Core Insights - Annaly (NYSE: NLY) reported solid earnings for the first fiscal quarter, driven by continuous improvement in the spread picture and robust distributable earnings [1] - The company increased its dividend for the first time, indicating positive financial performance [1] Financial Performance - The earnings report highlighted a continual improvement in the spread picture, which is crucial for mortgage REITs [1] - Robust distributable earnings were a key factor contributing to the solid performance in the first fiscal quarter [1] Dividend Policy - Annaly increased its dividend for the first time, reflecting confidence in its financial stability and growth prospects [1]

Company Performance - Abacus Life, Inc. (ABL) has gained approximately 11.1% year-to-date, outperforming the average gain of 4.6% in the Finance group [4] - The Zacks Consensus Estimate for ABL's full-year earnings has increased by 2% over the past 90 days, indicating improving analyst sentiment [4] - Abacus Life, Inc. currently holds a Zacks Rank of 2 (Buy), suggesting a favorable outlook for the stock [3] Industry Context - Abacus Life, Inc. is part of the Insurance - Life Insurance industry, which consists of 16 individual stocks and is currently ranked 75 in the Zacks Industry Rank [6] - The Insurance - Life Insurance industry has seen an average gain of 1.6% year-to-date, indicating that ABL is performing better than its peers in this specific sector [6] - In contrast, the REIT and Equity Trust industry, to which Annaly Capital Management (NLY) belongs, is ranked 155 and has declined by 2.7% this year [6]

Annaly Capital Management, Inc. (NYSE: NLY ) is the largest company in the mortgage Real Estate Investment Trust (mREIT) sector by market cap. Its high dividend yield of 14.42% (forward rate) looks very attractive. However, Annaly's forward total return is quite dependentBram de Haas brings 15 years of investing experience to the table and has over 5 years of experience managing a Euro hedge fund. He is also a former professional poker player and utilizes his bundle of risk management skills to uncover lucr ...

Core Viewpoint - Annaly Capital Management offers an exceptionally high dividend yield of over 14%, significantly higher than the S&P 500 average, but concerns exist regarding the sustainability of this yield due to the nature of its investments and market conditions [1][2]. Group 1: Dividend and Financial Performance - Annaly Capital raised its quarterly dividend payout by 7.7% to $0.70 per share, despite the high yield appearing unsustainable [2]. - The company reported earnings available for distribution of $0.72 per share in the first quarter, aligning with its increased dividend commitment [5]. - It will take over five years for investors to recoup their principal investment based on the current yield [3]. Group 2: Investment Strategy and Portfolio Composition - Unlike traditional REITs, Annaly invests in mortgage-backed securities (MBS), mortgage servicing rights (MSR), and residential credit, allowing it to avoid income taxes by distributing at least 90% of profits [4]. - As of March 31, 2023, Annaly's portfolio asset values were $77.6 billion in Agency MBS, $1.8 billion in MSR, and $5.2 billion in residential credit, with committed capital of $7.7 billion, $1.8 billion, and $2.1 billion respectively [5]. - The company utilizes approximately $8 billion in capital to manage a $75 billion MBS portfolio, indicating significant leverage [6]. Group 3: Risks and Market Conditions - The high yields offered by mortgage REITs like Annaly are tied to the performance of their MBS portfolios, which can be adversely affected by rising interest rates [7]. - Rapid interest rate increases can lead to significant challenges for Annaly, as evidenced by a 26% dividend reduction in early 2023 due to previous rate hikes [9][10]. - The Federal Reserve's decision to maintain interest rates and reduce its MBS portfolio adds uncertainty to Annaly's future dividend sustainability [11].

Financial Performance - The company reported a 3% economic return in Q1 2025, with a common stock dividend increase to $0.70 per share, indicating healthy earnings momentum [176]. - Net income for the three months ended March 31, 2025, was $130.3 million, a decrease from $465.2 million for the same period in 2024, primarily due to unfavorable changes in net gains on derivatives [197]. - Earnings available for distribution (EAD) were $461.9 million, or $0.72 per average common share, compared to $358.0 million, or $0.64 per average common share, in the prior year [198]. - GAAP net income for Q1 2025 was $130.3 million, a decrease from $465.2 million in Q1 2024, reflecting a significant drop in investment gains and losses [207]. - The annualized return on average equity was 4.04% for Q1 2025, down from 16.29% in Q1 2024, reflecting a significant decline in other income [254]. Investment Portfolio - The investment portfolio at period-end increased to $101.96 billion from $87.48 billion year-over-year [195]. - Agency MBS investments grew by $4.4 billion in market value, with TBA securities reaching $6.6 billion, the largest holdings in two years [177]. - The Residential Credit portfolio ended at $6.6 billion in market value, with six securitization transactions totaling $3.1 billion completed during the quarter [179]. - The fair value of Agency MBS was $68.3 billion as of March 31, 2025, reflecting the company's strong position in the mortgage-backed securities market [261]. - Total agency securities increased to $68,329,720 thousand as of March 31, 2025, up from $67,434,068 thousand at December 31, 2024, representing a growth of 1.32% [267]. Interest Income and Expenses - Interest income increased to $1.32 billion in Q1 2025 from $1.09 billion in Q1 2024, while net interest income rose to $220.0 million from a loss of $6.5 million [195][197]. - The average yield on interest-earning assets (excluding PAA) improved to 5.23% in Q1 2025 from 4.87% in Q1 2024 [199]. - The net interest margin (excluding PAA) increased to 1.69% from 1.43% year-over-year [199]. - Economic interest expense increased by $122 million in Q1 2025 compared to Q1 2024, primarily due to a reduction in the net interest component of interest rate swaps [239]. - The company reported a net interest spread (excluding PAA) of 3.88% for Q1 2025, compared to 3.78% for Q1 2024 [231]. Economic Indicators - U.S. GDP declined by 0.3% SAAR in Q1 2025, primarily due to a 4.8% drag from net trade, while final sales to private domestic purchasers grew at 3.0% SAAR [184]. - The unemployment rate increased to 4.2% by the end of Q1 2025, driven by more individuals entering the labor force [185]. - The Federal Reserve maintained the Federal Funds rate at 4.25% - 4.50%, marking their second pause since cutting rates by 100 basis points at the end of the previous year [187]. Capital Structure - Total GAAP debt rose to $88.6 billion as of March 31, 2025, compared to $76.5 billion a year earlier, with recourse debt increasing to $65.1 billion from $61.7 billion [218]. - The GAAP capital ratio at period-end was 12.4%, slightly down from 12.6% in the previous year [195]. - The economic leverage ratio slightly increased to 5.7:1 in Q1 2025 from 5.6:1 in Q1 2024, indicating a stable capital structure [218]. - The debt-to-net equity ratio was 6.8:1 as of March 31, 2025, indicating a stable leverage position compared to previous periods [261]. Risk Management - The company has a risk management framework that includes a firm-wide risk appetite statement to guide investment management activities [290]. - The liquidity management policy includes monitoring unencumbered assets and funding composition under stress conditions [318]. - The company manages operational risk through various tools, including Risk and Control Self Assessment (RCSA) testing and annual disaster recovery exercises [331]. - The Cybersecurity Committee oversees cybersecurity risk management, with daily monitoring performed by the IT Infrastructure Team [335]. Shareholder Actions - The company has authorized a new common stock repurchase program of up to $1.5 billion through December 31, 2029, replacing the previous program [279]. - The Preferred Stock Repurchase Program allows for the repurchase of up to 63.5 million shares of Preferred Stock, with an aggregate liquidation value of approximately $1.6 billion as of March 31, 2025 [283]. - During Q1 2025, the company issued 23.3 million shares under the at-the-market sales program, generating proceeds of $495.7 million, net of commissions and fees [282]. Market Conditions - The mortgage servicing rights (MSR) portfolio remained relatively unchanged, with $48 million in assets purchased, and the weighted average note rate rose to 3.23% [181]. - The weighted average experienced CPR for the period was 7.1%, up from 6.0% in the prior year [195]. - The projected long-term CPR for the Agency MBS portfolio rose to 9.5% in Q1 2025, compared to 8.9% in Q1 2024 [227]. - The company closely monitors its REIT status and compliance with applicable regulations, which is essential for maintaining its tax-exempt status [340].

Core Viewpoint - Annaly Capital Management offers a high dividend yield of over 14%, significantly higher than the S&P 500, and has recently increased its dividend despite past cuts [1][2]. Investment Strategy - The company employs a three-pronged investment strategy, utilizing leverage to invest in additional mortgages and profiting from the spread between interest paid and income earned [4]. - Annaly's investment portfolio includes Agency MBS, mortgage servicing rights (MSRs), and residential credit, with a focus on prime jumbo mortgages [5]. Financial Performance - Annaly generated $0.72 per share of earnings available for distribution (EAD) for two consecutive quarters, indicating a recovery in earnings after previous declines [5][7]. - The company raised its quarterly dividend from $0.65 to $0.70 per share, marking a partial reversal of a previous cut from $0.88 to $0.65 earlier in 2023 [7]. Portfolio Composition - As of early 2023, Annaly had an $85.5 billion investment portfolio, which decreased to $84.9 billion by the first quarter of the current year, with improved returns across its investment strategies [9]. - The company has shifted some capital towards residential credit and MSRs, allowing for less leverage while still achieving higher returns [9][10]. Market Outlook - The CEO expressed confidence in the company's diversified housing finance portfolio, suggesting it can deliver superior risk-adjusted returns over the long term [11]. - The mortgage investment strategy is characterized as high-risk but potentially lucrative, appealing to risk-tolerant investors [12].

Core Viewpoint - Annaly Capital Management, Inc. reported strong adjusted earnings for the first quarter of 2025, with a notable increase in average yield on interest-earning assets, although there was a decline in book value per share. Financial Performance - Adjusted earnings available for distribution (EAD) per average share were 72 cents, exceeding the Zacks Consensus Estimate of 71 cents and up from 64 cents in the same quarter last year [1] - Net interest income (NII) was $219.9 million, missing the Zacks Consensus Estimate by 46.2%, compared to a negative NII of $6.45 million in the prior-year quarter [2] - Total assets at the end of the first quarter were $105.1 billion, reflecting a 1.5% increase from the previous quarter [2] Yield and Margins - The average yield on interest-earning assets (excluding premium amortization adjustment) was 5.23%, up from 4.87% in the prior-year quarter [3] - The average economic costs of interest-bearing liabilities increased to 3.88% from 3.78% year-over-year [3] - Net interest spread (excluding PAA) improved to 1.35%, up from 1.09% in the prior-year quarter, while the net interest margin (excluding PAA) rose to 1.69% from 1.43% [3] Book Value and Capital Ratios - Book value per share (BVPS) was $19.02 as of March 31, 2025, down 3.6% from $19.73 in the prior-year quarter [4] - The economic capital ratio remained stable at 14.6% compared to the prior-year quarter [4] - Economic leverage increased to 5.7X from 5.6X year-over-year [4] Return on Equity - Annaly generated an annualized EAD return on average equity of 14.43%, an increase from 12.63% in the prior-year quarter [5] Strategic Outlook - The company's first-quarter results were bolstered by rising average yield and total assets, with prudent asset selection expected to drive future performance [6] - However, the decline in book value per share raises concerns, and achieving solid returns may face challenges due to increasing market uncertainties [6]

Financial Data and Key Metrics Changes - The economic return for Q1 2025 was 3%, consistent with the previous quarter, with earnings available for distribution per share at $0.72 [18][19] - Book value per share slightly declined to $19.02, a decrease of less than 1% quarter over quarter [19][22] - The common stock dividend was increased from $0.65 to $0.70 per share, reflecting earnings momentum [7][19] Business Line Data and Key Metrics Changes - The Agency portfolio saw a notional growth of $3.5 billion, driven by purchases of intermediate coupon TBAs [10][11] - The Residential Credit portfolio decreased by $340 million quarter over quarter, ending at $6.6 billion in market value [12][13] - The Mortgage Servicing Rights (MSR) portfolio remained relatively unchanged at $3.3 billion in market value [15][16] Market Data and Key Metrics Changes - Economic leverage increased modestly to 5.7 turns, remaining at the low end of the historical range [9][19] - The housing market showed signs of regional disparity, with home price appreciation slowing down due to increased inventory and affordability issues [13][60] - Inventory levels increased by 18% year over year, impacting existing home sales, which were at their lowest since February [57][58] Company Strategy and Development Direction - The company aims to maintain a conservative leverage approach amidst market volatility while focusing on agency investments due to attractive returns [17][37] - The strategic alignment with industry-leading sub-servicing partners is expected to create competitive advantages in the MSR business [15][16] - The company is optimistic about the potential for regulatory reforms that could positively impact the market dynamics [32][71] Management's Comments on Operating Environment and Future Outlook - Management noted that the macroeconomic environment remains uncertain, with volatility expected to persist [9][17] - The outlook for the housing market is stable in the long term, supported by low delinquencies and tight underwriting standards, despite short-term pullbacks [60][61] - The company is prepared for potential market fluctuations with a diversified and actively managed portfolio [17][22] Other Important Information - The company has approximately $7.5 billion in assets available for financing, reflecting a $600 million increase compared to the previous quarter [22] - The weighted average repo days extended to 50 days, indicating a strategic shift in financing [21] Q&A Session Summary Question: Update on book value quarter to date - The book value was off roughly 3.5% as of the latest update, improving from a 4.5% decline post-Easter [25] Question: Outlook for spreads and regulatory impacts - Swap spreads have tightened due to volatility, and regulatory reforms are anticipated to positively influence market conditions [26][32] Question: Thoughts on leverage amidst spread widening - The company is balancing the opportunity to increase leverage against the risks posed by high volatility [36][37] Question: Housing price moderation and systemic risks - Housing price increases are regional, with some areas experiencing declines, but overall, the market remains stable due to strong borrower equity [60][61] Question: Agency portfolio supply-demand dynamics - Demand from fixed income funds was strong before recent volatility, with banks and REITs also showing reasonable demand [85] Question: Impact of rate and spread volatility on loan acquisitions - The company is adopting a more defensive posture in response to increased spreads, but lock volumes remain stable [90]

Financial Data and Key Metrics Changes - The company reported earnings available for distribution per share of $0.72, consistent with the prior quarter, driven by lower average repo rates of 4.56% compared to 4.93% in the previous quarter [18] - The book value per share was $19.02, reflecting a modest decline of less than 1% quarter over quarter [18] - The economic return for Q1 was 3%, with individual business segments contributing positively despite a challenging macro environment [18] Business Line Data and Key Metrics Changes - The Agency portfolio saw a notional growth of $3.5 billion, driven by purchases of intermediate coupon TBAs [9] - The Residential Credit portfolio ended the quarter at $6.6 billion in market value, with a decrease of $340 million quarter over quarter due to opportunistic sales and increased securitizations [11] - The Mortgage Servicing Rights (MSR) portfolio remained relatively unchanged at $3.3 billion in market value, with $28 billion in principal balance settled during Q1 [14] Market Data and Key Metrics Changes - Economic leverage increased modestly to 5.7 turns, remaining at the low end of the historical range [6] - The housing market is showing signs of increased regional disparity, with some areas experiencing a modest reversal in home price appreciation trends [12] - Inventory levels have increased, with a year-over-year rise of 18%, impacting the spring selling season [58] Company Strategy and Development Direction - The company aims to maintain a conservative leverage approach amidst market volatility, balancing the opportunity to increase leverage with the risks associated with high volatility [38] - The focus remains on agency investments as spreads have cheapened, while also continuing to grow the OBX platform for loan acquisition and securitization [76] - The company is strategically aligned with industry-leading sub-servicing partners to enhance efficiency and technological investment in the mortgage industry [15] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about the impact of U.S. trade policy on consumer and business confidence, which may affect economic growth [7] - Despite the uncertain outlook, the company believes its diversified and actively managed portfolio positions it well to perform across various economic scenarios [17] - The management remains optimistic about the housing market's long-term stability due to low delinquencies and tight underwriting standards, despite short-term pullbacks in certain regions [62] Other Important Information - The company increased its common stock dividend to $0.70 per share, underscoring earnings momentum [6] - The total assets available for financing increased to approximately $7.5 billion, reflecting enhanced liquidity [22] Q&A Session Summary Question: Update on book value quarter to date - The book value was off roughly 3.5% as of Tuesday evening, improving from a 4.5% decline post-Easter [26] Question: Outlook for spreads and regulatory impacts - Swap spreads have tightened due to volatility, and regulatory reforms are anticipated to positively impact market conditions in the future [27][33] Question: Thoughts on leverage given current market conditions - The company is maintaining a conservative leverage approach due to high volatility, despite wider spreads suggesting a potential increase in risk [37][39] Question: Supply-demand dynamics in the agency portfolio - There was strong demand from fixed income funds and banks, but foreign demand, particularly from Asian accounts, remains limited [87][88] Question: Impact of housing price moderation on the market - Housing prices have increased significantly since 2019, but recent inventory increases may lead to short-term pullbacks in certain regions [58][62]

Annaly Capital Management (NLY) came out with quarterly earnings of $0.72 per share, beating the Zacks Consensus Estimate of $0.71 per share. This compares to earnings of $0.64 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 1.41%. A quarter ago, it was expected that this real estate investment trust would post earnings of $0.67 per share when it actually produced earnings of $0.72, delivering a surprise of 7.46%.Over the last ...