NLY-PF — Annaly Capital Management, Inc.

Summary of Annaly Capital Management Q2 2026 Earnings Call

1. Key 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.

2. Strategic 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.

3. Forward 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.

4. Bad 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.

5. Notable 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.