I am pleased to announce earnings available for distribution for the third quarter came in at $0.10 per share.
Book value ended the quarter at $3.25 per share, which represents an increase of 1.2%.
This increase in book value combined with our $0.09 dividend produced an economic return of 4% for the quarter.
The portfolio remains predominantly agency focused with substantially all of our entire $8.8 billion portfolio plus $1.5 billion notional in TBA invested in agency mortgages.
Our liquidity position remains strong as we held $788 million of unrestricted cash and unencumbered investments at quarter end.
As indicated by the light blue line, the third quarter ended with interest rates largely unchanged with a modest flattening twist at the 10-year portion of the curve resulting in the difference between the yield on the 30-year and five-year U.S. treasuries falling by 12 basis points.
Improving economic data, increased inflation expectations, indications of a peak in COVID cases, and clear signals from the Federal Reserve on the time line for tapering asset purchases at the September FOMC meeting led to a reversal in rates during the last couple of weeks of the quarter with a 10-year largely unchanged at 1.49% at quarter end.
Despite short-term funding rates remaining attractive, the decline in interest rates in the first half of the quarter and increase in interest rate volatility led to a reduction in commercial bank demand for agency mortgages with monthly purchases of approximately $28 billion per month compared to the $46 billion per month average in the first half of the year.
In the upper left-hand chart, we show year-to-date agency mortgage performance versus swap hedges in generic 30-year 2%, 2.5% and 3% coupons, highlighting the third quarter in gray.
As you can see, lower coupon 30-year 2% and 2.5% coupons modestly underperformed during the quarter, while 30-year coupons 3% and higher outperformed.
Implied financing in the TBA market, shown in the lower right-hand chart remains attractive in lower coupons with financing rates drifting modestly lower, while still volatile, higher up the coupon stack, as indicated by the purple line representing the 30-year 3% TBA.
While our overall allocation to the sector was largely unchanged, we modestly reduced exposure to lower coupons through paydowns and invested the proceeds in 30-year 3.5% specified pools, increasing our coupon diversification and higher coupon allocation by approximately $300 million.
We continue to actively manage our specified pool holdings, rotating $2.1 billion into more attractive alternatives within the sector while mitigating our exposure to elevated pay-ups.
Our specified pool holdings had a weighted average payout of 0.9 points as of September 30, an increase from 0.6 points as of June 30.
As noted on the previous slide, we have seen a reduction in demand for prepayment protection so far in the fourth quarter as our weighted average pay up has declined back to the June 30 average of 0.6 points.
The weighted average yield on our Agency RMBS holdings improved seven basis points to 2.11% as of quarter end, while prepayments on our holdings remained low at 7.3% CPR for the quarter.
We believe the strength of the dollar roll market and wider spreads represent attractive investment opportunities with ROEs on lower coupon dollar rolls in the mid-teens and 9% to 11% on specified pools.
Our remaining credit investments are detailed on slide seven with non-Agency CMBS representing nearly 60% of the $108 million portfolio.
Our $73 million of remaining credit securities are high quality with 90% rated single A or higher and we remain comfortable with the credit profile of our remaining holdings.
Although we anticipate limited near-term price appreciation, we believe these assets are attractive holdings at 100% are held on an unlevered basis and provide attractive unlevered yields.
Repurchase agreements collateralized by Agency RMBS remain unchanged at $7.9 billion as of September 30.
Given the modest decline in our holdings and hedges associated with those borrowings also remain unchanged at $5.3 billion notional of pay fixed received floating interest rate swaps.
The weighted average interest rate on our hedge book remained unchanged at 41 basis points, while a modest extension in the maturities of our repurchase agreements led to a two basis point increase and the average funding rate to 12 basis points.
In order to hedge additional exposures further out the yield curve, we continue to hold $1.3 billion notional of forward starting interest rate swaps with starting dates in 2023.
Our economic leverage when including TBA exposure ticked modestly lower during the quarter to 6.5 times debt to equity as we remain conservatively positioned.
Spread widening of nearly 30 basis points since May supports an attractive investment environment in the Agency RMBS sector with ROEs ranging from high single digit on specified pools to mid-teens on TBA.

Summary:
I am pleased to announce earnings available for distribution for the third quarter came in at $0.10 per share.
Book value ended the quarter at $3.25 per share, which represents an increase of 1.2%.