Annaly(NLY) - 2025 Q3 - Quarterly Results

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 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 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] Investment and Strategy Overview 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][5] - The Agency portfolio benefited from meaningful spread tightening during the quarter, driven by increased MBS demand and declining volatility[4] - 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][5] Financing and Capital Overview 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] | Metric | Q3 2025 | | :----- | :------ | | Total Assets Available for Financing | $8.8 billion | | Cash & Unencumbered Agency MBS | $5.9 billion | Corporate Responsibility & Governance 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] 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 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 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 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 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 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 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 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 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 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] - These measures adjust for disparate fair value reporting and exclude certain unrealized, non-cash, or episodic components of GAAP net income (loss)[28] - Non-GAAP measures have limitations, such as potential incomparability with peers and the PAA exclusion not being indicative of future amortization[22] Earnings Available for Distribution (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] - 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] - EAD serves as a useful indicator for investors in evaluating the Company's performance and ability to pay dividends[28] EAD Reconciliation 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 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][32] - 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] - 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][32] Premium Amortization Expense (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] - 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] - Excluding PAA from certain non-GAAP metrics helps to provide additional transparency into underlying trends in portfolio performance[34][41] PAA Impact Illustration 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 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] - 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] - Non-recourse debt from securitization vehicles and participations issued are excluded from economic leverage[37] Economic Leverage Ratio Reconciliation 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 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) 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] - 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] - Economic net interest income (excluding PAA) offers additional information on the net economics of primary business operations[44] Reconciliation of Interest Income and Expense 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) 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] - 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] - These measures provide management and investors with additional insights into the Company's profitability and performance[46][47] Economic Metrics (excluding PAA) 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 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] - 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] - The company disclaims any obligation to publicly release revisions to forward-looking statements, except as required by law[9] Company Profile 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] - Its principal business objective is to generate net income for distribution to stockholders and optimize returns through prudent management of diversified investment strategies[10] - Annaly is internally managed and has elected to be taxed as a real estate investment trust (REIT)[10] Investor Relations and Communication 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] - Investors can find the Third Quarter 2025 Investor Presentation and Financial Supplement on the company's website under the "Investors" section[12] - Details for the Q3 2025 earnings conference call, including pre-registration and replay information, are provided[12][13]