NLY

Annaly Capital Management, Inc. NLY emphasized dividend sustainability, disciplined leverage and selective investment opportunities during its third-quarter 2026 earnings call, despite significant pressure on mortgage-backed securities and book value. Management maintained a constructive outlook across its three investment businesses while acknowledging persistent interest-rate volatility, higher funding costs and housing affordability challenges. Chief executive officer and Co-Chief investment officer David Finkelstein emphasized that Annaly's existing portfolio continues to support its quarterly dividend of 75 cents per share. Responding to a Keefe, Bruyette & Woods analyst, Finkelstein said management expects earnings available for distribution (EAD) to exceed the dividend again in the fourth quarter. EAD reached 80 cents per share, exceeding the Zacks Consensus Estimate of 77 cents per share. However, reported revenues of $543.6 million missed the $596.1-million consensus. Book value declined 11.4% sequentially to $17.86. Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote Finkelstein attributed the difficult quarter to rising Treasury yields, wider mortgage spreads and elevated interest-rate volatility. These conditions contributed to a negative 7.6% economic return. Chief financial officer Serena Wolfe highlighted that economic leverage increased to 5.9 times from 5.6 times, primarily reflecting lower equity. The hedge ratio increased to 100% from 97%. During discussions with Piper Sandler, Finkelstein explained that management had increased Treasury futures hedges during the market sell-off and intends to consider replacing some futures with interest-rate swaps. Head of Agency V.S. Srinivasan explained that wider mortgage spreads have improved prospective investment returns, particularly for 5.5% and 6% coupon securities. Management identified prospective Agency returns in the mid-to-high teens, supported by attractive entry spreads and continued demand from institutional investors. Finkelstein noted that Annaly rotated more than $2 billion of seasoned mortgage pools into higher-coupon securities early in the fourth quarter. Management expects declining volatility to improve market conditions while continuing to monitor duration exposure. Co-Chief investment officer and Head of residential credit Michael Fania highlighted record quarterly correspondent loan fundings of $5.8 billion and $7.4 billion in third-quarter securitizations. During the Piper Sandler discussion, Finkelstein identified residential credit as management's preferred destination for incremental capital, followed closely by Agency mortgages and then mortgage servicing rights. Fania outlined prospective residential credit returns of 13% to 16%, supported by securitization opportunities and financing arrangements. He also emphasized conservative underwriting as housing affordability pressures persist. Head of mortgage servicing rights Ken Adler highlighted the portfolio's expansion to $4.3 billion, supported by selective bulk purchases and growing flow-channel activity. Adler explained that higher interest rates support servicing cash flows through reduced mortgage prepayments and increased income earned on borrower escrow balances. Responding to a JPMorgan analyst, Adler said industry consolidation, technological efficiency and weak origination profitability should encourage continued servicing-rights sales. Finkelstein added that Annaly remains selective about acquisition pricing. Wolfe reported $8.5 billion of assets available for financing, supporting the company's flexibility amid uncertain market conditions. Management raised $757 million through common equity issuance and redeemed approximately $443 million of preferred stock, actions Finkelstein connected to capital structure optimization. Finkelstein maintained that current leverage provides sufficient earnings potential, although the company retains capacity for tactical expansion. His remarks emphasized balancing investment opportunities against capital preservation rather than aggressively increasing exposure. Management entered the fourth quarter expecting some moderation in volatility while remaining vigilant about interest-rate exposure and mortgage market conditions. Finkelstein's overarching message centered on diversified earnings, available liquidity and disciplined capital allocation across Agency mortgages, residential credit and servicing rights. Annaly currently carries a Zacks Rank #2 (Buy), indicating favorable near-term earnings estimate revision characteristics. Its Value Score of B and Momentum Score of A highlight relatively attractive valuation and price momentum characteristics. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. However, the Growth Score of F indicates weak growth characteristics, while the VGM Score of C reflects a mixed overall profile across value, growth and momentum. The favorable Value and Momentum Scores complement its Zacks Rank, but the weaker Growth and composite scores warrant consideration. The Zacks Rank remains subject to change as analysts revise earnings estimates following the latest results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Annaly Capital Management Inc (NLY) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Annaly Capital Management has delivered a 82.8% share price gain over the past three years, even as more recent returns have cooled, which puts fresh focus on whether that run lines up with the returns the business earns on its capital. With the stock now around US$18.34 after a weaker year to date, investors are asking if the current valuation is still supported by the way Annaly deploys and reinvests its equity base. - A 82.8% move over three years means long term holders have meaningful gains at stake. The question is whether those past rewards are backed by durable returns on capital or mostly by shifting sentiment around the mortgage REIT sector. - Recent results included a reported loss of about US$1b alongside continued dividend payments and portfolio adjustments, which can influence how efficiently Annaly converts its capital into income in a higher rate world. - What if you looked at Annaly Capital Management through its earnings instead? See what Annaly Capital Management's 15.1x P/E says about the price. The issue now is whether Annaly Capital Management's current share price is properly aligned with the returns it earns on the capital entrusted to it. If you are weighing whether Annaly Capital Management's 82.8% three year gain is well supported by the returns it earns on its capital, it can help to compare with 29 high quality undervalued stocks. The Excess Returns model looks at how effectively Annaly Capital Management turns its equity base into earnings above the cost of that capital. On this view, the business is modeled with a Book Value of $17.86 per share and a Stable EPS of $3.17 per share, both anchored in estimates from five analysts. The implied Cost of Equity is $2.38 per share, so the Excess Return of $0.80 per share suggests the firm is expected to earn more on its equity than investors are modeled to require over the long run. An average Return on Equity of 16.75% and a Stable Book Value projection of $18.95 per share underpin why the Excess Returns approach places Annaly Capital Management's estimated intrinsic value substantially above the current share price of $18.34. The recent Q3 2026 loss of about $1b, alongside continued dividends and portfolio moves, helps explain why the price may still lag the earnings power implied by these excess returns. Readers who want to see how that gap is quantified can check the detailed Excess Returns workup and compare it directly with the current share price. Find out what Annaly Capital Management could be worth using our Excess Returns estimate. Narratives for Annaly Capital Management pick up where the valuation puzzle leaves off, spelling out which future paths for growth, margins and earnings would need to hold for the shares to trade materially higher or lower than today. Instead of relying on a single multiple or model line, each scenario lays out the key drivers behind its implied value so you can compare those assumptions with Annaly Capital Management's reported numbers as they come through. Narratives are available on Simply Wall St's Community page. One of the top community narratives on Annaly Capital Management: 24% undervalued "Improved financing costs and economic leverage, along with $400 million in accretive common equity raised, have set the stage for increased earnings..." Discover why this Narrative puts Annaly Capital Management at 24% undervalued. The missing piece is who is steering Annaly Capital Management and how their pay packets line up with your interests, because the structure of those incentives can shape what happens next. See who runs Annaly Capital Management and how they are paid. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NLY. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Annaly Capital Management slipped 1.5% to about US$18 in Thursday trading, extending a rough few months just as the mortgage real estate investment trust dropped its Q3 2026 scorecard. On the surface you see a sharp quarterly net loss and a hit to book value per share, which fell to US$17.86. The market is trading that setback quickly. Income investors will be far more focused on one question over the next few years: earnings available for distribution of US$0.80 per share still covered the US$0.75 dividend, even as economic return for the quarter turned deeply negative. Enjoy the US$0.75 income stream from Annaly Capital Management but concerned about the recent hit to book value and economic return? Compare that payout profile with our 7 dividend fortresses. - Total Revenue (Q3 2026 vs Q3 2025): loss of US$959.064 million vs. income of US$903.871 million (swing to revenue loss) - Net Income (Excl. Extra Items, Q3 2026 vs Q3 2025): loss of US$1,043.064 million vs. income of US$791.318 million (moved from strong profit to sizeable loss) - Basic EPS (Q3 2026 vs Q3 2025): loss of US$1.36 per share vs. earnings of US$1.21 per share (shift from positive earnings to per share loss) - Net Profit Margin (Trailing 12 Months vs 1 Year Ago): 68.4% vs. 76.7% (profitability margin compressed over the year) Ask Charlie what Annaly Capital Management sees in today's spread levels. For income holders, the good news is that Annaly Capital Management still earned its payout. Earnings available for distribution of US$0.80 per share covered the US$0.75 dividend and management signalled comfort with that level into Q4. MSR and residential credit platforms produced cash flows that helped offset market value hits in Agency MBS. Liquidity of about US$4.2b in cash and unencumbered Agency securities, plus US$6.9b of total unencumbered assets, supports the idea that the platform can keep funding operations while this rate backdrop plays through. The bear story centers on capital volatility and it has fresh backing. Annaly Capital Management reported a GAAP net loss of roughly US$1b and book value per share fell 11.4% in the quarter, driving a negative 7.6% economic return. Agency MBS spread widening was the main drag on equity and the stock has slipped about 19% over 90 days. Even with leverage at 5.9x and a high hedge ratio, the business model still translated rate and spread moves into a sizeable hit to common equity this quarter. Scan whether this quarter's equity hit and past dilution are isolated or part of deeper structural issues in Annaly Capital Management using our risk analysis for Annaly Capital Management which shows 3 important warning signs Annaly Capital Management recently showed how quickly reported book value can shift in a rate sensitive balance sheet. The real opportunity is finding stocks that could be undervalued before the market revises their pricing. - Company 1 - 38% below our estimate - builds an advisory platform where record mandates and senior hires convert into higher fee, larger capital transactions. - Company 2 - 23% below our estimate - supplies grid and test hardware that utilities and defense contractors adopt as electricity demand and program complexity increase. - Company 3 - 44% below our estimate - uses a culture driven banking model that aims to carry high retention and productivity into a large merger integration. Three companies from the same screener. Open every one of the 33 undervalued companies on it → This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NLY. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. - Earnings Available for Distribution (EAD): $0.80 per share, up $0.01 quarter-over-quarter; exceeded quarterly dividend of $0.75 per share. - Book Value Per Share: $17.86 as of September 30, 2026, down 11.4% from prior quarter. - Economic Return: Negative 7.6% for the quarter (including $0.75 dividend). - Net Interest Margin: Declined 7 basis points to 1.69%. - Net Interest Rate: Declined 8 basis points to 1.42%. - Average Asset Yields: Relatively stable at 5.45%. - Average Economic Cost of Funds: Increased 7 basis points to 4.03%. - Economic Leverage: 5.9x, up from 5.6x, primarily reflecting decline in equity. - Hedge Ratio: Increased to 100% from 97%. - Weighted Average Repo Rate: Increased 3 basis points to 3.87%; weighted average repo days to maturity 30 days, down three days. - OpEx to Equity Ratio: Decreased 11 basis points to 1.29% for the quarter; year-to-date ratio 1.34%. - Agency Portfolio: $92 billion market value, 55% of firm's capital; added ~$2 billion notional in MBS during the quarter. - Residential Credit Portfolio: $10.4 billion market value, roughly flat quarter-over-quarter, 23% of firm's capital. - MSR Portfolio: $4.3 billion market value, 22% of firm's capital; MSR multiple 6.15x; prepayment speeds 4.8 CPR; serious delinquencies below 60 basis points. - Residential Credit Volume: $7 billion locked volume and $5.8 billion fundings, highest quarterly funding volume since channel inception; average FICO 766 and average LTV 67%. - Securitization Activity: $7.4 billion settled in Q3; additional $2.2 billion priced in October; over $21 billion priced in 2026 across 37 deals. - MSR Purchases: One bulk package ~$140 million market value; flow channel just over $50 million, a new quarterly high. - Capital Markets: Redeemed $443 million Series I floating rate preferred stock; issued $757 million in common equity through ATM program. - Liquidity: $6.9 billion in unencumbered assets, including $4.2 billion in cash and unencumbered agency MBS; ~$8.5 billion of assets available for financing (~54% of total equity). - Warehouse Capacity: $8.3 billion total across residential credit and MSR, including $2.8 billion committed; utilization ~57% for residential credit and 50% for MSR. - Warning! GuruFocus has detected 9 Warning Signs with NLY. - High Yield Dividend Stocks in Gurus' Portfolio - This Powerful Chart Made Peter Lynch 29% A Year For 13 Years - How to calculate the intrinsic value of a stock? - Is NLY fairly valued? Test your thesis with our free DCF calculator. Release Date: October 21, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. - Earnings available for distribution (EAD) of $0.80 per share exceeded the quarterly dividend of $0.75 per share, providing dividend coverage. - Economic leverage remained conservative at 5.9x, with a hedge ratio of 100%, reflecting defensive positioning amid rate volatility. - Residential credit correspondent channel delivered record quarterly fundings of $5.8 billion with strong credit quality (average FICO 766, LTV 67%). - MSR portfolio grew to $4.3 billion with low prepayment speeds (4.8 CPR) and strong credit performance (serious delinquencies below 60 bps), generating durable cash flows. - New money returns are attractive across all three businesses, with agency returns in the mid-to-high 10s, residential credit at 13-16%, and MSR returns improving with higher rates. - Book value per share decreased 11.4% to $17.86, resulting in a negative economic return of -7.6% for the quarter due to wider agency MBS spreads and elevated rate volatility. - Net interest margin declined by 7 basis points to 1.69%, and net interest rate declined by 8 basis points to 1.42%, reflecting higher funding costs. - Economic leverage increased to 5.9x from 5.6x, primarily due to the decline in equity, which could amplify future volatility. - The macroeconomic environment remains challenging with the 10-year Treasury yield rising 82 basis points, mortgage rates at 7.5%, and expectations of further Fed rate hikes, pressuring housing activity. - Agency MBS spreads widened significantly, leading to underperformance, and the portfolio experienced duration extension and selling pressure from leveraged investors. Q: Can you provide an update on mark-to-market book value? A: CEO David Finkelstein stated that as of Friday, excluding the dividend accrual, book value was up about 2%, and closer to 3% inclusive of the dividend. Q: Given the expectation for current economic returns, how does dividend coverage compare with the required ROE to cover the dividend? A: CEO David Finkelstein explained that the company out-earned its dividend in Q3 and expects to do so in Q4. He noted that the current portfolio delivers the dividend and that projected returns on new money are up quarter over quarter, making the company comfortable with the current dividend level. Q: Can you discuss the dynamics driving higher returns across your strategies and where you are most interested in adding incremental capital today? A: CEO David Finkelstein stated that returns are incrementally higher across all three businesses. He outlined the capital allocation priority as: 1) Residential Credit, to be grown responsibly; 2) Agency, where returns are ample and compelling; and 3) MSR, which has room to grow. He noted that while MSR headline returns are lower, the position is largely funded with capital and very little leverage. Q: Have there been any distinct changes to your hedging strategy in recent months, especially as rates rose in Q3 and the environment changed in October? A: CEO David Finkelstein noted that the company dynamically hedged during the market sell-off, primarily using futures, and entered Q4 with a higher percentage of futures than usual. He anticipates converting some of those futures into swaps to gain more yield. He also mentioned being encouraged by volatility subsiding and feels the company is carrying a little bit of duration, which is appropriate given the attractiveness of rates. Q: How are you thinking about the role of MSRs in the portfolio today, given the changing convexity profile of agency MBS? A: Head of MSR Ken Adler answered that MSRs serve as both a stand-alone return opportunity and a diversifier. He explained that MSRs provide a hedge against model error in prepayment speeds and a direct hedge for the portfolio. CEO David Finkelstein added that MSRs also hedge against higher short-term rates through increased float income. Director Kristina Busch noted that MSRs have also provided a mark-to-market hedge when rates sell off. Q: Can you talk to your home price outlook and the assumptions underlying the 13% to 16% residential credit return? A: Co-Chief Investment Officer Michael Fania stated that the 13% to 16% return is modeled with conservative assumptions, including a 20% lifetime prepayment speed and 75 basis points of cumulative losses. He noted that the housing market's outlook is dependent on mortgage rates; if rates stay high, national home prices could decline by a couple of points. However, he believes the equity cushion in the portfolio is very manageable, with an average borrower having close to $400,000 of equity. Q: How are exogenous factors like technology and AI impacting the MSR market, and where do you see attractive opportunities? A: Head of MSR Ken Adler explained that due to technology and consolidation, origination profit margins are structurally lower, forcing originators to sell MSRs to generate income. He believes this will lead to a continual supply of MSRs for sale, whether volumes rise or fall. CEO David Finkelstein added that the bid for MSRs is bifurcated between capital participants like Annaly and banks, and that Annaly will sell MSRs when there is a rich bid. Q: Can you discuss the risk-reward in current coupon production and your recent activity layering into higher coupon TBAs? A: Director Kristina Busch clarified that "higher coupon" currently refers to 5.5s and 6s. She noted that TBAs, particularly in production coupons, are becoming more negatively convex as more collateral is carved out into specified pools. She stated the company generally does not like being in TBAs for long and will look to swap the 6s into specified pools over time. Q: How would you characterize your overall risk appetite given the current rate outlook and the trade-off between market volatility and return opportunity? A: CEO David Finkelstein stated he is reasonably optimistic, believing there is a ceiling to rates and that volatility should continue to come down. He noted the company let leverage organically increase in Q3 but is comfortable with its current position. He also explained the decision to redeem preferred stock was a capital structure optimization, as the cost of the preferred increased while agency spreads tightened, compressing the spread. Q: What is your outlook for the non-QM space and origination volumes, given the current level of mortgage rates? A: Co-Chief Investment Officer Michael Fania expects non-QM origination to be around $175 billion for the year, representing 8% to 9% of the total mortgage market. He attributed this elevated share to the purchase-heavy market and the product's appeal to investors and self-employed borrowers. He noted that if mortgage rates were to rally significantly, the non-QM share would shrink as conventional refinance activity would pick up. Q: Can you discuss the performance of the agency portfolio this quarter compared to peers? A: CEO David Finkelstein stated that the agency sector's performance was largely clustered among peers, as most were deliberate about managing duration exposure. He noted that it is not easy to differentiate an agency portfolio, as the entire sector tends to be affected when the market cheapens, and performance is largely dependent on how duration is managed. Q: Can you provide an update on the residential credit market, including any structural changes and the depth of the investor base? A: Co-Chief Investment Officer Michael Fania noted that AAA non-QM spreads widened modestly to around 140 basis points. He highlighted a minor structural change where the AAA bond, traditionally pro rata with the AA, has become a full sequential pay bond to help place slightly out-of-the-money deals. He emphasized that the market remains healthy and resilient, with significant investor depth and non-QM issuance already at $95 billion for the year. Q: Can you discuss your approach to home equity securitization volume and how the market is pricing those liabilities? A: Co-Chief Investment Officer For the complete transcript of the earnings call, please refer to the full earnings call transcript.

The third quarter was very challenging for fixed-income investors such as Annaly Capital Management (NYSE:NLY). A surge in the 10-year Treasury rate to a multi-decade high caused significant volatility. Despite that, the mortgage REIT's earnings available for distribution (EAD) rose in the period, more than covering its 16%-yielding dividend. That makes it a potentially attractive option for investors seeking a super-sized dividend yield. Missed AI's "Act 1"? Act 2 Could Be 14x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we're only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue » Image source: Getty Images. Annaly Capital's CEO David Finkelstein stated in the mortgage REIT's third-quarter earnings press release that "the third quarter of 2026 was a challenging period for fixed income markets, which we were not immune to." Surging interest rates caused volatility in the fixed-income markets, particularly for Agency MBS. That weighed on the value of MBS investments, resulting in the REIT's book value per common share declining from $20.15 in the second quarter to $17.86 in the third quarter. Meanwhile, its economic return was -7.6%, and it reported a GAAP loss of $1.36 per share. However, the company's underlying results were much stronger. The REIT generated $0.80 per share of EAD, more than covering its $0.75-per-share dividend. EAD increased from $0.79 per share in the second quarter and from $0.73 per share in the year-ago period. The company's improving earnings enabled it to raise its dividend from $0.70 per share to $0.75 per share this past June. While the quarter was challenging, Annaly's CEO noted that the REIT "entered the quarter prepared for the volatility." It had a low leverage ratio and minimal duration exposure. That gave it the flexibility to actively manage its portfolio while continuing to deploy capital across its three investment strategies. Its diversification allowed it to focus on opportunities to grow its mortgage servicing rights (MSR) portfolio, which increased 22% in the quarter to $4.3 billion. Meanwhile, its Agency MBS portfolio modestly declined to $91.8 billion, while its residential credit portfolio was relatively flat at $10.4 billion. The company's multifaceted investment strategy provides it with more durable earnings than those of other mortgage REITs. The company remains in a strong position to continue capitalizing on attractive investment opportunities. It has maintained a lower leverage level and strong liquidity, giving it ample investment capacity. Annaly raised $757 million of accretive capital during the quarter, further bolstering its financial flexibility. Meanwhile, returns remain healthy across its investment strategies, increasing over the past quarter: Strategy | Third Quarter Illustrative Returns | Second Quarter Illustrative Returns Agency MBS | 15%-17% | 14%-16% Residential Credit | 13%-16% | 12%-15% MSR | 12%-15% | 11%-13% Data source: Annaly Capital Management. That puts it in a solid position to continue generating EAD above its current dividend level over the coming quarter. Annaly weathered a rough third quarter rather well. It generated more than enough EAD to cover its 16%-yielding dividend, even after raising it earlier this year. Meanwhile, it's in a solid position to continue producing strong earnings. However, Annaly is a higher-risk income investment. It has cut its dividend in the past and could cut it again if market conditions and investment returns deteriorate significantly. Investors need to have a high risk tolerance to buy Annaly for income and should view it not as a buy-and-hold investment but as one they must monitor each quarter. Before you buy stock in Annaly Capital Management, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Annaly Capital Management wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $350,756!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,363,905!* Now, it's worth noting Stock Advisor's total average return is 922% — a market-crushing outperformance compared to 213% for the S&P 500. 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Annaly Capital Management, Inc.'s NLY third-quarter 2026 earnings available for distribution (EAD) per average common share of 80 cents beat the Zacks Consensus Estimate of 77 cents. The figure increased from 73 cents in the year-ago quarter. NLY's net interest income (NII) and net interest margin improved year over year in the reported quarter. The increase in EAD and stronger net interest income were encouraging. However, a decline in book value per common share (BVPS), higher funding costs and a GAAP net loss were concerning. Net loss available to common stockholders was $1.04 billion compared with net income of $791.3 million in the year-ago period. NII was $543.6 million in the reported quarter, which missed the Zacks Consensus Estimate of $596 million. The figure increased significantly from the year-ago quarter. Net interest spread (excluding the premium amortization adjustment, or PAA) was 1.42% in the third quarter, down from 1.50% in both the prior-year and prior quarters. Annaly's BVPS was $17.86 as of Sept. 30, 2026, down from $19.25 in the prior-year quarter. At the end of the reported quarter, the company's economic capital ratio was 14.2%, down from 14.8% in the year-ago quarter. The weighted average experienced constant prepayment rate was 9.6%, compared with 8.6% in the year-ago quarter. Annaly generated an annualized EAD return on average equity of 15.86% in the third quarter, up from 14.70% in the prior-year quarter. The company's total portfolio was $106.5 billion in the quarter, including a $91.8 billion Agency portfolio. The Residential Credit portfolio was $10.4 billion, while the mortgage servicing rights (MSR) portfolio increased to $4.3 billion in market value. Annaly's leverage increased in the quarter, with GAAP leverage at 8.0X, up from 7.1X in the year-ago quarter. Economic leverage rose to 5.9X from 5.7X in the prior-year period. The company reported total stockholders' equity of $15.8 billion as of quarter-end, down from $16.9 billion in the previous quarter. Liquidity remained important amid volatility in fixed-income markets. Annaly ended the quarter with $8.5 billion in total assets available for financing, including $4.2 billion in cash and unencumbered Agency mortgage-backed securities (MBS). The company maintained $8.3 billion in warehouse capacity across its Residential Credit and MSR businesses, including $2.8 billion of committed capacity. Annaly also issued 12 securitizations totaling a record $7.4 billion through its Residential Credit Group during the quarter. Against a challenging fixed-income market backdrop, NLY continued actively managing its hedge portfolio, primarily adding Treasury futures to offset market-driven extension and maintain a disciplined risk posture. The company ended the quarter with a hedge ratio of 100%, up from 92% in the year-ago quarter and 97% in the previous quarter. Funding costs increased during the quarter. Average GAAP costs of interest-bearing liabilities rose six basis points sequentially to 4.34%, while average economic costs increased seven basis points to 4.03%. Net interest margin, excluding PAA, was 1.69%, compared with 1.70% in the third quarter of 2025 and 1.76% in the previous quarter. The average yield on interest-earning assets, excluding PAA, was 5.45%, compared with 5.46% in both the year-ago and prior quarters. GAAP net interest margin improved to 1.54%, up marginally from the prior-year quarter. A key highlight for income-focused investors was that earnings again exceeded the common dividend. Annaly declared a quarterly common stock cash dividend of 75 cents per share, unchanged from the previous quarter and up from 70 cents in the year-ago period. EAD of 80 cents per share provided 1.07X coverage of the declared dividend. The company also continued raising equity capital to support its investment strategy. Annaly raised $757 million through its at-the-market sales program during the quarter, which it characterized as accretive. The capital-raising activity supports the company's ability to pursue investment opportunities across its Agency, Residential Credit and MSR strategies. Annaly's third-quarter results benefited from higher net interest income, improved GAAP net interest margin and stronger EAD per share. Earnings continued to cover the common dividend, while active hedging, liquidity management and equity issuance supported the company's investment strategy. However, the decline in book value per share, higher funding costs and increased leverage remain key concerns. The substantial GAAP net loss also highlights the impact of market-driven investment valuation changes on reported results.G Going forward, Annaly's performance will likely remain sensitive to interest-rate movements, mortgage prepayment trends and financing costs. Its ability to maintain dividend coverage while preserving book value and managing leverage will be important for sustaining shareholder returns. Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote NLY currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. ARMOUR Residential REIT's ARR third-quarter 2026 results reflected distributable earnings available to common stockholders of 71 cents per share, which missed the Zacks Consensus Estimate of 73 cents. ARR's net interest income increased to $83.7 million from $38.5 million in the prior-year quarter. However, the company reported a GAAP net loss of $2.26 per common share against net income of $1.49 per share in the year-ago quarter. Book value per common share declined to $14.55 from $17.49 in the year-ago period. AGNC Investment Corp.'s AGNC third-quarter 2026 results reflected net spread and dollar roll income of 37 cents per common share, which missed the Zacks Consensus Estimates of 39 cents. The company reported a net loss of $1.17 per common share and a 16.9% sequential decline in tangible net book value per comon share to $7.13. Higher interest rates and weakness in the Agency mortgage-backed securities market pressured performance. However, AGNC maintained liquidity of $6.3 billion in unencumbered cash and Agency MBS and raised $992 million through its at-the-market common stock offering program. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Annaly Capital Management Inc (NLY) : Free Stock Analysis Report AGNC Investment Corp. (AGNC) : Free Stock Analysis Report ARMOUR Residential REIT, Inc. (ARR) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Management attributed the negative 7.6% economic return to sharp 10-year Treasury yield increases and elevated rate volatility, which drove Agency MBS spreads wider. - Earnings remained durable with EAD of $0.80 per share, exceeding the dividend due to higher coupon income from larger investment balances and disciplined expense management. - The Agency portfolio was positioned defensively with conservative duration and low leverage, focusing on high-quality specified pools that provided call and extension protection. - Residential credit performance was driven by the Onslow Bay correspondent channel, which achieved record quarterly funding volume of $5.8 billion while maintaining strict credit standards. - MSR served as a critical stabilizer, with valuations increasing due to higher rates and wider MBS spreads, while providing predictable cash flows from low prepayment speeds. - Management optimized the capital structure by redeeming $443 million in floating-rate preferred stock, replacing higher-cost structural leverage with more attractive balance sheet financing. - Strategic positioning shifted toward carrying slightly more duration into Q4, as higher yields offer attractive value and reduced negative convexity minimizes the need for hedge rebalancing. - Management expects to continue outearning the dividend in Q4 2026, supported by new money returns in the mid-to-high teens across core strategies. - Capital allocation will prioritize Residential Credit growth, followed closely by Agency MBS, with MSR maintained at approximately 20% of the firm's capital. - The outlook for Agency MBS is constructive, assuming volatility subsides and technical support remains favorable from GSEs, banks, and record bond fund inflows. - MSR bulk supply is expected to remain robust through year-end as mortgage originators face liquidity needs and low profitability in a high-rate environment. - Management anticipates 2026 will be a post-GFC record year for private label securitization volume, driven by the continued expansion of the non-QM market. - Redeemed $443 million of Series I floating rate preferred stock to reduce structural leverage as its cost rose to approximately 10%. - Issued $757 million in common equity through the ATM program to fund the preferred redemption and reinvest in higher-yielding assets. - Identified regional disparities in housing, noting weakness in the Southeast (Texas and Florida) where month-supply of inventory has reached 10-year highs. - Maintained a high hedge ratio of 100% to protect against persistent rate uncertainty, primarily utilizing Treasury futures. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Management expressed comfort with the current dividend level, noting that the existing portfolio and new money returns both support the payout. - David Finkelstein confirmed the firm outearned the dividend in Q3 and expects to do so again in Q4. - MSR is viewed as both a standalone return opportunity and a model hedge against unexpected prepayment speed deviations. - Higher short-term rates have significantly increased float income from escrow deposits, enhancing the asset's yield profile. - Non-QM is expected to remain 8-9% of the total mortgage market because it serves self-employed and investor borrowers who are less rate-sensitive. - Management noted that if mortgage rates were to rally significantly, the non-QM share would likely shrink as conventional refinancing activity returns. - Book value was estimated to be up approximately 2% (3% inclusive of dividend) as of the Friday preceding the call. - Management believes a 'new normal' of higher rates is established, which should eventually lead to lower realized and implied volatility.

- Interested in Annaly Capital Management Inc? Here are five stocks we like better. - Annaly reported a difficult quarter: Economic return was negative 7.6%, while book value per share fell 11.4% to $17.86 as higher rates, volatility and wider Agency MBS spreads pressured results. - Earnings remained sufficient to cover the dividend: Earnings available for distribution rose to $0.80 per share versus the $0.75 dividend, and management expects to continue out-earning the dividend in the fourth quarter. - Management maintained a defensive but opportunistic strategy: Annaly increased its hedge ratio to 100%, expanded residential credit and MSR activity, and saw attractive returns in Agency MBS despite higher leverage and narrower net interest margins. - Dividend Increases: From Over 10% Yields to Over 10% Dividend Growth Annaly Capital Management (NYSE:NLY) reported a negative economic return of 7.6% for the third quarter of 2026 as higher interest rates, elevated volatility and wider Agency mortgage-backed securities spreads pressured book value. The mortgage real estate investment trust said earnings available for distribution nevertheless exceeded its quarterly dividend. Book value per share declined 11.4% from the prior quarter to $17.86 as of Sept. 30. Including the $0.75-per-share dividend, Annaly's economic return was negative 7.6%. Earnings available for distribution rose by 1 cent from the prior quarter to $0.80 per share, exceeding the dividend. → The AI Sell-Off Continues—These 3 Stocks Keep Raising Guidance Anyway - Here's Who Wins If Trump's 50-Year Mortgages Come to Market Chief Executive Officer and Co-Chief Investment Officer David Finkelstein said the fixed-income market faced a difficult quarter, with the 10-year Treasury yield rising 82 basis points to multidecade highs. Mortgage rates reached 7.5%, while rate volatility rose significantly in September, contributing to wider MBS spreads and Agency MBS underperformance. "Earnings remained durable," Finkelstein said, citing the company's $0.80 per-share earnings available for distribution. He also said Annaly expects to out-earn its dividend in the fourth quarter based on the current portfolio and projected returns on new investments. → Tesla's Roadster Reveal Hints at 2 Much Bigger Moves - 6 Mortgage REITS: How Badly Could Rising Rates Hurt Them? During the quarter, Annaly redeemed $443 million of its Series I floating-rate preferred stock and issued $757 million of common equity through its at-the-market program. The company used the proceeds to fund the preferred-stock redemption and make investments across its portfolios. Economic leverage increased to 5.9 times from 5.6 times, primarily because of the decline in equity, according to Chief Financial Officer Serena Wolfe. The hedge ratio increased to 100% from 97% as Annaly maintained what Wolfe called a defensive position amid market volatility. → Aurora Rejects Curaleaf's Higher Bid, But the Takeover Fight Isn't Over Annaly ended the quarter with $6.9 billion in unencumbered assets, including $4.2 billion in cash and unencumbered Agency MBS. It also had approximately $8.5 billion of assets available for financing, representing about 54% of total equity. Total warehouse capacity for the residential credit and mortgage servicing rights businesses was $8.3 billion, including $2.8 billion of committed capacity. Wolfe said net interest margin declined 7 basis points sequentially to 1.69%, while net interest spread declined 8 basis points to 1.42%. Average asset yields were stable at 5.45%, while the average economic cost of funds rose 7 basis points to 4.03%. Annaly's Agency portfolio declined modestly to $92 billion in market value and represented 55% of company capital. The company added about $2 billion of MBS notional during the quarter, concentrating purchases in higher-coupon specified pools, particularly 5.5% and 6% securities. Finkelstein said the company entered the quarter with conservative duration exposure and historically low leverage. As rates rose, Annaly added hedges, primarily through Treasury futures, to limit interest-rate exposure. The company entered the fourth quarter with somewhat more rate exposure because management views current higher yields as attractive. Early in the fourth quarter, Annaly rotated more than $2 billion of primarily seasoned specified pools into higher-coupon to-be-announced securities. V.S. Srinivasan, head of Agency, said the company's preferred 5.5% and 6% coupons were trading at discounts, while the 6.5% coupon was the only segment trading at a premium dollar price. Management said current Agency MBS spreads offer new-money returns in the mid- to high-teens. Finkelstein said the company's capital-allocation priority remains residential credit first, followed closely by Agency investments and then mortgage servicing rights. Annaly's residential credit portfolio ended the quarter at $10.4 billion in market value, or 23% of capital. The company's Onslow Bay correspondent channel generated $7 billion of lock volume and $5.8 billion of fundings, its highest quarterly funding volume since the channel began more than five years ago. The locked pipeline had an average FICO score of 766 and an average loan-to-value ratio of 67%, Finkelstein said. Annaly settled $7.4 billion of securitizations during the third quarter and priced an additional $2.2 billion in October. The company said it had priced more than $21 billion of securitizations across 37 deals in 2026. Mike Fania, co-chief investment officer and head of residential credit, said triple-A non-QM spreads widened from about 130 basis points over the Treasury curve at the end of the second quarter to about 140 basis points at the end of the third quarter. Annaly's most recent post-quarter-end non-QM transaction priced at 150 basis points over the curve, he said. Fania said the non-QM securitization market remained healthy despite modest structural adjustments. In some transactions, the triple-A bond has shifted from a pro-rata structure to a sequential-pay structure, a change he characterized as modest. On housing, Fania said Annaly believes national home prices could decline by several percentage points if mortgage rates remain near 7.375% to 7.5% for an extended period. However, he said the company views that scenario as manageable given its portfolio's approximately 64% mark-to-market loan-to-value ratio, significant borrower equity and limited layered risk. Annaly's mortgage servicing rights portfolio grew to $4.3 billion in market value, representing 22% of company capital. The company acquired one bulk package with about $140 million of market value during the quarter, while its flow channel generated more than $50 million of volume, a quarterly high. MSR valuations increased modestly, with the company's valuation multiple ending the quarter at 6.15 times. Prepayment speeds fell to 4.8 CPR, while serious delinquencies remained below 60 basis points. Ken Adler, head of mortgage servicing rights, said MSRs continue to serve as both a standalone return opportunity and a diversifier for Annaly's Agency MBS exposure. He said the assets can help offset model risk related to prepayments and have historically traded well when rates rise and Agency MBS spreads come under pressure. Finkelstein said Annaly expects continued MSR supply as mortgage originators face low profitability, consolidation and technology-driven operating changes. He said the company remains positioned to selectively add assets while also selling MSRs when market bids are attractive. Annaly Capital Management, Inc is a diversified capital manager and mortgage real estate investment trust listed on the New York Stock Exchange under the symbol NLY. The company primarily invests in and manages residential mortgage-related assets, seeking to generate income through interest-rate spreads, financing, and portfolio management. Annaly's investment activities have historically focused on agency mortgage-backed securities, which are backed by federally sponsored entities or government agencies. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "What Annaly Capital Management (NLY) Said on Its Q3 Earnings Call" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

Image source: The Motley Fool. Wed, Oct. 21, 2026 - Director of Investor Relations - Sean Kensil - Chief Executive Officer and Co-Chief Investment Officer - David Finkelstein - Chief Financial Officer - Serena Wolfe - Co-Chief Investment Officer and Head of Residential Credit - Mike Fania - Head of Agency - V.S. Srinivasan - Head of Mortgage Servicing Rights - Ken Adler Operator: Thank you for standing by, and welcome to the Annaly Capital Management third quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Sean Kensil, Director of Investor Relations. You may begin. Sean Kensil: Good morning, and welcome to the third quarter 2026 earnings call for Annaly Capital Management. Please note that this call is being recorded. As a reminder, materials for today's call are available on our website at www.annaly.com. Today's call may include forward-looking statements, which are subject to certain risks and uncertainties that could cause actual results to differ materially and refer to certain non-GAAP measures. Please see the notices in our earnings release for important information regarding forward-looking statements and non-GAAP measures. Participants on this morning's call include David Finkelstein, Chief Executive Officer and Co-Chief Investment Officer, Serena Wolfe, Chief Financial Officer, Mike Fania, Co-Chief Investment Officer and Head of Residential Credit, V.S. Srinivasan, Head of Agency, and Ken Adler, Head of Mortgage Servicing Rights. And with that, I'll turn the call over to David. David Finkelstein: Thank you, Sean. Good morning, everyone, and thanks for joining our Q3 earnings call. I'll begin with an overview of the macro environment and our performance during the quarter, then discuss each of our three investment businesses, finishing with our outlook. Serena will then provide a more detailed review of our financials, after which we'll open the call up to Q&A. Now, starting with the macro landscape, the U.S. economy remains resilient, supported by heavy AI investment and healthy consumption. The labor market is stable while inflation remains above the Fed's target, driven in part by higher energy prices. The bond market faced a challenging third quarter, with the 10-year Treasury yield rising 82 basis points to multi-decade highs. The sell-off accelerated following the Fed's first rate hike since 2023, and markets are now pricing nearly three additional 25 basis point hikes through the end of next year. Higher rates also reflected concerns around government debt, heavy corporate issuance, and a repricing of the Fed's neutral rate. Mortgage rates have accordingly reached 7.5%, a level during this cycle seen only briefly in the fall of 2023, and thus, housing activity is likely to stay subdued as affordability challenges persist and the existing borrower lock-in effect continues to constrain turnover. Weaker demand could soften home prices, though supply and demand remain broadly balanced, notwithstanding regional disparities and underlying borrower credit remains fundamentally sound. As upward pressure on rates intensified during the month of September, rate volatility rose significantly, with implied volatility measures reaching their highest levels since the administration's initial tariff announcement a year and a half ago. This drove MBS spreads wider and led to meaningful underperformance in Agency MBS. Against this backdrop, our portfolio delivered a negative 7.6% economic return for the quarter. Earnings remained durable, however, with EAD of $0.80 per share, again exceeding our dividend. While economic leverage ended Q3 up modestly at 5.9 turns. In capital markets, we announced the redemption of our $443 million series I floating rate preferred stock during the third quarter, and the redemption helps us maintain a very conservative capital structure, and we view balance sheet leverage as more attractive, particularly as repo financing remains readily available and terms for residential credit and MSR warehouse lines continue to improve. Relatedly, we issued $757 million in common equity on the quarter through our ATM program, with proceeds used both to fund the preferred redemption as well as to invest across our portfolios. Now turning to our investment strategies and beginning with agency, the sharp sell-off in rates led to meaningful extension across the MBS universe, particularly in the more negatively convex portions of the market. This created duration mismatches and contributed to selling pressure from some more highly levered investors late in the quarter, which exacerbated the volatility-driven MBS spread widening. While we are certainly not immune to mortgage underperformance, we were positioned for rate and spread volatility with conservative duration exposure and historically low leverage heading into the quarter. Our agency portfolio decreased modestly to $92 billion in market value, representing 55% of the firm's capital, though we added approximately $2 billion notional in MBS on the quarter. Activity focused on deploying a portion of our common equity raised into higher coupon specified pools, primarily five and a halfs and sixes. This past quarter also demonstrated the value of our allocation of high-quality specified pools. On average, our pools are more than three and a half years seasoned and carry loan balances less than half those of new production, providing both call and extension protection. As mortgage rates increase, paydowns declined on call-protected pools as expected, but increased on extension-protected pools. Given the distribution and quality of our collateral, the average pay-up on our portfolio increased modestly over the quarter. Now, early in the fourth quarter, we monetized some of this outperformance, rotating over $2 billion in primarily seasoned pools into higher coupon TBAs, which stand to benefit more from a decline in volatility, something we have begun to see since the end of the third quarter. On the liability side, as rates moved higher, we responded by adding to our hedge position, primarily in treasury futures, to keep our overall interest rate exposure contained. We entered the fourth quarter with slightly more rate exposure, however, as current higher yields offer attractive value. We're also comfortable carrying somewhat more duration as the rise in rates materially reduce negative convexity in both our portfolio and the broader MBS universe. As a result, asset durations should be less sensitive to further rate moves in the current environment, reducing the need for hedge rebalancing. Moving to residential credit, our portfolio ended the third quarter roughly flat quarter-over-quarter at $10.4 billion in market value, representing 23% of the firm's capital. Residential spreads traded in a tight range for the majority of Q3, with triple A non-QM spreads ending the quarter approximately 10 basis points wider, largely in sympathy with other securitized products. Our Onslow Bay correspondent channel delivered another strong quarter, with $7 billion of lock volume and $5.8 billion of fundings, our highest quarterly funding volume since the channel's inception more than 5 years ago. Importantly, growth has not come at the expense of credit discipline with our current locked pipeline carrying an average FICO of 766 and an average LTV of 67%. Now, with respect to securitization, we settled $7.4 billion of transactions in Q3 while pricing an additional $2.2 billion in October. Annaly remains the market's largest expanded credit sponsor, and we have now priced more than $21 billion securitizations in 2026 across 37 deals. While the new issue market has experienced marginal widening post quarter end, we are encouraged by the resiliency of the private label market and expect 2026 to be a post GFC record in transaction volume. Now to discuss MSR. Our portfolio increased to $4.3 billion market value, with our allocation of the sector representing 22% of the firm's capital. We took a measured approach to purchases during the quarter, settling one bulk package for roughly $140 million in market value, while our flow channel experienced just over $50 million in volume, a new quarterly high as we continue to gain market share in the co-issue sector. Bulk supply in the market increased quarter-over-quarter, and we expect it to stay robust throughout the balance of the year given current mortgage industry dynamics as we have spoken about extensively over the past year. This environment should provide ample opportunity to responsibly grow our portfolio. Year to date, we remain the largest purchaser of bulk MSR, reflecting the value we bring to the origination community as a strategic partner with a deep permanent capital base. MSR valuations modestly increased, with our multiple ending the quarter at 6.15x, largely driven by higher interest rates and wider current coupon MBS spreads. Our prepayment speeds remained very low this past quarter, decreasing to 4.8 CPR, reflecting our portfolio's low average note rate, seasonal factors, and higher mortgage rates. Credit performance remains strong, with serious delinquencies below 60 basis points. Along with healthy income from our escrow deposits, these factors support a predictable cash flow profile that continues to be a complement to our other investment strategies and an important contributor to our EAD. Now turning to our outlook. We are mindful of uncertainty in the market. We entered the fourth quarter prudently positioned with substantial liquidity, and we remain focused on preserving capital while dynamically allocating across our three businesses as opportunities emerge. Within agency, we continue to manage call and extension risk proactively as the rate outlook evolves, while current spread levels offer compelling new money returns in the mid to high teens. While elevated volatility persists, the outlook for Agency MBS is constructive as spreads have retraced the widest levels since before the GSEs began more actively increasing their portfolios in mid 2025. At the same time, the technical picture remains favorable, with record bond fund inflows and continued support from the GSEs, overseas investors, and banks, while supply is limited given seasonal and high primary mortgage rates. In residential credit, our scaled Onslow Bay correspondent platform gives us direct access to high-quality whole loans, greater control over asset selection, and supports one of the leading securitization programs across asset-backed finance. As the largest issuer of expanded credit MBS, we are uniquely positioned to participate in the continued growth in the non-agency market, with non-QM issuance up nearly 60% year to date. The investments we have made across our platform over the past several years have supported expansion, operating efficiency, and disciplined credit execution. Lastly, in MSR, our differentiated portfolio of low note rates, high-quality assets continues to generate durable cash flows supported by our diversified network of servicing and recapture partnerships, and has demonstrated this year we have the flexibility and capacity to grow the portfolio creatively, further enhancing our earnings and cash flow profile. Now collectively, our three complementary businesses provide multiple avenues to deploy capital efficiently without the burden of a high fixed cost origination model. We remain patient, but we have ample liquidity and balance sheet capacity to put capital to work. We believe the combination of diversified earnings, proprietary asset creation, conservative leverage, and capital allocation flexibility positions Annaly well to continue delivering attractive risk-adjusted returns. Now, with that, I will turn the call over to Serena to discuss our financials. Serena Wolfe: Thank you, David. Today, I will briefly review the financial highlights for the quarter ended September 30, 2026. As in prior quarters, our earnings release discloses GAAP and non-GAAP earnings metrics, and my comments will focus on our non-GAAP EAD and related key performance metrics, which exclude PAA. As David noted, the challenging fixed income market environment weighed on book value during the third quarter. Our diversified hub-and-finance platform nevertheless continued to generate solid earnings, supported by higher coupon income, continued residential credit securitization activity, and lower operating expenses. As of September 30, 2026, our book value per share decreased 11.4% from the prior quarter to $17.86. Including our quarterly dividend of $0.75 per share, we generated an economic return of negative 7.6% for the quarter. Book value performance primarily reflected wider Agency MBS spreads and the impact of elevated rate volatility, including market-driven duration and convexity effects. Gains on our hedging instruments provided meaningful offsets. Earnings available for distribution increased by 1 cent to $0.80 per share, and again exceeded our quarterly dividend of $0.75 per share. The increase was driven primarily by higher coupon interest income on larger average investment securities and residential mortgage loan balances, along with lower operating expenses. These benefits more than offset higher interest expense from increased securitization debt and repo balances, as well as modestly higher funding rates. Net interest margin declined by 7 basis points to 1.69%, while net interest spread declined by 8 basis points to 1.42%. Average asset yields were relatively stable at 5.45%. In comparison, our average economic cost of funds increased 7 basis points to 4.03%, primarily reflecting a greater proportion of securitized debt in our funding mix and slightly higher repo rates. We continue to actively manage the balance sheet through the market volatility. Economic leverage increased to 5.9x from 5.6x, primarily reflecting the decline in equity, while our hedge ratio increased to 100% from 97% as we maintained our defensive positioning. Our weighted average repo rate for the quarter increased 3 basis points to 3.87%, while weighted average repo days to maturity ended the quarter at 30 days, down three days from the prior quarter. Despite interest rate volatility in the third quarter, the repo funding market continued to function smoothly, ensuring reliable and efficient access to short-term financing for Agency MBS. Meanwhile, we continue to maintain ample financing availability for our credit businesses to support their growth, which David highlighted earlier. Total warehouse capacity across our residential credit and MSR businesses remained $8.3 billion, including $2.8 billion of committed capacity. We maintained significant available capacity with utilization rates of approximately 57% for residential credit and 50% for MSR. We ended the third quarter with $6.9 billion in unencumbered assets, including $4.2 billion in cash and unencumbered Agency MBS. In addition, we had approximately $1.6 billion of MSR collateral pledged and available to support future advances subject to market advance rates. In total, we had approximately $8.5 billion of assets available for financing at quarter end, down approximately $1.1 billion from the prior quarter, primarily reflecting lower equity and reduced unencumbered Agency MBS. This represented approximately 54% of our total equity and continued to provide meaningful liquidity and financial flexibility. Finally, our OpEx to equity ratio decreased 11 basis points to 1.29% for the quarter, while our year-to-date ratio remained 1.34%. As anticipated, expenses moderated from the elevated second quarter level, reflecting lower compensation and other G&A expenses. That concludes our remarks. We will now take questions. Thank you, operator. Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Bose George from KBW. Your line is open. Bose George: Hey, everyone. Good morning. Can I just start with a just get an update on the mark-to-market book value? David Finkelstein: Sure, Bose. Good morning. As of Friday, excluding the dividend accrual, we were up about 2% inclusive of the dividend, closer to 3%, and it's sideways since. Bose George: Okay, great. Thanks. I just wanted to ask about dividend coverage. Just given the expectation for current economic returns, how does that compare with the required ROE to cover the dividend? David Finkelstein: Sure. We outearned in Q3. We expect to outearn in Q4, and we will see how 2027 evolves. As it stands today, we did not de-lever in Q3, notwithstanding the volatility, and the current portfolio delivers the dividend. As we laid out our projected returns, which are up quarter-over-quarter, new money gets us there as well. We are comfortable with where the dividend is at today. Bose George: Okay, great. Thanks. David Finkelstein: Thank you, Bose. Operator: Your next question comes from a line of Crispin Love from Piper Sandler. Your line is open. Crispin Love: Thank you. Good morning. David, on that last point, on the market level returns, as you showed out on slide seven, looks like each strategy a little bit higher than last quarter. Can you just discuss some of the dynamics there, driving returns a little bit higher, and then also just where you're most interested in adding incremental capital today in the macro environment. I do appreciate you got three businesses that you want to add, but maybe if you could stack rank. Thank you. David Finkelstein: Sure. I will start with the end of your question on capital allocation, then we will go through each of the three businesses in terms of how the returns evolved heading into Q4. In terms of capital allocation, it is not much different than last quarter. Returns across the three businesses are incrementally higher. As we did say last quarter, we still want to grow the residential credit business responsibly, considerate of credit. That is at the margin where we would like to grow. Agency returns are ample and certainly compelling. That would be second. Then MSR, we still have room to grow. Obviously, those headline returns are a little bit lower than Agency and Resi. But one point to note is that position is largely funded with capital, very little leverage. So we do have room to grow and maintain a 20% capital allocation to the sector. The order is Resi first, close second Agency, and then not far behind is MSR. So let us just talk about returns in each, and I will start with Srini on the Agency and then go to Mike and Ken. V.S. Srinivasan: Sure, David. Basically, Agency spreads for the quarter widened about 20 basis points. Now, when we say spreads widened by 20 basis points, we generally refer to current coupon spreads. Given that only 5.5s, 6s, 6.5s are over par, we really cannot invest in current coupons. So we are slightly below current coupon. Call it 5.5 from six, which is our preferred coupon. For those compared to where current coupon was at the last quarter, spreads are about 10 basis points wider. So that gets us to 15 to 17 basis points is over 100 basis points increase in prospective returns. Mike Fania: Sure, Crispin, this is Mike. On the resi side, what those returns reflect are 13%-16%. First it will reflect the equity that we are retaining through our securitizations. So call that $0.06-$0.07 of capital on the retained OBX securities using maybe call it a turn of leverage. So we will retain, call it 10%-12%. One turn of leverage gets you that $0.06-$0.07 of deployment. Given spreads have widened, we have seen our equity basis has been able to widen as well, and given the volatility, we are pricing in incremental premium. We can also earn mid-teens returns on just residential loans, putting on non-mark-to-market facilities. Our non-mark-to-market facilities are very accretive in the current environment. Call it maybe four to five turns of leverage, and this is non-mark-to-market. You are calling it 15%, 16%. Lastly, there is an opportunity to buy BB non-QM bonds. These are new issue, third-party shelves. Right now they trade, call it 425 to swaps. You can use 20%-25% haircuts on those. The financing there is in the low 100s, so that would actually get you closer to that 16%, 17%. So there is a number of options at which we would be able to get mid-teens or potentially a little bit above mid-teens. Ken Adler: Yeah, hi, and thanks. This is Ken. On the MSR front, the change in return from the prior quarter is largely driven by all rates rising. As capital is deployed, that capital earns a higher rate of return. Additionally, with the MSR, a bulk of the negative duration, certainly on the lower note rate collateral is driven by the float income as we manage the borrower's escrow account. As rates rise, we as the servicer earn a higher rate of return on those escrow balances, and that applies to prospective investments. So those two items are really driving the change in prospective return quarter over quarter. David Finkelstein: Yeah, Crispin, just to add to that point, we entered Q3 with about one and a quarter hikes priced in to the market. We ended the quarter and sit today with about four, including the hike that occurred in September. So just that float income increase in income alone gets you a lot more yield. Crispin Love: Great. No, thank you. That makes sense. Then just one last question from me. Just on just the recent rate vol in the third quarter, then just a little bit of a change in the fourth quarter. Have you seen any distinct changes to your hedging strategy in kind of recent months, recent weeks, especially as rates were rising? You have a little bit of a different environment in October. Just curious on a little bit of the change kind of second half of 3Q into October. David Finkelstein: Yeah, look, as the market was selling off, we did dynamically hedge, and we predominantly used the futures market to achieve that. We entered Q4 with a relatively higher percentage of futures than we normally operate with. So heading into this quarter, our anticipation will be to find opportunities to convert some of those futures into swaps, which gives us a little bit more yield and keeps a good balance on our hedge profile. But generally speaking, over the last couple of weeks, we've been somewhat encouraged by vol subsiding to some extent. You see it both in realized and in implied vols somewhat. So we like to think we're out of the woods. We're still very vigilant when it comes to our hedge profile and making sure that we're managing the portfolio responsibly. When we look at the environment today and the level of rates, we understand why rates are higher. Obviously inflation is a big driver, and we are in a hiking cycle, as shallow as that may end up being. Heavy debt issuance and also the economy has proven to be able to grow at higher rates. So the neutral rate is higher, so we feel like the new normal is higher rates. So the floor on rates is higher. But we do generally like the rates market. We're carrying a little bit of duration here, and we think that's appropriate given the attractiveness of rates and we're comfortable with the positioning. Crispin Love: Great. Thanks for all the color, David. David Finkelstein: Thank you, Crispin. Operator: Your next question comes from the line of Doug Harter from BTIG. Your line is open. Doug Harter: Thanks, and good morning. You guys put up a smaller decline in economic return than your peers. Clearly diversification helped that, but I was wondering if you could help us think how the Agency portfolio performed this quarter as we try to compare that to peers. David Finkelstein: Look, I think I have a brief understanding of how others performed, and I think the Agency sector was largely pretty well clustered close to one another for the most part. I think my understanding is that folks were deliberate about managing duration exposure. I will tell you something, Doug, Agency, it is not that easy to differentiate an Agency portfolio, which may not sound too attractive to Agency monoline peers, but at the end of the day, there is a lot of correlation amongst Agency assets. You can be up in coupon, down in coupon, specs, TBAs. But when the Agency market cheapens, it tends to affect the entire sector and performance, X, how you manage duration can be somewhat uniform. I think this quarter, we were probably somewhat contextual with our Agency portfolio with how others performed, because I think everybody was pretty responsible about navigating the rates market and hedging. Doug Harter: I appreciate that, David. On the residential credit, you talked a little bit about some of the spread widening you have seen on new issue deals. Can you talk about whether there have been any kind of other structural changes or what the depth of the investor base looks like as we have gone through this market? Mike Fania: Sure, Doug. This is Mike. I would say at the top of the capital stack, we ended Q2, call it 130 over the curve. That is to Treasuries. At the end of Q3, we are probably 10 basis points wider, call it 140. We just priced our latest deal, our latest transaction post quarter end non-QM 16. That was done at 150. We have seen other AAA sponsors and other shelves probably price, call it 5 to 15 basis points wider. I do think reflecting the strength of the OBX name, the programmatic nature of the platform, and also the performance as well. I do think we are still firmly in that kind of tier 1 category, and we are benefiting from that. In terms of structural changes, what we have seen, it has been fairly modest, right? The deals that have been coming, call it maybe low 7% gross WAC, low to mid 7% gross WAC. The current coupon within non-QM right now, the one or two and a half rate is probably closer to 8%. These deals are modestly out of the money. What the market has really demanded as a concession to be able to move the risk is that the AAA bond, which traditionally is pro rata with the double A and the single A, has turned into a full sequential. It is a fairly modest change. The triple B and down, the M1 and down has always been a sequential pay. You are really changing the structure of the waterfall of two bonds. And then, what you are seeing is those double A and those single A bonds, because instead of being pro rata and factoring down, they become sequential pay in the initial period before the call. Very modest changes, but I would say that the market is still healthy. The market is very resilient. We have seen $95 billion of non-QM issuance this year. Last year, the entire year was $80 billion. 45% of all issuance we have seen in non-agency has been within the non-QM market. So have not really seen any change in terms of investor depth. And it is a slight structural change to be able to absorb modestly out of the money transactions. Doug Harter: Great. Appreciate that, Mike. David Finkelstein: Thank you, Doug. Operator: Your next question comes from a line of Jason Stewart from Compass Point. Your line is open. Jason Stewart: Hey, good morning. Thanks. We noticed a decent uptick in home equity securitization volume. Maybe if you could talk, Mike, about the two sides there, how you're approaching sizing that as an asset and then how the market is pricing those liabilities today. Mike Fania: Sure. Thanks, Jason. Home equity, we'll classify that as both HELOCs and closed-end seconds. We've seen in terms of total issuance, in the size of the entire market. We've seen about $220 billion of issuance within the non-agency market. About 15% of that has been closed-end seconds and HELOCs. It's around $33 billion. In terms of our production and what we really focus on, it's probably, call it, 5%-6% of our production that we see through the correspondent. We are active predominantly in full documentation HELOCs and closed-end seconds. We've talked about that before. There's a small niche market within the alternative doc. But really the focus continues to be on non-QM and DSCR. A lot of it is the scalability, a lot of it is our competitive advantages are within non-QM and DSCR. Close-end seconds and HELOCs, they trade at very large premiums. Even to be able to aggregate them through a correspondent, you need to be willing to pay 106, 107 type dollar prices. That is something where we've been, I would think, a little bit more conservative than the rest of the market. But in terms of the distribution securitization market, similar to non-QM, it's very healthy. It's not the same size. But I will say that we continue to see transactions, we continue to see deals. If you call AAA non-QM right now for tier 1 issuers, if we call that 150 to 155, I would say for tier 1 close-end second issuers, it's probably 5 to 10 basis points inside of non-QM. And part of that is that the market does believe it's a better convexity profile. But in terms of our strategy, we'll continue to buy those assets, but I think we're probably a little bit more conservative in terms of our scenario analysis, the analytics, and are willing to pay premiums. But market is open, it's healthy, and I would say maybe call it 5 to 10 basis points inside the non-QM AAA market right now. Jason Stewart: Okay. That's helpful. Thank you. Ken Adler: Thanks, Jason. Operator: Your next question comes from a line of Marissa Lobo from UBS. Your line is open. Marissa Lobo: Thanks and good morning. Just on MSRs. Historically, MSRs have provided you a natural offset to the negative convexity in Agency MBS. But as we're seeing the mortgage universe become more fully extended and the convexity profile improving, how are you thinking about the role of MSRs in the portfolio today? Should we think about them more as a standalone return opportunity, or do they continue to provide more diversification across rate scenarios? Ken Adler: Hey, this is Ken. Thanks for the question. I would answer as both. The standalone return is certainly ample, and we talked about that earlier. In terms of the hedging properties, beyond the gamma, the convexity sort of hedging, there is another form of hedging that is going on, and that is model hedging. We use prepayment models to measure our duration convexities and other risk measures. To the extent prepayment speeds for some other reason come in faster or slower than the model, MSR provides a direct hedge to the portfolio. Consider if speeds come in slower than expected, that is always good for MSR, and that is in today's market with the mortgage universe at a discount, just not good for the Agency MBS portfolio. So there is this model error that is being hedged through owning the MSR. Mike Fania: Yeah, one more point, Marissa, I will say is in following up on Ken's point, is that to the extent that the mortgage market is at a reasonable discount like it is, and turnover is actually lower than natural turnover or what should be the case, then the MSR portfolio is going to hedge that as well. As I talked about a moment ago in terms of float income, it is a hedge for short rates. Higher short rates increases the float income and MSR benefits from that as well. So there is still a very productive balancing component to the MSR portfolio in the current environment. V.S. Srinivasan: I would also add that away from models and all of that, Agency MBS has been trading directionally with rates. So when rates sell off, MBS spreads have been under pressure. What we have observed over the last three years is when rates sell off, MSR actually trades very, very well. So from a pure mark-to-market trading perspective, it does provide cushioning on book value moves. Marissa Lobo: Okay, great. Thank you. Then just shifting to residential credit, and thinking about home price appreciation. Can you talk to your home price outlook and is flat HPA manageable? What are the assumptions that are underlying that 13%-16% residential credit return? Mike Fania: Sure. Thanks, Marissa. I will address the second part of it, the 13%-16%. Again, that's mostly the OBX platform. It's non-QM and DSCR. I will say that's modeled to call it maybe a 20% lifetime speed, which is generally where non-QM has come in. In terms of cum losses, that probably represents close to 75 basis points of cum loss in terms of what our projections are. There's significant room for upside. If you look at the totality of our securitization program, we've issued, I think, close to $67 billion life to date. The actual amount of realized losses we have taken inside the trust is around $6 million. So it's been less than one basis point. So one of the areas where we've outperformed our initial expectations has been within credit modeling. We do expect to take more losses and lifetime cum losses on a lot of non-QM DSCR, maybe closer to 10 to 15 basis points as they season. But it just shows you that there is a level of conservatism in terms of those projections. In terms of the housing market, a lot of it will depend upon what mortgage rates do and where mortgage rates ultimately settle. If we stay at 7.375% to 7.5% for an extended period of time, we do believe housing can go negative. It can go negative by a couple points nationally. So a lot of it is dependent upon mortgage rates. In terms of where we sit today, what we would say the modestly bullish case for housing still positive. September was up 8 basis points month-over-month. It's up 1% year-over-year. If you look at zip code level, 77% have positive year-over-year increases. There's a significant amount of homeowner equity, call it 35 to 40 trillion, depending upon what you think that the size of the market is. The average borrower is locked into a 4.65% rate. Inventory is still 15% below 2019. New listings, which is reflecting that mortgage rate, they haven't really increased. It's only up 1% to 2%. The caution, and this is what a lot of people are seeing now, and we do have a level of conservative in terms of just not only our purchase assumptions, but also the quality of the portfolio, as Dave mentioned. The Southeast is very weak. Texas, Florida, you see the public builders talking about competing with resale. Month supply is at a 10-year high. A 7.375% mortgage payment is, that mortgage payment is up 6% to 7% just over the last quarter relative to Q3. Everyone knows the affordability issues that we have, right? If we stay at these rates, yeah, we do think it could go down 2%-3%, 3%-4%. Marissa Lobo: But manageable within the- Mike Fania: Is that all, Marissa? Marissa Lobo: Yes. Mike Fania: Yeah. Marissa Lobo: Mike Fania: Yeah. It's very manageable. As Dave mentioned in the script, our average borrower has close to $400K of equity. It's a 64 mark to market LTV in our portfolio. The D60 plus of our portfolio right now is 160 basis points, and we are predominantly targeting upper-middle-class borrowers, right? It is not necessarily this first-time home buyer, it is not necessarily the borrower who has been challenged with their discretionary income in this inflationary environment. So, I think from that perspective, we feel pretty good about the strategy. David Finkelstein: Yeah, Marissa, there's also very little layered risk in the portfolio. So we can manage and wouldn't even mind seeing HPA home prices come down a little bit to increase the affordability equation and get turnover up. Marissa Lobo: Thank you very much. David Finkelstein: Thanks, Marissa. Operator: Your next question comes from a line of Rich Shane from JPMorgan. Your line is open. Rich Shane: Good morning, everybody, and thanks for taking my questions. There have been a lot of great questions this morning. I just wanted to talk a little bit. Empirically, it is one thing to understand what is going on in MSR, but there are, I would describe, a lot of exogenous factors that are potentially impacting valuation. Mortgage volumes, industry capacity, potentially the impact of AI affecting speeds. I am curious when we think about, again, sort of your empirical models and then overlay all of these different structural things that are happening in mortgage right now. How is that impacting value pricing, demand, and where you see attractive opportunity within MSR? David Finkelstein: Yeah. Thanks for the question, and those are certainly things we are thinking about all day and actually all night. Look, the mortgage industry is in a place because of consolidation, because of technology, where people are operating much more efficiently and are operating at much lower profit margins. Because the efficiency that is priced in, because there is overcapacity, because there is technology, because there is consolidation, it is tough to decouple all the reasons. The profitability of the origination part of the business is very low. The value of a newly created MSR today is somewhere, depending on the loan type, between a point and a point and a half. The profitability of the mortgage industry is substantially lower than that. On average, when you look at the MBA numbers, it is in the 20 basis point range now. Since they have been measuring it, on average, it is in the 40 basis point range. Originators are just forced to sell MSR going forward in our view. If loan production picks up, they have to sell MSR because they are not making as much money. Historically, when volumes picked up, margins picked up, and they picked up because of the shortage of capacity that occurred. We think because of technology, that will not occur anymore. As a result, there will be lots of MSRs selling if volumes pick up because the profitability will not increase on a per unit basis, allowing more MSR retention. Then we think, if origination volume do not pick up, what we are seeing is capitulation, consolidation, needs for liquidity to keep the platforms going until profitability might increase. That is creating MSR selling as well. We just see a continual restructuring of how the industry works where folks without a cost of capital like ours or better are not really going to be able to hold MSR, and they are still holding a lot of legacy MSR. Then go forward, the new MSR, we have a tough time seeing how they will be able to retain that. I think when you look at the MSR transfer data that is public You will see who the sellers are, the bulk sellers are, and you will see this thesis playing out already. Ken Adler: Rich, I will jump in here and just talk about the demand side and valuation. The market, the bid for MSR is somewhat bifurcated. You have folks like us, capital participants in the market that have obviously accumulated a lot of MSR. You also have banks, which particularly given the likelihood of MSR not being a constraint when it comes to the Basel reproposal, which we expect to get out the final of which in the next couple of months. Banks have been a strong source of demand, particularly in lower loan balance type MSR that carry a lot of escrow balances relative to the capital committed. They have been a significant bid, as we talked about last quarter. We sold into the bank bid at levels that we thought were quite attractive. Folks like us, we benefited from all the liquidity that has been generated with the activity in the MSR market and have traded quite a bit of MSR. We still have a fair amount of appetite to add MSR, as do others like us that are portfolio companies. So we understand the market pricing. We still think it is fair. When there is a rich bid out there, we will sell MSRs, we have evidenced very recently. I think from a portfolio standpoint, we are positioned conservatively and our pricing on our portfolio is probably the most conservative in the industry. Rich Shane: Well, look, I appreciate the answer, and it is an interesting thing. I think 25 years ago, we wrote something that said, "The procyclicality of margins would start to erode because of technology. Ken Adler: Yeah Rich Shane: It feels like we're finally on the cusp of that. I do think that there's probably no industry that's financial services industry that's going to be more transformed by AI than mortgage. So it's a really interesting time, and I do appreciate your insights. David Finkelstein: Well, thank you, Rich. Operator: Your next question comes from a line of Jason Weaver from Jones Trading. Your line is open. Jason Weaver: Good morning. Thanks for taking my question. First, hey, Dave. Since the beginning of the year, we've thought of the GSEs as showing a stabilizing bid behind the MBS spreads. I don't think we've seen any data since August, but do you have any sense as to the extent they've been involved or stepped away from purchases over the past several weeks? David Finkelstein: Yeah, look, everything's anecdotal subsequent to August because we don't have that data either. It did appear as though the activity was a little bit slow in the summer. But anecdotally, we have heard that they have been involved in the market. I think you even got a tweet out of the FHFA director in September talking about the GSEs buying and some adjective to describe a considerable quality or quantity of MSR. So our understanding is that they probably are. They still do have a fair amount of dry powder. I think at last look at the end of August, total capacity under the PSPA caps for loans and MBS was like $140 billion. They do still have to keep a lot of dry powder for loan buyouts and things like that. But our understanding is that they still have some ammunition left. Jason Weaver: Got it. Thanks for that. Second, I think you mentioned layering into some higher coupon TBAs in your prepared remarks. I wonder if you could talk just a bit about how you see the risk reward in current coupon production where a sharp uptick in prepayments could occur under a flight to quality. V.S. Srinivasan: Sure. Before we go there, I just want to define where higher coupon is. Where we refer to Fannie five and a half and sixes as higher coupon now, six and a half float is quite small. We're going to start getting more issuance in six and a half in the coming months. But five and a half and sixes are preferred coupon right now, and at this point, they're both discount coupons. The only coupon that's trading at a premium dollar price is six and a half. So most of the TBAs we bought were in five and a half and sixes. In terms of prepayments, we think TBA, particularly in production coupon, continues to deteriorate at an accelerating pace because more and more collateral is being carved out into specified pools. So what is left for TBA is significantly more negatively convex. Up the coupon stack, we generally don't like being in TBA for very long. We obviously when we want to add mortgage exposure, we typically do it in TBA and then over time swap it into pools. So right now we're not worried about our TBAs at five and a half and sixes, mainly because they are discounts. But at some point, particularly for sixes, we will swap them into specified pools. Jason Weaver: Got it. That's great color, Srini. I appreciate it. Thanks, guys. David Finkelstein: You bet. Thank you, Jason. Operator: Your next question comes from a line of Kenneth Lee from RBC Capital Markets. Your line is open. Kenneth Lee: Hey, good morning, and thanks for taking my question. Just at a higher level, curious as to how you'd characterize your overall risk appetite, just given the current rate outlook and the potential trade-off between market vol and return opportunity as you see across the various asset categories. Thanks. David Finkelstein: Yeah. Thanks, Ken. Good question. Look, we are reasonably optimistic on the outlook here. Rates are higher. We do think there is somewhat of a ceiling to rates. I think when you look at the level of interest rates, it is obviously being driven by strong growth and inflation. There are some real costs associated with these high rate levels. Obviously, the AI sector is continuing to borrow and continuing to invest. But the rest of the economy, to some extent, is being crowded out. That is households, corporates, and it is becoming more expensive for government to issue debt. We feel like there are limits to how high rates can go, but there is also a new floor on the level of rates, given we are, as I spoke about, in this new normal environment. What that says to us or suggests to us is that vol should come down. It has to some extent, as we started the fourth quarter, we have reset. Our view is that things are going to stabilize or continue to stabilize, and you will see implied vols coming down because realized vols are a little bit lower. That gives us a little more optimism in terms of our appetite for risk. I think the position is, to a large extent, reflecting that. We let our leverage organically increase this past quarter. We did not de-lever. We did de-lever the capital structure a little bit on the pref side. I will just tell you a little bit about that because that was really about capital structure and leverage optimization. When we issued pref a year ago, we issued it at 8 and 7/8, and Agency spreads were 18%-19% or thereabout. So the spread on that was about 1,000 basis points. Then you fast-forward to when we made the decision to reduce our structural leverage, which was right after earnings, I believe. At that time, we had floating rate pref outstanding. We had gone from two cuts priced into the market over the prior year to four hikes. The cost of that increased to around 10%. Meanwhile, Agency spreads were relatively tight at that time, and levered returns, as we spoke about on the last call, were as low as 14%-15%. So that spread compressed quite a bit. We reduced capital structure leverage, and we felt good about it. Then you fast-forward, and the market cheapened again, obviously, to get closer to the higher teens return. So here we are again, and things look pretty appealing from that standpoint. We are comfortable with our leverage. We have a little capacity to increase it tactically. But we are generating the returns we need with current leverage. Should spreads tighten, I think we show in our spread shocks for a 25-basis-point tightening, it is just over 10% return from that. We are in a position where we like to be, and we are comfortable with the risk in the market, and we think vol will continue to come down, and we will be back in business like we were prior to the episode of vol in the late summer. Kenneth Lee: Great. Very helpful color there. That is all I had. Thanks again. David Finkelstein: Thank you, Ken. Operator: Your final question comes from a line of Trevor Cranston from Citizens JMP. Your line is open. Trevor Cranston: Great. Thanks. Question on the non-QM market. Obviously, it is less rate sensitive in general than the conventional space. I am curious your outlook on how the increase in rates, particularly if mortgage rates hold up here, how that impacts the non-QM space and what your outlook is for origination volumes there going forward compared to where they have been the last couple of quarters. Thanks. Mike Fania: Sure. Thanks for the question, Trevor. It's Mike. In terms of non-QM origination this year, we still think it probably is going to be in, call it the $150 billion to $175 billion. I would say it's probably leaning towards the higher number and the higher amount of that range. In terms of total mortgage origination, maybe we'll call it $1.9 trillion to $2 trillion. We do think it'll continue to be around, call it 8%-9% of the entire market. The reason that non-QM is still an elevated percentage of originations, a lot of it is just because mortgage rates are elevated. It is a purchase market, and non-QM is targeting a lot of investor. Over 50% of this market is investor. Investors right now are about 20% of all real estate purchases, which is a higher share. We are getting a higher percentage of the end borrower at this point. Also, to your point, self-employed borrowers are a little bit more inelastic in terms of at these level of rates. I don't know if the share itself will grow. I think a lot of what you've seen over the last number of years has been maturation. But originators at this point pretty much to a T have rolled out the product. It's still higher gross margins than the conforming market, than the government market. And it's a product that originators need to have to be able to serve their brokers or serve their LOs on the retail side. I would expect it to continue to be 8%-9% of originations at this point. In terms of if the market rallies, if the market rallies and the mortgage rate is at six and a quarter, that percentage is going to shrink exponentially because you're going to see a lot of rate and term refinance of government and conventional. The share is outsized a lot just because it is a purchase market. This market does target the purchase borrower, high investor share. And there's not a lot of rate and term and cash out at this point. Trevor Cranston: Sure. Okay. That's helpful. Thank you. David Finkelstein: Thank you, Trevor. Operator: That concludes our question and answer session. I will now turn the call back over to CEO David Finkelstein for closing remarks. David Finkelstein: Thank you, and thank you, everybody, for joining us. We will talk to you soon. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Before you buy stock in Annaly Capital Management, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Annaly Capital Management wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Annaly (NLY) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

NEW YORK, October 20, 2026--(BUSINESS WIRE)--Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company") today announced its financial results for the quarter ended September 30, 2026. Financial Highlights - GAAP net income (loss) of ($1.36) per average common share for the quarter - Earnings available for distribution ("EAD") of $0.80 per average common share for the quarter - Economic return (loss) of (7.6%) for the third quarter - Book value per common share of $17.86 - GAAP leverage of 8.0x, up from 7.4x in the prior quarter; economic leverage of 5.9x, up from 5.6x in the prior quarter - Declared quarterly common stock cash dividend of $0.75 per share Business Highlights Investment and Strategy - Total portfolio of $106.5 billion, including $91.8 billion in highly liquid Agency portfolio(1) - Annaly's Agency portfolio decreased modestly, representing 55% of dedicated capital(2), with activity focused on further rotation into higher coupon specified pools - Actively managed the hedge portfolio throughout the quarter, primarily adding Treasury futures to offset market-driven extension and maintain a disciplined risk posture, ending the quarter with a hedge ratio of 100% - Annaly's Residential Credit portfolio was effectively unchanged at $10.4 billion(1), representing 23% of dedicated capital(2), with continued strong production from its whole loan correspondent channel including record loan fundings of $5.8 billion - Annaly's MSR portfolio increased to $4.3 billion(1) in market value, representing 22% of dedicated capital(2); Onslow Bay is the sixth-largest non-bank servicer of Agency MBS(3) Financing and Capital - $8.5 billion of total assets available for financing(4), including cash and unencumbered Agency MBS of $4.2 billion - During the quarter, Annaly Residential Credit Group issued twelve securitizations totaling a record $7.4 billion across a wide array of product types – Remained the largest non-bank issuer and the second largest issuer overall of Prime Jumbo and Expanded Credit MBS(5) - Average GAAP cost of interest-bearing liabilities of 4.34%, up six basis points quarter-over-quarter, and average economic cost of interest-bearing liabilities of 4.03%, up seven basis points quarter-over-quarter - Maintained warehouse capacity of $8.3 billion across our Residential Credit and MSR businesses, including $2.8 billion of committed capacity - Announced redemption of all outstanding shares of the $442.5 million Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock(6) - Raised $757 million of accretive capital through the Company's at-the-market sales program(7) "While the third quarter of 2026 was a challenging period for fixed income markets, which we were not immune to, we entered the quarter prepared for the volatility. Our cycle-low leverage and minimal duration exposure provided us with the flexibility to actively manage our portfolio while continuing to make attractive investments across our three strategies," remarked Chief Executive Officer & Co-Chief Investment Officer David Finkelstein. "Meanwhile, Annaly generated EAD of $0.80 per share, once again exceeding the common stock dividend and underscoring the durable earnings power of our platform. "Looking ahead, we remain disciplined in our approach to capital allocation, leverage, liquidity and our hedge portfolio. We continue to see ample investment opportunities across each of our three strategies and we believe Annaly's deep capital base, differentiated operating capabilities and active portfolio management position us well to deploy capital and generate compelling risk-adjusted returns." (1) | | Total portfolio represents Annaly's investments that are on-balance sheet and off-balance sheet in which Annaly has economic exposure. Assets exclude assets transferred or pledged to securitization vehicles of $42.5 billion, include TBA purchase contracts (market value) of $6.5 billion, include $4.1 billion of retained securities that are eliminated in consolidation and are shown net of participations issued totaling $2.2 billion. (2) | | Dedicated capital for each of the investment strategies is calculated as the difference between each investment strategy's allocated assets (including TBAs) and liabilities. (3) | | Based on information aggregated from Fannie Mae and Freddie Mac monthly loan level files by eMBS servicing transfer data as of September 30, 2026. Excludes transfer activity related to platform acquisitions. (4) | | Comprised of $6.9 billion of unencumbered assets, which represents Annaly's excess liquidity and defined as assets that have not been pledged or securitized (generally including cash and cash equivalents, Agency MBS, CRT, Non-Agency MBS, residential mortgage loans, MSR, reverse repurchase agreements, other unencumbered financial assets and capital stock), and $1.6 billion of fair value of collateral pledged for future advances. (5) | | Issuer ranking data from Inside Nonconforming Markets for 2025 to 2026 (October 9, 2026 issue). Used with permission. (6) | | All outstanding shares of Annaly's 6.750% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock were redeemed subsequent to quarter end on October 1, 2026. (7) | | Net of sales agent commissions and other offering expenses. Financial Performance The following table summarizes certain key performance indicators as of and for the quarters ended September 30, 2026, June 30, 2026 and September 30, 2025: | September 30,2026 | | June 30,2026 | | September 30,2025 Book value per common share | $ | 17.86 | | | $ | 20.15 | | | $ | 19.25 | GAAP net income per average common share (1) | $ | (1.36 | ) | | $ | 1.06 | | | $ | 1.21 | Annualized GAAP return on average equity (2) | | (24.35 | %) | | | 19.88 | % | | | 23.69 | % GAAP leverage at period-end (3) | 8.0:1 | | | 7.4:1 | | | 7.1:1 | Net interest margin (4) | | 1.54 | % | | | 1.47 | % | | | 0.97 | % Average yield on interest earning assets (5) | | 5.58 | % | | | 5.44 | % | | | 5.40 | % Average GAAP cost of interest bearing liabilities (6) | | 4.34 | % | | | 4.28 | % | | | 4.73 | % Net interest spread | | 1.24 | % | | | 1.16 | % | | | 0.67 | % Non-GAAP metrics * | | | | | | | | Earnings available for distribution per average common share (1) | $ | 0.80 | | | $ | 0.79 | | | $ | 0.73 | Annualized EAD return on average equity | | 15.86 | % | | | 15.12 | % | | | 14.70 | % Economic leverage at period-end (3) | 5.9:1 | | | 5.6:1 | | | 5.7:1 | Net interest margin (excluding PAA) (4) | | 1.69 | % | | | 1.76 | % | | | 1.70 | % Average yield on interest earning assets (excluding PAA) (5) | | 5.45 | % | | | 5.46 | % | | | 5.46 | % Average economic cost of interest bearing liabilities (6) | | 4.03 | % | | | 3.96 | % | | | 3.96 | % Net interest spread (excluding PAA) | | 1.42 | % | | | 1.50 | % | | | 1.50 | % * Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information. (1) Net of dividends on preferred stock. The quarter ended September 30, 2025 includes cumulative and undeclared dividends of $3.7 million on the Company's 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock (the "Series J Preferred Stock") as of September 30, 2025. (2) Annualized GAAP return on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return on average equity is (6.09%), 4.97%, and 5.92% for the quarters ended September 30, 2026, June 30, 2026, and September 30, 2025, respectively. (3) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, structured repurchase transactions (included within Debt issued by securitization vehicles) and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued are non-recourse to us and are excluded from economic leverage. (4) Net interest margin represents interest income less interest expense divided by average Interest Earning Assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income and less economic interest expense divided by the sum of average Interest Earning Assets plus average outstanding TBA contract balances. PAA represents the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company's Agency mortgage-backed securities. (5) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (6) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss). Other Information This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's beliefs and expectations, speak only as of the date on which they were made, and are subject to significant risks and uncertainties. Actual results could differ materially from those set forth in forward-looking statements. Factors that could cause actual results to differ from those contained in the forward-looking statements can be found in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. Annaly undertakes no obligation to update or revise any forward-looking statements. We use our website and LinkedIn account as additional channels for distributing material company information, along with our press releases, SEC filings and public conference calls and webcasts. The Company prepares an investor presentation and financial supplement for the benefit of its shareholders. Please refer to the investor presentation for definitions of both GAAP and non-GAAP measures used in this news release. Both the Third Quarter 2026 Investor Presentation and the Third Quarter 2026 Financial Supplement can be found on our website. Conference Call The Company will hold the third quarter 2026 earnings conference call on October 21, 2026 at 9:00 a.m. Eastern Time. Participants are encouraged to pre-register for the conference call to receive a unique PIN to gain immediate access to the call and bypass the live operator. Pre-registration may be completed by accessing the pre-registration link found on the "Investors" section of the Company's website at www.annaly.com, or by using the following link: https://registrations.events/direct/IDX71212VIP2npOaYFOwrG0Td. Pre-registration may be completed at any time, including up to and after the call start time. For participants who would like to join the call but have not pre-registered, access is available by dialing 800-715-9871 within the U.S., or 646-307-1963 internationally, and requesting the "Annaly Earnings Call." There will also be an audio webcast of the call on www.annaly.com. A replay of the call will be available for one week following the conference call. The replay number is 800-770-2030 for domestic calls and 609-800-9909 for international calls and the conference passcode is 71212#. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on News & Insights, then select Subscribe and complete the email notification form. Financial Statements ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(dollars in thousands, except per share data) | | | | | | | | | | September 30,2026 | | June 30,2026 | | March 31,2026 | | December 31,2025 (1) | | September 30,2025 | (unaudited) | | (unaudited) | | (unaudited) | | | | (unaudited) Assets | | | | | | | | | Cash and cash equivalents | $ | 2,180,894 | | | $ | 2,912,086 | | | $ | 1,912,444 | | | $ | 2,037,838 | | | $ | 2,096,696 | Securities | | 86,897,746 | | | | 89,515,485 | | | | 88,473,681 | | | | 91,287,630 | | | | 85,062,725 | Loans, net | | 6,869,820 | | | | 7,280,979 | | | | 7,230,876 | | | | 5,020,784 | | | | 4,008,299 | Mortgage servicing rights | | 4,199,823 | | | | 4,089,485 | | | | 4,115,999 | | | | 3,645,865 | | | | 3,476,181 | Interests in MSR | | 110,350 | | | | 106,775 | | | | 27,212 | | | | 28,626 | | | | 35,833 | Assets transferred or pledged to securitization vehicles | | 42,459,566 | | | | 38,256,690 | | | | 34,207,738 | | | | 32,067,433 | | | | 29,512,309 | Derivative assets | | 1,204,812 | | | | 81,784 | | | | 395,099 | | | | 115,533 | | | | 47,899 | Reverse repurchase agreements | | 32,425 | | | | 33,047 | | | | 33,524 | | | | 34,389 | | | | 35,004 | Receivable for unsettled trades | | 705,160 | | | | 104,722 | | | | 891,293 | | | | 1,031 | | | | 185,916 | Principal and interest receivable | | 882,299 | | | | 846,548 | | | | 806,484 | | | | 926,660 | | | | 959,435 | Intangible assets, net | | 4,708 | | | | 5,380 | | | | 6,053 | | | | 6,726 | | | | 7,398 | Other assets | | 599,871 | | | | 508,195 | | | | 437,188 | | | | 437,323 | | | | 433,877 | Total assets | $ | 146,147,474 | | | $ | 143,741,176 | | | $ | 138,537,591 | | | $ | 135,609,838 | | | $ | 125,861,572 | Liabilities and stockholders' equity | | | | | | | | | Liabilities | | | | | | | | | Repurchase agreements | $ | 85,525,065 | | | $ | 86,895,874 | | | $ | 85,068,102 | | | $ | 81,865,723 | | | $ | 75,118,963 | Other secured financing | | 1,125,000 | | | | 1,125,000 | | | | 1,125,000 | | | | 1,075,000 | | | | 1,025,000 | Debt issued by securitization vehicles | | 38,380,269 | | | | 34,366,098 | | | | 30,719,417 | | | | 28,918,753 | | | | 26,601,790 | Participations issued | | 2,200,562 | | | | 2,553,709 | | | | 2,484,018 | | | | 1,932,655 | | | | 1,831,657 | U.S. Treasury securities sold, not yet purchased | | — | | | | — | | | | — | | | | 2,396,724 | | | | 2,442,570 | Derivative liabilities | | 302,774 | | | | 247,968 | | | | 207,369 | | | | 53,755 | | | | 199,100 | Payable for unsettled trades | | 1,108,206 | | | | 331,586 | | | | 1,522,750 | | | | 2,059,386 | | | | 2,604,278 | Interest payable | | 319,589 | | | | 420,764 | | | | 347,607 | | | | 380,688 | | | | 285,080 | Dividends payable | | 588,505 | | | | 562,931 | | | | 511,203 | | | | 494,881 | | | | 476,737 | Other liabilities | | 703,118 | | | | 258,870 | | | | 226,314 | | | | 272,362 | | | | 279,818 | Total liabilities | | 130,253,088 | | | | 126,762,800 | | | | 122,211,780 | | | | 119,449,927 | | | | 110,864,993 | Stockholders' equity | | | | | | | | | Preferred stock, par value $0.01 per share (2) | | 1,802,480 | | | | 1,802,480 | | | | 1,802,480 | | | | 1,802,480 | | | | 1,802,480 | Common stock, par value $0.01 per share (3) | | 7,847 | | | | 7,506 | | | | 7,303 | | | | 7,070 | | | | 6,811 | Additional paid-in capital | | 29,654,134 | | | | 28,886,263 | | | | 28,427,555 | | | | 27,927,113 | | | | 27,352,976 | Accumulated other comprehensive income (loss) | | (795,806 | ) | | | (557,014 | ) | | | (533,614 | ) | | | (488,566 | ) | | | (624,387 | ) Accumulated deficit | | (14,848,732 | ) | | | (13,213,859 | ) | | | (13,429,615 | ) | | | (13,157,325 | ) | | | (13,626,983 | ) Total stockholders' equity | | 15,819,923 | | | | 16,925,376 | | | | 16,274,109 | | | | 16,090,772 | | | | 14,910,897 | Noncontrolling interests | | 74,463 | | | | 53,000 | | | | 51,702 | | | | 69,139 | | | | 85,682 | Total equity | | 15,894,386 | | | | 16,978,376 | | | | 16,325,811 | | | | 16,159,911 | | | | 14,996,579 | Total liabilities and equity | $ | 146,147,474 | | | $ | 143,741,176 | | | $ | 138,537,591 | | | $ | 135,609,838 | | | $ | 125,861,572 | (1) Derived from the audited consolidated financial statements at December 31, 2025. (2) 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 28,800,000 shares authorized, issued and outstanding. 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 17,000,000 shares authorized, issued and outstanding. 6.75% Series I Preferred Stock - Includes 17,700,000 shares authorized, issued and outstanding. 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock - Includes 11,500,000 shares authorized, and 11,000,000 issued and outstanding. (3) Includes 1,456,750,000 shares authorized. Includes 784,673,349 shares issued and outstanding at September 30, 2026; 750,574,308 shares issued and outstanding at June 30, 2026; 730,290,500 shares issued and outstanding at March 31, 2026; 706,972,452 shares issued and outstanding at December 31, 2025; 681,052,317 shares issued and outstanding at September 30, 2025. ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(dollars in thousands, except per share data)(Unaudited) | For the quarters ended | September 30,2026 | | June 30,2026 | | March 31,2026 | | December 31,2025 | | September 30,2025 Net interest income | | | | | | | | | Interest income | $ | 1,970,425 | | | $ | 1,812,198 | | | $ | 1,724,930 | | | $ | 1,690,707 | | | $ | 1,532,497 | Interest expense | | 1,426,813 | | | | 1,324,005 | | | | 1,272,239 | | | | 1,324,128 | | | | 1,256,747 | Net interest income | | 543,612 | | | | 488,193 | | | | 452,691 | | | | 366,579 | | | | 275,750 | Net servicing income | | | | | | | | | Servicing and related income | | 173,096 | | | | 175,059 | | | | 159,133 | | | | 156,131 | | | | 141,356 | Servicing and related expense | | 17,087 | | | | 17,835 | | | | 16,580 | | | | 16,485 | | | | 15,104 | Net servicing income | | 156,009 | | | | 157,224 | | | | 142,553 | | | | 139,646 | | | | 126,252 | Other income (loss) | | | | | | | | | Net gains (losses) on investments and other | | (4,721,745 | ) | | | (318,503 | ) | | | (672,119 | ) | | | 289,428 | | | | 561,927 | Net gains (losses) on derivatives | | 3,074,072 | | | | 552,426 | | | | 409,112 | | | | 251,799 | | | | (92,308 | ) Other, net | | 16,895 | | | | 13,521 | | | | 9,323 | | | | 13,952 | | | | 13,959 | Total other income (loss) | | (1,630,778 | ) | | | 247,444 | | | | (253,684 | ) | | | 555,179 | | | | 483,578 | General and administrative expenses | | | | | | | | | Compensation expense | | 41,185 | | | | 44,640 | | | | 41,384 | | | | 39,279 | | | | 38,393 | Other general and administrative expenses | | 12,021 | | | | 13,549 | | | | 11,180 | | | | 11,928 | | | | 11,947 | Total general and administrative expenses | | 53,206 | | | | 58,189 | | | | 52,564 | | | | 51,207 | | | | 50,340 | Income (loss) before income taxes | | (984,363 | ) | | | 834,672 | | | | 288,996 | | | | 1,010,197 | | | | 835,240 | Income taxes | | 16,335 | | | | 6,899 | | | | (1,519 | ) | | | (7,754 | ) | | | (7,823 | ) Net income (loss) | | (1,000,698 | ) | | | 827,773 | | | | 290,515 | | | | 1,017,951 | | | | 843,063 | Net income (loss) attributable to noncontrolling interests | | 1,061 | | | | 5,100 | | | | 7,863 | | | | 4,457 | | | | 10,618 | Net income (loss) attributable to Annaly | | (1,001,759 | ) | | | 822,673 | | | | 282,652 | | | | 1,013,494 | | | | 832,445 | Dividends on preferred stock (1) | | 41,305 | | | | 41,036 | | | | 40,652 | | | | 42,387 | | | | 41,127 | Net income (loss) available (related) to common stockholders | $ | (1,043,064 | ) | | $ | 781,637 | | | $ | 242,000 | | | $ | 971,107 | | | $ | 791,318 | Net income (loss) per share available (related) to common stockholders | | | | | | | | Basic | $ | (1.36 | ) | | $ | 1.06 | | | $ | 0.33 | | | $ | 1.40 | | | $ | 1.21 | Diluted | $ | (1.36 | ) | | $ | 1.06 | | | $ | 0.33 | | | $ | 1.40 | | | $ | 1.20 | Weighted average number of common shares outstanding | | | | | | | | Basic | | 764,359,434 | | | | 738,926,270 | | | | 722,707,153 | | | | 693,011,031 | | | | 656,335,974 | Diluted | | 764,359,434 | | | | 740,256,247 | | | | 724,364,897 | | | | 695,034,348 | | | | 657,856,427 | Other comprehensive income (loss) | | | | | | | | Net income (loss) | $ | (1,000,698 | ) | | $ | 827,773 | | | $ | 290,515 | | | $ | 1,017,951 | | | $ | 843,063 | Unrealized gains (losses) on available-for-sale securities | | (250,449 | ) | | | (23,400 | ) | | | (45,048 | ) | | | 74,992 | | | | 113,281 | Reclassification adjustment for net (gains) losses included in net income (loss) | | 11,657 | | | | — | | | | — | | | | 60,829 | | | | 2,378 | Other comprehensive income (loss) | | (238,792 | ) | | | (23,400 | ) | | | (45,048 | ) | | | 135,821 | | | | 115,659 | Comprehensive income (loss) | | (1,239,490 | ) | | | 804,373 | | | | 245,467 | | | | 1,153,772 | | | | 958,722 | Comprehensive income (loss) attributable to noncontrolling interests | | 1,061 | | | | 5,100 | | | | 7,863 | | | | 4,457 | | | | 10,618 | Comprehensive income (loss) attributable to Annaly | | (1,240,551 | ) | | | 799,273 | | | | 237,604 | | | | 1,149,315 | | | | 948,104 | Dividends on preferred stock (1) | | 41,305 | | | | 41,036 | | | | 40,652 | | | | 42,387 | | | | 41,127 | Comprehensive income (loss) attributable to common stockholders | $ | (1,281,856 | ) | | $ | 758,237 | | | $ | 196,952 | | | $ | 1,106,928 | | | $ | 906,977 | (1) The quarter ended December 31, 2025 excludes, and the quarter ended September 30, 2025 includes, cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025. ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(dollars in thousands, except per share data) | For the nine months ended | September 30,2026 | | September 30,2025 | (unaudited) | | (unaudited) Net interest income | | | Interest income | $ | 5,507,553 | | | $ | 4,268,498 | Interest expense | | 4,023,057 | | | | 3,499,577 | Net interest income | | 1,484,496 | | | | 768,921 | Net servicing income | | | Servicing and related income | | 507,288 | | | | 423,461 | Servicing and related expense | | 51,502 | | | | 43,788 | Net servicing income | | 455,786 | | | | 379,673 | Other income (loss) | | | Net gains (losses) on investments and other | | (5,712,367 | ) | | | 1,456,242 | Net gains (losses) on derivatives | | 4,035,610 | | | | (1,458,960 | ) Other, net | | 39,739 | | | | 37,169 | Total other income (loss) | | (1,637,018 | ) | | | 34,451 | General and administrative expenses | | | Compensation expense | | 127,209 | | | | 112,273 | Other general and administrative expenses | | 36,750 | | | | 36,149 | Total general and administrative expenses | | 163,959 | | | | 148,422 | Income (loss) before income taxes | | 139,305 | | | | 1,034,623 | Income taxes | | 21,715 | | | | 884 | Net income (loss) | | 117,590 | | | | 1,033,739 | Net income (loss) attributable to noncontrolling interests | | 14,024 | | | | 19,971 | Net income (loss) attributable to Annaly | | 103,566 | | | | 1,013,768 | Dividends on preferred stock (1) | | 122,993 | | | | 115,544 | Net income (loss) available (related) to common stockholders | $ | (19,427 | ) | | $ | 898,224 | Net income (loss) per share available (related) to common stockholders | | Basic | $ | (0.03 | ) | | $ | 1.45 | Diluted | $ | (0.03 | ) | | $ | 1.44 | Weighted average number of common shares outstanding | | Basic | | 742,107,269 | | | | 621,484,893 | Diluted | | 742,107,269 | | | | 622,768,481 | Other comprehensive income (loss) | | Net income (loss) | $ | 117,590 | | | $ | 1,033,739 | Unrealized gains (losses) on available-for-sale securities | | (318,897 | ) | | | 311,717 | Reclassification adjustment for net (gains) losses included in net income (loss) | | 11,657 | | | | 81,578 | Other comprehensive income (loss) | | (307,240 | ) | | | 393,295 | Comprehensive income (loss) | | (189,650 | ) | | | 1,427,034 | Comprehensive income (loss) attributable to noncontrolling interests | | 14,024 | | | | 19,971 | Comprehensive income (loss) attributable to Annaly | | (203,674 | ) | | | 1,407,063 | Dividends on preferred stock (1) | | 122,993 | | | | 115,544 | Comprehensive income (loss) attributable to common stockholders | $ | (326,667 | ) | | $ | 1,291,519 | | | | (1) The nine months ended September 30, 2025 includes cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025. Key Financial Data The following table presents key metrics of the Company's portfolio, liabilities and hedging positions, and performance as of and for the quarters ended September 30, 2026, June 30, 2026 and September 30, 2025: | September 30,2026 | | June 30,2026 | | September 30,2025 Portfolio related metrics | | | | | | | | Fixed-rate Residential Securities as a percentage of total Residential Securities | | 99 | % | | | 99 | % | | | 99 | % Adjustable-rate and floating-rate Residential Securities as a percentage of total Residential Securities | | 1 | % | | | 1 | % | | | 1 | % Weighted average experienced CPR for the period | | 9.6 | % | | | 11.6 | % | | | 8.6 | % Weighted average projected long-term CPR at period-end | | 8.6 | % | | | 11.0 | % | | | 10.4 | % Liabilities and hedging metrics | | | | | | | | Weighted average days to maturity on repurchase agreements outstanding at period-end | | 30 | | | | 33 | | | | 49 | Hedge ratio (1) | | 100 | % | | | 97 | % | | | 92 | % Weighted average pay rate on interest rate swaps at period-end (2) | | 3.19 | % | | | 3.20 | % | | | 3.16 | % Weighted average receive rate on interest rate swaps at period-end (2) | | 3.97 | % | | | 3.73 | % | | | 4.27 | % Weighted average net rate on interest rate swaps at period-end (2) | | (0.78 | %) | | | (0.53 | %) | | | (1.11 | %) GAAP leverage at period-end (3) | 8.0:1 | | | 7.4:1 | | | 7.1:1 | GAAP capital ratio at period-end (4) | | 10.9 | % | | | 11.8 | % | | | 11.9 | % Performance related metrics | | | | | | | | Book value per common share | $ | 17.86 | | | $ | 20.15 | | | $ | 19.25 | GAAP net income per average common share (5) | $ | (1.36 | ) | | $ | 1.06 | | | $ | 1.21 | Annualized GAAP return on average equity (6) | | (24.35 | %) | | | 19.88 | % | | | 23.69 | % Net interest margin (7) | | 1.54 | % | | | 1.47 | % | | | 0.97 | % Average yield on interest earning assets (8) | | 5.58 | % | | | 5.44 | % | | | 5.40 | % Average GAAP cost of interest bearing liabilities (9) | | 4.34 | % | | | 4.28 | % | | | 4.73 | % Net interest spread | | 1.24 | % | | | 1.16 | % | | | 0.67 | % Dividend declared per common share | $ | 0.75 | | | $ | 0.75 | | | $ | 0.70 | Annualized dividend yield (10) | | 15.88 | % | | | 13.42 | % | | | 13.85 | % Non-GAAP metrics * | | | | | | | | Earnings available for distribution per average common share (5) | $ | 0.80 | | | $ | 0.79 | | | $ | 0.73 | Annualized EAD return on average equity (excluding PAA) | | 15.86 | % | | | 15.12 | % | | | 14.70 | % Economic leverage at period-end (3) | 5.9:1 | | | 5.6:1 | | | 5.7:1 | Economic capital ratio at period end (4) | | 14.2 | % | | | 14.9 | % | | | 14.8 | % Net interest margin (excluding PAA) (7) | | 1.69 | % | | | 1.76 | % | | | 1.70 | % Average yield on interest earning assets (excluding PAA) (8) | | 5.45 | % | | | 5.46 | % | | | 5.46 | % Average economic cost of interest bearing liabilities (9) | | 4.03 | % | | | 3.96 | % | | | 3.96 | % Net interest spread (excluding PAA) | | 1.42 | % | | | 1.50 | % | | | 1.50 | % * Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information. (1) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding long receiver swaptions), futures and U.S. Treasury securities sold, not yet purchased, relative to repurchase agreements, other secured financing, cost basis of TBA derivatives outstanding and net forward purchases (sales) of investments; excludes MSR and the effects of term financing, both of which serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration differences in duration between assets and liabilities. (2) Excludes forward starting swaps. (3) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, structured repurchase transactions (included within Debt issued by securitization vehicles) and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued are non-recourse to us and are excluded from economic leverage. (4) GAAP capital ratio is computed as total equity divided by total assets. Economic capital ratio is computed as total equity divided by total economic assets. Total economic assets include the implied market value of TBA derivatives and are net of debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued. (5) Net of dividends on preferred stock. The quarter ended September 30, 2025 includes cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025. (6) Annualized GAAP return on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return on average equity is (6.09%), 4.97% and 5.92% for the quarters ended September 30, 2026, June 30, 2026, and September 30, 2025, respectively. (7) Net interest margin represents interest income less interest expense divided by average interest earning assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances. (8) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (9) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss). (10) Based on the closing price of the Company's common stock of $18.89, $22.36 and $20.21 at September 30, 2026, June 30, 2026 and September 30, 2025, respectively. The following table contains additional information on our investment portfolio as of the dates presented: | For the quarters ended | September 30,2026 | | June 30,2026 | | September 30,2025 Agency mortgage-backed securities | $ | 85,294,151 | | $ | 87,768,578 | | $ | 83,317,819 Residential credit risk transfer securities | | 69 | | | 46,872 | | | 330,647 Non-agency mortgage-backed securities | | 1,603,526 | | | 1,565,016 | | | 1,414,259 Commercial mortgage-backed securities | | — | | | 135,019 | | | — Total securities | $ | 86,897,746 | | $ | 89,515,485 | | $ | 85,062,725 Residential mortgage loans | $ | 6,869,820 | | $ | 7,280,979 | | $ | 4,008,299 Total loans, net | $ | 6,869,820 | | $ | 7,280,979 | | $ | 4,008,299 Mortgage servicing rights | $ | 4,199,823 | | $ | 4,089,485 | | $ | 3,476,181 Interests in MSR | $ | 110,350 | | $ | 106,775 | | $ | 35,833 Residential mortgage loans transferred or pledged to securitization vehicles | $ | 42,459,566 | | $ | 38,256,690 | | $ | 29,512,309 Assets transferred or pledged to securitization vehicles | $ | 42,459,566 | | $ | 38,256,690 | | $ | 29,512,309 Total investment portfolio | $ | 140,537,305 | | $ | 139,249,414 | | $ | 122,095,347 Non-GAAP Financial Measures To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company provides the following non-GAAP measures: - earnings available for distribution ("EAD"); - earnings available for distribution attributable to common stockholders; - earnings available for distribution per average common share; - annualized EAD return on average equity; - economic leverage; - economic capital ratio; - interest income (excluding PAA); - economic interest expense; - economic net interest income (excluding PAA); - average yield on interest earning assets (excluding PAA); - average economic cost of interest bearing liabilities; - net interest margin (excluding PAA); and - net interest spread (excluding PAA). These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP. While intended to offer a fuller understanding of the Company's results and operations, non-GAAP financial measures also have limitations. For example, the Company may calculate its non-GAAP metrics, such as earnings available for distribution, or the PAA, differently than its peers making comparative analysis difficult. Additionally, in the case of non-GAAP measures that exclude the PAA, the amount of amortization expense excluding the PAA is not necessarily representative of the amount of future periodic amortization nor is it indicative of the term over which the Company will amortize the remaining unamortized premium. Changes to actual and estimated prepayments will impact the timing and amount of premium amortization and, as such, both GAAP and non-GAAP results. These non-GAAP measures provide additional detail to enhance investor understanding of the Company's period-over-period operating performance and business trends, as well as for assessing the Company's performance versus that of industry peers. Additional information pertaining to the Company's use of these non-GAAP financial measures, including discussion of how each such measure may be useful to investors, and reconciliations to their most directly comparable GAAP results are provided below. Earnings available for distribution, earnings available for distribution attributable to common stockholders, earnings available for distribution per average common share and annualized EAD return on average equity The Company's principal business objective is to generate net income for distribution to its stockholders and to preserve capital through prudent selection of investments and continuous management of its portfolio. The Company generates net income by earning a net interest spread on its investment portfolio, which is a function of interest income from its investment portfolio less financing, hedging and operating costs. Earnings available for distribution, which is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items), and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items) and excludes (g) the premium amortization adjustment ("PAA") representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company's Agency mortgage-backed securities is used by the Company's management and, the Company believes, used by analysts and investors to measure its progress in achieving its principal business objective. The Company seeks to fulfill this objective through a variety of factors including portfolio construction, the degree of market risk exposure and related hedge profile, and the use and forms of leverage, all while operating within the parameters of the Company's capital allocation policy and risk governance framework. The Company believes these non-GAAP measures provide management and investors with additional details regarding the Company's underlying operating results and investment portfolio trends by (i) making adjustments to account for the disparate reporting of changes in fair value where certain instruments are reflected in GAAP net income (loss) while others are reflected in other comprehensive income (loss) and (ii) by excluding certain unrealized, non-cash or episodic components of GAAP net income (loss) in order to provide additional transparency into the operating performance of the Company's portfolio. In addition, EAD serves as a useful indicator for investors in evaluating the Company's performance and ability to pay dividends. Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders' equity, provides investors with additional detail on the earnings available for distribution generated by the Company's invested equity capital. The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented: | For the quarters ended | September 30,2026 | | June 30,2026 | | September 30,2025 | (dollars in thousands, except per share data) GAAP net income (loss) | $ | (1,000,698 | ) | | $ | 827,773 | | | $ | 843,063 | Adjustments to exclude reported realized and unrealized (gains) losses | | | | | Net (gains) losses on investments and other (1) | | 4,728,272 | | | | 316,206 | | | | (560,957 | ) Net (gains) losses on derivatives (2) | | (2,982,293 | ) | | | (464,968 | ) | | | 284,199 | Other adjustments Amortization of intangibles | | 672 | | | | 673 | | | | 673 | Non-EAD (income) loss allocated to equity method investments (3) | | — | | | | — | | | | 376 | Transaction expenses and non-recurring items (4) | | 10,738 | | | | 10,246 | | | | 8,117 | Income tax effect of non-EAD income (loss) items | | 13,820 | | | | 5,044 | | | | (6,742 | ) TBA dollar roll income (5) | | 18,803 | | | | 17,904 | | | | 9,019 | MSR amortization (6) | | (93,570 | ) | | | (89,816 | ) | | | (72,081 | ) EAD attributable to noncontrolling interests | | (2,086 | ) | | | (2,476 | ) | | | (4,175 | ) Premium amortization adjustment cost (benefit) | | (44,518 | ) | | | 7,081 | | | | 18,390 | Earnings available for distribution * | | 649,140 | | | | 627,667 | | | | 519,882 | Dividends on preferred stock (7) | | 41,305 | | | | 41,036 | | | | 41,127 | Earnings available for distribution attributable to common stockholders * | $ | 607,835 | | | $ | 586,631 | | | $ | 478,755 | GAAP net income (loss) per average common share | $ | (1.36 | ) | | $ | 1.06 | | | $ | 1.21 | Earnings available for distribution per average common share * | $ | 0.80 | | | $ | 0.79 | | | $ | 0.73 | Annualized GAAP return (loss) on average equity (8) | | (24.35 | %) | | | 19.88 | % | | | 23.69 | % Annualized EAD return on average equity * | | 15.86 | % | | | 15.12 | % | | | 14.70 | % * Represents a non-GAAP financial measure. (1) Includes write-downs or recoveries on investments which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). (2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $91.8 million, $87.5 million and $191.9 million for the quarters ended September 30, 2026, June 30, 2026 and September 30, 2025, respectively. (3) The Company excludes non-EAD (income) loss allocated to equity method investments, which represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other, net. (4) Represents costs incurred in connection with securitizations of residential whole loans. (5) TBA dollar roll income represents a component of Net gains (losses) on derivatives. (6) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period. (7) The quarter ended September 30, 2025 includes cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025. (8) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is (6.09%), 4.97%, and 5.92% for the quarters ended September 30, 2026, June 30, 2026, and September 30, 2025, respectively. From time to time, the Company enters into TBA forward contracts as an alternate means of investing in and financing Agency mortgage-backed securities. A TBA contract is an agreement to purchase or sell, for future delivery, an Agency mortgage-backed security with a specified issuer, term and coupon. A TBA dollar roll represents a transaction where TBA contracts with the same terms but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the "drop". The drop is a reflection of the expected net interest income from an investment in similar Agency mortgage-backed securities, net of an implied financing cost, that would be foregone as a result of settling the contract in the later month rather than in the earlier month. The drop between the current settlement month price and the forward settlement month price occurs because in the TBA dollar roll market, the party providing the financing is the party that would retain all principal and interest payments accrued during the financing period. Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency mortgage-backed security less an implied financing cost. TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions. The fair value of TBA derivatives is based on methods similar to those used to value Agency mortgage-backed securities. The Company records TBA derivatives at fair value on its Consolidated Statements of Financial Condition and recognizes periodic changes in fair value in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives. TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract. Although accounted for as derivatives, TBA dollar rolls capture the economic equivalent of net interest income, or carry, on the underlying Agency mortgage-backed security (interest income less an implied cost of financing). TBA dollar roll income is reported as a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). Premium Amortization Expense In accordance with GAAP, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities, excluding interest-only securities, multifamily and reverse mortgages, taking into account estimates of future principal prepayments in the calculation of the effective yield. The Company recalculates the effective yield as differences between anticipated and actual prepayments occur. Using third-party model and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security's acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period. The Company's GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of the Company's non-GAAP metrics exclude the effect of the PAA, which quantifies the component of premium amortization representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term CPR. The following table illustrates the impact of the PAA on premium amortization expense for the Company's Residential Securities portfolio and residential securities transferred or pledged to securitization vehicles, for the quarters ended September 30, 2026, June 30, 2026 and September 30, 2025: | For the quarters ended | September 30,2026 | | June 30,2026 | | September 30,2025 | (dollars in thousands) Premium amortization expense (accretion) | $ | 18,422 | | | $ | 52,423 | | $ | 36,719 Less: PAA cost (benefit) | | (44,518 | ) | | | 7,081 | | | 18,390 Premium amortization expense (excluding PAA) | $ | 62,940 | | | $ | 45,342 | | $ | 18,329 Economic leverage and economic capital ratios The Company uses capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on its assets and the cost of its borrowings and hedging activities. The Company's capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for its stockholders while maintaining appropriate liquidity to support its business and meet the Company's financial obligations under periods of market stress. To maintain its desired capital profile, the Company utilizes a mix of debt and equity funding. Debt funding may include the use of repurchase agreements, loans, securitizations, participations issued, lines of credit, asset backed lending facilities, corporate bond issuance, convertible bonds or other liabilities. Equity capital primarily consists of common and preferred stock. The Company's economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, structured repurchase transactions (included within Debt issued by securitization vehicles) and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued are non-recourse to us and are excluded from economic leverage. The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating the Company's economic leverage ratio for the periods presented: | As of | September 30,2026 | | June 30,2026 | | September 30,2025 Economic leverage ratio reconciliation | (dollars in thousands) Repurchase agreements | $ | 85,525,065 | | | $ | 86,895,874 | | | $ | 75,118,963 | Other secured financing | | 1,125,000 | | | | 1,125,000 | | | | 1,025,000 | Debt issued by securitization vehicles | | 38,380,269 | | | | 34,366,098 | | | | 26,601,790 | Participations issued | | 2,200,562 | | | | 2,553,709 | | | | 1,831,657 | U.S Treasury securities sold, not yet purchased | | — | | | | — | | | | 2,442,570 | Total GAAP debt | $ | 127,230,896 | | | $ | 124,940,681 | | | $ | 107,019,980 | Less Non-recourse debt: | | | | | Debt issued by securitization vehicles (1) | $ | (38,136,634 | ) | | $ | (34,114,655 | ) | | $ | (26,601,790 | ) Participations issued | | (2,200,562 | ) | | | (2,553,709 | ) | | | (1,831,657 | ) Total recourse debt | $ | 86,893,700 | | | $ | 88,272,317 | | | $ | 78,586,533 | Plus / (Less): | | | | | Cost basis of TBA derivatives | $ | 6,710,766 | | | $ | 7,169,573 | | | $ | 3,981,439 | Payable for unsettled trades | | 1,108,206 | | | | 331,586 | | | | 2,604,278 | Receivable for unsettled trades | | (705,160 | ) | | | (104,722 | ) | | | (185,916 | ) Economic debt * | $ | 94,007,512 | | | $ | 95,668,754 | | | $ | 84,986,334 | Total equity | $ | 15,894,386 | | | $ | 16,978,376 | | | $ | 14,996,579 | Economic leverage ratio * | 5.9:1 | | 5.6:1 | | 5.7:1 | | | | | * Represents a non-GAAP financial measure. (1) Non-recourse debt excludes debt issued by securitization vehicles related to structured repurchase transactions. The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating the Company's economic capital ratio for the periods presented: | As of | September 30,2026 | | June 30,2026 | | September 30,2025 Economic capital ratio reconciliation | (dollars in thousands) Total GAAP assets | $ | 146,147,474 | | | $ | 143,741,176 | | | $ | 125,861,572 | Less: | | | | | Gross unrealized gains on TBA derivatives (1) | | (34,383 | ) | | | (50,393 | ) | | | (24,074 | ) Debt issued by securitization vehicles (2) | | (38,136,634 | ) | | | (34,114,655 | ) | | | (26,601,790 | ) Participations issued | | (2,200,562 | ) | | | (2,553,709 | ) | | | (1,831,657 | ) Plus: | | | | | Implied market value of TBA derivatives | | 6,488,723 | | | | 7,216,874 | | | | 3,991,915 | Total economic assets * | $ | 112,264,618 | | | $ | 114,239,293 | | | $ | 101,395,966 | Total equity | $ | 15,894,386 | | | $ | 16,978,376 | | | $ | 14,996,579 | Economic capital ratio * | | 14.2 | % | | | 14.9 | % | | | 14.8 | % | | | | | * Represents a non-GAAP financial measure. (1) Included in Derivative assets in the Company's Consolidated Statements of Financial Condition. (2) Excludes debt issued by securitization vehicles related to structured repurchase transactions. Interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA) Interest income (excluding PAA) represents interest income excluding the effect of the PAA, and serves as the basis for deriving average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA), which are discussed below. The Company believes this measure provides management and investors with additional detail to enhance their understanding of the Company's operating results and trends by excluding the component of premium amortization expense representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company's Agency mortgage-backed securities (other than interest-only securities, multifamily and reverse mortgages), which can obscure underlying trends in the performance of the portfolio. Economic interest expense includes GAAP interest expense, the net interest component of interest rate swaps (which includes net interest on variation margin related to interest rate swaps) and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). The Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. Accordingly, adding the net interest component of interest rate swaps to interest expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of the Company's financing strategy. The Company may use market agreed coupon ("MAC") interest rate swaps in which the Company may receive or make a payment at the time of entering into such interest rate swap to compensate for the off-market nature of such interest rate swap. In accordance with GAAP, upfront payments associated with MAC interest rate swaps are not reflected in the net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss). Similarly, economic net interest income (excluding PAA), as computed below, provides investors with additional information to enhance their understanding of the net economics of our primary business operations. | For the quarters ended | September 30,2026 | | June 30,2026 | | September 30,2025 Interest income (excluding PAA) reconciliation | (dollars in thousands) GAAP interest income | $ | 1,970,425 | | | $ | 1,812,198 | | | $ | 1,532,497 | Premium amortization adjustment | | (44,518 | ) | | | 7,081 | | | | 18,390 | Interest income (excluding PAA) * | $ | 1,925,907 | | | $ | 1,819,279 | | | $ | 1,550,887 | Economic interest expense reconciliation | | | | | GAAP interest expense | $ | 1,426,813 | | | $ | 1,324,005 | | | $ | 1,256,747 | Add: | | | | | Net interest component of interest rate swaps and net interest on initial margin related to interest rate swaps (1) | | (104,133 | ) | | | (98,841 | ) | | | (205,030 | ) Economic interest expense * | $ | 1,322,680 | | | $ | 1,225,164 | | | $ | 1,051,717 | Economic net interest income (excluding PAA) reconciliation | | | | Interest income (excluding PAA) * | $ | 1,925,907 | | | $ | 1,819,279 | | | $ | 1,550,887 | Less: | | | | | Economic interest expense * | | 1,322,680 | | | | 1,225,164 | | | | 1,051,717 | Economic net interest income (excluding PAA) * | $ | 603,227 | | | $ | 594,115 | | | $ | 499,170 | * Represents a non-GAAP financial measure. (1) Interest on initial margin related to interest rate swaps is reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). Average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA), net interest margin (excluding PAA) and average economic cost of interest bearing liabilities Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances, provide management with additional measures of the Company's profitability that management relies upon in monitoring the performance of the business. Disclosure of these measures, which are presented below, provides investors with additional detail regarding how management evaluates the Company's performance. | For the quarters ended | September 30,2026 | | June 30,2026 | | September 30,2025 Economic metrics (excluding PAA) | (dollars in thousands) Average interest earning assets | $ | 141,338,058 | | | $ | 133,263,735 | | | $ | 113,522,223 | Interest income (excluding PAA) * | $ | 1,925,907 | | | $ | 1,819,279 | | | $ | 1,550,887 | Average yield on interest earning assets (excluding PAA) * | | 5.45 | % | | | 5.46 | % | | | 5.46 | % Average interest bearing liabilities | $ | 129,667,247 | | | $ | 122,802,541 | | | $ | 103,994,302 | Economic interest expense * | $ | 1,322,680 | | | $ | 1,225,164 | | | $ | 1,051,717 | Average economic cost of interest bearing liabilities * | | 4.03 | % | | | 3.96 | % | | | 3.96 | % Economic net interest income (excluding PAA) * | $ | 603,227 | | | $ | 594,115 | | | $ | 499,170 | Net interest spread (excluding PAA) * | | 1.42 | % | | | 1.50 | % | | | 1.50 | % Interest income (excluding PAA) * | $ | 1,925,907 | | | $ | 1,819,279 | | | $ | 1,550,887 | TBA dollar roll income | | 18,803 | | | | 17,904 | | | | 9,019 | Economic interest expense * | | (1,322,680 | ) | | | (1,225,164 | ) | | | (1,051,717 | ) Subtotal | $ | 622,030 | | | $ | 612,019 | | | $ | 508,189 | Average interest earnings assets | $ | 141,338,058 | | | $ | 133,263,735 | | | $ | 113,522,223 | Average TBA contract balances | | 5,624,613 | | | | 6,088,214 | | | | 6,356,708 | Subtotal | $ | 146,962,671 | | | $ | 139,351,949 | | | $ | 119,878,931 | Net interest margin (excluding PAA) * | | 1.69 | % | | | 1.76 | % | | | 1.70 | % * Represents a non-GAAP financial measure. View source version on businesswire.com: https://www.businesswire.com/news/home/20261019634427/en/ Contacts Annaly Capital Management, Inc. Investor Relations 1-888-8Annaly www.annaly.com

Annaly Capital Management (NLY) came out with quarterly earnings of $0.8 per share, beating the Zacks Consensus Estimate of $0.77 per share. This compares to earnings of $0.73 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +3.90%. A quarter ago, it was expected that this real estate investment trust would post earnings of $0.75 per share when it actually produced earnings of $0.79, delivering a surprise of +5.33%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Annaly, which belongs to the Zacks REIT and Equity Trust industry, posted revenues of $543.61 million for the quarter ended September 2026, missing the Zacks Consensus Estimate by 8.81%. This compares to year-ago revenues of $275.75 million. The company has not been able to beat consensus revenue estimates over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Annaly shares have lost about 20.8% since the beginning of the year versus the S&P 500's gain of 12.4%. While Annaly has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Annaly was favorable. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #2 (Buy) for the stock. So, the shares are expected to outperform the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.78 on $544 million in revenues for the coming quarter and $3.09 on $2.03 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, REIT and Equity Trust is currently in the bottom 14% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Ares Commercial Real Estate (ACRE), another stock in the same industry, has yet to report results for the quarter ended September 2026. This real estate investment trust is expected to post quarterly earnings of $0.09 per share in its upcoming report, which represents a year-over-year change of -10%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Ares Commercial Real Estate's revenues are expected to be $28.57 million, up 22.8% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Annaly Capital Management Inc (NLY) : Free Stock Analysis Report Ares Commercial Real Estate Corporation (ACRE) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research