Summary of Annaly Capital Management Q2 2026 Earnings Call

1Key Financial Results and Metrics

Earnings Available for Distribution (EAD): $0.79 per share, exceeding the newly increased quarterly dividend of $0.75, marking the ninth consecutive quarter of EAD exceeding dividends.

Economic Return: 5.5% for Q2 2026, bringing the year-to-date economic return to 6.9%.

Book Value per Share: Increased by 1.7% to $20.15.

Economic Leverage: Remained conservative at 5.6x, down from 5.7x in the prior quarter.

Net Interest Margin: Increased to 1.76%, with net interest spread improving to 1.5%.

Cash and Unencumbered Assets: $5.5 billion in cash and unencumbered Agency MBS, with total assets available for financing at $9.6 billion.

2Strategic Updates and Business Highlights

Agency Portfolio: Grew by approximately $3 billion to $95 billion, increasing capital allocation to 57%. The portfolio strategy included a rotation towards higher coupon MBS.

Residential Credit: Portfolio value stable at $10.4 billion, with record loan purchases of $7.1 billion in Q2. Annaly remains the largest issuer of Expanded Credit mortgages.

Mortgage Servicing Rights (MSR): Portfolio value stable at $4.1 billion; the company is shifting towards higher average loan balance MSRs to enhance return profiles.

Capital Raising: Raised approximately $450 million through an ATM program, supporting growth across Residential Credit and MSR businesses.

3Forward Guidance and Outlook

Investment Strategy: Expect to deploy new capital across Agency and Residential Credit sectors, with a focus on maintaining a balanced approach to risk-adjusted returns.

Market Conditions: Anticipate continued opportunities in a favorable fixed income and housing finance environment, despite geopolitical uncertainties and rising interest rates.

Dividend Sustainability: Management expressed confidence in the ability to cover the increased dividend over the foreseeable future, with a focus on maintaining earnings power.

4Bad News, Challenges, or Points of Concern

Geopolitical Risks: Ongoing geopolitical tensions, particularly related to the Middle East, could impact market conditions and investor sentiment.

Interest Rate Environment: Rising interest rates and potential Fed hikes may pose challenges, particularly in managing portfolio exposure and prepayment risks.

Operational Costs: The OpEx-to-equity ratio increased to 1.4%, indicating rising operational expenses, which may need to be monitored for future quarters.

5Notable Q&A Insights

Dividend Coverage: Management reassured investors about the sustainability of the dividend, indicating that the economic returns from the portfolio are sufficient to cover it.

Capital Allocation: There is a strategic preference for deploying capital into Residential Credit due to its attractive risk-adjusted returns, while also maintaining strong positions in Agency and MSR sectors.

Sourcing Loans: Annaly's established relationships and operational efficiencies provide a competitive edge in sourcing loans, despite industry challenges in volume and pricing.

Market Dynamics: The GSEs' participation in the Agency market has been constructive, helping stabilize mortgage spreads and providing a favorable investment environment. This summary encapsulates the key points from the earnings call, highlighting both the strengths and challenges faced by Annaly Capital Management in Q2 2026.