8-K: Annaly Reports Strong Q4, Full-Year 2025 Results

Annaly Capital Management, Inc. announced robust financial performance for Q4 and full-year 2025, driven by significant portfolio growth and increased profitability.

Summary

• GAAP net income reached $1.40 per average common share for Q4 2025 and $2.92 for the full year.
• Earnings available for distribution (EAD) was $0.74 per average common share for Q4 and $2.92 for the full year.
• The company delivered an economic return of 8.6% for Q4 and an impressive 20.2% for the full year 2025.
• Book value per common share increased to $20.21 at December 31, 2025, up from $19.25 in the prior quarter.
• Total portfolio expanded to $104.7 billion, with the Agency portfolio growing 6% in Q4 and 32% ($22 billion) for the full year.
• Residential Credit portfolio increased 16% in Q4 to $8.0 billion and 15% for the full year, driven by record correspondent channel activity ($23.1 billion lock volume, $16.5 billion loan fundings).
• Mortgage Servicing Rights (MSR) portfolio grew 8% in Q4 to $3.8 billion and 15% for the full year.
• Average GAAP cost of interest-bearing liabilities decreased by 24 basis points quarter-over-quarter to 4.49%.
• Net interest margin improved to 1.18% in Q4 2025, up from 0.97% in the prior quarter and 0.75% in Q4 2024.
• Raised $2.9 billion of accretive capital in 2025, including $2.6 billion from common equity sales and $275 million from preferred stock issuance.

Sentiment

Score: 8

Explanation: The filing indicates strong financial performance across key metrics, significant portfolio growth, effective capital deployment, and positive management outlook for 2026. The increase in book value, net income, and economic return, coupled with strategic market positioning, points to a very positive sentiment, despite a slight increase in GAAP leverage.

Positives

• GAAP net income per average common share increased significantly to $1.40 in Q4 2025 from $1.21 in Q3 2025 and $0.78 in Q4 2024.
• Full-year 2025 economic return was strong at 20.2%, contributing to a 40% total shareholder return.
• Book value per common share rose to $20.21, indicating value creation for shareholders.
• Total portfolio grew by nearly 30% in 2025, demonstrating successful capital deployment across investment strategies.
• The Agency portfolio increased by $22 billion (32%) in 2025, with investments focused on specified pools offering significant call protection.
• Residential Credit platform achieved record production and securitization activity, closing 29 securitizations totaling $15.2 billion in 2025.
• MSR portfolio expanded by 15% in 2025, positioning Annaly as the second largest purchaser of conventional MSR.
• Average GAAP cost of interest-bearing liabilities decreased by 24 basis points quarter-over-quarter to 4.49%, improving financing efficiency.
• Net interest spread improved to 0.93% in Q4 2025 from 0.67% in Q3 2025 and 0.40% in Q4 2024.
• Maintained a prudent leverage and liquidity posture, with total assets available for financing increasing $2.5 billion to $9.4 billion in 2025.

Negatives

• GAAP leverage slightly increased to 7.2x in Q4 2025 from 7.1x in the prior quarter.
• Weighted average days to maturity for repurchase agreements decreased to 35 days from 49 days in the prior quarter, potentially indicating shorter-term financing reliance.

Risks

• Changes in interest rates.
• Changes in the yield curve.
• Changes in prepayment rates.
• Availability of mortgage-backed securities (MBS) and other securities for purchase.
• Availability of financing and its terms.
• Changes in the market value of the company's assets.
• Changes in business conditions and the general economy.
• Ability to grow its residential credit business.
• Ability to grow its mortgage servicing rights business.
• Credit risks related to investments in credit risk transfer securities and residential mortgage-backed securities and related residential mortgage credit assets.
• Risks related to investments in mortgage servicing rights.
• Ability to consummate any contemplated investment opportunities.
• Changes in government regulations or policy affecting the company's business.
• Ability to maintain its qualification as a REIT for U.S. federal income tax purposes.
• Ability to maintain its exemption from registration under the Investment Company Act of 1940.
• Operational risks or risk management failures by the company or critical third parties, including cybersecurity incidents.

Future Outlook

Annaly enters 2026 well-positioned to continue its momentum, anticipating a constructive environment and believing its diversified platform will continue to provide enhanced risk-adjusted returns. The company expects to continue deploying accretive capital across its investment strategies, particularly in Agency MBS, and to grow its Residential Credit and MSR businesses.

Management Comments

• "2025 was a solid year for Annaly as we delivered a 20% economic return and 40% total shareholder return underscoring the resilience and strength of our diversified housing finance model."
• "Our portfolio grew by nearly 30% as we successfully deployed accretive capital raised across our three investment strategies, primarily into Agency MBS."
• "Our Agency business benefited from meaningful spread tightening, supported by strong fund flows, improved fundamentals and a more favorable operating environment."
• "Our Residential Credit platform generated record production from our whole loan correspondent channel and securitization platform, which continues to gain market share through the introduction of innovative structured transactions."
• "Moreover, we were the second largest buyer of conventional MSR last year, growing our differentiated portfolio of low note rate, high credit-quality loans while expanding our network of subservicing and recapture partners."
• "We enter 2026 well-positioned to continue this momentum given the constructive environment and believe our platform will continue to provide enhanced risk-adjusted returns."

Industry Context

Annaly's strong performance in 2025, particularly in its Agency and Residential Credit portfolios, reflects a favorable operating environment characterized by meaningful spread tightening and strong fund flows. The company's strategic focus on specified pools with call protection within Agency MBS and its record activity in the whole loan correspondent channel and securitization platform align with broader trends of seeking yield and managing interest rate risk in the housing finance sector. Its growth in MSR, becoming the second largest purchaser of conventional MSR, indicates a strategic move to diversify income streams and capitalize on servicing market opportunities.

Comparison to Industry Standards

• Annaly was the second largest purchaser of conventional MSR in 2025, demonstrating significant market presence in the mortgage servicing rights sector.
• The company is uniquely positioned with the lowest note rate portfolio among the top 20 Agency servicers, suggesting a potentially more stable MSR portfolio.
• Annaly remained the largest non-bank issuer and the second largest issuer overall of Prime Jumbo and Expanded Credit MBS year-to-date, highlighting its leadership in the securitization market.

Stakeholder Impact

• Shareholders: Benefited from increased GAAP net income per share, higher book value per share, a stable dividend of $0.70 per share, and a 40% total shareholder return for the full year 2025.
• Customers (borrowers/originators): The Residential Credit platform generated record production from its whole loan correspondent channel and securitization platform, indicating strong engagement and service offerings.
• Employees: Compensation expense increased from $38.393 million in Q3 2025 to $39.279 million in Q4 2025, and from $130.403 million in 2024 to $151.552 million in 2025, suggesting potential growth in headcount or compensation.

Next Steps

• Annaly Capital Management, Inc. will hold its fourth quarter 2025 earnings conference call on January 29, 2026, at 9:00 a.m. Eastern Time.
• Investors are encouraged to monitor the company's website (www.annaly.com) and LinkedIn account for company information, investor presentations, and financial supplements.

Key Dates

Recommendation

The filing demonstrates robust financial health and strategic execution. Key metrics like GAAP net income per share, book value per share, and economic return show significant improvement both quarter-over-quarter and year-over-year. The company successfully grew its diversified portfolio by nearly 30% and raised substantial accretive capital, indicating strong operational capabilities and market positioning. The reduction in the average GAAP cost of interest-bearing liabilities and improved net interest spread highlight efficient financial management. Management's optimistic outlook for 2026, coupled with leadership positions in MSR and Prime Jumbo/Expanded Credit MBS issuance, suggests continued growth potential. These factors collectively point to a strong investment opportunity.

Keywords

Annaly Capital Management, NLY, REIT, Mortgage REIT, Agency MBS, Residential Credit, Mortgage Servicing Rights, MSR, Securitization, Financial Results, Earnings, Dividend, Book Value, Leverage, Net Interest Margin, Economic Return, Capital Raise, Housing Finance