Also the content of this call contain time-sensitive information that is accurate only of today, Thursday, July 22, 2010. The company does not intend to and undertake no duty to update the information to reflect future events or circumstances.For opening remarks and introductions I’ll now turn the call over to Rick Cleary, CYS’s Chief Operating Officer. Please go ahead, Mr. Cleary. Rick Cleary Thank you, Sania. Good morning and welcome to CYS’s 2010 Second Quarter Earnings Conference Call. Today’s call is being recorded and access to the recording will be available on the Company’s Web site at www.cysinv.com starting at 3:00 P.M. this afternoon. With me here this morning are Kevin Grant, the Company’s Chairman and CEO, Frances Spark, the company’s CFO and Bill Shean, Managing Director of Investments. To better understand today’s discussion, it’ll be helpful to have the earnings release that we issued last night. The release is available with the investor relations section of our Web site and as in past releases. This release includes information regarding non-GAAP financial measures including reconciliation of those measures to GAAP measures which will be discussed on this call. I’m now pleased to turn the call over to Kevin. Kevin Grant Thank you, Rick, and good morning, everyone. Welcome to our Second Quarter 2010 Earnings Conference Call. This was a very busy quarter for us. We’re pleased to report a good quarter for CYS. The existing portfolio is performing well and we were not meaningfully impacted by Fannie Mae and Freddie Mac’s buyout program. Indeed, CYS’s prepayments continue to slow through the quarter. The cash flows are very stable owing to the stability of the 15-year mortgages and this should produce a fairly stable NIM for many quarters to come. We spent a lot of time during the quarter on liability management. We took advantage of the market and reset from hedges at lower rate and we extended their maturity. Rebalancing the hedges with something that we need to do anyway but we were fortunate this quarter to see good opportunities during the quarter to actually improve our net interest margin and reduce interest rate risk.
In summary, during the quarter, the yield on the portfolio went up, the NIM went up, the expense ratio went down and will go down more this quarter and the NAV went up and we were able to feel very confident raising the dividend.As you know we did a follow-on offering in late June, the three principle motivations for the transaction were first to take advantage of the investing environment, second, to make a meaningful impact on our expense ratio, and third, to improve the liquidity of our stock. The transaction settled on June 30 and we wasted no time putting a new capital for it. Hybrid ARMs had lagged the overall RMBS market during the quarter so that was the first place we focused and executed that portion of the targeted asset strategy immediately. As we have been saying for some time, we still like the 15-year market. In early July, there was a small back-up in prices and we jumped on it and took advantage. All the meaningful trades are now executed for the new capital and the purchases will settle mostly in September and October and a little bit in November. We feel very good about the execution and timing. The new capital will help lower our expense ratio quite a bit further. We continue to benefit from the interest rate environment and the spread present in our market. The U.S. economy appears to be in a very weak recovery with little or no inflationary pressures and a growing possibility of the U.S. entering a self-reinforcing deflationary environment. Read the rest of this transcript for free on seekingalpha.com