NLY-PF — Annaly Capital Management, Inc.

Annaly Capital Management (NLY-PF) Q1 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Economic Return: 1.5% for Q1 2026.
• Earnings Available for Distribution (EAD): $0.76 per share, up $0.02 from the previous quarter.
• Book Value per Share: Decreased by 1.9% to $19.82.
• Leverage: Maintained at a conservative 5.7x.
• Net Interest Margin: Improved by 2 basis points to 1.71%.
• Repo Rate: Average repo rate decreased to 3.9%.
• Securitization: Achieved $4.7 billion across 8 securitizations in Residential Credit.

2. Strategic Updates and Business Highlights

• Portfolio Allocation: Increased capital allocation to Residential Credit and Mortgage Servicing Rights (MSR) from 38% to 44% of total capital.
• Agency Portfolio: Ended the quarter with $92 billion in market value, representing 56% of total capital.
• Residential Credit: Grew to $10.3 billion in market value, now 23% of total capital, driven by strong correspondent channel growth.
• MSR Portfolio: Increased to $4.2 billion, representing 21% of total capital, with a focus on acquiring current coupon MSR.
• Hedging Strategy: Maintained conservative interest rate exposure and adjusted hedging tactics in response to market volatility.

3. Forward Guidance and Outlook

• Market Positioning: Expecting favorable returns across investment strategies, with Agency spreads at reasonable levels and strong technical support.
• Growth in Residential Credit: Anticipating continued strong growth due to infrastructure investments and partnerships.
• MSR Acquisition: Plans to further expand MSR holdings through flow acquisition channels and partnerships.
• Overall Strategy: Aiming for a long-term capital allocation target of 50% Agency, 30% Residential Credit, and 20% MSR.

4. Bad News, Challenges, or Points of Concern

• Geopolitical Risks: The ongoing conflict in the Middle East has introduced volatility and potential economic headwinds, particularly affecting consumer affordability.
• Market Volatility: Rising oil and food prices could further squeeze consumers, impacting overall economic performance.
• Book Value Decline: The Agency sector lagged in performance, contributing to a decline in book value due to spread widening and hedging costs.
• Regulatory Environment: Uncertainty surrounding bank capital rules and their impact on mortgage origination dynamics.

5. Notable Q&A Insights

• Bank Capital Rules: Changes may lead banks to retain more mortgages, positively impacting mortgage market technicals, but banks are unlikely to regain significant market share in origination.
• Capital Allocation Strategy: Long-term goals remain at 50% Agency, 30% Residential Credit, and 20% MSR, with flexibility to pivot based on market conditions.
• Investor Appetite: Despite rising pressures on consumers, investor appetite for non-QM products remains stable, with consistent performance in delinquencies.
• Government Actions: Current government efforts to lower mortgage rates are seen as insufficient, with broader structural economic issues needing to be addressed for meaningful change.

This summary encapsulates the key points from Annaly Capital Management's Q1 2026 earnings call, highlighting financial performance, strategic initiatives, and market outlook while addressing potential challenges and insights from the Q&A session.