NLY-PI — Annaly Capital Management, Inc.

Annaly Capital Management (NLY-PI) Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Earnings Available for Distribution (EAD): $0.79 per share, up $0.03 from the previous quarter, marking the ninth consecutive quarter of exceeding the dividend.
• Dividend: Increased to $0.75 per share.
• Economic Return: 5.5% for Q2, bringing the year-to-date economic return to 6.9%.
• Book Value per Share: Increased by 1.7% to $20.15.
• Economic Leverage: Slightly decreased to 5.6x from 5.7x.
• Repo Rate: Average repo rates declined to 3.84%.

2. Strategic Updates and Business Highlights:

• Agency Sector: Grew the Agency portfolio by approximately $3 billion, reaching a market value of $95 billion, representing 57% of total capital.
• Residential Credit: Portfolio remained stable at $10.4 billion, with record loan purchases of $7.1 billion in Q2. Annaly is the largest issuer of Expanded Credit mortgages.
• Mortgage Servicing Rights (MSR): Portfolio unchanged at $4.1 billion, with a focus on higher loan balances to enhance returns.
• Capital Raising: Raised about $450 million through an ATM program, contributing to a conservative balance sheet with $8 billion in unencumbered assets.

3. Forward Guidance and Outlook:

• Investment Strategy: Plans to incrementally add capital to Residential Credit while also considering Agency investments due to strong technicals.
• Market Conditions: Anticipates continued opportunities across all three strategies (Agency, Residential Credit, MSR) supported by a healthy fixed income and housing finance environment.
• Dividend Sustainability: Management expresses confidence in the ability to cover the increased dividend, despite potential geopolitical uncertainties.

4. Bad News, Challenges, or Points of Concern:

• Geopolitical Risks: Ongoing concerns regarding inflation and geopolitical tensions, particularly from the Middle East, which could affect market conditions.
• Market Volatility: While lower rate volatility has been beneficial, rising interest rates could pose challenges.
• Sourcing Challenges: Some competitors are struggling with sourcing enough volume in the Residential Credit market, although Annaly maintains a competitive advantage through established relationships and infrastructure.

5. Notable Q&A Insights:

• Dividend Coverage: Management reassured that the economic returns from their portfolio are sufficient to cover the dividend, with a focus on maintaining a sustainable payout.
• Capital Allocation: Incremental capital will likely be directed towards Agency investments due to favorable technicals, while Residential Credit remains a priority for growth.
• MSR Market Dynamics: Annaly's operational model allows it to capitalize on unique opportunities in the MSR market, particularly as other participants face liquidity challenges.
• Competitive Position: Annaly's established relationships and operational efficiency provide a competitive edge in sourcing loans and managing portfolios, particularly in the Residential Credit space.

Overall, Annaly Capital Management reported solid financial performance in Q2 2026, with strategic growth across its investment platforms and a positive outlook despite external market challenges.