NLY-PF — Annaly Capital Management, Inc.

Summary of Annaly Capital Management Earnings Call (Q1 2026)

1. Key Financial Results and Metrics

• Economic Return: 1.5% for Q1 2026.
• Earnings Available for Distribution (EAD): $0.76 per share, a $0.02 increase from the previous quarter.
• Book Value per Share: Decreased by 1.9% to $19.82.
• Leverage: Remained conservative at 5.7x.
• Net Interest Margin: Improved by 2 basis points to 1.71%.
• Repo Rate: Average repo rate improved to 3.9%.
• Capital Raised: Approximately $510 million through ATM, primarily allocated to residential credit and mortgage servicing rights (MSR).

2. Strategic Updates and Business Highlights

• Portfolio Performance: Strong performance across diversified housing finance strategies despite market volatility.
• Agency Portfolio: Ended Q1 with a market value of $92 billion, representing 56% of the firm's capital. Capital was dynamically reallocated away from Agency into residential credit and MSR due to changing valuations.
• Residential Credit: Portfolio increased to $10.3 billion, now 23% of total capital. Strong growth in whole loan correspondent channel, with $6.7 billion in acquisitions.
• MSR Portfolio: Increased to $4.2 billion, now 21% of total capital. Annaly was the second-largest buyer of conventional MSR in Q1.
• Securitization Activity: Settled 8 securitizations for $4.7 billion, with a total of 12 transactions priced year-to-date.

3. Forward Guidance and Outlook

• Market Positioning: Each investment strategy is well-positioned to deliver attractive risk-adjusted returns through the remainder of the year.
• Agency Spreads: Expected to offer new money returns in the mid-teens, supported by favorable market technicals.
• Growth in Residential Credit: Anticipated continued strong growth with a focus on asset selection and credit quality.
• MSR Acquisition: Plans to further add MSR through flow acquisition channels, leveraging relationships with large originators.

4. Bad News, Challenges, or Points of Concern

• Geopolitical Risks: The ongoing conflict in the Middle East has introduced energy price shocks, potentially impacting U.S. economic performance.
• Market Volatility: Increased volatility in bond markets and treasury yields due to geopolitical tensions and inflation concerns.
• Declining Metrics: The book value decline was attributed to widening Agency spreads and costs associated with dynamic hedging.
• Competitive Pressures: Non-banks continue to dominate the mortgage origination market, limiting banks' ability to compete effectively.

5. Notable Q&A Insights

• Bank Capital Rules: Changes in bank capital regulations may lead to banks retaining more mortgages, which could positively affect mortgage market technicals.
• Capital Allocation Strategy: Long-term allocation goals remain 50% Agency, 30% Residential Credit, and 20% MSR, with flexibility to pivot based on market conditions.
• Investor Appetite: Despite rising pressures on consumers from inflation, investor appetite for non-QM remains stable, with consistent performance in Annaly's portfolio.
• Hedging Strategy: A shift towards increased use of swaps for hedging is anticipated, given evolving market conditions and correlations.

Overall, Annaly Capital Management demonstrated resilience in a challenging market environment, with strategic capital allocation and a diversified portfolio positioning the company for continued growth despite external pressures.