Two Harbors Investment (TWO) 1 Aug 232023 Q2 Earnings call transcript

Good morning. My name is Klement, and I will be your conference facilitator. At this time, I would like to welcome everyone to Two Harbors' Second Quarter 2023 Financial Results Conference Call. All participants will be in a listen-only mode. After the speakers' remarks, there will be a question-and-answer period.

to the like Karr. to now would turn call over Maggie I

on morning morning, our and Investment XXXX and second me to and Chief financial Financial Officer. Mary call to With Good Letica, welcome Officer; Harbors' Executive call Officer; everyone, our our Bill are Greenberg, discuss Nick Two results. Riskey, the President Chief this Chief quarter our

review SEC's been website, release In information presentation conjunction presentation, call. well website available associated filed have with measures, of reconciliations this and call are our the have to press we Investor The on our in the non-GAAP and today's the as as of today's to and Relations financial with and SEC urge with we provided GAAP earnings page release twoharborsinvestment.com. at you

Page include from our As our not subject to Except does risks as so. and a presentation and required to SEC. reminder, our These that with and any today Harbors expectations. differ be are Two of obligation to comments results Form filed reports in disclaims law, statements, are cause do by on the may forward-looking X uncertainties may materially which forward-looking the statements update subsequent will and XX-K described

will call I now over the turn to Bill.

Mary Good quarter second current Nick outlook. positioning, our our our results performance our and return I'll activity, on curve quarterly after to in Thank our our inverted our I'll the cover thoughts a and of effects overview to financial second Then, morning, to reduce environment. market hedging welcome moments Maggie. and everyone, and an portfolio summarizing Today, will I'll illustrate you, detail an environment, of quarter yield in discuss take few will earnings provide call. dividend. decision the review

RMBS and assets Slide it end in different government at Initially, widened Much an risk concerns coupled quarter as about this begin stress market debt the a spreads with address quarter June early Let's of divided of began. ceiling very than of faced would first like the system, ongoing the banking where underperformed how year, the X. second the lifting investors with sentiment deadline. was were with ahead

May growth at raise as passed by economic was shifted the strong confidence fundamentals the past. debt and sentiment and legislation investors inflation. worst bank in end end both grow began spread that of This returned assets that stress in as to the ceiling bipartisan and equities of However, resulted to of the like focus June, performance for was the the their to

per annualized backward $X.XX and at changes, viewed with opportunistically total share, stock average value This June benefited XXth our return both equity. metric XX.X% representing Book was or is common $XX.XX representing preferred our of the value We of shares Income IXM on quarter, second a looking metrics common which share, market-driven positively XX. the to realized be X.X% together economic book value. in Slide a forward-looking excluding return repurchased per return. was on meant

$X.XX per to of from a share dividend This reduction in quarter, Board our $X.XX. approved our Directors

additional Importantly, a and RMBS earnings for earnings is pressure of decision We attractive this outlook. MSR current downward also book capital very that shareholders. for which to environment Agency current was more reflection and allow put to on neither dividend an investing we the nor positive believe reducing retaining of work increase, by view will value should the positive to as result returns. for Further, in definition, opportunity our

market this which allowing on given return dividend translates current book competitive level flexibility. We The and yields. in outlook new XX% to sustainable dividend our value, an is return historical a that line a with remains level while our is strategic believe

future stress market the as while signal high be again X. seen target and considers June in rates Slide on second hikes to data that raised the Last side on be minutes to X.XX%, XXXX system in only few banking Fed the will dependent. in about there one Fed at on to rate meeting. debate, debt The no the to rate more any concerns this markets as rates its slide. chart the market raised hand about will funds ceiling left the a are to spend Fed pausing the the in hikes X.X% once the of priced and and go, ongoing the I'd as the like turn quarter. Please Amid week,

not market short-term a From since to the are perspective, many at XXXX, a hiking levels seen led has expecting rates participants longer term and rate Fed's aggressive recession.

are XX rate in XXX rates. years. rates into rates market XXth, short-term which most the X.XX%, basis June while treasury are cuts XX-year Indeed, X.XX%, inverted of negative near a as lower in longer As future than interest than were a treasury the rates XXXX, points, beginning interest spread two-year priced term more of is were

two, the between shown chart This the blue and rates general mortgage line spread has between rates. coupon is long-term the The short-term towards where current levels the chart. the bottom in green line the of shows the of by extreme the collateral spread rates and repo widening reached spread

at REIT does June, As of mortgage the generate or positive have of investors matter, Two many returns that in the an environment. curve XX for how basis Harbors or any wondered spread points above end inverted the yield of with was such asset, rates this funding yield

at high I'll Slide moments to a a turn Please that. about think and X how few take we level to illustrate

of funded side a of is consisting agreement, X. Slide unhedged but the of as shown consider repurchase that funding debt-to-equity short-term left hand and mortgage REIT as first such hypothetical otherwise of that on RMBS portfolio a with Agency ratio a Let's has Xx

the not short-term are the These funding is yield spread and the equity funding they for rate asset of the seen X%, the funding a that equation pay For REIT a This to it which in borrows. the SOFR, asset yield zero. assets, that assume example, $XXX is on assume amount is illustrate as $XXX, at let's has that but this rates, a the X.X% let's one. concreteness, simplicity, say applies overnight SOFR point the on yield receives X,XXXx Also, REIT RMBS In invested well. current of on and X.X%. has

These dividing $XXX yield the asset of numbers of the by multiplied of and equity these be amount on its say rephrased can rate then earns economics a yield the the REIT $XXX, return asset the borrowed equity easily balance $XXX. by the the between turn to two. and We rates equation seen a can as by that additionally, into spread of funding in

yield spread curve and the X.X%, illustrative return is equation could asset between rates only With negative Indeed, we of expected and inverted, that interest SOFR as chosen, the have further REIT this even if X.X% is yield negative. were expected return in this be three. the seen the the positive

only RMBS between either and unchanged, the day. For This as five or basis the duration direction. liability. minus then interest and would return agreement in say the is duration yields this to RMBS changes the instance, rates it's significantly if of exists positive generally X.X% of were duration the The repurchase gap years, exposed the short, assumed constructed, is a one the long, raise asset expected the decline expected SOFR due liability points is we and mortgage asset to XXX that portfolio is in were to to of return

the mortgage hedges same The hand eliminate asset this in short-term side the hypothetical right Now, between duration interest the REIT, the use on to funding. example, swap. but and fixed is rate gap shown let's let's situation In payer let's Slide some X. add RMBS of consider a rate

flat. transform interest of hand rate The short-term hedge example. typically nature swap hedge a term closely instrument The from this example, longer reality to pays but more along duration rate the is more the rate swap the The on hedge the purposes static matches for portfolio of but of say, that We or a with complex duration side, hedge into expected of fixed multiple let's interest the we rate assets. a the points this hedging return includes interest funding floating single of same flows maturity left the the receives X.X% of constructed as the a also gap and yield than assume is curve, the that is swap. of SOFR cash the the

in balance of leveraged can the that to of be the on swap, If five equity and SOFR we as additionally, chose returns the the converting is inverted static spread The the by and $X,XXX hypothetical then are fixed even yields. though higher equation rates REIT return economics than earning multiplied interest the this expressed and expected rates in a the funding the the asset and curve example, again we is XX.X%, use dollars. instead of asset shown rate a yield the $XXX, between

the short-term instead. happens particular, to example any correlated. the it both on for asset instead use of generally swaps where This the same of the math floating is cleanly of the but same true this funding SOFR, the highly swap In treasury tied are to that in to the are the leg rate index also short-term if treasuries those because extent hedge rate index, works we rates repo most enters and

points unhedged largely affects which That's to the to or XXX the unexpectedly increase risk-free hedged are to points. the is REIT, A funding. one. REIT yields case, from this the modest immune to one a XX.X% means in compared levered In hedged example return XXX static the changes static levered that very unchanged. return return, changes by basis expected is imagine be a changed basis and that rises REIT which to or SOFR it caveat basis by of XXX and mortgage for points rates Now, short-term in hedged, portfolio, expected and let's of rates this changes what a XX.X%, with

the effect REIT rates is asset higher borrowing static hand yield no whether the or our lower downward which swap between the that is This the spread looking the shown hedge, change the of yield. the or same, bottom shape whether zero. all sloping. to In than want are of that the hedges duration rate and curve cases, yield I to gap depending and or curve at sloping on duration of asset the yield is with with hedging portfolio on gap fact at strategies the the as hedges main side, contributing hypothetical the right stress by the the upward the the is of the fixed return matter not exemplified does shows

simplified to to interest how the hedge further call of starting hypothetical in where a While Harbors release inverted industry this We we on special can that curve investors. little deeper flavor release tried to series I we into topics topic. a earnings spend. format have have goes will we Conversations, because this end, excited plan the a to find to time Two yield environment, REIT share limits detail video give or of the we amount in and quarter, are of specific of topics into Two called we short our conversations we We that To can plan of I'm delve that the Harbors. in assumptions hope you helpful an interesting. that on to special example videos a these Each videos

and in MSR Looking Agency's for lower High first excellent We speed the assets. our which the half believe both in RMBS of we at beneficial about leading to to Agency excited resolved, keep ahead, been MSR that + slow, have year unknown remain levels. prepayment spreads to will are strategy. while attractive variables unique the our is of rates the environment continue overall environment in historically investing MSR. Many this is volatility

continue end portfolio of the our our of transferred we to having sub-servicing from through progress make RoundPoint, to Furthermore, transitioning our MSR XX% June. on network

terrific investing to additional these space efficiencies the broadly it to We in strategy. a capitalize finance make in expect the The for continue to factors combination our realize opportunities mortgage more future. and cost in of time

Now, Mary the call our over results. I'll discuss hand to to financial

turn $X.XX Thank X. the good you, per Please weighted $XX.X generated or company in Slide average quarter. and share of The morning. million Bill, to second income comprehensive

dividend of XXst, including Our of higher per carry compared book returns March X.X%. $X.XX XXth common $XX.XX offset was this spreads. which results quarter, return contributed Both at positive portfolio economic the high small of coupon $XX.XX in in to widening strategy a quarterly by June value partially the share our a reflected at components the

$XX.XX shares XXX,XXX repurchased stock share of at an of both shares we of stock price to average value. per $XX.XX per accretive were highlighted, preferred an XXX,XXX Bill book common of and price share, of As average at which

version as by Please turn increased XX.X%. annualized income XX, operating IXM. TBA RMBS quarter X. funding to well roll MSR driven for Slide share, and offset second MSR Slide per was by and the forward-looking on our lower expenses. This IXM slide as was dollar and representing the return is was $X.XX return losses. IXM outlook increased of increased partially RMBS an expenses prepays, of

Earnings Though this higher quarter Please futures per interest in first dollar turn distribution as rolls, offset report our to revenue reflect in by servicing TBA EAD earning losses not share Slide to and compared we EAD to dividend metric, was higher available EAD positive the $X.XX decline income. X. a decisions. negative U.S. net quarter. was currently and $X.XX expense for driven on it Treasury by nor does potential drive continue our portfolio's does The

yielding of a total higher coupon our This points securities yield by X. increased available-for-sale with higher basis Slide available-for-sale CPR assets. and purchases higher the due premium proportion XX securities. portfolio experienced to The slightly unamortized invested offset X.XX% portfolio of Turning to in lower higher was to a on

realized net higher primarily narrowed borrowing on and by X.XX% higher from RMBS quarter the to XX both MSR. balances spread due points to Our basis in rates X.XX%, and

expected As a portfolio the cost yields in value to and based returns. on table as amortized are this opposed market reminder,

repo with In Slide and potential the points between our for second repurchase agreements stability to average repo we signs the on rolling XX sheet basis our financing throughout SOFR At weighted us focused XX ceiling of to financing. plus XX. looming, with stable remain our turn debt points our which maintain of XX any to days, end, with and quarter the Please maturity avoid helps beginning no for Spreads RMBS in stress. liquid agency days disruptions. balance to basis quarter was

We $XXX financed outstanding with of notes. total advances. four servicing our and for lenders million and billion unused $XXX with million outstanding capacity five-year finance million MSR across ended facilities MSR of $X.X the under $XXX unused term borrowings of We a bilateral capacity quarter

over turn now to I'll the Nick. call

Thank you, to Please Mary. turn Slide XX.

RMBS June sales excess index. [indiscernible] FDIC had on the aggregate, ahead and MBS Over with performed assets well, of the and XX% schedule, been returns the finishing of supply as May money demand Bloomberg supply $XX sold. FDIC outperformed from coupon second quarter, on of with bank strong positive from Lower billion approximately met waned, manager fears the

of coupons basis spread spread Nominal realized in out of volatility when net points month for widened to basis late as X.X hedged at and June widened generated that by in return the recovering including substantially spreads treasury X May. XXX on the low that as Aided coupon points curve by of widening finishing points, a current the basis like carry XXX still them the for most positive even modestly production quarter. MBS curve, the took wide

spreads As of coupon in you percentile nominal see still XXth the remain can above historically current figure history. long-term attractive, one,

that remain we for into will inflows last spread discussed second yield in MBS providing headwind this for with to spreads. the there quarter, of experienced likely is for QX good this support supply specifically spread generate to we anticipate and to income though spreads returns. As levels, will assets no spreads a And current tighten as and be for we at our organic for year half need MBS wide, attractive tightening, continue fixed strong,

own at figure terms the or option Looking basis. a and reviews in either X. technical so on our you of X.X we coupons Though to do a we incorporate in our fundamentals range that concentrate stack, as exposure adjusted two coupon we see to can factors, spreads when nominal continue increases coupon on of wide

and $XX.X $XX.X portfolio settled and At discuss including billion, the turn quarter. billion to was in portfolio of let's XX XXth, positions. positioning June activity our Now our second Slide

can the bullet positioning leverage. of our you about risk slide, few On the top see points a and right

was position wide still exposure Our quarter-end We the debt-to-equity against book unbiased. volatility. our rates neutral available nominal and a changes rate We economic in in spreads maintained value leverage the X.Xx. throughout market to low elevated quarter, balancing the kept

positioning detail the by more and see XX, appendix. at our XX, risk in Slides XX on can You XX looking

We liquidations. triggered $X.X coupons semi portfolio low TBA TBAs coupon of to higher rotated into specified the from lower widening FDIC we of coupon season by carry. improve into terms capture activity, some relative moved to did lower positions In we billion Subsequently, this pools coupons.

X%. MSR reduced the $XX value and approximately MSR added $XXX by acquisitions million and our we recapture basis UPB points we our After on securities, the UPB portfolio, MSR points servicing In bulk billion through XX.X X.X reducing IO flow-sale three quarter-end, through converting by settled purchases. fee market to basis to

to you the Moving quarters point, how X well the to as by ticks, underperformed led a the ticks. in through three the by and curve to the with real with followed of money market XX coupon sponsorship XX Xs while coupons. to performance from Xs of X.Xs of by by coupons the and X.Xs. FDIC. similar X TBA hedges Production can same production outperforming XX quarter supply and Xs about X.Xs testament outperforming followed stack figure pattern coupon ticks, accounts to like swap see Xs by rest Slide a Outperforming Specified across the The lack was higher due absorbed a banks. two. TBAs coupon pools by lower coupon specified Xs pools over a outperformed

three, to slightly X.X% speeds prepayment expected to increased given increased the was Moving which seasonality. CPR, pool figure specified turnover

XX. Please turn to Slide

was Bulk the of strong bringing was market portfolio the well at MSR of billion $X.X demand. MSR billion notable with bid $XXX for quarter, total Our increase XXth. offered June the $XXX in continued billion. Dovetailing second UPB half remain in the XXXX to in packages quarter, value supply in off first the conventional first strong

to MSR effects. again on to increased was in seasonal due CPR, Speeds increased Our slightly from X.Xx. the X.X% once anticipated price which multiple X.X% to quarter

MSR's should speeds reflects mortgage strategy. Prepayment average weaker to this quarter, low speeds rates higher coupon weighted a X.XX%. primary Despite tailwind third historically of decline factors owing remain the slow, gross increase, in the the and seasonal which for providing

quarter. Slide potential returns that our of hedged this and table a return is about in XX% This believe XX% return MSR with is allocated to hedged meant We and market is slide. the expectations the are of available to return remaining to with turn XX, capital our of to MBS estimate projection outlook capital allocation in to we static to return line with what Please show top half XX%. The capital allocated a XX% market. of last estimate static market XX%, are or

section slide our estimated returns the common specific for the our on the shown portfolio to X.X% of common a structure half lower top to The With the portfolio. with equity to static return estimate is applying is expenses, and XX%, capital table in and before our portfolio portfolio share. focus leverage allocation per after the any of between

to falls of XX.X% prospective static quarterly convertible potential our effect we that giving static the notes and XX.X% equity return range in per a on return $X.XX After or $X.XX. outstanding stock, to preferred common the believe of to share

I of future. should the positioned close is are tighten are And to Spreads in remain MSR our moderate to Speeds we returns. so just spreads point and optimistic plenty slow meaningfully, combined attractive of the markets believe in the cycle, this ample could our wide cycle. are are shareholder really end we and should be reasons historically have this volatility foreseeable cyclicality if rate hiking at Fed drive well indeed when or with of either there in the potential. return and about for MSR the strategy mortgages believe hedged, to and on

to take have. today, for and be will Thank happy any much we joining you might very you questions now us

you. Thank

question-and-answer Instructions] be conducting session. you. We will [Operator now a Thank

from Doug question Please is Harter Credit first with Suisse. Our proceed.

Good morning, Doug.

the see changes how you the potential? catalysts of potential do return kind in coming kind any – spread to How morning. would impact your months or that and risks of Good

Nick, you're on mute.

Doug, little a Sorry, technical difficulty here.

Bill. worries, no Yes,

take you figures just while repeat that can Nick Okay. there bit little question a Can your out. so Doug, I one

Sure. Yes.

of were or you the spread the we at to impact to does return market, the a at risks As see potential catalysts see do tightening, this And potential the you look how portfolio? spread point? MBS if that how

Yes. Sure.

Inflation remarks though of and about I risks sales FDIC market. a we've here. be path of the I we continues of We as said expect and that been good be the some lots somewhat. market. down. The year there's out reduced as The So uncertainties our seems half or the the the a dissipated think it high, mean, received couple Fed on to first remaining in solidify have were of be get worried of seems volatility them. Rate to to coming to mentioned and we moderate well in by taken seen prepared the

So think spreads tighten. we do could

market are mortgages their The Fed However, run participating. are lots letting Banks participants out still the not still of of market. off. is

are, benefit. as spreads an fair us capital as will our we number see spreads, you Nick, spreads to to where they on maybe our – which returns stay environment strategy XX% and do, forth, If with mortgage said more our will just fine before but XX add historically benefit think a you we do why you as want the stay they and XX anything have particularly Can we and to do of of So time. that tightening. certainly We of of been period have is and Slide don't back? mortgage you show can reasons wider that we've still and could that, wide for are they from on so book we Slide in that? depend value from we see may, as extended so allocated spreads than they around

me? hear you Can

Yes.

Yes.

Okay, good.

that. No, think said you much it. about Sorry I Bill, I pretty think

are good while me. in on it the money inflows first manager the and comments met if larger from managers reasonable money the market, demand of be sector supply just into our with a happened believe amount quarter it also some in and opinion, to first what excuse are look mortgage you the challenging at some half, just As – public reasons look for – the will dynamic remains little a we profiled coupons. that the bit production there In call, at

far volatility the We really our probable as profile which of was a available demonstration good you spreads power really in this that as bit, it quarter earn down our past And that did tail now which is concerned, are can towards be rate spread this the shows third first able quarter, little – of the actual and for a path the market, which think fairly calms carry the carry. really certainly volatility were a end portfolio when is particularly quarter. own past low. has this balanced in really rate volatility even last expressed the to We – been month of the of quarter, has been fairly

So we the the think environment our for it's a year. of constructive for very strategy rest

Great. Thank you.

you. Thank

proceed. is question Please from next KBW. George Bose Our with

everyone. Hey, Good morning.

Bose. morning, Good

expected The to XQ quarter. declined, from XXX portfolio basis was the about it second guess on I return your points

to drivers the wanted what that was. Just see change of

way little how Nick. spreads at moved Bose, of This you? a have the from the I Hey, each a reflection – snapshot are everything just a think We bit is quarter. end of That's quarter-to-quarter.

Okay.

of the first second, from spreads or the just was so really are tighter So bit a that? the end of that the end

correct. That's

terms book happen? update can give quarter-to-date? Okay. Does book just Great. you then in value, And anything meaningful Thanks. us on value an of

Yes.

yesterday. have up that of slightly we're quarter. close so things on far a is book through around bit, value the moved around up We As X% little estimate

Thanks. Great. Okay.

you. Thank

you. Thank

Our JMP next question with Cranston Securities. from Please proceed. is Trevor

Thanks. Hey.

change forward, maybe think higher go You of spread a to start sort terms market having widening. probability of positioning what more about probability and in on aggressive of talk you MBS going as tightening quarter. about risk leverage you Can less shift your – a curious how if characterized view if of you to a throughout leverage of leverage was guys as your view level, what you the as you guys spread the Thanks. neutral particularly would see tightening we in the and forward? I'm would

Hey. the question. for Thank you

– very So actual the our really presentation and where we levels, book leverage been and is again, our you return could first the as dividend, is good spread all, at our current in dividend see of extra do potential and this return risk could growth which past of supportive has can also our the of from we demonstrate the return as earn our currently. return quarter Once potentially portfolio or time. of out over value generate is like

So don't any plans have at the particular for increasing moment, we leverage.

environment. at side, feel rates on a rates think in As that. like about – being see said, held believe higher done point doesn't the element The spread how in most it the we having we we is I that that where to with cycle rates? single do need Fed do the be really Should That higher important the still unbounded raising terms truly have optimistic we materially can experienced tighter spread or of investors and how I Fed do paths can how movement. I've investors back be spreads to

Fed in performance. we volatility thing materially a tightening extra done, tighter spreads important then should spread a really would decline being that. of And with most that single along and the and to be driver be big the think I drive However, would see

volatility. in that's bit. a months this of little an come again, six important in then we've driver last of come once amount our keep And as trying the implied the necessary quarter But for That's balancing rate again, of seen has still it's we're to investors out ebbed the spread up rate models in – uncertain which bit up times, a ourselves even come over described, to down I couple all high a in We've think seen back a volatility versus really little spiked a environment we a kind leverage back lot terms of in. there, we're and don't portfolio. flowed, back And and at. it XX look

those do our growth, value of returns, but we'll the that's our absolute we're our book So day, leverage, a of it we're at after. can we're really supportive so. generate generating and that dividend things, returns to that our end are makes and If we increase trying at portfolio to what if sign look sense balance how there's the clear

it. Got

Thank helpful. That’s you. Okay.

Thank you.

Please Markets. proceed. question is Our RBC from next Kenneth with Capital Lee

Hey. Thanks question. morning. Good taking for my

about about wondering rates underlying about value value MSR quarter, to you Thanks. just per increase if investment the the increase little book talk the help Just the book the strategy, how book but repurchases in you the bit more also value could talk there? strategy contributed potentially and how share, a pairing

very of morning. was the that share good small. The quarter Thanks Ken, we during Yes. reasonably and amount did much, repurchases

small that given the the being of correspondingly another, of $X.XX. And result we the it roughly portfolio it as the from bulk bulk announced. We that as so and what return the which XX as performance and it had was that a carry was as that return offset is to there's it of was pluses was, one in around IXM, the Slide return. and book value largely on the we think portfolio, impact the minuses high was is it show relatively such of The

it. Got I Thanks now, opportunities then of terms the what investment opportunities, right they Thanks. of investment color at see guess where more here? that near-term And there. attractive for the in some look you over that are the

again. Thanks

demand RMBS, a the clearly investor MSR robust although, both RMBS than bit. it I amongst the FDIC think to the We encouraging. happen XX in see a Slide the we supports been hedged in is for So we've and little as like the are was by thing RMBS same shown Spreads better on and the can which bit wide MSR. from little here, saying sales

allocation there's assets uncertainties here other market. between said, rate we in like the MSR. remains like hedged as and RMBS those classes. asset Although of volatility our capital We target But our Nick high, just

to so participate going invest those in to And we're and sectors. continue

again. Thanks there. helpful Very Great.

you. Thank

with Our proceed. JPMorgan. next Shane Rick question Please is from

coupon Thanks the point interested potential hedging in comparing I'm in particular, the I'm looking guys quarter kind my return the outlook of quarter. this the to at at and strategy. the between And second questions. interplay for taking really first from

One increasing? the of in the return is in strategy. a are things, little rates decrease the market tweaking function where of bit? for with the a that Is a in and static again, sort that estimates are that but Is modest, we of there's RMBS it what's slight pay-ups

slide the into return for This Thank question. Rick. Hey is Nick. things you Many the static go potential.

in lower in than noted which a coupons commentaries, spread have amount of go higher we do. the we as of One coupon did little them, bit, nominal a does down

natively So that that's probably on hedge lower numbers levered a a I biggest potential. tighter be those and has have portfolio will lower coupon affected a the quarter-over-quarter. static And you will MBS and thing of basis, think consequently return

this were coupons As were in the wider, a well, as noted lower quarter. coupons commentary little the we was tighter. a nominally, Current there past bit divergence in quarter over performance big

a I return So the we potential why down extent largest think the probably is bit a of in reason on component little that of that shifted side. that coupon, seen return we've lower that to the

Got it.

rate And be helpful. where the will and in when again, in look that relatively continue to portfolio, That's we either or all securities? Okay. to I'm we the par are modest. at cycle strategy given assuming the premium slight that the the it's uncertainty buy of discount

I'm sorry, do When your say what understand question. don't premium, I you mean? Rick. you

a the won't ton par you you at I ton in value, have speeds, if a If we see don't in pickup the a realized look term, losses. so versus of have cost big that of of premiums the portfolio intermediate some point the amortized at

you're would sense rate our cost since Oh, mark amortized cost I down a which, securities but we're looking basis, basis, now the book bit at – wouldn't bit have a a amortized of little – average nominal things effect extent kind we portfolio don't of little of we're more return every it of measure, says, in the things an accurate. upside no the is see. the the the right, and of terms some The The basis every you're from pretty correct. total that have we yield month, across portfolio right of at always on, a mix looking accounting to on so big more on these of we that the par as of Yes, is to or have more think cost Bill is day, that I in say a book. close I that's is world measures

there's I these par just price not to which points number Xs] right? Rick, and mean, might today one, [Fannie so add if par forth. is dollar in above couple dollar very I securities the price handle many a I days, that, other can, are world

from when current is the the EAD a things it amortized the of is – to a too. refer the of prices bit at of asynchronous, problem, right. cost of little suffers we Looking sort for bought to It also things prices refers what them, which doesn't it market

a potentially is that actual prepayment right. risk So the little bit about the misleading what is of securities,

risk, are world, good fast environment. say, of in we're down Slow are that, prepays said upside we're prepays prepayment in discounted a in I bad, RMBS. terms In always as an Nick

slow a dollar is the of the you're have Of opposite current always MSR, in it. does course holdings exact good. average our and in not prepayments right, of are price premium But true lot

the Yes. end Look, than are managing at tail a normally a you closer are when they lot of portfolio guys I be. risks would the day think

times. These are agree. I uncertain

Okay. Thank you very much. guys

Thank you, Rick.

you. Thank

is question BTIG. Eric next from proceed. Our Please Hagen with

brought you in I here How I on Thank how servicing feel if more up and you bulk how operating Good that back stepping about scaling light you of you, even in you MSR look, grow couple prepay Would onboarding the even a for is you're even like morning. to scalable guys. platform that, just do are there's questions think your RoundPoint. both the feel maybe say RoundPoint talking on? much because how philosophically, have platform would Hey. appetite you the a where maybe we mean, think leverage like like portfolio. of doing? you wave of servicing or the like that a it and do scenario have about more there? How you've appetite

Thanks the morning, Good Eric. question. Sure. Yes. for

a remaining RoundPoint we're yet. on waiting closed know still on states. We haven't few we So

of RoundPoint to that As smoothly, the up close. that's appear confidence been to yet, the that able said already. all still can deal to to gives and we've are have we XX% transferred that reports we've we're even don't and that we do prepared own our And in absorb us while able happened easily very has said continue more. that still And context the to we what And we that leverage the capacity we been operating good. which in platform we post once portfolio the RoundPoint platform our achieve confident we expect we around when and the and announced inside scale a have of earnings been well bit transfers remarks, little gotten

– The have as lower for And in our make will are we acquire that and attractive as will moved the be we we so what paying our platform exercise see loans RoundPoint doing. on do platform it's cost as itself than does right? on cost loans service over RoundPoint what and to of a can capable marginal what sub-servicing, do investors servicing platform. that imagine currently of the We we that that more there

our on So advantageous. amount But will portfolio to than the look even ability sector. Slide RMBS in all else be some to and we're just will better diversity numbers you adding that equal MSR liquidity with XX. of the balancing It have that see

and And as there Nick we is reversion, are opportunities think so mean there. said, we markets are believe good there cyclical – in still

be, to will sector. little from increase close of we already. to that, allocation we sub-servicing to our that capital operating give grow and presence want –we're that a finance participate benefit it of to parts something to to and that space. to low platform, from bit mortgage the like other which what that. the see be our the there service RoundPoint Can be has looking able RoundPoint scalability is in able in the we'll the opportunities third-party opportunity perspective. of We So us cost we

opportunities other be we'll is too. there to able have And that

ways. You to refinancing But wave. protection RoundPoint working be with portfolio what in happen does now order we're mentioned will other in provide right partners that. able to capabilities do not to have a in various

in we'll have as another to that participate we able so the think that's and opportunity markets that space unfolds. as to evolve be time And

you much. Thank so

Eric. you, Thank

Thank you.

there Bill As would at to over are comments. I this like questions time, to closing the further for floor turn no Greenberg

to I always thank want us just and everyone Two your in today as you thank for interest for Harbors. joining

you today’s This your Thank teleconference. participation. concludes for

You your may now lines. disconnect