NLY-PG — 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.
• 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%.
• Repo Rate: Average repo rate decreased to 3.9%.
• Securitization Activity: $4.7 billion across 8 securitizations in Residential Credit.

2. Strategic Updates and Business Highlights

• Portfolio Allocation: Increased capital allocation to Residential Credit and Mortgage Servicing Rights (MSR), now representing 23% and 21% of total capital, respectively.
• Agency Portfolio: Market value at $92 billion, representing 56% of total capital. Adjusted strategy by reallocating capital from Agency to credit businesses due to changing market conditions.
• Residential Credit Growth: Strong performance with $6.7 billion in whole loans acquired, primarily from correspondent channels, and a significant increase in lock volume.
• MSR Purchases: Committed to $24 billion in principal balance of MSR, with a weighted average note rate of 3.4%.

3. Forward Guidance and Outlook

• Market Positioning: Expectation of attractive risk-adjusted returns across all investment strategies, supported by favorable market conditions.
• Agency Spreads: Seen as more reasonable, with potential new money returns in the mid-teens.
• Continued Growth: Plans to further expand MSR portfolio and maintain strong credit quality in Residential Credit.

4. Bad News, Challenges, or Points of Concern

• Geopolitical Risks: The ongoing conflict in the Middle East has introduced volatility and raised commodity prices, which could pressure the U.S. economy and consumer spending.
• Book Value Decline: Driven primarily by Agency spread widening and costs associated with hedging.
• Interest Rate Environment: Uncertainty remains regarding future monetary policy and potential rate cuts, which could affect market dynamics and consumer affordability.

5. Notable Q&A Insights

• Bank Capital Rules: Changes may encourage banks to hold more mortgages, but the trend towards nonbank mortgage origination is expected to continue.
• Capital Allocation Strategy: Long-term target remains 50% Agency, 30% Residential Credit, and 20% MSR, with flexibility to adjust based on market conditions.
• Investor Appetite: Despite rising delinquencies in newer vintages, investor appetite for non-QM remains strong, with no significant impact on credit enhancement or pricing observed.
• Government Actions: Current government initiatives to lower mortgage rates are seen as insufficient without addressing broader economic structural issues.

This summary encapsulates the key points from Annaly Capital Management's Q1 2026 earnings call, providing a balanced view of their financial performance, strategic direction, and market challenges.