NLY-PF — Annaly Capital Management, Inc.

Summary of Annaly Capital Management Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Economic Return: 8.6% for Q4 2025; 20.2% for the full year.
• Total Shareholder Return: 40% for 2025.
• Earnings Available for Distribution (EAD): Increased to $0.74 per share, exceeding the dividend.
• Book Value per Share: Rose 5% from $19.25 to $20.21.
• Economic Leverage: Decreased to 5.6x.
• Repo Rate: Improved to 4.02%, down 34 basis points.
• Liquidity: Ended Q4 with $7.8 billion in unencumbered assets.

2. Strategic Updates and Business Highlights

• Portfolio Growth: Increased by 30% in 2025, with all three strategies (Agency, Residential Credit, MSR) showing double-digit growth.
• Agency Portfolio: Valued at $93 billion, benefiting from lower volatility and a supportive supply-demand picture.
• Residential Credit: Portfolio reached $8 billion, with record performance in the Onslow Bay franchise, achieving all-time highs in lock volume and securitization.
• Mortgage Servicing Rights (MSR): Portfolio increased to $3.8 billion, with strong cash flows and low delinquency rates.

3. Forward Guidance and Outlook

• 2026 Outlook: Each investment strategy is positioned for continued strong results. Anticipated growth in the non-Agency market and a focus on increasing allocations to Residential Credit and MSR.
• Market Conditions: Expectation of mid-teens returns in the Agency market, with a favorable backdrop for non-Agency and MSR due to declining costs of funds and stable capital markets.

4. Bad News, Challenges, or Points of Concern

• Labor Market Risks: Softening labor market could impact economic conditions.
• Global Fiscal Risks: High levels of global debt and asset market euphoria could lead to increased volatility.
• Policy Uncertainty: Potential changes in housing policy, including G-fee cuts, could affect the MBS market and prepayment dynamics.
• Valuation Risks: Agency MBS valuations are at the tight end of the range, posing risks if spreads widen.

5. Notable Q&A Insights

• Dividend Safety: Management expressed confidence in the sustainability of the dividend, citing strong earnings and a supportive balance sheet.
• MSR Strategy: The company is focused on being opportunistic in the MSR market, particularly in acquiring lower coupon MSRs as they become available.
• GSE Involvement: Discussions around the potential impact of GSE purchases on the market and the uncertainty regarding portfolio caps.
• Hedging Costs: Management noted that the cost of hedging has decreased, contributing positively to economic returns.

Overall, Annaly Capital Management demonstrated strong financial performance in Q4 2025, with positive growth across its investment strategies. However, management remains cautious about macroeconomic risks and potential policy changes that could impact future performance.