Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25 [20] - Economic return for Q3 was 8.1%, bringing the year-to-date economic return to 11.5% [20][21] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [22] - Average yields improved to 5.46% from 5.41% in the prior quarter, with net interest spread ex-PAA increasing to 1.5% [22][23] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with total growth of $7.8 billion [9] - Residential credit portfolio increased to $6.9 billion in economic market value, with average yields rising to 6.29% [11][22] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion [15] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment [5] - Inflation remained elevated near 3%, with a modest impact from higher tariffs on goods inflation [6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month [7] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, generating a 13% annualized economic return over the past three years [18] - Focus on maintaining high credit quality in residential credit and leveraging proprietary assets through the correspondent channel [15] - The company is positioned to benefit from expected Fed cuts and healthy fixed income demand [18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the agency sector despite tighter spreads, citing improved fundamentals and technicals [26] - The outlook for the residential credit business is positive, with expectations for continued growth in the private label market [18] - Management remains cautious about taking on additional rate risk given current market uncertainties [56] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program [8] - The MSR valuation multiple decreased slightly due to lower mortgage rates, but cash flows remain stable [16] - The company has $7.4 billion in unencumbered assets, including $5.9 billion in cash and Agency MBS [24] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and REITs [26][27] Question: MSR bulk supply and pricing - Management noted that bulk supply has increased from large participants, with stable pricing throughout the year [29] Question: Breakdown of agency returns - Management provided insights on the spread to swaps versus treasuries, indicating a blended yield of about 160 basis points [33] Question: Book value performance - Management reported a 1% increase in book value pre-dividend accrual, translating to a 1.5% to 2% economic return [35] Question: Prepayment protection in the OBX portfolio - Management highlighted that the OBX portfolio has shown slower prepayment speeds than anticipated, benefiting from prepayment penalties [82]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 and 11.5% year-to-date [20][21] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [22] - The average yield improved to 5.46% from 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [22][23] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with total growth of $7.8 billion [9][10] - The residential credit portfolio increased to $6.9 billion in economic market value, with significant contributions from securitization and loan purchases [11][12] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and low delinquency rates [15][16] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment, despite elevated inflation near 3% [5][6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, leading to a slight increase in the unemployment rate [7] - Interest rate volatility declined, benefiting the company's portfolio by lowering convexity costs [8] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, generating a 13% annualized economic return over the past three years [19] - The investment strategies are positioned for the balance of the year, with expectations of declining macro volatility and additional Fed cuts [18] - The company aims to increase its residential credit and MSR weightings to a combined 40% [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for the agency sector, citing improved demand dynamics and expectations for regulatory reform [17][18] - The company remains cautious about taking on additional rate risk, preferring to maintain a stable duration profile amid market uncertainties [56][59] - The management highlighted the importance of maintaining high credit quality in the residential credit portfolio, especially in light of softer housing market conditions [15] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program [8] - The MSR valuation multiple decreased modestly due to lower mortgage rates, but the portfolio remains well insulated [16] Q&A Session Summary Question: Agency returns and investment preferences - Management noted that despite tighter spreads, the agency sector remains attractive due to improved fundamentals and technicals [26] Question: Bulk supply and pricing for MSR - The bulk supply has increased from large participants, with stable pricing encouraging future bulk supply [29] Question: Breakdown of agency returns - The spread to swaps versus treasuries is around 35 to 40 basis points, with low realized volatility aiding hedging costs [33] Question: Outlook for mortgage spreads and securitization - Non-QM issuance is expected to grow, with the market penetration of non-QM loans increasing significantly [47][49] Question: Duration risk and portfolio management - The company is currently maintaining a close-to-zero duration gap due to market uncertainties, with a cautious approach to taking on additional rate risk [56][59]

Financial Data and Key Metrics Changes - The company's book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 and 11.5% year to date [19][20] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [20] - The average yield improved to 5.46% compared to 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [20][21] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter over quarter, with total growth of $7.8 billion [10] - The residential credit portfolio increased to $6.9 billion in economic market value, with new origination non-QM AAA spreads tightening by 15 basis points [12] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and unchanged serious delinquencies at 50 basis points [15] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth likely on pace with Q2, supported by consumer spending and AI-driven business investment [6] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, while inflation remained elevated near 3% [6][7] - The agency MBS market saw improved supply and demand dynamics, with fixed income fund inflows more than 50% higher than the average over the past few quarters [10] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, which has generated a 13% annualized economic return over the past three years [17] - The focus remains on maintaining a high credit quality portfolio and leveraging proprietary assets through the correspondent channel [14] - The company is positioned to benefit from expected Fed cuts and a healthy fixed income demand, with plans to increase allocations to residential credit and MSR [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook, highlighting the benefits of declining macro volatility and anticipated Fed cuts [16] - The company remains flexible in the current investing climate with historically low leverage and significant liquidity [18] - Concerns about the housing market were noted, with expectations of modest cumulative depreciation due to elevated mortgage rates [14] Other Important Information - The company raised $1.1 billion of accretive equity in Q3, including $800 million through its ATM program [9] - The MSR valuation multiple decreased modestly due to lower mortgage rates, but the portfolio remains well insulated [15] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and overseas participants [26][27] Question: MSR bulk supply and pricing - The bulk supply has increased from large participants, with stable pricing throughout the year, encouraging future bulk supply [29][30] Question: Agency returns breakdown - The spread to swaps versus treasuries is around 35 to 40 basis points, with low realized volatility aiding hedging costs [35][36] Question: MSR purchase strategy - The company prefers lower note rate MSRs to mitigate negative convexity risk, with a focus on maintaining a diversified portfolio [46][48] Question: Outlook for mortgage spreads and securitization - Management expects stable mortgage spreads to support continued market activity, with NonQM market penetration increasing [51][54] Question: Duration risk and portfolio management - The company is currently maintaining a close to zero duration gap due to market uncertainty, with plans to manage risks carefully [62][66] Question: GSEs' potential impact on the market - Speculation exists regarding GSEs becoming more active buyers, but the market has strong demand from REITs and fixed income funds [70][71]

Financial Data and Key Metrics Changes - The book value per share increased by 4.3% from $18.45 in the prior quarter to $19.25, achieving an economic return of 8.1% for Q3 2025 and 11.5% year-to-date [19][20] - Earnings available for distribution per share remained consistent at $0.73, exceeding the dividend for the quarter [20] - The average yield improved to 5.46% from 5.41% in the prior quarter, while the average repo rate improved by three basis points to 4.5% [20] Business Line Data and Key Metrics Changes - The agency portfolio's market value increased to over $87 billion, up 10% quarter-over-quarter, with a total growth of $7.8 billion [8][19] - The residential credit portfolio increased to $6.9 billion in economic market value, with significant contributions from new securitizations [10][11] - The mortgage servicing rights (MSR) portfolio increased by $215 million to $3.5 billion, with stable cash flows and low delinquency rates [13][14] Market Data and Key Metrics Changes - The U.S. economy showed resilience with GDP growth supported by consumer spending and AI-driven business investment, despite elevated inflation near 3% [4][5] - Labor market conditions weakened, with hiring slowing to 30,000 jobs per month, leading to a slight increase in the unemployment rate [5] - The agency MBS market saw improved supply and demand dynamics, with fixed income fund inflows over 50% higher than average [9] Company Strategy and Development Direction - The company maintains a diversified housing finance strategy, focusing on agency MBS, residential credit, and MSR, which has generated a 13% annualized economic return over the past three years [16][18] - The outlook remains positive, with expectations of additional Fed cuts and healthy fixed income demand supporting investment strategies [17][18] - The company aims to increase its residential credit and MSR weightings to a combined 40% in the near term [26] Management's Comments on Operating Environment and Future Outlook - Management noted that the macro environment is expected to remain stable, with declining volatility and a favorable technical backdrop for agency MBS [16][17] - The company is cautious about taking on additional rate risk, preferring to maintain a close-to-zero duration gap due to market uncertainties [50][52] - The management expressed confidence in the stability of earnings available for distribution, supported by a strong swap portfolio and low leverage [60][67] Other Important Information - The company raised $1.1 billion of equity in Q3, including $800 million through its ATM program, and reopened the mortgage REIT preferred market [6][7] - The MSR valuation multiple decreased slightly due to lower mortgage rates, but the portfolio remains well insulated with stable cash flows [14][15] - A new partnership with PennyMac Financial Services was announced, enhancing the company's servicing capabilities [16] Q&A Session Summary Question: Agency returns and investment preferences - Management indicated that agency investments remain attractive despite tighter spreads, with expectations for increased demand from banks and REITs as the Fed continues to cut rates [25][26] Question: Bulk supply and pricing of MSR - The bulk supply of MSR has increased by 50%, primarily from large participants, with stable pricing throughout the year [27] Question: Breakdown of agency returns - The spread to swaps versus treasuries is around 35 to 40 basis points, with a blended yield of about 160 basis points, indicating a favorable risk-return profile [30] Question: Prepayment protection in specified pools - Management discussed the advantages of specified pools for prepayment protection, emphasizing their long-term options and favorable convexity profiles [34][35] Question: Outlook for mortgage spreads and securitization - The company expects continued activity in the non-QM market, with stable mortgage spreads allowing for growth despite seasonal pressures [42][43] Question: Duration risk and leverage - Management confirmed a cautious approach to duration risk, maintaining a close-to-zero duration gap while evaluating opportunities for future leverage [50][52] Question: Stability of NII and dividend coverage - The company expressed confidence in maintaining stable NII levels and ensuring dividend coverage, supported by a strong hedge ratio [58][67]

Financial Performance - Earnings available for distribution was $0.73 per average common share for the quarter[11] - Book value per common share was $19.25[11] - The company declared a quarterly common stock cash dividend of $0.70 per share[11] - Economic return was 8.1% for the quarter and 11.5% year-to-date through the third quarter[11] Portfolio Composition and Growth - Total portfolio was $97.8 billion, including $87.3 billion in Agency MBS, representing 89% of total assets and 64% of dedicated capital[11] - The Agency portfolio grew by 10% during the quarter, with new purchases predominantly in specified pools with call protection across 5.5% and 6.0% coupons[11] - The Residential Credit portfolio increased 4% to $6.9 billion, representing 17% of dedicated capital[11] - The MSR portfolio increased 6% to $3.5 billion in market value, representing 19% of dedicated capital[11] Financing and Capital Markets Activities - Economic leverage was 5.7x, down from 5.8x in the second quarter[11] - The company raised $1.1 billion of accretive capital during the quarter, including $823 million of common equity and $275 million through preferred stock issuance[11] - The company priced 24 residential whole loan securitizations totaling $12.4 billion in proceeds year-to-date[11]

Core Insights - Annaly Capital Management (NLY) reported quarterly earnings of $0.73 per share, exceeding the Zacks Consensus Estimate of $0.72 per share, and up from $0.66 per share a year ago, representing an earnings surprise of +1.39% [1][2] Earnings Performance - Over the last four quarters, the company has consistently surpassed consensus EPS estimates, achieving this four times [2] - For the quarter ended September 2025, Annaly posted revenues of $275.75 million, which fell short of the Zacks Consensus Estimate by 38.31%, compared to revenues of $13.4 million in the same quarter last year [2] Stock Movement and Market Comparison - Annaly shares have increased approximately 15% since the beginning of the year, outperforming the S&P 500's gain of 14.5% [3] Future Earnings Outlook - The company's earnings outlook is crucial for investors, including current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $0.74 on revenues of $455 million, and for the current fiscal year, it is $2.89 on revenues of $1.4 billion [7] Industry Context - The REIT and Equity Trust industry, to which Annaly belongs, is currently ranked in the bottom 42% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

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Executive Summary & Highlights Annaly reported strong Q3 2025 financial results with significant GAAP net income and economic return, alongside strategic portfolio growth and accretive capital raising [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Annaly achieved a GAAP net income of $1.21 per average common share and Earnings Available for Distribution (EAD) of $0.73 per average common share for Q3 2025. The economic return was 8.1% for the quarter and 11.5% year-to-date. Book value per common share stood at $19.25 | Metric | Q3 2025 | | :----- | :------ | | Economic Return | 8.1% | | Economic Return YTD | 11.5% | | Metric | Q3 2025 | | :----- | :------ | | GAAP Net Income per Avg Common Share | $1.21 | | EAD per Avg Common Share | $0.73 | | Book Value per Common Share | $19.25 | | Common Stock Cash Dividend per Share | $0.70 | [Business Highlights](index=1&type=section&id=Business%20Highlights) The total portfolio reached $97.8 billion, with the highly liquid Agency portfolio comprising $87.3 billion. The Agency portfolio grew by 10%, Residential Credit by 4% to $6.9 billion, and MSR portfolio by 6% to $3.5 billion. The Residential Credit Group closed a record $3.9 billion in securitizations | Portfolio | Q3 2025 Value | Growth | | :-------- | :------------ | :----- | | Total Portfolio | $97.8 billion | N/A | | Agency Portfolio | $87.3 billion | +10% | | Residential Credit Portfolio | $6.9 billion | +4% | | MSR Portfolio | $3.5 billion | +6% | - Annaly Residential Credit Group closed eight securitizations totaling a record **$3.9 billion** during Q3 2025, remaining the largest non-bank issuer and second largest overall of Prime Jumbo and Expanded Credit MBS year-to-date[5](index=5&type=chunk) [Investment and Strategy Overview](index=1&type=section&id=Investment%20and%20Strategy%20Overview) Annaly deployed accretive capital primarily into its Agency MBS portfolio, focusing on specified pools with call protection in 5.5% and 6.0% coupon securities. The Agency portfolio benefited from spread tightening due to increased MBS demand and declining volatility. Residential Credit growth was driven by record loan lock, funding, and securitization volumes, while the MSR business expanded its subservicing and recapture partners - Accretive capital was deployed across three businesses, with the majority going to the Agency MBS portfolio, specifically into specified pools with call protection in **5.5% and 6.0% coupon securities**[4](index=4&type=chunk)[5](index=5&type=chunk) - The Agency portfolio benefited from meaningful spread tightening during the quarter, driven by increased MBS demand and declining volatility[4](index=4&type=chunk) - Residential Credit portfolio growth was fueled by record loan lock, funding, and securitization volumes through the whole loan correspondent channel. The MSR business expanded its network of subservicing and recapture partners[4](index=4&type=chunk)[5](index=5&type=chunk) [Financing and Capital Overview](index=1&type=section&id=Financing%20and%20Capital%20Overview) Annaly maintained GAAP leverage at 7.1x and reduced economic leverage to 5.7x. The company raised $1.1 billion of accretive capital, including $823 million from common equity sales and $275 million from preferred stock issuance. Total assets available for financing were $8.8 billion | Metric | Q3 2025 | Q2 2025 | Change (QoQ) | | :----- | :------ | :------ | :----------- | | GAAP Leverage | 7.1x | 7.1x | Unchanged | | Economic Leverage | 5.7x | 5.8x | Down 0.1x | - Raised **$1.1 billion** of accretive capital during the quarter, comprising **$823 million** from common equity through an at-the-market sales program and **$275 million** from the issuance of 8.875% Series J fixed-rate cumulative redeemable preferred stock[5](index=5&type=chunk) | Metric | Q3 2025 | | :----- | :------ | | Total Assets Available for Financing | $8.8 billion | | Cash & Unencumbered Agency MBS | $5.9 billion | [Corporate Responsibility & Governance](index=1&type=section&id=Corporate%20Responsibility%20%26%20Governance) Annaly published its sixth Corporate Responsibility Report, detailing its impact and efforts in supporting American homeownership and broader corporate responsibility initiatives - Published sixth Corporate Responsibility Report, highlighting impact and efforts in supporting American homeownership and broader corporate responsibility priorities and achievements[4](index=4&type=chunk) Financial Performance Overview Annaly's Q3 2025 financial performance showed significant improvements in GAAP net income and return on equity, stable leverage, and increased net interest spread, with a predominantly fixed-rate residential portfolio [Key Performance Indicators](index=2&type=section&id=Key%20Performance%20Indicators) Annaly's financial performance in Q3 2025 showed significant improvements in GAAP net income and return on equity compared to the prior quarter and year-ago period, alongside stable leverage ratios and an increased net interest spread. Book value per common share increased to $19.25 from $18.45 QoQ. GAAP net income per average common share surged to $1.21 from $0.03 QoQ, with annualized GAAP return on average equity rising to 23.69% from 1.82%. EAD per average common share remained stable at $0.73 | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :--------------------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Book value per common share | $19.25 | $18.45 | $19.54 | +$0.80 | -$0.29 | | GAAP net income per average common share | $1.21 | $0.03 | $0.05 | +$1.18 | +$1.16 | | Annualized GAAP return on average equity | 23.69% | 1.82% | 2.77% | +21.87% | +20.92% | | GAAP leverage at period-end | 7.1:1 | 7.1:1 | 6.9:1 | Unchanged | +0.2:1 | | Net interest margin | 0.97% | 1.04% | 0.06% | -0.07% | +0.91% | | Average yield on interest earning assets | 5.40% | 5.42% | 5.16% | -0.02% | +0.24% | | Average GAAP cost of interest bearing liabilities | 4.73% | 4.76% | 5.42% | -0.03% | -0.69% | | Net interest spread | 0.67% | 0.66% | (0.26%) | +0.01% | +0.93% | | EAD per average common share | $0.73 | $0.73 | $0.66 | Unchanged | +$0.07 | | Annualized EAD return on average equity | 14.70% | 14.86% | 12.95% | -0.16% | +1.75% | | Economic leverage at period-end | 5.7:1 | 5.8:1 | 5.7:1 | -0.1:1 | Unchanged | [Portfolio Related Metrics](index=7&type=section&id=Portfolio%20Related%20Metrics) The portfolio remained predominantly in fixed-rate residential securities (99%). The weighted average experienced CPR slightly decreased QoQ to 8.6%, while the projected long-term CPR increased to 10.4% | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Fixed-rate Residential Securities as % of total | 99% | 99% | 98% | Unchanged | +1% | | Adjustable-rate and floating-rate Residential Securities as % of total | 1% | 1% | 2% | Unchanged | -1% | | Weighted average experienced CPR for the period | 8.6% | 8.7% | 7.6% | -0.1% | +1.0% | | Weighted average projected long-term CPR at period-end | 10.4% | 9.1% | 11.9% | +1.3% | -1.5% | [Liabilities and Hedging Metrics](index=7&type=section&id=Liabilities%20and%20Hedging%20Metrics) The weighted average days to maturity on repurchase agreements remained stable at 49 days. The hedge ratio was unchanged at 92%, while the weighted average net rate on interest rate swaps improved to (1.11%) from (1.33%) QoQ | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Weighted average days to maturity on repurchase agreements | 49 | 49 | 34 | Unchanged | +15 | | Hedge ratio | 92% | 92% | 101% | Unchanged | -9% | | Weighted average pay rate on interest rate swaps | 3.16% | 3.14% | 3.05% | +0.02% | +0.11% | | Weighted average receive rate on interest rate swaps | 4.27% | 4.47% | 4.94% | -0.20% | -0.67% | | Weighted average net rate on interest rate swaps | (1.11%) | (1.33%) | (1.89%) | +0.22% | +0.78% | | GAAP leverage at period-end | 7.1:1 | 7.1:1 | 6.9:1 | Unchanged | +0.2:1 | | GAAP capital ratio at period-end | 11.9% | 12.0% | 12.4% | -0.1% | -0.5% | | Economic leverage at period-end | 5.7:1 | 5.8:1 | 5.7:1 | -0.1:1 | Unchanged | | Economic capital ratio at period end | 14.8% | 14.3% | 14.6% | +0.5% | +0.2% | [Performance Related Metrics](index=7&type=section&id=Performance%20Related%20Metrics) Dividend declared per common share remained at $0.70 QoQ, increasing from $0.65 YoY. The annualized dividend yield was 13.85% | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :--------------------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Book value per common share | $19.25 | $18.45 | $19.54 | +$0.80 | -$0.29 | | GAAP net income per average common share | $1.21 | $0.03 | $0.05 | +$1.18 | +$1.16 | | Annualized GAAP return on average equity | 23.69% | 1.82% | 2.77% | +21.87% | +20.92% | | Net interest margin | 0.97% | 1.04% | 0.06% | -0.07% | +0.91% | | Average yield on interest earning assets | 5.40% | 5.42% | 5.16% | -0.02% | +0.24% | | Average GAAP cost of interest bearing liabilities | 4.73% | 4.76% | 5.42% | -0.03% | -0.69% | | Net interest spread | 0.67% | 0.66% | (0.26%) | +0.01% | +0.93% | | Dividend declared per common share | $0.70 | $0.70 | $0.65 | Unchanged | +$0.05 | | Annualized dividend yield | 13.85% | 14.88% | 12.95% | -1.03% | +0.90% | Consolidated Financial Statements Annaly's Q3 2025 saw total assets and liabilities increase significantly, driven by securities and securitization vehicles, with a substantial surge in net income attributable to Annaly [Consolidated Statements of Financial Condition](index=4&type=section&id=Consolidated%20Statements%20of%20Financial%20Condition) Total assets increased to $125.86 billion in Q3 2025 from $112.14 billion in Q2 2025, driven by growth in securities and assets transferred to securitization vehicles. Total liabilities also rose to $110.86 billion from $98.67 billion, primarily due to increased repurchase agreements and debt issued by securitization vehicles. Total equity increased to $14.99 billion from $13.47 billion QoQ | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Total assets | $125.86 billion | $112.14 billion | $101.52 billion | +$13.72 billion | +$24.35 billion | | Securities | $85.06 billion | $73.50 billion | $71.70 billion | +$11.56 billion | +$13.36 billion | | Loans, net | $4.01 billion | $3.72 billion | $2.31 billion | +$286.03 million | +$1.70 billion | | Mortgage servicing rights | $3.48 billion | $3.28 billion | $2.69 billion | +$194.99 million | +$783.12 million | | Assets transferred or pledged to securitization vehicles | $29.51 billion | $27.02 billion | $21.04 billion | +$2.49 billion | +$8.47 billion | | Total liabilities | $110.86 billion | $98.67 billion | $88.98 billion | +$12.20 billion | +$21.89 billion | | Repurchase agreements | $75.12 billion | $66.54 billion | $64.31 billion | +$8.58 billion | +$10.81 billion | | Debt issued by securitization vehicles | $26.60 billion | $24.11 billion | $18.71 billion | +$2.49 billion | +$7.89 billion | | Total equity | $14.99 billion | $13.47 billion | $12.54 billion | +$1.52 billion | +$2.46 billion | [Consolidated Statements of Comprehensive Income (Loss) - Quarterly](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20-%20Quarterly) Net interest income increased to $275.75 million in Q3 2025 from $273.20 million in Q2 2025 and significantly from $13.40 million in Q3 2024. Net income attributable to Annaly surged to $832.45 million in Q3 2025 from $57.10 million in Q2 2025 and $66.45 million in Q3 2024, primarily due to substantial net gains on investments and other | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Interest income | $1.53 billion | $1.42 billion | $1.23 billion | +$113.60 million | +$303.16 million | | Interest expense | $1.26 billion | $1.15 billion | $1.22 billion | +$111.05 million | +$40.81 million | | Net interest income | $275.75 million | $273.20 million | $13.40 million | +$2.55 million | +$262.35 million | | Net servicing income | $126.25 million | $127.10 million | $109.60 million | -$847.00 | +$16.66 million | | Net gains (losses) on investments and other | $561.93 million | $83.50 million | $1.72 billion | +$478.42 million | -$1.16 billion | | Net gains (losses) on derivatives | ($92.31 million) | ($388.78 million) | ($1.75 billion) | +$296.48 million | +$1.66 billion | | Net income (loss) attributable to Annaly | $832.45 million | $57.10 million | $66.45 million | +$775.35 million | +$766.00 million | | Net income (loss) available to common stockholders | $791.32 million | $19.84 million | $24.82 million | +$771.48 million | +$766.50 million | | Basic EPS | $1.21 | $0.03 | $0.05 | +$1.18 | +$1.16 | | Diluted EPS | $1.20 | $0.03 | $0.05 | +$1.17 | +$1.15 | | Comprehensive income (loss) attributable to Annaly | $948.10 million | $104.46 million | $511.17 million | +$843.65 million | +$436.94 million | [Consolidated Statements of Comprehensive Income (Loss) - Nine Months](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20-%20Nine%20Months) For the nine months ended September 30, 2025, net interest income significantly increased to $768.92 million from $60.51 million in the prior year. Net income attributable to Annaly more than doubled to $1.01 billion from $519.85 million, and basic EPS rose to $1.45 from $0.80 | Metric (in thousands) | 9M Sep 30, 2025 | 9M Sep 30, 2024 | YoY Change | | :------------------------------------------------ | :-------------- | :-------------- | :--------- | | Interest income | $4.27 billion | $3.50 billion | +$767.34 million | | Interest expense | $3.50 billion | $3.44 billion | +$58.93 million | | Net interest income | $768.92 million | $60.51 million | +$708.41 million | | Net servicing income | $379.67 million | $320.36 million | +$59.31 million | | Net gains (losses) on investments and other | $1.46 billion | $160.84 million | +$1.30 billion | | Net gains (losses) on derivatives | ($1.46 billion) | $53.62 million | -$1.51 billion | | Net income (loss) attributable to Annaly | $1.01 billion | $519.85 million | +$493.91 million | | Net income (loss) available to common stockholders | $898.22 million | $404.01 million | +$494.22 million | | Basic EPS | $1.45 | $0.80 | +$0.65 | | Diluted EPS | $1.44 | $0.80 | +$0.64 | | Comprehensive income (loss) attributable to Annaly | $1.41 billion | $1.14 billion | +$264.01 million | Investment Portfolio Details Annaly's total investment portfolio expanded to $122.10 billion in Q3 2025, driven by substantial growth in Agency mortgage-backed securities and residential mortgage loans [Investment Portfolio Composition](index=8&type=section&id=Investment%20Portfolio%20Composition) Annaly's total investment portfolio grew to $122.10 billion in Q3 2025, primarily driven by a significant increase in Agency mortgage-backed securities and residential mortgage loans. Agency mortgage-backed securities increased by $11.56 billion QoQ to $83.32 billion. Residential mortgage loans grew by $286.03 million QoQ to $4.01 billion. Residential credit risk transfer securities decreased significantly YoY | Investment Type (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :--------------------------------------------- | :----------- | :----------- | :----------- | :--------- | :--------- | | Agency mortgage-backed securities | $83.32 billion | $71.76 billion | $69.15 billion | +$11.56 billion | +$14.17 billion | | Residential credit risk transfer securities | $330.65 million | $414.05 million | $826.84 million | -$83.40 million | -$496.19 million | | Non-agency mortgage-backed securities | $1.41 billion | $1.33 billion | $1.62 billion | +$84.32 million | -$202.44 million | | Commercial mortgage-backed securities | — | — | $106.24 million | — | -$106.24 million | | Residential mortgage loans | $4.01 billion | $3.72 billion | $2.31 billion | +$286.03 million | +$1.70 billion | | Mortgage servicing rights | $3.48 billion | $3.28 billion | $2.69 billion | +$194.99 million | +$783.12 million | | Interests in MSR | $35.83 million | — | — | +$35.83 million | +$35.83 million | | Residential mortgage loans transferred or pledged to securitization vehicles | $29.51 billion | $27.02 billion | $21.04 billion | +$2.49 billion | +$8.47 billion | | Total investment portfolio | $122.10 billion | $107.53 billion | $97.74 billion | +$14.57 billion | +$24.35 billion | Non-GAAP Financial Measures Non-GAAP measures supplement GAAP statements by adjusting for fair value reporting and non-cash items, providing additional insights into operating performance and business trends [Introduction to Non-GAAP Measures](index=8&type=section&id=Introduction%20to%20Non-GAAP%20Measures) Non-GAAP measures are provided to supplement GAAP financial statements, offering additional detail on operating performance and business trends by adjusting for disparate fair value reporting and excluding certain unrealized, non-cash, or episodic components of GAAP net income. These measures, while useful, have limitations and may not be comparable to peers - Non-GAAP measures are used to provide additional detail for understanding period-over-period operating performance and business trends, and for assessing performance against industry peers[23](index=23&type=chunk) - These measures adjust for disparate fair value reporting and exclude certain unrealized, non-cash, or episodic components of GAAP net income (loss)[28](index=28&type=chunk) - Non-GAAP measures have limitations, such as potential incomparability with peers and the PAA exclusion not being indicative of future amortization[22](index=22&type=chunk) [Earnings Available for Distribution (EAD)](index=8&type=section&id=Earnings%20Available%20for%20Distribution%20(EAD)) EAD is a key non-GAAP metric used by management and investors to measure Annaly's progress in generating net income for distribution to stockholders and preserving capital. It is derived from economic net interest income, TBA dollar roll income, net servicing income (less MSR amortization), and other adjustments, excluding the premium amortization adjustment (PAA) - EAD measures the company's progress in generating net income for distribution to stockholders and preserving capital, reflecting net interest spread on the investment portfolio less financing, hedging, and operating costs[24](index=24&type=chunk) - EAD is calculated by adjusting GAAP net income for various items including economic net interest income, TBA dollar roll income, net servicing income (less MSR amortization), and excluding the PAA[24](index=24&type=chunk) - EAD serves as a useful indicator for investors in evaluating the Company's performance and ability to pay dividends[28](index=28&type=chunk) [EAD Reconciliation](index=10&type=section&id=EAD%20Reconciliation) GAAP net income of $843.06 million was adjusted to an EAD of $519.88 million for Q3 2025, primarily by excluding net gains on investments and derivatives, and including TBA dollar roll income and MSR amortization. EAD per average common share was $0.73, unchanged QoQ | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | GAAP net income (loss) | $843.06 million | $60.37 million | $82.35 million | +$782.69 million | +$760.71 million | | Net (gains) losses on investments and other (adjustment) | ($560.96 million) | ($82.85 million) | ($1.72 billion) | -$478.10 million | +$1.16 billion | | Net (gains) losses on derivatives (adjustment) | $284.20 million | $574.44 million | $2.07 billion | -$290.24 million | -$1.79 billion | | TBA dollar roll income | $9.02 million | $7.25 million | ($1.13 million) | +$1.77 million | +$10.15 million | | MSR amortization | ($72.08 million) | ($68.80 million) | ($62.48 million) | -$3.28 million | -$9.60 million | | Premium amortization adjustment cost (benefit) | $18.39 million | ($3.86 million) | $21.37 million | +$22.25 million | -$2.98 million | | Earnings available for distribution | $519.88 million | $489.91 million | $382.51 million | +$29.98 million | +$137.37 million | | EAD per average common share | $0.73 | $0.73 | $0.66 | Unchanged | +$0.07 | | Annualized EAD return on average equity | 14.70% | 14.86% | 12.95% | -0.16% | +1.75% | [TBA Dollar Roll Income Explanation](index=10&type=section&id=TBA%20Dollar%20Roll%20Income%20Explanation) TBA dollar roll income represents the economic equivalent of net interest income earned on underlying Agency mortgage-backed securities less an implied financing cost. It is derived from the price difference between TBA contracts with different settlement dates and is accounted for as a component of Net gains (losses) on derivatives under GAAP - TBA dollar roll income is the economic equivalent of net interest income earned on underlying Agency mortgage-backed securities less an implied financing cost[30](index=30&type=chunk)[32](index=32&type=chunk) - It is calculated as the price difference between two TBA contracts with the same terms but different settlement dates, multiplied by the notional amount[32](index=32&type=chunk) - Under GAAP, TBA dollar roll transactions are accounted for as a series of derivatives, with fair value changes recognized in Net gains (losses) on derivatives[31](index=31&type=chunk)[32](index=32&type=chunk) [Premium Amortization Expense (PAA)](index=11&type=section&id=Premium%20Amortization%20Expense%20(PAA)) Premium amortization expense for Agency mortgage-backed securities is calculated using estimates of future principal prepayments. The PAA (Premium Amortization Adjustment) is a non-GAAP adjustment that quantifies the cumulative impact of quarter-over-quarter changes in estimated long-term CPR on prior periods' premium amortization, helping to reveal underlying portfolio performance trends - Premium amortization or accretion for Agency MBS is calculated using estimates of future principal prepayments, with effective yield recalculated as prepayment estimates change[33](index=33&type=chunk) - The PAA quantifies the component of premium amortization representing the cumulative impact on prior periods of quarter-over-quarter changes in estimated long-term CPR[34](index=34&type=chunk) - Excluding PAA from certain non-GAAP metrics helps to provide additional transparency into underlying trends in portfolio performance[34](index=34&type=chunk)[41](index=41&type=chunk) [PAA Impact Illustration](index=11&type=section&id=PAA%20Impact%20Illustration) For Q3 2025, premium amortization expense was $36.72 million, with a PAA cost of $18.39 million, resulting in premium amortization expense (excluding PAA) of $18.33 million | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | | :------------------------------------ | :----------- | :----------- | :----------- | | Premium amortization expense (accretion) | $36.72 million | $28.14 million | $53.45 million | | Less: PAA cost (benefit) | $18.39 million | ($3.86 million) | $21.37 million | | Premium amortization expense (excluding PAA) | $18.33 million | $32.00 million | $32.08 million | [Economic Leverage and Capital Ratios](index=11&type=section&id=Economic%20Leverage%20and%20Capital%20Ratios) Annaly uses a mix of debt and equity funding to invest in real estate-related assets. Economic leverage is a non-GAAP measure that includes recourse debt, TBA derivatives, and net forward purchases/sales of investments, divided by total equity, excluding non-recourse debt from securitization vehicles and participations issued - The company's capital structure uses a mix of debt and equity to invest in real estate-related assets, aiming for efficient funding and positive risk-adjusted returns[36](index=36&type=chunk) - Economic leverage is calculated as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments, divided by total equity[37](index=37&type=chunk) - Non-recourse debt from securitization vehicles and participations issued are excluded from economic leverage[37](index=37&type=chunk) [Economic Leverage Ratio Reconciliation](index=12&type=section&id=Economic%20Leverage%20Ratio%20Reconciliation) Total GAAP debt was $107.02 billion in Q3 2025. After excluding non-recourse debt and adjusting for TBA derivatives and unsettled trades, economic debt was $84.99 billion, resulting in an economic leverage ratio of 5.7:1, down from 5.8:1 QoQ | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Total GAAP debt | $107.02 billion | $95.76 billion | $86.13 billion | +$11.26 billion | +$20.89 billion | | Total recourse debt | $78.59 billion | $70.09 billion | $66.95 billion | +$8.49 billion | +$11.63 billion | | Economic debt | $84.99 billion | $78.18 billion | $71.41 billion | +$6.80 billion | +$13.58 billion | | Total equity | $14.99 billion | $13.47 billion | $12.54 billion | +$1.52 billion | +$2.46 billion | | Economic leverage ratio | 5.7:1 | 5.8:1 | 5.7:1 | -0.1:1 | Unchanged | [Economic Capital Ratio Reconciliation](index=12&type=section&id=Economic%20Capital%20Ratio%20Reconciliation) Total GAAP assets were $125.86 billion in Q3 2025. After adjustments for unrealized gains on TBA derivatives, non-recourse debt, and implied market value of TBA derivatives, total economic assets were $101.40 billion, resulting in an economic capital ratio of 14.8%, up from 14.3% QoQ | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Total GAAP assets | $125.86 billion | $112.14 billion | $101.52 billion | +$13.72 billion | +$24.35 billion | | Total economic assets | $101.40 billion | $94.16 billion | $85.67 billion | +$7.23 billion | +$15.73 billion | | Total equity | $14.99 billion | $13.47 billion | $12.54 billion | +$1.52 billion | +$2.46 billion | | Economic capital ratio | 14.8% | 14.3% | 14.6% | +0.5% | +0.2% | [Interest Income, Economic Interest Expense, and Net Interest Income (excluding PAA)](index=12&type=section&id=Interest%20Income%2C%20Economic%20Interest%20Expense%2C%20and%20Net%20Interest%20Income%20(excluding%20PAA)) These non-GAAP measures provide a clearer view of the company's core profitability by adjusting GAAP interest income for PAA and including the net interest component of interest rate swaps in economic interest expense - Interest income (excluding PAA) removes the cumulative impact of quarter-over-quarter changes in estimated long-term prepayment speeds, providing a clearer view of underlying portfolio performance[41](index=41&type=chunk) - Economic interest expense includes GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, reflecting the total cost of financing[42](index=42&type=chunk) - Economic net interest income (excluding PAA) offers additional information on the net economics of primary business operations[44](index=44&type=chunk) [Reconciliation of Interest Income and Expense](index=14&type=section&id=Reconciliation%20of%20Interest%20Income%20and%20Expense) For Q3 2025, GAAP interest income of $1.53 billion was adjusted to $1.55 billion (excluding PAA). GAAP interest expense of $1.26 billion was adjusted to an economic interest expense of $1.05 billion, leading to an economic net interest income (excluding PAA) of $499.17 million, up from $467.20 million QoQ | Metric (in thousands) | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | GAAP interest income | $1.53 billion | $1.42 billion | $1.23 billion | +$113.60 million | +$303.16 million | | Interest income (excluding PAA) | $1.55 billion | $1.42 billion | $1.25 billion | +$135.86 million | +$300.18 million | | GAAP interest expense | $1.26 billion | $1.15 billion | $1.22 billion | +$111.05 million | +$40.81 million | | Economic interest expense | $1.05 billion | $947.83 million | $882.24 million | +$103.89 million | +$169.47 million | | Economic net interest income (excluding PAA) | $499.17 million | $467.20 million | $368.46 million | +$31.97 million | +$130.71 million | [Yield, Spread, and Margin Metrics (excluding PAA)](index=14&type=section&id=Yield%2C%20Spread%2C%20and%20Margin%20Metrics%20(excluding%20PAA)) These non-GAAP metrics, including average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA), and net interest margin (excluding PAA), are used by management to monitor business profitability and provide investors with additional insights into performance - Net interest spread (excluding PAA) is the difference between average yield on interest earning assets (excluding PAA) and average economic cost of interest bearing liabilities[46](index=46&type=chunk) - Net interest margin (excluding PAA) is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense, divided by average interest earning assets plus average TBA contract balances[46](index=46&type=chunk) - These measures provide management and investors with additional insights into the Company's profitability and performance[46](index=46&type=chunk)[47](index=47&type=chunk) [Economic Metrics (excluding PAA)](index=14&type=section&id=Economic%20Metrics%20(excluding%20PAA)) For Q3 2025, the average yield on interest earning assets (excluding PAA) was 5.46%, while the average economic cost of interest bearing liabilities was 3.96%. This resulted in a net interest spread (excluding PAA) of 1.50% and a net interest margin (excluding PAA) of 1.70% | Metric | Sep 30, 2025 | Jun 30, 2025 | Sep 30, 2024 | QoQ Change | YoY Change | | :------------------------------------------------ | :----------- | :----------- | :----------- | :--------- | :--------- | | Average yield on interest earning assets (excluding PAA) | 5.46% | 5.41% | 5.25% | +0.05% | +0.21% | | Average economic cost of interest bearing liabilities | 3.96% | 3.94% | 3.93% | +0.02% | +0.03% | | Net interest spread (excluding PAA) | 1.50% | 1.47% | 1.32% | +0.03% | +0.18% | | Net interest margin (excluding PAA) | 1.70% | 1.71% | 1.52% | -0.01% | +0.18% | Other Information This section outlines forward-looking statement disclaimers, provides a company profile for Annaly as a diversified capital manager, and details investor communication channels [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements based on various assumptions, and actual results may differ materially due to factors such as changes in interest rates, prepayment rates, market values, financing availability, and regulatory changes. The company disclaims any obligation to update these statements - Forward-looking statements are based on various assumptions and actual results could differ materially due to factors like changes in interest rates, yield curve, prepayment rates, and market value of assets[9](index=9&type=chunk) - Other risks include financing availability, business conditions, ability to grow residential credit and MSR businesses, credit risks, government regulations, REIT qualification, Investment Company Act exemption, and operational risks[9](index=9&type=chunk) - The company disclaims any obligation to publicly release revisions to forward-looking statements, except as required by law[9](index=9&type=chunk) [Company Profile](index=3&type=section&id=Company%20Profile) Annaly is a leading diversified capital manager focused on mortgage finance, aiming to generate net income for stockholders and optimize returns through prudent management of diversified investment strategies. It is internally managed and taxed as a REIT - Annaly is a leading diversified capital manager with investment strategies across mortgage finance[10](index=10&type=chunk) - Its principal business objective is to generate net income for distribution to stockholders and optimize returns through prudent management of diversified investment strategies[10](index=10&type=chunk) - Annaly is internally managed and has elected to be taxed as a real estate investment trust (REIT)[10](index=10&type=chunk) [Investor Relations and Communication](index=3&type=section&id=Investor%20Relations%20and%20Communication) Annaly uses its website (www.annaly.com) and LinkedIn as official channels for company information. Investors can find additional resources like investor presentations, financial supplements, and conference call details on the website, and can subscribe to email alerts - Annaly uses its website (www.annaly.com) and LinkedIn account as official channels for distributing company information, which may be deemed material[11](index=11&type=chunk) - Investors can find the Third Quarter 2025 Investor Presentation and Financial Supplement on the company's website under the "Investors" section[12](index=12&type=chunk) - Details for the Q3 2025 earnings conference call, including pre-registration and replay information, are provided[12](index=12&type=chunk)[13](index=13&type=chunk)

Core Insights - Annaly Capital Management reported a strong financial performance for the third quarter of 2025, achieving an economic return of 8.1% for the quarter and 11.5% year-to-date, with earnings exceeding dividends [3][7]. Financial Highlights - GAAP net income per average common share was $1.21 for the quarter, compared to $0.03 in the previous quarter and $0.05 a year ago [7][23]. - Earnings available for distribution (EAD) per average common share was $0.73, unchanged from the previous quarter and up from $0.66 a year ago [7][26]. - Book value per common share increased to $19.25 from $18.45 in the previous quarter [7][8]. - Total portfolio value reached $97.8 billion, with $87.3 billion in a highly liquid Agency portfolio, which increased by 10% [7][8]. Business Highlights - The Agency MBS portfolio benefited from significant spread tightening due to increased demand and reduced volatility [3][4]. - The Residential Credit portfolio grew by 4% to $6.9 billion, driven by record correspondent channel activity and securitization issuance of nearly $4 billion [7][8]. - The Mortgage Servicing Rights (MSR) portfolio increased by 6% to $3.5 billion, representing 19% of dedicated capital [7][8]. Investment and Strategy - The company raised $1.1 billion in accretive capital during the quarter, including $823 million in common equity and $275 million through preferred stock issuance [7][8]. - The hedge ratio remained stable at 92%, with new hedges primarily allocated to swaps to enhance overall portfolio returns [7][8]. Financing and Capital - Annaly's total assets available for financing amounted to $8.8 billion, including $5.9 billion in unencumbered Agency MBS [7][8]. - The average GAAP cost of interest-bearing liabilities decreased to 4.73%, while the average economic cost increased slightly to 3.96% [7][8].

Annaly Capital Management (NYSE:NLY) is set to report Q3 results on Wednesday, October 22, after market close, as U.S. rates continue to shift. Interest rates in the U.S. are starting to fall after a period of sharp increases, and the yield curve, where ...