NLY-PI — Annaly Capital Management, Inc.

Summary of Annaly Capital Management Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Economic Return: 1.5% for Q1 2026.
• Earnings Available for Distribution (EAD): $0.76 per share, a $0.02 increase from the previous quarter.
• Book Value per Share: Decreased by 1.9% to $19.82.
• Leverage Ratio: Maintained at 5.7x.
• Net Interest Margin: Improved by 2 basis points to 1.71%; net interest spread declined slightly to 1.42%.
• Capital Raised: Approximately $510 million through an ATM, 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 from 38% to 44% of total capital.
• Agency Portfolio: Market value at $92 billion, representing 56% of the firm's capital; repositioned to lower coupon TBAs for improved cash flows.
• Residential Credit: Portfolio value at $10.3 billion, with strong growth in whole loan correspondent channel and a 16% increase in lock volume quarter-over-quarter.
• MSR Portfolio: Valued at $4.2 billion, with a commitment to purchase $24 billion in principal balance of MSR.
• Securitization Activity: Settled 8 securitizations for $4.7 billion in Q1, with a total of 12 transactions totaling $6.6 billion year-to-date.

3. Forward Guidance and Outlook

• Market Positioning: Each investment strategy is expected to deliver attractive risk-adjusted returns supported by favorable market conditions.
• Agency Spreads: Considered reasonable with potential new money returns in the mid-teens.
• Residential Credit Growth: Anticipated continued growth with a focus on asset selection and credit quality.
• MSR Expansion: Plans to further acquire MSR through flow acquisition channels and partnerships with large originators.

4. Bad News, Challenges, or Points of Concern

• Geopolitical Risks: The ongoing conflict in the Middle East has introduced volatility and potential economic challenges, particularly with rising commodity prices affecting consumers.
• Book Value Decline: Driven mainly by widening agency spreads and costs associated with hedging.
• Regulatory Environment: Uncertainty surrounding bank capital rules and their impact on the mortgage market; banks may retain more loans, affecting agency issuance.
• Competitive Pressures: Non-bank entities continue to dominate the mortgage origination market, limiting banks' participation.

5. Notable Q&A Insights

• Bank Capital Rules: Changes may lead to banks holding more mortgages, but the trend towards non-bank origination is expected to persist.
• Capital Allocation Strategy: Long-term goal remains 50% Agency, 30% Residential Credit, and 20% MSR, with flexibility to adjust based on market conditions.
• Investor Appetite: Despite rising mortgage rates, investor interest in non-QM and residential credit remains strong, with consistent performance in delinquencies.
• Hedging Strategy: A shift towards using swaps as a hedge is anticipated due to improved correlations and market dynamics, although treasuries will still play a role during volatility.

This summary encapsulates the key points from the earnings call, highlighting both the strengths and challenges faced by Annaly Capital Management as they navigate a complex market environment.