NLY-PI — Annaly Capital Management, Inc.

Annaly Capital Management (NLY-PI) Q3 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Economic Return: Achieved an economic return of 8.1% for Q3 2025 and 11.5% year-to-date.
• Earnings Available for Distribution (EAD): Consistent at $0.73 per share, exceeding the quarterly dividend of $0.70.
• Book Value per Share: Increased by 4.3% from $18.45 to $19.25.
• Net Interest Margin: Stable at 1.7% with a net interest spread of 1.5%.
• Leverage: Maintained a modest economic leverage ratio of 5.7x, with a weighted average repo days of 49.
• Unencumbered Assets: Totaled $7.4 billion, including $5.9 billion in cash and Agency MBS.

2. Strategic Updates and Business Highlights

• Capital Raise: Raised $1.1 billion in equity, including $800 million through an ATM program.
• Agency Portfolio: Grew to over $87 billion, benefiting from lower interest rate volatility and improved supply-demand dynamics.
• Residential Credit: Increased portfolio value to $6.9 billion, with record volumes in securitization and whole loans.
• Mortgage Servicing Rights (MSR): Increased market value to $3.5 billion, with stable cash flows and a new partnership with PennyMac for MSR management.
• Investment Strategy: Focused on specified pools to mitigate prepayment risk, with a preference for lower note rate MSR.

3. Forward Guidance and Outlook

• Market Positioning: Well-positioned for the remainder of the year, anticipating further Fed rate cuts and healthy fixed income demand.
• Agency MBS: Expected to remain attractive despite tighter spreads, with potential regulatory reforms and increased bank demand.
• Residential Credit: Anticipated growth in the private label market, leveraging the Onslow Bay platform.
• MSR Supply: Expected to remain healthy, with plans to opportunistically grow the portfolio.

4. Challenges and Points of Concern

• Labor Market Weakness: Hiring slowed significantly, with potential implications for economic growth and consumer spending.
• Housing Market Pressures: National home price appreciation has flattened, raising concerns about affordability and potential depreciation.
• Interest Rate Volatility: Although currently low, any unexpected increases could impact portfolio performance.
• Competitive Pressures: Increased supply in the MSR market from large participants could affect pricing and margins.

5. Notable Q&A Insights

• Agency Returns: Spreads have tightened, leading to a more cautious capital allocation strategy. Management remains optimistic about the attractiveness of Agency MBS.
• MSR Market Dynamics: Bulk supply has increased, primarily from large sellers, with stable pricing. Management prefers taking convexity risk in MBS rather than MSR.
• Prepayment Speeds: Slower than anticipated in the OBX portfolio, benefiting from prepayment penalties on investor loans.
• Dividend Coverage: Management expressed confidence in sustaining the dividend, supported by stable EAD and a strong hedge ratio.

Overall, Annaly Capital Management reported solid financial performance in Q3 2025, with strategic initiatives aimed at capitalizing on favorable market conditions while remaining cautious about potential economic headwinds.