at a slight premium to book value, and deploy the proceeds in an attractive investment environment.
Previous report
The tariff announcements late in the first quarter and in early April of 2025 brought these favorable market conditions to an abrupt end. In fact, conditions were reminiscent of March 2020 when the COVID-19 pandemic led to an abrupt de-leveraging that materially depressed prices of all asset classes. The Company sold a significant amount of assets in early April as needed to maintain leverage at acceptable levels and was able to do so without suffering material permanent losses to date. It is not clear if these conditions have subsided fully or if they will return. Accordingly, the Company intends to maintain prudent leverage and ample liquidity while the threat of turbulent market conditions persists.
Reworded paragraphs (31)
Previous wording
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes to those statements included in Item 1 of this Form 10-Q. The discussion may contain certain forward-looking statements that involve risks and uncertainties. Forward-looking statements are those that are not historical in nature. As a result of many factors, such as those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.
Current wording
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes to those statements included in Item 1 of this Form 10-Q. Certain written statements in this Quarterly Report on Form 10-Q that are not historical facts constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Statements in this report addressing expectations, assumptions, beliefs, projections, future plans and strategies, future events, developments that we expect or anticipate will occur in the future, and future operating results, capital management, and dividend policy are forward-looking statements. Forward-looking statements are based upon management’s beliefs, assumptions, and expectations as of the date of this report regarding future events and operating performance, considering all information currently available to us, and are applicable only as of the date of this report. Forward-looking statements generally can be identified by the use of words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “intend,” “should,” “could,” or similar expressions. We caution readers not to place undue reliance on our forward-looking statements, which are not historical facts and may be based on projections, assumptions, expectations, and anticipated events that do not materialize. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this Quarterly Report on Form 10-Q may include, but are not limited to, statements about interest rates, inflation, liquidity, pledging of our structured RMBS, funding levels and spreads, prepayment speeds, portfolio composition, positioning and repositioning, hedging levels, leverage ratio, dividends, investment and return opportunities, the supply and demand for Agency RMBS and the performance of the Agency RMBS sector generally, the effect of actual or expected actions of the U.S. government, including the Fed, market expectations, capital raising, future opportunities and prospects of the Company, the stock repurchase program, geopolitical uncertainty and general economic conditions (including the effects of tariffs, trade wars, inflation, the U.S. deficit, and the strength of the U.S. dollar). As a result of many factors, such as those set forth under “Risk Factors” in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.
Previous wording
On February 24, 2025, we entered into an equity distribution agreement (the “February 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $350,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. Through March 31, 2025, we issued a total of 14,470,882 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $123.7 million, and net proceeds of approximately $121.7 million, after commissions and fees.
Current wording
On February 24, 2025, we entered into an equity distribution agreement (the “February 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $350,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. Through June 30, 2025, we issued a total of 34,355,086 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $265.4 million, and net proceeds of approximately $261.2 million, after commissions and fees. Subsequent to June 30, 2025, we issued a total of 162,498 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $1.2 million, and net proceeds of approximately $1.2 million, after commissions and fees.
Previous wording
From the inception of the stock repurchase program through March 31, 2025, the Company repurchased a total of 5,144,602 shares at an aggregate cost of approximately $77.5 million, including commissions and fees, for a weighted average price of $15.07 per share. The Company did not repurchase any shares during thethree months ended March 31, 2025. Subsequent to March 31, 2025, the Company repurchased a total of 1,113,224 shares at an aggregate cost of approximately $7.3 million, including commissions and fees, for a weighted average price of $6.52 per share. The remaining authorization under the stock repurchase program as of April 25, 2025 was 2,719,137 shares.
Current wording
From the inception of the stock repurchase program through June 30, 2025, the Company repurchased a total of 6,257,826 shares at an aggregate cost of approximately $84.8 million, including commissions and fees, for a weighted average price of $13.55 per share. During thesix months ended June 30, 2025, the Company repurchased a total of 1,113,224 shares at an aggregate cost of approximately 7.3 million, including commissions and fees, for a weighted average price of $6.52 per share. During the year ended December 31, 2024, the Company repurchased a total of 396,241 shares at an aggregate cost of approximately $3.3 million, including commissions and fees, for a weighted average price of $8.30 per share. The remaining authorization under the stock repurchase program as of July 24, 2025 was 2,719,137 shares.
Previous wording
Described below are the Company’s results of operations for the three months ended March 31, 2025, as compared to the Company’s results of operations for the three months ended March 31, 2024.
Current wording
Described below are the Company’s results of operations for the six and three months ended June 30, 2025, as compared to the Company’s results of operations for the six and three months ended June 30, 2024.
Previous wording
Net income for thethree months ended March 31, 2025 was $17.1 million, or $0.18 per share. Net income for thethree months ended March 31, 2024 was $19.8 million, or $0.38 per share. The components of net income for thethree months ended March 31, 2025 and 2024, along with the changes in those components are presented in the table below:
Current wording
Net loss for thesix months ended June 30, 2025 was $16.5 million, or $0.16 per share. Net income for thesix months ended June 30, 2024 was $14.8 million, or $0.27 per share. Net loss for thethree months ended June 30, 2025 was $33.6 million, or $0.29 per share. Net loss for thethree months ended June 30, 2024 was $5.0 million, or $0.09 per share. The components of net (loss) income for thesix and three months ended June 30, 2025 and 2024, along with the changes in those components are presented in the table below:
Previous wording
Described below are the Company’s results of operations for each quarter in 2025 to date and 2024.
Current wording
Described below are the Company’s results of operations for the six months ended June 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.
Previous wording
The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the income statement line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for each quarter of 2025 to date and 2024.
Current wording
The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the income statement line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for the six months ended June 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.
Previous wording
During the three months ended March 31, 2025, we earned net interest income of$19.7 million consisting of$81.1 million of interest income from RMBS assets offset by$61.4 million of interest expense on borrowings. For the comparable period ended March 31, 2024, we incurred$2.5 million of net interest expense, consisting of$48.9 million of interest income from RMBS assets offset by$51.4 million of interest expense on borrowings. The$32.2 million increase in interest income was due to a 38 basis point ("bps")increase in the yield on average RMBS, combined with a $2.1 billion increase in average RMBS. The$10.0 million increase in interest expense was due to a 125 bpsdecrease in the average cost of funds, combined with a$2.0 billion increase in average outstanding borrowings.
Current wording
During the three months ended June 30, 2025, we earned net interest income of$23.2 million consisting of$92.3 million of interest income from RMBS assets offset by$69.1 million of interest expense on borrowings. For the comparable period ended June 30, 2024, we incurred$0.7 million of net interest expense, consisting of$53.1 million of interest income from RMBS assets offset by$53.8 million of interest expense on borrowings. The$39.2 million increase in interest income was due to a 33 bpsincrease in the yield on average RMBS, combined with a $2.7 billion increase in average RMBS. The$15.3 million increase in interest expense was due to a 111 bpsdecrease in the average cost of funds, combined with a$2.5 billion increase in average outstanding borrowings.
Previous wording
On an economic basis, our interest expense on borrowings for the three months ended March 31, 2025 and 2024 was $40.5 millionand$23.8 million, respectively, resulting in$40.6 million and$25.1 million of economic net interest income, respectively.
Current wording
On an economic basis, our interest expense on borrowings for the three months ended June 30, 2025 and 2024 was $48.2 millionand$24.3 million, respectively, resulting in$44.1 million and$28.8 million of economic net interest income, respectively.
Previous wording
The tables below provide information on our portfolio average balances, interest income, yield on assets, average borrowings, interest expense, cost of funds, net interest income (expense) and net interest spread for each quarter of 2025 to date and 2024 on both a GAAP and economic basis.
Current wording
The tables below provide information on our portfolio average balances, interest income, yield on assets, average borrowings, interest expense, cost of funds, net interest income (expense) and net interest spread for the six months ended June 30, 2025 and 2024, and for each quarter in 2025 to date and 2024 on both a GAAP and economic basis.
Previous wording
The table below presents the average portfolio size, income and yields of our respective sub-portfolios, consisting of structured RMBS and PT RMBS, for each quarter of 2025 to date and 2024.
Current wording
The table below presents the average portfolio size, income and yields of our respective sub-portfolios, consisting of structured RMBS and PT RMBS, for the six months ended June 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.
Previous wording
We had average outstanding borrowings of $5.7 billion and $3.7 billion and total interest expense of $61.4 million and $51.4 million for the three months ended March 31, 2025 and 2024, respectively. Our average cost of funds was 4.29% for the three months ended March 31, 2025, compared to 5.54% for the comparable period in 2024. The $10.0 million increase in interest expense was due to the 125 bps decrease in the average cost of funds, combined with a $2.0 billion increase in average outstanding borrowings during the three months ended March 31, 2025, as compared to the comparable period in 2024.
Current wording
We had average outstanding borrowings of $6.5 billion and $4.0 billion and total interest expense of $69.1 million and $53.8 million for the three months ended June 30, 2025 and 2024, respectively. Our average cost of funds was 4.23% for the three months ended June 30, 2025, compared to 5.34% for the comparable period in 2024. The $15.3 million increase in interest expense was due to the 111 bps decrease in the average cost of funds, combined with a $2.5 billion increase in average outstanding borrowings during the three months ended June 30, 2025, as compared to the comparable period in 2024.
Previous wording
Our economic interest expense was $40.5 million and $23.8 million for the three months ended March 31, 2025 and 2024, respectively. There was a 27 bps increase in the average economic cost of funds to 2.83% for the three months ended March 31, 2025, from 2.56% for the three months ended March 31, 2024.
Current wording
Our economic interest expense was $48.2 million and $24.3 million for the three months ended June 30, 2025 and 2024, respectively. There was a 54 bps increase in the average economic cost of funds to 2.95% for the three months ended June 30, 2025, from 2.41% for the three months ended June 30, 2024.
Previous wording
Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 4 bps below the one-month average SOFR and 26 bps below the six-month average SOFR for the quarter ended March 31, 2025. Our average economic cost of funds was 150 bps below the average one-month SOFR and 172 bps below the average six-month SOFR for the quarter ended March 31, 2025. The average term to maturity of the outstanding repurchase agreements was 40 days at March 31, 2025 and 26 days at December 31, 2024.
Current wording
Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 9 bps below the one-month average SOFR and 14 bps below the six-month average SOFR for the quarter ended June 30, 2025. Our average economic cost of funds was 137 bps below the average one-month SOFR and 142 bps below the average six-month SOFR for the quarter ended June 30, 2025. The average term to maturity of the outstanding repurchase agreements was 35 days at June 30, 2025 and 26 days at December 31, 2024.
Previous wording
The tables below present the average balance of borrowings outstanding, interest expense and average cost of funds, and average one-month and six-month SOFR rates for each quarter in 2025 to date and 2024, on both a GAAP and economic basis.
Current wording
The tables below present the average balance of borrowings outstanding, interest expense and average cost of funds, and average one-month and six-month SOFR rates for the six months ended June 30, 2025 and 2024, and for each quarter in 2025 to date and 2024, on both a GAAP and economic basis.
Previous wording
The table below presents our gains or losses for the three months ended March 31, 2025 and 2024.
Current wording
The table below presents our gains or losses for the six and three months ended June 30, 2025 and 2024.
Previous wording
We invest in RMBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from sales. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the three months ended March 31, 2025, we received proceeds of $168.6 million from sales of RMBS, resulting in losses of approximately $1.3 million. During the three months ended March 31, 2024, we received proceeds of $221.7 million from sales of RMBS. The 2024 sales consisted entirely of pools that were consolidated into a larger pool and simultaneously acquired by us. No gain or loss was recorded on this resecuritization.
Current wording
We invest in RMBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from sales. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the six months ended June 30, 2025, we received proceeds of $733.9 million from sales of RMBS, resulting in losses of approximately $9.3 million. During the six months ended June 30, 2024, we received proceeds of $221.7 million from sales of RMBS. The 2024 sales consisted entirely of pools that were consolidated into a larger pool and simultaneously acquired by us. No gain or loss was recorded on this resecuritization.
Previous wording
For the three months ended March 31, 2025, the Company’s total operating expenses were approximately $4.2 million, compared to approximately $3.7 million for the three months ended March 31, 2024. The table below presents a breakdown of operating expenses for the three months ended March 31, 2025 and 2024.
Current wording
For the six and three months ended June 30, 2025, the Company’s total operating expenses were approximately $9.2 million, and $5.0 million, respectively, compared to approximately $8.1 million and $4.4 million for the six and three months ended June 30, 2024. The table below presents a breakdown of operating expenses for the six and three months ended June 30, 2025 and 2024.
Previous wording
As of December 31, 2024 and 2023, the Company had accrued liabilities of $0.6 million for bonuses to be paid to the Manager's employees. During the first three months of 2025 and 2024 the Company awarded shares of Company common stock with a fair value of $0.2 million and $0.3 million, respectively. Accrued incentive compensation for the three months ended March 31, 2025 and 2024 includes a reversal of the over accrual of these liabilities.
Current wording
As of December 31, 2024 and 2023, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees. During the six months ended June 30, 2025 and 2024, the Company awarded shares of Company common stock with a fair value of $0.2 million and $0.3 million, respectively. Accrued incentive compensation for the six months ended June 30, 2025 and 2024 includes a reversal of the over accrual of this liability.
Previous wording
The following table summarizes the management fee and overhead allocation expenses for each quarter in 2025 to date and 2024.
Current wording
The following table summarizes the management fee and overhead allocation expenses for the six months ended June 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.
Previous wording
As of March 31, 2025, our RMBS portfolio consisted of $6.7 billion of Agency RMBS at fair value and had a weighted average coupon on assets of 5.30%. During the three months ended March 31, 2025, we received principal repayments of $133.0 million, compared to $74.3 million for the three months ended March 31, 2024. The average three month prepayment speeds for the quarters ended March 31, 2025 and 2024 were 7.8% and 6.0%, respectively.
Current wording
As of June 30, 2025, our RMBS portfolio consisted of $7.0 billion of Agency RMBS at fair value and had a weighted average coupon on assets of 5.42%. During the six months ended June 30, 2025, we received principal repayments of $332.2 million, compared to $172.6 million for the six months ended June 30, 2024. The average three month prepayment speeds for the quarters ended June 30, 2025 and 2024 were 10.1% and 7.6%, respectively.
Previous wording
The following table presents a summary of portfolio assets acquired during the three months ended March 31, 2025 and 2024, including securities purchased during the period that settled after the end of the period, if any.
Current wording
The following table presents a summary of portfolio assets acquired during the six months ended June 30, 2025 and 2024, including securities purchased during the period that settled after the end of the period, if any.
Previous wording
As of March 31, 2025, we had obligations outstanding under the repurchase agreements of approximately $6.4 billion with a net weighted average borrowing cost of 4.46%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 11 to 168 days, with a weighted average remaining maturity of 40 days. Securing the repurchase agreement obligations as of March 31, 2025 are RMBS with an estimated fair value, including accrued interest, of approximately $6.7 billion, and cash pledged to counterparties of approximately $2.8 million. Through April 25, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at March 31, 2025, with maturities through September 15, 2025.
Current wording
As of June 30, 2025, we had obligations outstanding under the repurchase agreements of approximately $6.7 billion with a net weighted average borrowing cost of 4.48%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 8 to 136 days, with a weighted average remaining maturity of 35 days. Securing the repurchase agreement obligations as of June 30, 2025 are RMBS with an estimated fair value, including accrued interest, of approximately $7.0 billion, and cash pledged to counterparties of approximately $7.9 million. Through July 25, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at June 30, 2025, with maturities through November 13, 2025.
Previous wording
We use two primary measures of leverage. Economic leverage is calculated by dividing the sum of total liabilities and our net notional TBA position, by stockholders' equity. We include our net TBA position in our calculation of economic leverage because a forward contract to purchase or sell an Agency RMBS in the TBA market carries similar risks to an Agency RMBS purchased or sold in the cash market and funded with repurchase agreement liabilities. Adjusted leverage is calculated by dividing our repurchase agreements by stockholders' equity. Our economic leverage at March 31, 2025 was 7.8 to 1, compared to 7.3 to 1 as of December 31, 2024. Our adjusted leverage at March 31, 2025 was 7.5 to 1, compared to 7.5 to 1 as of December 31, 2024. The following table presents information related to our historical leverage.
Current wording
We use two primary measures of leverage. Economic leverage is calculated by dividing the sum of total liabilities and our net notional TBA position, by stockholders' equity. We include our net TBA position in our calculation of economic leverage because a forward contract to purchase or sell an Agency RMBS in the TBA market carries similar risks to an Agency RMBS purchased or sold in the cash market and funded with repurchase agreement liabilities. Adjusted leverage is calculated by dividing our repurchase agreements by stockholders' equity. Our economic leverage as of June 30, 2025 was 7.3 to 1, compared to 7.3 to 1 as of December 31, 2024. Our adjusted leverage as of June 30, 2025 was 7.3 to 1, compared to 7.5 to 1 as of December 31, 2024. The following table presents information related to our historical leverage.
Previous wording
Under our repurchase agreement funding arrangements, we are required to post margin at the initiation of the borrowing. The margin posted represents the haircut, which is a percentage of the market value of the collateral pledged. To the extent the market value of the asset collateralizing the financing transaction declines, the market value of our posted margin will be insufficient and we will be required to post additional collateral. Conversely, if the market value of the asset pledged increases in value, we would be over collateralized and we would be entitled to have excess margin returned to us by the counterparty. Our lenders typically value our pledged securities daily to ensure the adequacy of our margin and make margin calls as needed, as do we. Typically, but not always, the parties agree to a minimum threshold amount for margin calls so as to avoid the need for nuisance margin calls on a daily basis. Our master repurchase agreements do not specify the haircut; rather haircuts are determined on an individual repo transaction basis. Throughout the three months ended March 31, 2025, haircuts on our pledged collateral remained stable and as of March 31, 2025, our weighted average haircut was approximately 4.3% of the value of our collateral.
Current wording
Under our repurchase agreement funding arrangements, we are required to post margin at the initiation of the borrowing. The margin posted represents the haircut, which is a percentage of the market value of the collateral pledged. To the extent the market value of the asset collateralizing the financing transaction declines, the market value of our posted margin will be insufficient, and we will be required to post additional collateral. Conversely, if the market value of the asset pledged increases in value, we would be over collateralized and we would be entitled to have excess margin returned to us by the counterparty. Our lenders typically value our pledged securities daily to ensure the adequacy of our margin and make margin calls as needed, as do we. Typically, but not always, the parties agree to a minimum threshold amount for margin calls so as to avoid the need for nuisance margin calls on a daily basis. Our master repurchase agreements do not specify the haircut; rather haircuts are determined on an individual repo transaction basis. Throughout the six months ended June 30, 2025, haircuts on our pledged collateral remained stable and as of June 30, 2025, our weighted average haircut was approximately 4.1% of the value of our collateral.
Previous wording
In future periods, we expect to continue to finance our activities in a manner that is consistent with our current operations through repurchase agreements. As of March 31, 2025, we had cash and cash equivalents of $396.4 million. We generated cash flows of $200.9 million from principal and interest payments on our RMBS and had average repurchase agreements outstanding of $5.7 billion during the three months ended March 31, 2025.
Current wording
In future periods, we expect to continue to finance our activities in a manner that is consistent with our current operations through repurchase agreements. As of June 30, 2025, we had cash and cash equivalents of $440.8 million. We generated cash flows of $486.4 million from principal and interest payments on our RMBS and had average repurchase agreements outstanding of $6.1 billion during the six months ended June 30, 2025.
Previous wording
On February 24, 2025, we entered into an equity distribution agreement (the “February 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $350,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. Through March 31, 2025, we issued a total of 14,470,882 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $123.7 million, and net proceeds of approximately $121.7 million, after commissions and fees.
Current wording
On February 24, 2025, we entered into an equity distribution agreement (the “February 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $350,000,000 of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. Through June 30, 2025, we issued a total of 34,355,086 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $265.4 million, and net proceeds of approximately $261.2 million, after commissions and fees. Subsequent to June 30, 2025, we issued a total of 162,498 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $1.2 million, and net proceeds of approximately $1.2 million, after commissions and fees.
Previous wording
The Agency RMBS index generated a return for the first quarter of 3.0% and a return of 0.4% versus comparable duration swaps, as compared to 2.4% and -0.3%, respectively for these measures, for the investment grade corporate index, and 1.0% and -1.1%, respectively for these measures, for high yield debt. Total returns for U.S. Treasury securities and most sectors of the fixed income markets generated positive total returns for the quarter, although excess returns versus comparable duration swaps were mixed.
Current wording
The Agency RMBS index generated a return for the second quarter of 1.1% and a return of -0.3% versus comparable duration swaps, as compared to 1.8% and 0.5%, respectively for these measures, for the investment grade corporate index, and 3.6% and 2.0%, respectively for these measures, for high yield debt. Total returns for U.S. Treasury securities and most sectors of the fixed income markets generated positive total returns for the quarter, although excess returns, aside from Treasuries, versus comparable duration swaps were mixed.
Previous wording
Within Agency RMBS for the first quarter of 2025, conventional 30-year mortgages generated a total return of 2.7%, 15-year mortgages generated a total return of 2.9% and Ginnie Mae 30-year mortgages generated a total return of 2.4%. Versus comparable duration swaps the returns were 0.4%, 0.6% and 0.3% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Returns with the 30-year stack of coupons were fairly even, but correlated with the duration of the respective securities, as lower coupon, longer duration bonds generated the highest total returns and the highest coupon – 7.0% - generated slightly lower total returns. The range for the lower portion of the coupon stack was 3.0% to 3.3% (for coupons up to 4.5%) and 2.6% to 2.9% for higher coupons. Excess returns versus comparable duration swaps were inversely related to coupons, as the higher coupons generated excess returns as high as 1.4% but excess returns for lower coupons were generally between 0.3% and 0.5%.
Current wording
Within Agency RMBS for the second quarter of 2025, conventional 30-year mortgages generated a total return of 1.0%, 15-year mortgages generated a total return of 1.8% and Ginnie Mae 30-year mortgages generated a total return of 1.1%. Versus comparable duration swaps the returns were -0.3%, 0.3% and -0.3% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Returns with the 30-year stack of coupons were correlated with the duration of the respective securities, as lower coupon, longer duration bonds generated the lowest total returns and the highest coupon – 7.0% - generated the highest total returns. The range for the lower portion of the coupon stack was 0.0% to 1.4% (for coupons up to 4.5%) and 1.4% to 1.9% for higher coupons. Excess returns versus comparable duration swaps were inversely related to coupons, as the higher coupons generated excess returns as high as 0.7% but excess returns for lower coupons were generally between -0.8% and -0.1%.
Previous wording
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed's decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds have kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and the first quarter of 2025. As of March 31, 2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $551 billion from the peak to $2.2 trillion, shedding approximately 40% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since May 2021.
Current wording
In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed's decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds have kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and the second quarter of 2025. As of June 30, 2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $602 billion from the peak to $2.2 trillion, shedding approximately 44% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since March 2021.
Previous wording
On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the "OCC") the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the "Basel III Endgame"). The Basel III Endgame, if implemented as proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency RMBS markets. The comment period for the Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry. In testimony before the United States Senate Committee on Banking, Housing and Urban Affairs in July 2024, Fed chairman Jerome Powell stated that the OCC, the FDIC and the Fed were in discussions to materially revise the proposed rule, and that there was consensus at the Fed to undergo another comment period. In remarks given on September 10, 2024, Michael Barr, the Fed's Vice Chair for Supervision, confirmed that the Basel III Endgame was being rewritten to, among other things, reduce the risk weights for residential real estate and retail exposures, extend the scope of the reduced risk weight for certain low-risk corporate debt, and eliminate the minimum haircut for securities financing transactions.
Current wording
On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the "OCC") the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the "Basel III Endgame"). The Basel III Endgame, if implemented as originally proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency RMBS markets. The comment period for the Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry. While implementation of the Basel III Endgame has since stalled, Fed chairman Jerome Powell testified before the U.S. Senate Committee on Banking, Housing and Urban Affairs in June 2025 that the Fed was making a “fresh start” in reworking the Basel III Endgame. On June 27, 2025, the Fed, OCC and FDIC jointly issued a proposed rule to revise the enhanced supplementary leverage ratio for globally systemically important bank holding companies (“GSIBs”), with comments open to the public until August 26, 2025. The proposed rule seeks to promote effective GSIB capital management and remove disincentives for banks to engage in low-risk activities, particularly in the U.S. Treasury market. This shift is expected to free up significant capital, allowing GSIBs greater discretion in asset allocation and potentially fostering increased lending and economic activity.