Annaly(US:NLY)2025-05-08 20:16Financial 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].