Annaly Capital Management, Inc. Q2 FY26 Earnings Analysis

- Residential Credit showed strong growth with over 60% year-over-year increase in Q1, driven by whole loan correspondent business ramp-up and resilient non-agency market activity (Page 10). - The company priced 8 deals and settled $4.7 billion in securitizations during Q1, with 12 deals priced to date, indicating robust deal flow and market liquidity (Page 10). - Agency sector is considered investable with strong technical support, but capital deployment will be methodical and selective (Page 7). - The firm raised approximately $510 million of common equity in Q1, primarily deployed to Residential Credit and MSRs, reflecting a strategic growth tilt toward higher-return segments (Page 2). - The capital allocation target remains roughly 50% Agency, 30% Residential Credit, and 20% MSRs, showing long-term growth focus on diversified housing finance (Page 5). - Positive market trends in whole loans and non-agency sectors suggest continued volume growth (Page 10).

- Q1 2026 economic return was 1.5% with book value per share down 1.9%, reflecting market volatility. - Earnings available for distribution (EAD) per share increased $0.02 to $0.76, exceeding the quarterly dividend. - Capital allocation shifted towards Residential Credit and MSRs due to tightening in Agency spreads, with a long-term target of 50% Agency, 30% Resi Credit, 20% MSRs. - Market improvements and strategic capital deployment are expected to sustain or improve returns. - Q1 activity included raising approximately $510 million through ATM, primarily deployed in Residential Credit and MSRs. - Management remains cautious but sees opportunities to methodically raise capital and invest, especially in Agency, as technicals improve. - Overall, earnings growth is expected to be supported by diversified platform resilience, active portfolio management, and improving market technicals despite geopolitical risks.

The document does not explicitly mention any specific current or future capital expenditures (capex) or capital investments in fixed assets. However, strategic capital allocation and investment highlights include: - Raised approximately $510 million of common equity through ATM in Q1, primarily deployed to Residential Credit and MSR strategies. - Long-term capital allocation target remains approximately 50% Agency, 30% Residential Credit, and 20% MSRs. - Expanded Residential Credit portfolio by $2.3 billion in Q1 through investments in third-party securities, whole loans, and OBX securities, targeting mid to high teens returns. - Focus on opportunistically deploying capital in Agency MBS when attractive relative value presents itself. - Invested in securitizations and credit businesses to capitalize on tightening spreads and relative value opportunities. No explicit mention of investments in property, plant, or equipment or other traditional capex was discussed.

- Annaly raised approximately $510 million of common equity through their ATM program in Q1 2026. - The majority of this capital raise was deployed in residential credit and MSR strategies due to attractive valuations in those areas. - On a go-forward basis, Annaly is open to methodically raising capital and investing in Agency MBS but does not plan to be aggressively heavy in that sector. - Capital allocation remains flexible, with a long-term target allocation of 50% Agency, 30% residential credit, and 20% MSRs. - The company emphasizes a thoughtful and deliberate approach to capital raising and deployment, focusing on accretive investments rather than aggressive increases. - No specific mention of upcoming debt fundraising was noted in the provided pages.

- Residential Credit locked volume was strong at $7.4 billion in Q1, a 16% increase quarter-over-quarter and 41% year-over-year. - Residential Credit securitization gross issuance was $79 billion in Q1, a 63% increase year-over-year. - Onslow Bay currently holds the largest position as a non-bank securitizer in Residential Credit and remains well positioned for market growth. - Quarter-end locked pipeline for Residential Credit reflects strong credit quality with a weighted average FICO of 764 and 67% combined LTV, with less than 2% over 80 LTV. - $4.7 billion settled in 8 securitizations in Q1; 12 deals priced year-to-date totaling $6.6 billion, with 4 deals priced after quarter-end. - Total warehouse capacity of $7.6 billion across Residential Credit and MSR businesses with utilization at 65% and 50%, respectively. - MSR flow acquisition channels have significantly expanded with $1.9 billion UPB purchased via flow, tripling quarter-over-quarter.