NLY-PG — Annaly Capital Management, Inc.

Annaly Capital Management (NLY-PG) 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 1.9% to $19.82.
• Leverage Ratio: Maintained at 5.7x.
• Net Interest Margin: Improved to 1.71%, with a net interest spread of 1.42%.
• Capital Raised: Approximately $510 million through an ATM offering, primarily allocated to Residential Credit and Mortgage Servicing Rights (MSR).

2. Strategic Updates and Business Highlights:

• Portfolio Allocation: Increased allocation to Residential Credit and MSR, now representing 23% and 21% of total capital, respectively.
• Agency Portfolio: Market value at $92 billion, representing 56% of the firm's capital. Adjusted coupon exposure to enhance cash flows.
• Residential Credit Growth: Achieved $10.3 billion in market value, with significant growth in whole loan correspondent channel and strong securitization activity.
• MSR Activity: Committed to purchasing $24 billion in principal balance of MSR, maintaining a strong credit profile with low delinquency rates.

3. Forward Guidance and Outlook:

• Investment Strategy: Expectation of attractive risk-adjusted returns across all business segments, supported by favorable market conditions and housing finance backdrop.
• Market Positioning: Anticipate continued growth in Residential Credit and MSR, with a long-term target allocation of 50% Agency, 30% Residential Credit, and 20% MSR.
• Economic Environment: Cautiously optimistic about the ability to navigate potential headwinds from geopolitical tensions and inflationary pressures.

4. Challenges and Points of Concern:

• Geopolitical Risks: The ongoing conflict in the Middle East has introduced volatility and energy price shocks, which could impact consumer spending and economic performance.
• Market Volatility: Increased treasury yields and shifting monetary policy expectations may pose challenges for fixed income markets.
• Declining Metrics: A slight decrease in book value and the potential for further tightening in credit spreads could affect profitability.
• Competitive Pressures: Non-bank lenders continue to dominate the mortgage origination market, limiting banks' ability to regain market share.

5. Notable Q&A Insights:

• Bank Capital Rules: Changes in capital requirements may encourage banks to hold more mortgages, but the trend towards non-bank origination is expected to continue.
• Capital Allocation Strategy: Management confirmed a long-term allocation target of 50% Agency, 30% Residential Credit, and 20% MSR, with flexibility to adjust based on market conditions.
• Investor Appetite: Despite rising delinquencies in newer vintages, the overall performance of the non-QM market remains stable, with no significant impact on credit enhancement or pricing.
• Government Actions: Current government initiatives to lower mortgage rates are seen as insufficient without addressing broader economic issues like spending and revenue generation.

This summary encapsulates the key points from Annaly Capital Management's Q1 2026 earnings call, highlighting both the positive developments and the challenges faced by the company in the current economic landscape.