Annaly Capital Management Inc.

Good morning and welcome to the Q3 2025 Annually Capital Management Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Sean Kensil, Director of Investor Relations. Please go ahead.

Good morning, and welcome to the third quarter 2025 earnings call for Annaleigh Capital Management. Any forward-looking statements made during today's call are subject to certain risks and uncertainties, which are outlined in the risk factors section in our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. We encourage you to read the disclaimer in our earnings release in addition to our quarterly and annual filings. Additionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date hereof. We do not undertake and specifically disclaim any obligation to update or revise this information. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings release. Content referenced in today's call can be found in our third quarter 2025 investor presentation and third quarter 2025 financial supplement, both found under the presentation section of our website. Please also note this event is being recorded. Participants on this morning's call include David Finkelstein, Chief Executive Officer and Co-Chief Investment Officer, Serena Wolt, Chief Financial Officer, Mike Fania, Co-Chief Investment Officer and Head of Residential Credit, V.S. Srinivasan, Head of Agency, and Ken Adler, Head of Mortgage Service and Rights. And with that, I'll turn the call over to David.

Thank you, Sean. Good morning, everyone, and thank you all for joining us for our third quarter earnings call. Today, as usual, I'll briefly review the macro and market environment, as well as our performance for the quarter. Then I'll provide an update on each of our three businesses, ending with our outlook. Serena will then discuss her financials before opening up the call to Q&A. Now, starting with the macro landscape, the U.S. economy remained resilient in the third quarter, with GDP likely to be on pace with that of Q2. Growth was supported by healthier consumer spending, as well as AI-driven business investment, despite lingering uncertainty around tariffs and immigration. Inflation remained elevated near 3% during the quarter, though the anticipated uptick in goods inflation resulting from higher tariffs has been more muted than expected thus far. Labor market conditions did weaken, with hiring slowing to a mere 30,000 jobs per month over the past three months, while sentiment around future hiring deteriorated. Although the unemployment rate has moved only slightly higher, The Fed's 25 basis point cut in September and forward guidance was supported by an outlook that suggests growing downside risks to its employment mandate. Yields fell modestly during the quarter and the curve steepened given the market's expectation for modestly lower policy rates going forward. The Treasury market also benefited from a shift in issuance towards the front end of the yield curve. and strong tariff revenue, the combination of which helped ease concerns about long-term debt issuance. This led to lower term premium quarter over quarter and a six to nine basis point widening in swap spreads relative to their forward implied levels, which benefited our returns. The precipitous decline in interest rate volatility during the quarter also provided meaningful support to our portfolio by lowering convexity costs and fueling much of the agency spread tightening that occurred. We generated an economic return of 8.1% for the third quarter and 11.5% year to date, notably recording a positive economic return for eight consecutive quarters, exhibiting the benefits of Annalise's diversified housing finance strategy. Our portfolio's earnings power remains strong with EAD of 73 cents per share, out-earning our dividend each quarter since we increased it at the outset of the year. Also to note, we raised $1.1 billion of accretive equity in Q3, including $800 million through our ATM program. We also reopened the mortgage rate preferred market with Annalise's first preferred issuance since 2019 and the first residential M-rate issuance in multiple years. Now, turning to our investment strategies and beginning with agency, our portfolio ended the quarter at just over $87 billion in market value of 10% quarter over quarter. as the majority of the capital raised was deployed in agency MBS, considerate of attractive relative returns. Total growth of our agency portfolio was $7.8 billion in market value, with about 15% of that increase coming from agency CMBS and a similar share coming from market value appreciations. While the primary driver of agency performance was lower interest rate volatility, also noteworthy is that the supply and demand dynamics in the agency MBS market continue to improve. Specifically, fixed income fund inflows were more than 50% higher than the average over the past few quarters. And an additional indication of favorable technicals is that CMO demand has been heavy, with production running at over $30 billion per month, which has helped distribute MBS supply to a wider audience of investors. Overall, agency spreads tightened by 8 to 12 basis points to treasuries on the quarter, with intermediate and lower coupons outperforming higher coupons. Early in the quarter, we added agency in line with our capital raise across coupons, And ultimately, as higher coupons began to look more attractive, given cheapening into lower mortgage rates, we shifted purchases to specified pools and five and a halves and sixes. Our holdings and higher coupons have been methodically constructed over the past few years to mitigate prepayment risk, which gives us flexibility to add in areas that provide the best expected return. And on the hedging side, we had less need to intervene this past quarter as realized volatility was somewhat muted, but we did maintain our disciplined approach to rate risk management as we added hedges alongside new asset purchases with a bias towards swaps in the front end of the yield curve. And as we mentioned previously, relative value and the superior carry of swap hedges has informed our overweight in swaps, which added meaningfully to our economic return this past quarter. Shifting to residential credit, our portfolio increased to $6.9 billion in economic market value, representing $2.5 billion in the firm's capital. Investment-grade residential credit assets tightened during the quarter, with new origination non-QM AAA spreads ending Q3 15 basis points tighter, providing a supportive backdrop for securitization issuance. Non-agency gross securitizations have totaled 160 billion year to date, which is already the second largest annual gross issuance since 2008, and will end up being second only to the 2021 vintage. Our Onslow Bay platform closed eight transactions for 3.9 billion on the quarter, generating 473 million of high yielding OBX retained securities for Analeigh and our joint venture. Year to date, We've now priced 24 transactions representing $12.4 billion of UPB, solidifying Analee as not only the largest non-bank issuer in the residential credit market, but a top 10 issuer worldwide of asset-backed and mortgage-backed securities. We also redeemed OBX 2022 NQM 8 during the quarter, exercising the transaction's three-year call feature, and we expect there to be significant embedded value in our late 22 and 23 vintage NQM issues, given current mortgage rates and securitization economics. With respect to our correspondent channel, we achieved record-setting quarterly volumes across both locks and fundings, while remaining disciplined in our approach to credit. The channel locked $6.2 billion in whole loans and funded $4 billion in the third quarter, with our quarter-end locked pipeline representing a 765 weighted average FICO, a 68 LTV, and over 96% first lien. Now, with respect to the underlying housing market, as we foreshadowed on previous calls, the market is now experiencing relatively flat year-over-year HPA nationally, as consistently elevated mortgage rates weigh on affordability. There is potential for further depreciation in the winter seasonals as available-for-sale inventory has increased, although we do expect cumulative depreciation to be modest given the longer-term positive fundamentals of the housing market. Nonetheless, in light of softer housing, we'll remain focused on maintaining a high-credit quality portfolio with a continued emphasis on manufacturing our own proprietary assets through our market-leading correspondent channel. And approximately 75% of our residential credit exposure is now comprised of OBX securities and residential hold loans, providing full control over both the acquisition and management of the assets. Now moving to MSR, our portfolio increased by $215 million in market value to $3.5 billion, comprising $2.9 billion of the firm's capital. We purchased 17 billion in UPB across three bulk packages in our flow network during the quarter, as well as committing to purchase an additional package for 9 billion in UPB subsequent to quarter end. Our MSR valuation multiple decreased very modestly quarter over quarter, driven largely by lower mortgage rates. Our portfolio remains well insulated, as the aggregate borrower is approximately 300 basis points out of the money, and the portfolio continues to exhibit highly stable cash flows as it pays sub-5 CPR over the past three months. The fundamentals associated with conventional MSR remain positive, as evidenced by our portfolio's serious delinquencies being unchanged at 50 basis points, the competition for deposits remaining strong, resulting in better-than-expected float income, and subservicing costs decreasing given increased technology investments across our servicing partners. Also to note, we announced a new partnership with PennyMac Financial Services subsequent to quarter end, adding another industry-leading mortgage originator and servicer to our existing set of best-in-class subservicing and recapture partners. As part of this new relationship, we purchased 12 billion, a low note rate MSR, whereby PennyMac will handle all subservicing and recapture responsibilities for the portfolio sold. Now, shifting to our outlook. Our investment strategies are well positioned for the balance of the year, given declining macro volatility, additional Fed cuts expected, and healthy fixed income demand. While agency spreads are tighter, the sector remains compelling as spread compression has been achieved through lower volatility and a steeper yield curve, thus improving the fundamentals of the asset class. Furthermore, a more accommodative monetary policy should continue to support a strong technical backdrop for agency MBS, not to mention the likelihood of regulatory reform and the potential for greater bank demand for the sector into 2026. Our residential credit business should further benefit from the growing private label market, with our Onslow Bay correspondent channel and OBX securitization platform being clear market leaders. And our MSR portfolio stands out as the lowest note rate portfolio out of the top 20 largest conventional portfolios in the market, providing highly predictable, durable cash flows with limited negative convexities. Lower note rate MSR remains our preferred positioning as investors are compensated more for selling convexity in agency MBS. We also expect MSR supply to remain healthy as we maintain ample excess capacity to opportunistically grow our portfolio. Now, this diversified housing finance model has delivered proven results, having generated a 13% annualized economic return over the past three years since scaling each business. And while we maintain our positive outlook, we've carefully built our portfolio to guard against uncertainty, and we remain flexible in the current investing climate with historically low leverage and significant liquidity. Now, with that, I'll turn it over to Serena to discuss the financials.