NLY-PG — 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, exceeding the dividend.
• Book Value per Share: Rose 5% to $20.21.
• Economic Leverage: Decreased to 5.6x.
• Repo Rate: Improved to 4.02%, down 34 basis points.
• Total Assets Available for Financing: Approximately $9.4 billion, up $500 million from Q3.

2. Strategic Updates and Business Highlights

• Portfolio Growth: Total portfolio increased by 30% in 2025, with Agency MBS at $93 billion, Residential Credit at $8 billion, and MSR at $3.8 billion.
• Agency MBS: Benefited from lower volatility and a supportive supply-demand environment, with significant inflows into bond funds.
• Residential Credit: Record performance in the Onslow Bay franchise, with $6.4 billion in locked volume and $4.6 billion in securitization issuance in Q4.
• MSR Activity: Committed to purchasing $22 billion in principal balance of MSR, with a focus on expanding the footprint across GSE platforms.

3. Forward Guidance and Outlook

• 2026 Expectations: Each investment strategy is well-positioned for continued strong results. Anticipated growth in the non-Agency market and a focus on increasing allocations in Residential Credit and MSR.
• Market Conditions: Expectation of mid-teens returns with stable hedging costs due to lower volatility. The non-QM market is expected to see significant growth.

4. Challenges and Points of Concern

• Macro Risks: Concerns about global fiscal stability and asset market euphoria could lead to increased volatility.
• Policy Uncertainty: Potential G-fee cuts and their impact on prepayment behavior and the MBS market remain uncertain.
• Valuation Risks: Agency MBS are at the tight end of the valuation range, which could pose risks if spreads widen unexpectedly.

5. Notable Q&A Insights

• Mark-to-Market Book Values: Book value increased by 4% post-quarter end.
• Dividend Safety: Management expressed confidence in the sustainability of the dividend, expecting to outearn it in Q1 2026.
• Opportunistic MSR Purchases: Management is actively looking to acquire lower coupon MSRs, which are currently seen as valuable due to their lower prepayment risk.
• GSE Portfolio Caps: Uncertainty remains regarding the likelihood of increasing portfolio caps, which could affect market dynamics.
• Hedging Costs: Lower volatility has reduced hedging costs, contributing positively to economic returns.

Overall, Annaly Capital Management reported strong financial performance in Q4 2025, with strategic initiatives positioning the company well for future growth despite some macroeconomic and policy-related uncertainties.