NLY-PI — 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, up $0.02 from the previous quarter, exceeding the quarterly dividend of $0.70.
• Book Value per Share: Decreased by 1.9% to $19.82.
• Leverage: Conservative at 5.7x.
• Net Interest Margin: Improved by 2 basis points to 1.71%.
• Net Interest Spread: Slightly declined to 1.42%.
• Capital Raised: Approximately $510 million in common equity through ATM, primarily allocated to residential credit and mortgage servicing rights (MSR).

2. Strategic Updates and Business Highlights

• Portfolio Composition: Increased allocation to residential credit (23% of capital) and MSR (21% of capital), while agency MBS remains at 56%.
• Residential Credit: Strong growth with $6.7 billion in whole loans acquired, and a 16% increase in lock volume quarter-over-quarter.
• Securitization Activity: Settled 8 securitizations totaling $4.7 billion, with a total of 12 transactions amounting to $6.6 billion year-to-date.
• MSR Purchases: Committed to purchasing $24 billion in principal balance of MSR, ranking as the second-largest buyer of conventional MSR in the quarter.

3. Forward Guidance and Outlook

• Market Positioning: Annaly expects each investment strategy to deliver attractive risk-adjusted returns supported by a favorable housing finance backdrop.
• Agency MBS: Spreads are at reasonable levels, with anticipated new money returns in the mid-teens.
• Continued Growth: Plans to further expand MSR acquisitions and maintain a disciplined approach to capital allocation across its strategies.

4. Bad News, Challenges, or Points of Concern

• Geopolitical Risks: The ongoing conflict in the Middle East has introduced volatility and energy price shocks, potentially impacting U.S. economic performance.
• Market Volatility: The bond market reacted negatively to geopolitical events, leading to increased treasury yields and uncertainty in monetary policy.
• Declining Metrics: The book value decline was attributed to agency spread widening and costs associated with hedging, particularly in a volatile market.
• Competitive Pressures: The shift of mortgage origination towards non-banks continues, with banks remaining less active in this space.

5. Notable Q&A Insights

• Bank Capital Rules: Changes in capital requirements may encourage banks to retain more mortgages, potentially reducing agency issuance but not likely reversing the trend towards non-bank origination.
• Capital Allocation Strategy: Annaly aims for a long-term allocation 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 of non-QM loans, investor interest remains strong, with no significant impact on credit enhancement or pricing observed.
• Government Actions: Current government efforts to lower mortgage rates are seen as insufficient without addressing broader economic issues like spending and deficits.

This summary encapsulates the key points from the earnings call, providing a balanced view of Annaly Capital Management's financial performance, strategic direction, and market challenges.