Earnings call transcript Q1 2023

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Operator

Good morning, and welcome to the Q1 2023 Annaly Capital Management Earnings Conference Call. [Operator Instructions]. 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.

Sean Kensil

to Management. Quarter welcome for Earnings and Capital Annaly morning, the XXXX First Call Good statements during in forward-looking and and section Any made our quarterly uncertainties, certain subject in which risks SEC to filings. are recent outlined most the Factors today's Risk annual call are

Actual results and in release addition materially our quarterly may from We forward-looking statements. earnings events you in to our filings. and annual encourage read differ these the disclaimer to

that call undertake Additionally, only revise is any the information this contain hereof. accurate not conference of do may obligation content and date the or this information. as time-sensitive of disclaim to We update specifically

release. both reconciliation can call referenced found this both we non-GAAP Quarter in in included to be During the XXXX quarter supplement, website. our financial First non-GAAP found earnings financial section is and GAAP under of may Investor Presentations Content GAAP XXXX our measures. Presentation A present today's measures call, first our and of in

note, Agency; this Chief Executive that, Please Head Credit; call Finkelstein, Head I'll Srinivasan, Participants Wolfe, David. Officer; Officer Chief Investment Chief Fania, morning's and Mortgage Chief And Adler, of Investment V David event Serena this Rights. Residential Deputy recorded. to also Head with and Officer; include Officer and Mike call is Ken over of being Financial of S on Servicing the turn

David Finkelstein

our business during financial on additional provide morning, earnings also Good you then positioning macro us an performance all discuss and leaders the thank provide Sean. portfolio provide are and who Serena I'll call. Q&A. detail the other Today, business. landscape can quarter by you, we and and review will activity our our on Thank update for quarter, joined performance, first our during within joining each perspective further on then our

our beginning Now performance. with

potential given near As we but was term. last volatility the on call, our the outlook further for cautious our optimistic noted over

strategy, during selection hedging what of our by economic which X.X proved generated roughly We quarter detail, validated with outearning asset in dividend rightsized very conservative challenging we and with the unchanged quarter. posture an at deliberate to to as were on maintain discuss and our was economic a leverage we our $X.XX. more approach be turns I'll X% continue while return Our to respect defensive

the outlook on Fed's management the rapid the few macro be the to environment, of the SVB led for Now of first the The policy. induced and of anticipated the cycle. the would of banking financial about bank in the turbulence implied fixed crisis. compromised hiking questions income since volatility among it some victims highest monetary realized Moreover, levels economy system, markets and resulting notion calmer the liquidity

are main about that to currently The be participants. situation start if demand is market being supply. the at participants the million banks penciled And from banks $XXX market coming this most of remains to of the MBS sell we MBS in SVB The overhang turmoil view other not need implication in events had an sold, week, securities, even year. adding private and fluid do of given assets the Signature by absorbed and creating banking portfolios

market aggregate this of absorb in However, to roughly MBS supply. likely managers Fed on runoff mode, continued the money see demand, billion instead we issuance, And in decline. holdings bank with more net of in the $XXX reliant be in will addition further will

spread to limited potential occur, though is attractive spreads for forward. tightening going the are for Now this sufficiently more

the weeks before is in to in activity. past banks over episode Now a preserve slowing were economic possible contraction March, that growth. events likely standards suggest second implication and lending the was lending opt curbing of will Credit is availability few turn illustrates capital turn already it tight this but the further reduced

jobs the quarter, per with ground staying solid on and inflation remains above the nearly U.S. economy measure. Reserve's XXX,XXX U.S. month Federal market this target recording the Now labor readings still

a banking rest the basis of points in hike will line with the Fed forecasts. to year, the next XX the situation week their rates likely of meaningful keep slowdown, increases for interest risks unchanged Although and aim

to levels funds. softened, in on our meaningful cheapening despite rose MBS February, ultimately of mortgage during interest manageable activity fixed gave volatility. the FDIC into in Bank month Performance And [indiscernible] Now spread driven and shifting SVB In of MBS quarter. news as portfolio March receivership. performance yields the strong to meaningfully diverge decline agency, way in tightened significantly implied January, income a this and Within supply. Signature spreads entering and rate however, the inflows each given by more

spreads mortgage the the grew early the basis with approximately modestly to quarter. commensurate our while And option-adjusted across accretive In X on maintaining we raised portfolio in equity leverage. agency common points XX quarter total, prudent widened coupons

XX% portfolio And gravitation only X.Xs, our in better a we were and continued ago, up our We the FDIC that lower a [indiscernible]. X% was end, widening quarter at of protected higher coupons from result occurred Xs and coupon the year from stack. portfolio the in thus down of as

over spreads our hedge investors of positive to as avoiding drove leading which headline to supply X.Xs our sales in quarter. more Also up bank X.Xs, of is coupons, XX% widening the coupon marginally remain the portfolio these shift portfolio over to from while MBS insulated stack. intermediate note, define despite pressure within higher what This to potential performance the portion into dynamic this coupons, we

also invest higher continue we intermediate coupons, spreads. to these these and historically and Xs into assets as favor the nominal opportunistically forward, stack provide attractive we'll up Looking

the furthermore, outside costs. which management excess we navigate agency rotate volatility we throughout trading sessions adding And In Over closely more a short-end market, able and of consecutive day. in positioned quarter. continue March. replaced were of X-year note hedges were of SOFR duration repo moved more addition experienced hedges the in advantage swaps, the over hedging X, levels, beginning portfolio in take at as this which by the see on hedge to out we and our was March critical and in the to points efficient moves our treasury decisions basis futures us helping tracks to per positioning our runoff period, well balanced the XX across And swap attractive our funding

Shifting and credit, loans performance AAA while across securities year-end. XX expanded credit both was to transfer basis were points XX products, mixed risk wider the XX to credit points whole on quarter, benchmark securities were residential basis from tighter XX non-QM to

up ended in portfolio approximately assets market active of in purchases loans, $X.X loans retention market channel. representing resi whole generated million driven This was investment-grade the opportunistic and through in we was Our through purchasing correspondent our million of quarter, in $XXX OpEx credit increase at capital. $XXX by predominantly value, securitization CRT XX% expanded currently quarter-over-quarter, which in QX billion XX% of remained directly -- sourced value

challenging remains of Our aggregate as despite X.XX%. an And of settlements ended mortgage with million. with conditions, quality loan pipeline the had QX a $XXX high LTV loan quarter a rate weighted we XX XXX FICO, market average robust

of Our including first X $X.X spread just excess us our last securitization third to markets also quarter, selective we the March. the the liquidity months subsided volatility transactions warehouse the transactions begin platform. securitization year the as We jumbo allowed volatility prior the second note, And capital billion, non-QM of partnership accessing onset totaling to priced quarter week. be deal, and X in in to a in non-QM conducted in first completed via and management capacity all to X the our OBX of quarter,

remain $X.X comprised portfolio, Now than profile risk lastly, of our And attractive CPR, flows. package, an delinquencies whole our basis we this points. recent is with speeds, billion portfolio quarters, currently and serious MSR very adding below MSR within portfolio quality recent disciplined X prepayment stable evidenced high-credit value XX were by $XXX market is consisting low-note-rate cash billion and trending with and X and a just less UPB, in

the terms is supply in expansion despite the valuations, strong sector XX and increase rates of publicized in roughly during which MSR declining into broadly, reflected portfolio basis WAC Now a points the our market interest multiple. in performance widely drove of an of quarter, more low the modest introduced

And persist. feel beneficial about have we positioning briefly levered and preferred Now liquidity avenue our our That believe current fundamentals presentation, said, for appropriately we across being leverage environment. see outlined capital our are returns as Agency careful to been to our incremental new with our headwinds good we investor attractive for in over our technical remaining money businesses for do the the but each businesses term. X on touch where improved, and has outlook, deployment of our approach near

to of do be MSR to risk-adjusted diversification. will appealing mid-double-digit represent the roughly with and diversification benefit grow collectively, and offer returns our measured And further Residential of our capital we enhance the provide look respect to horizon, to but continue we XX% stability out to to dedicated low patient strategies returns. and these credit a

we're it hand pleased to to our Now morning. I to Srini finally, Srinivasan, welcome Serena, lead this with wanted back who to off very having to to I call agency us the returned the happy before on agency on ability has navigate we're have have in worked and the the and years, back fully with extensively confident his I him am effort team. very over market, him V.S.

will the over to Serena financials. to I discuss hand it Now with that,

Serena Wolfe

performance our my Thank focus earnings earnings XXXX. exclude which metrics, and quarter and you, ended the PAA. non-GAAP David. release with while related that GAAP for I highlights disclosures prior metrics, XX, financial will key quarters, Today, brief EAD will March Consistent provide on non-GAAP comments

Despite at to our was $XX.XX. earlier, the the unchanged challenging prior David QX relatively from book value quarter for share market referred per

the board gains comprised losses to and $X.XX, of contributing Our were on derivative increases positions on related roughly investments of for our our predominantly agency losses gained swap offset hedging value portfolios the which our MSR These portfolio, our across the in quarter. valuation by resi book. $X.XX XX% on book to with

in for $X.XX $X.XX $XXX our the share interest income first rise with the a interest swap book rate dividend continued component We generated return increase in attributable reduction $XX of the XX% After higher swaps with compared XX last EAD our the primarily or of is climbed expense to quarter. in expense net for $X.XX, XX% our expense quarter-over-quarter. in value as average basis XX% million million is up points, was repo earnings to prior of or or in mitigating quarter. economic The Largely receive performance a distribution quarterly to approximately compared resulting increase repo quarter the quarter available first X%. combining per

dollar EAD the the of near related experienced expect continued TBA continued communicated economic we portfolio, we between economics Therefore, dividend the the all runoff, still as mismatch decline is swap quarter. the the earnings with driving the and this had spec level, the some but earnings offsetting increase of costs, that things previous expectation factors financing of calls, to That the in moderate roll our we In hold. quarter. that to to term, in on And of higher previously equal. would benefit yields and further referenced moderation the given pools current earnings during demonstrated futures. rolls the our in continue EAD specialness comfortable be to earnings decline,

in the we EAD continue illustrated as roll Average PAA, X quarter X.XX% than XX% the points agency point yields basis the quarter to include NIS rotate down quarter, points basis and in less our the decline coupon NIM were NIM, XXX X.XX% The interest ex higher dollar in this not impacted of X.XX% coupons generating at prior Therefore, with decrease PAA X.X% spread basis that of quarter-over-quarter in XX Net portfolio for from does are versus points a in also at with now QX. higher. XX ex NIM than factors was QX. basis portfolio up income.

basis the The to repo points XX average rates by continued cost and QX, our for of prior total rising and quarter. impacted XXX average in was for higher in funds XXX to repo points quarter, XXX compared basis rate the in quarter points basis basis the balances rise our points

as positively mentioned, funds points. during the impacted basis cost approximately swaps previously However, quarter XX by of

ample. funding shorter-term after Consistent volatility details nonagency the on in remaining agency markets Now bright XXXX, for portfolios markets Funding and Fed markets financial the all meeting with amongst is concentrated with most resilient turning in liquidity of financing. security our spot to dates. and remain a

we our we during In our XX-month saying entered such, attractive extend have core as In XX% approximately QX, diversification, and that, of floating is this term. funding repo at a to tenet books. sought rates. both agency philosophy into opportunistically trades counterparty of vein, X- rate and And

repo in average positioning, result days a reported XX QX. up from this As days, of our weighted QX days XX were

facilities adding for million for Since resi new the and the resi we increased beginning $XXX upsizing dedicated by $XXX of an MSR businesses, year, credit our combined. facility our in financing credit million warehouse existing credit and

substantial capacity financing unchanged combined credit $X for businesses of from Our resulted with levels diversifying billion. and deliberate a over capacity credit in QX billion approach and of MSR to for leverage our $X resi substantially has both unused

continues platform part credit securitization of Our core to strategy. resi be our a

end a of weighted consolidated X.XX%, As XX% whole non-QM of of below portfolio quarter. average basis at through our the loan cost securitization QX, funds of was of of XXX funds approximately GAAP funded the sheet points balance for cost the

to rate financing the our debt, of is rate. a of the addition locked below-market in fixed securitized XX% at In debt

MSR OpEx growth the Our as as and the to modestly we've ACREG in and quarter of ratio most divestiture platforms. resi expenses cost credit XXXX our of rise from and for we X.X% from MML may savings full to continue resources equity in our businesses. for unchanged was invest realized at year internalization Operating

remains of assets billion of at quarter. of million decrease MSR positions cash the The our $XXX assets higher billion, undrawn and profile approximately to which agencies robust assets pledging whole came loan $X.X end. from and slightly in unencumbered in leverage and unencumbered QX, unencumbered remains for agencies of new including liquidity Our the quarter with $X.X primarily facility

prepared the open we Now for questions. line now that will concludes Thank you, remarks, our and operator.

Operator

[Operator Instructions].

come from question first will Our KBW. George Bose with

Bose George

can Actually, an value on quarter-to-date? update get book I

David Finkelstein

Sure, Bose.

last to weeks left a of write X%. choppy, couple ways still are roughly the The there's long about, nothing in, and days been in as have So home little off quarter. we of bit

Bose George

the that as market is as of lower well, a versus the just to the in of first largely it your agencies the portfolio? and attributable quarter coupons much then And outperformance Great. positioning where your are terms in not part and

David Finkelstein

the better. enabled in very us quarter. the I there's Most which Look, the first but Feb Bose, We return, fact of keep we matter have fact of a manage positive is to navigate the and in the agency didn't much X/X it's things the the We in whipsawed steady kept Each get a market to of easier much generated capital of rate portfolio, importantly, your smaller factors. it's a businesses helped. because lot to rally risk and diversification nimble. coupon, when gravitated capital us allocation the of January We portion that right up sell-off is of the X economic think that allocation.

and the of had a ultimately had then on crisis we When the X-year that into the And we market, positioning. low, we along got were the front we when X% reduce and bank March, right note. evolved, very steepener on end inside well a

quarter a the helped what responsible ended what duration allocation. we of capital we leverage and roughly us to level position of so And think unchanged, a quarter. amount very moderate And conservative in very navigate be leverage and effectively that's the with

Bose George

book just the Okay. actually, Absolutely And on then good job on value. spreads.

that So not noted spread that is you you tightening thought that likely.

of longer-term curious spreads, think on settle things just just kind are think out? could thoughts your like you where -- you So what do

David Finkelstein

priced agency is fact tighten for is aren't matter to involved. Bose. it for the of when is market agency The appropriately banks environment, difficult The Sure. considerably the current

relying perfectly So matter prepared But we're of and money remain anticipate on the given they're spreads And that the for think we're may and your assets. short very is basis, generally like occur, speaking, we term, cautious them. a longer-term dislocations But over And we long localized are volatility market, volatility. in the agency, range that will see do great term, on bound. we And are we the fact could we over it. on to they But point, the inexpensive. we the like managers.

Operator

Securities. Our with next Cranston JMP from will come question Trevor

Trevor Cranston

banks sales non-agency impact months bank non-agency assets to about you've the how if the amount the can of coming I you've you whole demand assets, market. that changing curious say market? in if portfolio see or of and the of if failed talked was you expect that could coming or sales guys agency bank other out You for loans and over material do you or think if seen seen outlook the any

David Finkelstein

billion talking loans. which well When And residential performing Well, that portfolio, hang credit assets. there that Sure, roughly balance Bank, value residential week, high-quality to does in the in relationship. at potentially particular $XXX as this And market obviously, we Trevor. hold other Republic are loans. about as the is those very look is First could the

we're be securitization the IO fit there So and intermediate think a will asset, type XX% it loans they of of for but that we should is we expand for should given this can a ultimately over good Mike on sold. do think home go this, do the term, channel. through that portfolio those particularly be very over

our shelf and strong. obviously brand is Our quite

ability risk And an IO. collateral. the we subordinate for do on the have retention high-quality the We appetite of to take have securities

how And to we'll And so out. that. things expand responsibly, see we be believe. ultimately, will handled Mike, this feel on play free But

Michael Fania

Yes, that I in GSEs of billion it terms could think extent that we large portfolio sales having digested in to pretty auction. the to easily think we $X have would each per of And $X in the loan just that that, billion context be add size, out the through that market. set the came precedence

area that where securitize have new be In to probably underwriting lending leading prime tightening banks stepping bank still to just we rates from see origination away terms that on of We of prime really think north supply need standards, terms in jumbo, the the jumbo. we in not X% that loans X.X%, of X.XX%, cost seen on and X%. to

not securitizers. market point origination to from jumbo secondary new prime at volume going this is and So to the

Trevor Cranston

it. Got

in think term? kind around the general outlook that rate you plays Can out steepener how shape your helpful. kind the of That's in curve curve of the near you a on, over of mentioned and with talk which value book the helped thoughts you your And had you Okay. March. performance

David Finkelstein

Yes.

all, of outlook, first to the view respect with very conservative is with exposure. respect So rate our rate to

look get markets. very I first a ultimately good February, leading was which Then MBS. we for at Agency if flattening sell-off stronger January, the good in pickup and think particularly assets of risk meaningful In saw a the you rally you a we to bias and a X agency. and economic driven obviously all sudden, very which saw disinflationary on was curve, for a sentiment cuts, in data quarter, data, different by not inflation

currently, to we where flight we it a your March, you out scenario And year, And which, a and prepared for. were we're exposure. quality end running point, of momentarily. we're half curve about ultimately crisis right then a year flattened And half and now, agnostic I'll to completely why steepener, tell meaningful up at of and was inside on the a in duration a you our relatively curve,

but the steady fact the think scenarios we matter economic occur Fed and week, to market cuts, see outlook, to Fed don't think again, more in. the of don't is the not inflation, of and to any a hike the year love We think X that next you ultimately, leave are think data that have January the be ultimately terms progression we this going themselves. in But three we expect weaker of is, of bad. on We'd will We as We're will case. the that's as accommodative. repeat optimistic those in slowdown do will pricing and cuts to be a that

expensive any steepener the have XX have priced don't longer. a as on on. curve roughly over it's a the points year. the matter already trade fact steepen bet we the the of basis so next to to The very consequence, is is of And And

on you that it money. do so amount, have and you bet doesn't And by lose steepen that if

something calm the don't the enough with pricing our on respectful we're flight of on but get terms to here cuts, agnostic inflation go is willing and And relatively we like want as and bit all the down, standpoint But again, protection. the it's We data protected of we fact rates. on to in right some need morning, bets assets that the be of to because sell-off to Does in staying help? meaningful so and matter to in duration little Should conservative do this a respect we not we're duration. where seeing well. curve get a we're to we we're want doesn't we very keep be make of market enough a have to from the if where spread front quality, is there that

Trevor Cranston

Yes, very helpful.

Operator

Harter question Credit next from Doug with come Our will Suisse.

Douglas Harter

returns about how MSR goal you XX-ish kind longer-term Agency in talk of balancing versus and you're you allocation percent the relative credit Can to equity of today? see higher

David Finkelstein

it. want if we pricing favor MSR and Like does value standards playing fact matter our risk is maintain we should to Doug, that's we how with get and respect very do the want the economic we've both spoken add relatively We resi very we're the assets we more play modestly of wanted relative agencies well is, conservative Yes, and but agency. that that exactly toggle to credit, the that on that, given modestly, conservative. equation tight an more of about. do resi, could The it environment, downturn lending to to and quality under channel corresponding

MSR then market MSR expect do throughout this secondary to of on -- continue MSR supply XXXX. And we

packages to that be to right it ultimately, that is why the So we when our to our to of MSR, expect episodically lot responsible now, overweight. have get to the we're of comes does resi XX% patient. there, going value market, favor we're capital and And the we been and agency, allocated be will pick going to spots. is to in and which portfolio, traded But quite has objective there it, do get and about but competition a going equation relative both grow to we're we're but

Douglas Harter

acquisitions of if of sources take to come would kind those either weigh the to on of any add large opportunities to capital, or larger ability about the if it's how kind just of come to extent And then leverage you along. loans that advantage that they raising can attractive you there's the about of kind versus talk of fund MSR, that liquidity portfolio kind to

David Finkelstein

we that unused. talked is considerable capacity we Sure. about, have do warehouse as And

portfolio. when how and For MSR. coupon the money virtually in no that leverage MSR, current a asset the are, the own at we of available MSR example, it in look out somewhat is relative on loans have we deep what's we those And market benign to and

a exhibit volatility example, ours, it for like turn for price coupon should moves of leverage unlevered. gross less you rate than on if So MSR do XXX have MSR that's WAC current

So lever the we feel ability the we certainly trade to opportunity even the occur, are it, be like we and perfectly and for warehouse larger lines should ready have could for available.

And then and on the the resi securitization about is the capacity and capacity, side, we as can perfectly matter well. do our is we in resi liquid. on talked the warehouse front fact extensively same that the our market But unused of

been as as opportunity we've and should we -- loans And so the buy we loans, and this when of obviously in Xx done could year. kind we keep the portfolio, those meaningful is already arise. securitize a well opportunity the it's we meaningful take you warehouse size as stock there, go, and But

well. Another Doug, relatively as on point, we're resi underlevered

look think I in MSR the leverage very you fact our overall if turns, little leverage in of no over matter there's the leverage and X at virtually is resi. at just

is there So capacity.

Operator

will Vilas Our from UBS. with next Abraham question come

Vilas Abraham

it strategy? here? evolving position a wind versus to may on bit swap your little from like be are Specifically, futures mean I how treasury about thinking you position down you trying those treasury expand you hedging your Can hedges. sounded your

David Finkelstein

still bit. which first was came right negative in tight the good banking we well And in thereabouts futures, of was to treasuries In and the as function is matter what future. is of is oftentimes mid-XXs we that hedges and fact on relatively the convert hedges down. the little our the a lot curve. futures. hold better a we our out XX-year the then for we spreads its when given up as back predicated what of until swaps, on the it's it episode compared conversion a curve trades, XX% did worked out and be the in for to think treasury and not fit spreads into consider to It And money. And do on financing futures. XX%, be trade the tight entirely we basis quarter, But still of well very trade it a Sure. from example, a swaps versus It's it wind -- TBAs SOFR

tend we're our futures going for flows longer-term be a swaps our cash to to always fit. So maintain pools, better and but position,

Vilas Abraham

And you makes volatility. That talk sense. quarter? the gears, sounds I point could was behavior there shifting was I as But just some the of through counterparties given anxiety curious, mean, any maybe it then Okay. business of it was any at about usual. funding the your like

Serena Wolfe

been want of things Vilas, have say even it's term end Serena. script, I repo. say for through it a been have spreads actually are the point trades in I said, also, quarter. makes the spreads historical like And the sense had robust and have see volatility. get through opportunistically in tightened funding a the say and widen quarter for end, on first modestly time. this did and those of also be where would said are all We've post continued us. haircuts that in I We meaningful would But We repo spreads not any roll fulsome have seen consistent repo would have like at haircuts to to even spreads I at and able with that, we increase no. I we've the no better Like with word, able issues and in markets being actually, storm, port my with to they some

David Finkelstein

I'll otherwise add, kind went markets in liquid financing is and or March. One in ample even disruption of on in repo short-term through perfectly that warehouse Securitization thing hold, just well. see was securities Vilas, but for credit, we as didn't a the was

Serena Wolfe

the for Also, that end added right fact capacity the there our quarter as illustrated quarter credit and we've post by portfolio. during

of also and illustrative the access and that I the appetite for So warehouse think banks' is repo.

Operator

Our come will next with question JPMorgan. from Richard Shane

Richard Shane

little taking bit everybody around we're covered, demand this calls. some if was I'd apologize particular, in space. just between [indiscernible] morning this about talk out in and for site some Thanks and capacity question a origination how bouncing of as like coming the I my of and that production you the sellers supply well. the supply on from space the then the -- throughout throughout And impacts pricing year, of with to think

David Finkelstein

the about talking level coming origination at you're out? So production

Richard Shane

will that for Yes, margins securities? wondering you Because origination spreads, any guys better will pricing? your you see have in what presumably, to happen exactly. actually how wider terms that impact Does there. of is I'm impacts start

David Finkelstein

the agency side, On correct?

Richard Shane

exactly. Yes, Yes...

David Finkelstein

Yes.

more and rates, elevated. XXX primary XXX, the tighter, look, Certainly, limited have would but wide. of and it have around above have There's factors, secondary expect basis a in So would you which level points, is employment with the spread given would of of XXXX, industry. there's volatility capacity been been the of levels. well the which relatively competition, 'XX plenty there wide origination, is terms origination other in it in lot market We're kept

around think I it's the still in market. XXX,XXX employed

it. production you're coupon and why for paying So refinanced, see and of going protection X.Xs impact going Xs to we're coupon folks rally should cautious a for because is it's on, example, recently to much in those get we're certainly work, current issued most rally, to higher take to which rates it go MBS, and well bonds worth and it's won't borrowers those

of around speaking, the majority manageable. generally supply couple billion hundred Fed, billion, demand and this But But banks prepared we and the supply the of of tune And is see. have year thereabouts. later billion question, from banking between the The have the part to remarks, which we'll we SVB of as to to is another $XXX sector, $XXX net the in expected your second to I So expected growth the or from market said of around now $XXX we first net organic coming. in be coming year, perfectly Signature. production, my agency come billion

As buying. selling, other example. banks expect runoff we without a look the expect don't little regional lot for We at very but and banking certainly reinvestment in we level, of

and be billion between from $XXX $XXX the that $XXX have $XXX in with and expecting from really bank supply been the billion that billion billion then expect could banking -- sector sector And go you So Signature on and SVB year it headline runoff don't the demand would to to. reinvested in we that's the imminent on from net

net less buy. billion the they'd decline thought plus a it's about $XXX So $XXX billion we

So it dynamics. the changes

Richard Shane

Got it.

very That's helpful. Okay.

Operator

[Operator Instructions].

next Jones Our Stewart question from come with will Trading. Jason

Jason Stewart

just on where to opportunistic think Or Rick's investments the if credit? be? it are capital like follow in would most up includes like I to you'd question in the structure David, you where

David Finkelstein

can credit in a investments. of about agency both little about talk and but will talk and thinking we let's actually bit and what terms with like then agency, Srini we're start agency Sure.

Unidentified Company Representative

rates. spreads belly which government-guaranteed at $XXX rallying immediate we a finances In like us space, to are protection in somewhere the coupon, million SOFR I range. $XXX of spreads the pretty for the SOFR cash million the to mean, asset wide flow that And some agency on the to gives

the if low We -- to pools, you up assume right range, coupon higher get you are spec are with at of bogey. mid-XX you are rates to spreads Xx you willing pay if for where up end yield easily stack. even your where look leverage, And the the at are now,

So over agencies have XX The now. fed the out money the by attractive we the banks a sector, and spread attractive what is takes some last come growth, XX private happened somewhat of pretty of of with sector been did years also sector, or of time. that that not back the now. but and the But they right it will last years these organic is takes flow right lot fully time. and dominated MBS levels, kind money private problem expect are market its It into that some to agency the takes look less

imbalance we that right time, coming now. are the we which money see that will supply-demand over private seeing in, help So

David Finkelstein

they're technicals. quarter. that MXb, BBB bond. basis both low points credit we is XXX probably NIM, on say low cost long-term positive would the which it's financing. mid-XXXs. below a of our They're is and last MX, the of risk which allocated IG, continuation CRT We side, mid-XXXs, credit of think support of We've given that's that there The is And to short-term transfer.

a just turn reactive leverage. seen potentially pulling on low X spreads deals NIM. So to the mid-teens that's of given are. GSEs market of points where XXX basis That's We've ROE conditions, be

of year. that $XX do There's is think terms already new billion been in limited So announced X originations. this that, tenders, tenders of we

also OBX. terms channel in the good pretty of continuation feel buying and we loans then of there So correspondent portfolio through and our a allocate and continuing to

So rates, home that We'll on loans, a class. call it achieving X.XX%. you're And yield. X.XX% XXX the right whole mid-teens asset to loans now, non-QM X% in probably unlevered X.XX % to we ROEs think securitization,

Unidentified Company Representative

can I MSR this add the gross state mortgage the up Yes, existing portfolio, and industry. that the more of we side, -- -- mean of is given our kind on

cash a much buy is to about the And there's to the highlighted with of into. available. opportunity contractual billions mortgage basis unprecedented this secondary the as primary several of characteristics of Dave you XXX money flows be yields so able still the seeing points volumes we'll of an to XXX, As the hundred cash out and We're flows are spreads the and origination, mentioned, quarter lever that, for continue rights industry double-digit servicing unprecedented trading.

Jason Stewart

multiples think final one? do the is at, on side ? Okay. think the side? [indiscernible] side opportunity Where it you capital And what up investment in then best the number Two or loan on MSR do Is end you questions. two, the

David Finkelstein

approach. Well, discounted it mean, cash MSR I on is a really multiples. the flow

interest certainly is dependent it So on rates.

a industry with to been by theoretical because it's multiples mortgage such not selling allowed great reason focusing deep for The quantity. simple slowed improved analysis opportunity out So rise ordinarily cash that have they've it's of occur. has down, And our the those have the been is required speeds portfolio, would the very because prepayment as where flows the there money certainty. in their much the a values so we've

happy capital. we're not we're to see to higher So those allocate go multiples continuing because

And will they certainly the expect allocation about to our long-term don't we given and go happy approach and -- much that So capital our higher. we're asset class.

Unidentified Company Representative

loans. And loans on the the approach have flex say I third-party terms pricing partners. level Jason, ability into strategy, to preferred product, in versus securities, have don't our control where We of control control. both. remains credit, control We we of the would purchasing that our whether we obviously securitizations you

strategy. environment, bit uncertain into and a going more all that control little certainly of the want have of So dictate economic we aspects to a

Jason Stewart

sense. makes That

Operator

This to for any Finkelstein to closing over I remarks. turn concludes like session. would David back conference question-and-answer our the

David Finkelstein

joining you Thanks, Anthony, next and thank quarter. today. Good you, to us and for talk everybody, luck, we'll

Operator

attending you presentation. The conference Thank has concluded. today's for now

You may now disconnect.

Annaly Capital Management (NLY) 27 Apr 232023 Q1 Earnings call transcript