Summary of Annaly Capital Management Q3 2025 Earnings Call

1Key Financial Results and Metrics

Economic Return: Annaly reported an economic return of 8.1% for Q3 2025, bringing the year-to-date return to 11.5%. This marks eight consecutive quarters of positive economic returns.

Earnings Available for Distribution (EAD): EAD per share was $0.73, consistent with Q2, and exceeded the quarterly dividend of $0.70.

Book Value: Book value per share increased by 4.3% from $18.45 to $19.25.

Net Interest Margin: The net interest margin (excluding PAA) remained stable at 1.7%, with a net interest spread of 1.5%.

Leverage: Economic leverage ratio was reported at 5.7x, slightly lower than the previous quarter.

2Strategic Updates and Business Highlights

Capital Raise: Annaly raised $1.1 billion in equity during the quarter, including $800 million through its ATM program.

Agency Portfolio Growth: The Agency portfolio's market value rose to over $87 billion, a 10% increase quarter-over-quarter, driven by attractive relative returns and improved supply-demand dynamics.

Residential Credit: The portfolio increased to $6.9 billion, with significant contributions from the Onslow Bay platform, which closed eight transactions worth $3.9 billion.

Mortgage Servicing Rights (MSR): The MSR portfolio grew to $3.5 billion, with stable cash flows and a new partnership with PennyMac Financial Services for subservicing.

3Forward Guidance and Outlook

Annaly remains optimistic about the investment strategies for the remainder of the year, citing declining macro volatility and expected Fed rate cuts.

The company anticipates continued strong demand for Agency MBS and a favorable environment for its Residential Credit business, bolstered by the growing private label market.

The outlook for MSR remains positive, with expectations of healthy supply and stable cash flows.

4Challenges and Points of Concern

Labor Market Weakness: The labor market showed signs of slowing, with hiring rates declining, which could impact consumer spending and overall economic conditions.

Interest Rate Volatility: Although interest rate volatility has decreased, the potential for future fluctuations remains a concern, particularly regarding the impact on the portfolio's convexity.

Housing Market Pressures: The housing market is experiencing flat year-over-year home price appreciation, with potential for modest depreciation due to elevated mortgage rates affecting affordability.

5Notable Q&A Insights

Agency Returns: Management acknowledged that tighter spreads have impacted Agency returns but remain confident in the attractiveness of the sector due to improved fundamentals and technicals.

MSR Supply: There has been a notable increase in bulk MSR supply, primarily from large participants, which could provide further acquisition opportunities.

Duration Management: The company is currently maintaining a close-to-zero duration gap due to market uncertainties and is cautious about taking on additional rate risk.

Prepayment Sensitivity: The OBX portfolio has shown slower prepayment speeds than anticipated, positively impacting returns, with a focus on maintaining a favorable convexity profile. Overall, Annaly Capital Management demonstrated strong financial performance in Q3 2025, with strategic growth across its business segments, while navigating challenges in the broader economic landscape.