8-K: Annaly Capital Q1 2026 Earnings and Business Update

Annaly Capital Management reports Q1 2026 earnings available for distribution of $0.76 per share and maintains a disciplined leverage profile.

Summary

• Earnings available for distribution (EAD) of $0.76 per average common share.
• Book value per common share of $19.82.
• Declared quarterly common stock cash dividend of $0.70 per share.
• Economic return of 1.5% for the first quarter.
• Total portfolio size of $106.7 billion as of March 31, 2026.
• Economic leverage maintained at 5.7x.
• Residential Credit portfolio grew 30% quarter-over-quarter to $10.3 billion.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a solid performance, reflecting successful execution of a diversified strategy despite macro headwinds and a slight decline in book value.

Positives

• Tenth consecutive quarter of positive economic returns.
• EAD of $0.76 outperformed the $0.70 dividend.
• Residential Credit and MSR businesses increased financing capacity by $550 million and $100 million, respectively.
• Record quarterly securitization issuance of $4.7 billion in Q1.
• Average GAAP cost of interest-bearing liabilities decreased 20 basis points quarter-over-quarter to 4.29%.

Negatives

• Book value per share declined to $19.82 from $20.21 in the previous quarter.
• Economic leverage increased slightly to 5.7x from 5.6x.
• Agency portfolio decreased marginally during the quarter.
• GAAP net income per share dropped to $0.33 from $1.40 in the prior quarter.

Risks

• Geopolitical uncertainty and rising commodity prices linked to the war in the Middle East.
• Potential for headline inflation to remain above the Federal Reserve's 2% target.
• Interest rate volatility and changes in the yield curve.
• Prepayment rate fluctuations impacting mortgage-backed securities.
• Credit risks related to investments in credit risk transfer securities and residential mortgage-backed securities.

Future Outlook

Management expects supply in the MSR market to remain healthy throughout 2026 due to industry consolidation. The company anticipates continued momentum in its residential credit whole loan correspondent channel and expects to utilize its pipeline of callable transactions to provide value.

Management Comments

• Annaly delivered its tenth consecutive quarter of positive economic returns.
• The company remains the largest non-bank issuer and the second largest issuer overall of Prime Jumbo and Expanded Credit MBS.
• Annaly increased its capital allocation to its Residential Credit and MSR portfolios in Q1 2026 given attractive relative value.

Industry Context

StockSavvy.ai notes that Annaly continues to pivot toward a diversified housing finance platform, reducing reliance on pure Agency MBS by scaling Residential Credit and MSR. This strategy aligns with broader mREIT trends of seeking higher risk-adjusted returns through credit-sensitive assets in a volatile interest rate environment.

Comparison to Industry Standards

• Annaly's economic return per unit of leverage is approximately 30% higher than its mREIT peers on average.
• Maintained a lower leverage profile compared to the broader mREIT average.
• Onslow Bay is the fifth largest non-bank servicer of Agency MBS.

Stakeholder Impact

• Shareholders benefit from continued dividend coverage and positive economic returns.
• Creditors see disciplined leverage management and increased financing capacity.

Next Steps

• Continue monitoring interest rate environments and geopolitical impacts on inflation.
• Execute on the pipeline of callable residential credit transactions.
• Maintain disciplined hedging and leverage management.

Key Dates

Recommendation

The company is performing steadily within its stated strategy, but the slight decline in book value and macro uncertainties suggest a cautious hold for investors awaiting further interest rate clarity.

Keywords

Annaly Capital Management, REIT, Mortgage-backed securities, MSR, Residential credit, Earnings, NLY