Annaly Capital Management Inc.

Thank you for standing by and welcome everyone to the Annaly Capital Management Second Quarter 2026 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, again press star one. At this time, I would like to turn the conference over to Sean Hensel, Director of Investor Relations. Please go ahead.

Good morning, and welcome to the second quarter 2026 earnings call for Analy Capital Management. Please note that this call is being recorded. As a reminder, materials for today's call are available on our website at www.analy.com. Today's call may include forward-looking statements, which are subject to certain risks and uncertainties. that could cause actual results to differ materially and refer to certain non-GAAP measures. Please see the notices in our earnings release for important information regarding forward-looking statements and non-GAAP measures. Participants on this morning's call include David Finkelstein, Chief Executive Officer and Co-Chief Investment Officer, Serena Wolfe, Chief Financial Officer, Mike Sania, Co-Chief Investment Officer and Head of Residential Credit, V.S. Srinivasan, Head of Agency, and Ken Adler, Head of Mortgage Services and Rights. And with that, I'll turn the call over to David.

Thank you, Sean. Good morning, everyone, and thanks for joining us. Today, I'll open with a brief macro update for discussing our performance for the quarter. Then I'll provide further detail on each of our three investment strategies and finish with our outlook. Serena will then discuss our financials in more detail before opening up the call to Q&A. Now starting with the macro landscape, the U.S. economy continued to display resiliency during the second quarter as healthy consumer spending and tech-related investment activity drove economic growth. Also, the labor market appears to have gained some momentum in recent months, which is a welcome shift from the softer trend seen in the second half of 2025. Now that said, Fed officials have become increasingly concerned about persistent elevated inflation, notwithstanding last week's softer CPI trend. Price pressures have been driven by a confluence of factors, including the energy price shock from the conflict in the Middle East, residual effects from tariffs, and strong demand for computing equipment given the AI build-out. And with policymakers more vocal about the potential to tighten policy, interest rates continue to rise, led by the front end of the yield curve. And after pricing roughly 225 basis point cuts earlier this year, Current market pricing suggests the Fed to hike at least once in 2026. Now, despite this pressure on the bond market, lower rate volatility provided a tailwind for our portfolio this past quarter. We delivered a 5.5% economic return, once again demonstrating strong performance of our diversified housing finance model. Additionally, we generated 79 cents of earnings available for distribution, marking the ninth consecutive quarter that our EAD has exceeded the dividend. And the reinforced durability of our earnings power helped inform our recent increase in our quarterly common dividend to 75 cents per share. And also to note, we continue to operate with conservative economic leverage of 5.6 turns, and we raised roughly $450 million in equity through our ATM program during the quarter. Now turning to our investment strategies and beginning with the agency sector. Sred's tightened in the second quarter as de-escalation in the Middle East led to a decline in both realized and implied rate volatility, and demand for agency MBS remained strong, driven by healthy fixed income inflows, increased purchases from overseas investors, and a robust CMO market, which is absorbing roughly 30% of gross issuance and broadly distributing the risk to a diversified set of investors. Given this attractive environment, we grew our agency portfolio by roughly $3 billion, ending the quarter at $95 billion in market value, which increased our capital allocation to agency to 57%. As far as portfolio activity, we rotated slightly up in coupon by reducing our exposure to 4.5s in favor of 5.5s and 6s, and we invested capital raised primarily into production coupon MBS and agency CMBS. Over the first half of the year, specified pools outperformed in spite of relatively benign rate volatility and a subdued prepayment outlook, which typically favors more generic collateral and TBAs. Notably, pool outperformance was largely driven by strong GSE demand, and we took advantage of these valuations and reduced our payoff exposure by moving to lower payoff pools and increasing our TBA holdings. Late in the second quarter, pool valuations became more attractive as GSE demand waned, and as a consequence, we expect new investments to be more balanced across TVAs and specified pools. With respect to our hedge profile, we were conservative in managing our rate exposure and proactively added additional swap hedges to detect against rising rates. Our portfolio remains diversified across treasury futures and swaps, with a preference for the latter giving more attractive carry and comfort around balance sheet availability going forward. Now moving to residential credit, our portfolio ended the second quarter at $10.4 billion in market value, virtually unchanged quarter over quarter, and representing 22% of the firm's capital. Resi Credit spreads moved in tandem with broader fixed income markets, with AAAs ending the quarter approximately 10 basis points tighter. Our Onslow Bay Correspondent Channel produced another strong quarter of volume with $6.7 billion of locks and $5.1 billion of fundings. Including whole loan bulk purchases and our partnerships, Analy purchased $7.1 billion of loans in Q2, which is a new quarterly record for the business. Now, despite record volumes, The credit quality of our loan pipeline continues to improve, best evidenced by the locked pipeline 765 FICO, the 67% CLTV. Non-agency gross securitization issuance totaled over $150 billion year-to-date, up approximately 50% year-over-year, putting the private label market on pace for its largest gross issuance year since 2007. and Analy remains the largest issuer of expanded credit mortgages and the second largest issuer overall as we closed 13 deals for $6.8 billion in principal balance in the second quarter, creating approximately $780 million in proprietary investments. Year-to-date, the OBX platform has priced 25 transactions, totaling $14.2 billion. and notably we have securitized eight different forms of residential collateral, underscoring the depth and diversity of our platform. The OBX securitization program also had the distinction of closing the first billion dollar new origination non-QM transaction, demonstrating Analy's leadership position in the non-agency market. This inaugural billion-dollar deal was well-received by investors, which allowed us to price a second, equally sizable transaction approximately two weeks later. Our residential credit platform is well-positioned for continued growth of the non-agency market, given the substantial investments we've made over the last number of years, which we believe is a key differentiator and should continue to result in annually manufacturing high-yielding proprietary investments difficult to duplicate and scale. Now shifting to MSR, our portfolio was roughly unchanged at $4.1 billion in market value with our allocation of the sector representing 21% of the firm's capital. During the quarter, we modestly rotated the portfolio higher in loan balance as we committed to purchase approximately $200 million in market value of MSR across our various sourcing channels while also committing to sell two bulk pools with lower loan balances for $220 million in proceeds. These transactions capitalized on differing buyer economics across the MSR market, highlighting our relative value approach and portfolio flexibility. Moving into higher average loan balance, MSR meaningfully enhances our return profile as our cost to service is contractually a fixed amount per loan in contrast to in-house servicers with high fixed costs and a variable cost per incremental loan. Both supply in the second quarter decreased modestly from Q1, though we expect supply to remain healthy throughout the balance of the year, given ongoing originator profitability constraints and industry consolidation. On a minor note, our flow purchase channel is picking up with $31 million in market value purchased this quarter, and it should become an increasingly important avenue to acquire current coupon MSR and allows us to offset portfolio paydowns. Our MSR portfolio fundamentals remain compelling as prepayment speeds increased in line with seasonals to 5.2 CPR in Q2. They were still below our initial model projections, providing potential upside returns. The credit quality of the portfolio remains exceptional, with serious delinquencies range-bound at approximately 50 basis points. At a weighted average note rate of 3.3%, the lowest among the 20 largest MSR holders, Our portfolio continues to generate durable, predictable cash flows with meaningful prepayment protection. MSR valuations remain well supported in the current interest rate environment and our multiple increased marginally to 5.97, largely driven by the increase in rates offset by a flatter curve. And finally, to touch on our outlook, We continue to see compelling opportunities across our three strategies underpinned by a healthy fixed income and housing finance investment environment. Agency spreads remain at attractive levels with mid-teens levered returns and very favorable technicals and we'll look to further deploy new capital in the sector balanced against relative value opportunities in our other businesses. Our residential credit platform continues to exhibit substantial growth Our MSR business is performing well ahead of our expectations, anchored by a deliberately constructed portfolio, low note rate, high credit quality that would be difficult to replicate at scale in today's market. Importantly, Analy offers investors a differentiated way to access value across the housing finance sector without assuming the operational intensity and volume dependency of a traditional origination model. We're not relying on loan volumes to sustain the economics of our portfolios, which allows us to remain selective, invest with scale, and allocate capital to the opportunities offering the most attractive risk-adjusted returns. And that is a structural advantage that transcends market cycles, and it has contributed to our ability to generate double-digit economic returns while operating with less leverage than our peers. And in an environment that continues to challenge origination-dependent business models, the capital efficiency, scale, and flexibility of our platform meaningfully sets us apart. And now with that, I'll hand it over to Serena to discuss the financials.