Summary of Annaly Capital Management Q3 2025 Earnings Call

1Key Financial Results and Metrics

Economic Return: Annaly reported an economic return of 8.1% for Q3 2025, bringing the year-to-date return to 11.5%. This marks the eighth consecutive quarter of positive economic returns.

Earnings Available for Distribution (EAD): EAD was $0.73 per share, consistent with Q2 and exceeding the quarterly dividend of $0.70.

Book Value: Increased by 4.3% from $18.45 to $19.25 per share.

Net Interest Margin: Remained stable at 1.7%, with net interest spread ex-PAA increasing to 1.5%.

Leverage: Economic leverage ratio stood at 5.7x, slightly lower than the previous quarter, with a healthy repo principal of approximately $8.6 billion added at attractive spreads.

2Strategic Updates and Business Highlights

Agency Portfolio: Grew to over $87 billion in market value, up 10% quarter-over-quarter, driven by strong capital deployment in Agency MBS and improved supply-demand dynamics.

Residential Credit: Portfolio increased to $6.9 billion, with record-setting volumes in the correspondent channel and significant securitization activity through the Onslow Bay platform.

Mortgage Servicing Rights (MSR): Market value rose to $3.5 billion, supported by stable cash flows and a new partnership with PennyMac Financial Services to enhance servicing capabilities.

Capital Raise: Successfully raised $1.1 billion in equity, including $800 million through an ATM program, and re-entered the preferred market with a new issuance.

3Forward Guidance and Outlook

The company remains optimistic about its diversified housing finance model, expecting continued support from declining macro volatility and additional Fed rate cuts.

Anticipates strong demand for Agency MBS and a favorable environment for Residential Credit, with plans to increase allocations in these sectors.

The MSR portfolio is positioned for stable cash flows with limited negative convexity, and the company expects healthy supply to support growth.

4Bad News, Challenges, or Points of Concern

Labor Market Weakness: Hiring has slowed, with only 30,000 jobs added per month over the past three months, raising concerns about consumer spending and economic growth.

Housing Market Pressures: The housing market is experiencing flat year-over-year home price appreciation, with potential for further depreciation due to elevated mortgage rates affecting affordability.

Interest Rate Volatility: Although realized volatility has been low, there are uncertainties regarding future rate movements, which could impact portfolio performance.

Competitive Pressures: The company faces challenges from a growing supply of MSR and potential shifts in market dynamics, including the GSEs' participation in the MBS market.

5Notable Q&A Insights

Agency Returns: Management indicated that while Agency spreads have tightened, the sector remains attractive due to improved fundamentals and technicals, with expectations of increased demand from banks and REITs.

MSR Supply: The increase in bulk supply is driven by large participants, with stable pricing observed, suggesting potential for further MSR acquisitions.

Duration Risk Management: The company maintains a conservative approach to duration risk, preferring to stay close to a zero duration gap amid market uncertainties.

Lock Volume and Securitization: Despite seasonal pressures, the company expects continued activity in mortgage locks and securitization issuance, particularly in the non-QM sector, which is gaining market share. This summary encapsulates the key takeaways from Annaly Capital Management's Q3 2025 earnings call, highlighting both the positive performance metrics and the challenges ahead.