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Management is pivoting the business model to acquire and securitize mortgage loans from both HomeXpress and third parties, responding to compressed sale margins in the current market.

The company successfully achieved a normalized Earnings Available for Distribution (EAD) of $0.46 per share, aligning with the projected run rate after excluding prior one-time benefits.

HomeXpress achieved record loan production growth of 30% year-over-year, though earnings remained flat due to margin compression from increased market competition.

Portfolio optimization continued through the reduction of lower-yielding assets and the execution of two resecuritizations, which released $13 million in capital for redeployment.

Strategic capital allocation shifted toward Agency MBS, which now represents 26% of invested capital, providing a balance of yield and liquidity for future credit opportunities.

Management emphasized a 'fixed destination but flexible route' strategy, prioritizing diversified income streams and liquidity to navigate unpredictable interest rate and geopolitical environments.

Management reaffirmed its full-year 2026 EAD guidance of at least $1.80, despite anticipating continued period-to-period volatility.

The company plans to execute three securitizations by year-end: two consisting of HomeXpress loans and one featuring third-party non-QM loans.

HomeXpress is on track to exceed its $4 billion annual loan origination target, supported by an expanded warehouse capacity of $1.65 billion.

Future securitization strategy involves a flexible 'rinse and repeat' model, where management will decide between retaining credit residuals for long-term yield or selling for immediate gain-on-sale revenue.

Strategic focus for the remainder of the year remains on scaling production, reducing origination costs, and opportunistically pursuing residential credit acquisitions.

Book value per share declined 3.2% to $17.75, primarily driven by interest rate volatility affecting the valuation of loans held in consolidated GAAP securitizations.

Recourse leverage increased to 3.3:1, largely due to the growing allocation to Agency RMBS and related financing activities.

Management noted a shift in hedging strategy, replacing some payer swaps with in-the-money interest rate caps to improve portfolio convexity during potential market rallies.

Third-party fee revenue from Palisades Advisory Services experienced some dilution due to reduced transaction activity from external clients and increased internal resource allocation.

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The decline was attributed to a sharp sell-off in rates affecting the $8 billion of loans on the balance sheet, which are not hedged for book value because they are in fixed-rate term securitizations.

Management confirmed that quarter-to-date book value is down approximately 1.5% due to continued rate pressure.

Management clarified that book value fluctuations do not impact earnings power or dividend-paying ability as floating-rate liabilities remain hedged.

Non-delegated correspondent business has 10 to 15 basis points lower margins than wholesale but offers higher processing efficiency and lower origination costs.

Despite margin compression, management expects third-quarter production volume to exceed the second quarter's record levels.

Agency MBS currently generates returns in the low to mid-teens and serves as a liquidity bucket for more accretive opportunities.

Management views the current environment as an inflection point to lean back into core residential credit competencies, targeting mid-teens returns on retained credit portions of the capital stack.