Positive Economic Return and Dividend Coverage
Delivered an economic return of 1.5% in Q1 2026 and generated earnings available for distribution (EAD) of $0.76 per share (up $0.02 QoQ), which exceeded the quarterly dividend of $0.70.
Annaly Capital
· NLY
April 21st, 2026
Summary
- Earnings Call Date:
- 2026-04-21
- Change Since:
- -1.28%
- Next Earnings Date:
- 2026-07-29
Earnings Call Sentiment
PositiveThe call conveyed resilient operating performance across a diversified platform despite a volatile macro and geopolitical backdrop. Key positives include a positive economic return (1.5%), EAD that covered the dividend ($0.76 vs $0.70), disciplined leverage (5.7x), successful equity raise (~$510M) and strong growth in Residential Credit and MSR (portfolio growth, record securitizations, and improved platform scale). Challenges included a 1.9% QoQ book value decline, March rate/treasury sell-off that increased hedging costs and some spread widening in credit and Agency late in the quarter. On balance, management emphasized conservative risk management, ample liquidity, and attractive relative-value opportunities across the three strategies.
Company Guidance
The company guided that each of its three strategies is “well positioned to deliver attractive risk‑adjusted returns” for the rest of 2026, with Agency offering perspective new‑money returns in the mid‑teens and the firm reiterating its long‑term capital target of ~50% Agency / 30% Residential Credit / 20% MSR while remaining ready to dynamically reallocate capital; current Q1 metrics include a 1.5% economic return, $0.76 EAD per share (ex‑PAA), book value per share of $19.82 (down 1.9% QoQ) after a $0.70 dividend, economic leverage of 5.7x, ~$510M of common equity raised via ATM, aggregate capital allocation to Resi+MSR up from 38% to 44%, Agency market value $92B (56% of capital), Residential Credit market value $10.3B (23% of capital) with $6.7B whole‑loan acquisitions, $7.4B lock volume (+16% QoQ, +41% YoY), $4.7B OBX settlements (8 securitizations) and $79B industry gross issuance (+63% YoY), MSR market value $4.2B (21% of capital) with ~$24B UPB committed (~$388M MV), weighted average note rates ~3.3–3.4%, MSR prepay speeds ~4.2 CPR and MSR serious delinquencies just under 50 bps, portfolio‑level non‑QM D90+ ≈140 bps, average repo ~3.9% (reported earning repo 3.87%), NIM 1.71% (↑2 bps), net interest spread ~1.42%, ~$7.4B unencumbered assets (incl. ~$5B cash/Agency MBS), ~$9B assets available for financing (~55% of capital), total warehouse capacity $7.6B (incl. $2.8B committed) with 65% Resi / 50% MSR utilization, and an efficiency ratio of 1.29%—all supporting continued MSR and Residential Credit growth while keeping Agency exposure investable.
Conservative Leverage and Strong Liquidity
Maintained disciplined economic leverage at 5.7x and ended the quarter with $7.4 billion in unencumbered assets (including $5.0 billion in cash and unencumbered Agency MBS) and roughly $9.0 billion of total assets available for financing (~55% of total capital).
Successful Equity Raise and Capital Reallocation
Raised approximately $510 million of common equity through ATM in Q1 and opportunistically increased aggregate capital allocation to Residential Credit and MSR from 38% to 44% to capture relative value.
Residential Credit Growth and Strong Securitization Activity
Residential Credit portfolio grew to $10.3 billion (23% of capital). Acquired $6.7 billion in whole loans; lock volume was $7.4 billion (+16% QoQ, +41% YoY). Q1 Residential Credit gross issuance was $79 billion (+63% YoY). OBX settled 8 securitizations for $4.7 billion, generating $570 million of proprietary assets; 12 transactions totaling $6.6 billion brought to market YTD.
MSR Scale and Attractive Fundamentals
MSR portfolio market value ended at $4.2 billion and now represents ~21% of capital. Committed to purchase $24 billion UPB (~$388 million market value) with weighted average note rate ~3.4%. Prepay speeds muted at 4.2 CPR, serious delinquencies ~50 bps, weighted average note rate 3.3% (lowest among top-20 agency MSR holders). Ranked as the second-largest buyer of conventional MSR (by transfers) and fifth-largest nonbank conventional servicer.
Net Interest and Funding Improvements
Average repo rate improved by ~30 bps to ~3.9%; reported earning repo rate ~3.87%. Net interest margin improved 2 bps to 1.71% with net interest spread remaining strong at 1.42% (modest decline).
Operational Efficiency
Maintained a low efficiency ratio of 1.29% (fell 2 bps QoQ), among the lowest in the mortgage REIT sector while operating three fully scaled businesses.
Market Position & Platform Advantages
Onslow Bay remains the largest non-bank securitizer of Residential Credit; OBX platform and correspondent channel produced high-quality proprietary assets. Company highlighted ability to dynamically allocate capital and historically delivered double-digit annualized economic return over the last three years with lower leverage versus peers.
QTD Book Value Recovery
Management reported quarter-to-date economic book value was up ~4% (inclusive of accrued dividend) during the April trading period following Q1 volatility.
Operator
Good day, and welcome to the First Quarter 2026 Annaly Capital Management Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sean Kensil, Director Investor Relations. Please go ahead.
Sean Kensil
Good morning, and welcome to the First Quarter 2026 Earnings Call for Annaly Capital Management. Any forward-looking statements made during today's call are subject to certain risks and uncertainties, which are outlined in the Risk Factors section and our most recent annual and quarterly SEC filings. Actual events and results may differ materially from these forward-looking statements. We encourage you to read the disclaimer in our earnings release in addition to our quarterly and annual filings. Additionally, the content of this conference call may contain time-sensitive information that is accurate only as of the date hereof. We do not undertake and specifically disclaim any obligation to update or revise this information. During this call, we may present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings release.
Content referenced in today's call can be found in our first quarter 2026 Investor Presentation and First Quarter 2026 financial supplement, both found under the Presentations section of our website. Please also note this event is being recorded. Participants on this morning's call include David Finkelstein, Chief Executive Officer and Co-Chief Investment Officer; Serena Wolfe, Chief Financial Officer; Mike Fania, Co-Chief Invest...
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