Executive Summary

Q1 2025 EAD held at $0.72 per share while GAAP EPS was $0.15; economic return was 3.0%, book value per share was $19.02, and the quarterly common dividend was raised to $0.70 .
Versus consensus, EPS beat and revenue missed: Q1 2025 Primary EPS actual $0.72 vs $0.698 estimate; Revenue actual $244.54M vs $418.52M estimate. Primary EPS likely reflects EAD (non-GAAP) used by Street for mREITs; GAAP EPS was $0.15. Values retrieved from S&P Global.*
Leverage and risk remained conservative: GAAP leverage fell to 6.8x (from 7.1x), economic leverage rose modestly to 5.7x (from 5.5x), and the hedge ratio was ~95% as management emphasized prudence amid post-quarter tariff-driven volatility and MBS spread widening .
Portfolio positioning: Total portfolio $84.9B with $75.0B Agency; mix tilted toward intermediate coupon TBAs (4.0s/4.5s) and higher-coupon specified pools (5.5s); Residential Credit decreased to $6.6B; MSR stable at $3.3B (~21% of dedicated capital) .
Management expects to maintain the $0.70 quarterly dividend for 2025 “all else equal”; catalysts include potential regulatory reform (SLR/Basel “endgame”) that could support swap spreads and Agency MBS, and disciplined balance sheet/liquidity (~$7.5B assets available for financing) to navigate volatility .

What Went Well and What Went Wrong

What Went Well
- EAD durability and dividend increase: EAD of $0.72 per share matched Q4 and supported an increased $0.70 dividend; “we increased our common stock dividend… Given our outlook for 2025, we expect to maintain this level” (CFO) .
- Broad-based contribution: “each of our three investment strategies contributed positively” with Agency, Residential Credit (OBX platform), and MSR all positive to economic return; Agency allocation increased slightly and liquidity strengthened (~$7.5B assets available for financing) .
- Funding tailwinds: Lower average repo rates (4.56% vs 4.93% prior quarter) and extended repo tenor (50 days vs 32 days) supported earnings; warehouse capacity expanded to $5.8B post-quarter .
What Went Wrong
- GAAP earnings compression: GAAP diluted EPS fell to $0.15 from $0.78 in Q4; hedge losses ($2.14/share) modestly outpaced gains from Agency ($1.89), resi credit ($0.08) and MSR ($0.05) as volatility increased late in Q1 .
- Margin mix: NIM ex-PAA ticked down to 1.69% (from 1.71%) and average economic liability cost rose 9 bps to 3.88%, partly reflecting swap income dynamics and funding mix .
- Market headwinds: Post-quarter tariff headlines drove rate volatility and MBS spread widening (more pronounced vs swaps); AAA non-QM spreads were ~20 bps wider QoQ with additional widening post quarter (since partially retraced) .

Financial Results

Headline metrics versus prior quarters (GAAP, non-GAAP, leverage)

Metric	Q3 2024	Q4 2024	Q1 2025
GAAP Diluted EPS ($)	$0.05	$0.78	$0.15
EAD per avg common share ($)	$0.66	$0.72	$0.72
Book Value per common share ($)	$19.54	$19.15	$19.02
Net Interest Margin (%)	0.06%	0.75%	0.87%
Net Interest Margin (ex-PAA) (%)	1.52%	1.71%	1.69%
GAAP Leverage (x)	6.9x	7.1x	6.8x
Economic Leverage (x)	5.7x	5.5x	5.7x
Dividend per common share ($)	$0.65	$0.65	$0.70

Consensus versus actual (S&P Global standardization)

Metric	Q3 2024	Q4 2024	Q1 2025
Primary EPS – Consensus Mean ($)	0.6676*	0.6674*	0.6976*
Primary EPS – Actual ($)	0.66*	0.72*	0.72*
Revenue – Consensus Mean ($M)	407.23*	367.57*	418.52*
Revenue – Actual ($M)	227.14*	539.11*	244.54*

Note: Primary EPS for mREITs typically reflects non-GAAP EAD per share used by the Street; GAAP EPS for Q1 2025 was $0.15 . Values retrieved from S&P Global.*

Segment/portfolio mix

Portfolio Item ($USD Billions)	Q3 2024	Q4 2024	Q1 2025
Agency MBS	$69.15	$67.43	$68.33
Total Loans, net (Residential)	$2.31	$3.55	$3.86
MSR	$2.69	$2.91	$3.27
Assets transferred/pledged to securitization vehicles	$21.04	$21.97	$24.46
Total Securities	$71.70	$69.76	$70.36

Operating KPIs

KPI	Q3 2024	Q4 2024	Q1 2025
Weighted avg experienced CPR	7.6%	8.7%	7.1%
Hedge Ratio	101%	100%	95%
Avg GAAP cost of interest-bearing liabilities	5.42%	4.96%	4.77%
Avg economic cost of interest-bearing liabilities	3.93%	3.79%	3.88%
Avg yield on interest-earning assets (ex-PAA)	5.25%	5.26%	5.23%
Net Interest Spread (ex-PAA)	1.32%	1.47%	1.35%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Common Dividend per Share	FY 2025	n/a	“Expect to maintain” $0.70 per quarter, all else equal (initiated with Q1)	Raised (from $0.65 in Q4 2024 to $0.70 in Q1 2025)
Leverage posture	Near-term	Conservative posture; low leverage	Maintain conservative leverage, likely inside ~6x economic until volatility subsides	Maintained
Quantitative revenue/margin/OpEx/tax guidance	n/a	—	None provided	n/a

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q1 2025)	Trend
Agency MBS positioning	Q3: Moved up-in-coupon; Q4: ~50% in 5.5%+ coupons; hedges lengthened to long end	Tilt to intermediate coupon TBAs (4s/4.5s) plus 5.5% specified; hedge ratio ~95%	Rotating toward intermediate TBAs; maintaining high hedge coverage
Leverage & liquidity	Q3: Econ leverage 5.7x; Q4: 5.5x; ~$6.9B assets available	Econ leverage 5.7x; ~$7.5B assets available for financing; keep leverage conservative amid volatility	Slightly higher leverage, strong liquidity, cautious posture
Residential Credit (OBX)	Q3: 18 YTD securitizations; record correspondent volumes	6 Q1 deals ($3.1B), plus 2 post-Q1 ($1.1B); inaugural HELOC deal; robust locks/fundings	Programmatic issuance, expanding products (HELOC)
MSR	Q3/Q4: Growing low-coupon MSR, strong performance	Stable ~$3.3B MV; low note rate (3.23%), strong delinquency/CPR, positive float tailwinds	Stable, resilient income contributor
Tariffs/macro & spreads	—	Tariff news lifted volatility; MBS widened vs swaps; funding markets stable	Volatility risk elevated; fundamentals supportive long term
Regulatory backdrop	Q4: noted dynamics;	Expect regulatory reform (SLR/Basel reproposal) could widen swap spreads and aid liquidity	Potential medium-term tailwind
Housing trends	—	Regional softening (South/Southeast) but national footing solid; delinquencies low; equity high	Near-term HPA moderation; long-term constructive
GSE conservatorship	Q4: hurdles high; footprint reductions favor private capital	Smaller GSE footprint would aid Agency supply-demand and private credit opportunities	Opportunity set expanding for private capital

Management Commentary

“We were pleased to deliver a 3% economic return in the first quarter, as well as an increase to our common stock dividend, with each of our three investment strategies contributing positively to our return.” – CEO David Finkelstein .
“Earnings available for distribution per share for the quarter was consistent with the prior quarter at $0.72 per share… we increased our dividend from $0.65 to $0.70 per share… we expect to maintain this level for the remainder of the year, all else equal.” – CFO Serena Wolfe .
“Post quarter end… interest rates and financial assets broadly have exhibited meaningful volatility following the tariff announcements… we entered the year with our lowest economic leverage in a decade and enhanced our liquidity… prepared us well for the volatility.” – CEO .
“Agency… growth… driven by purchases of largely intermediate coupon TBAs… offering favorable convexity and carry… On hedging, we shifted some longer-dated swaps into Treasury futures.” – CEO .
“HELOC securitization… AAA at SOFR+160; blended cost ~SOFR+170 with ~85% advance… very accretive vs warehouse.” – Co-CIO Mike Fania .

Q&A Highlights

Spreads and swaps/regulation: Swap spreads tightened to historically tight levels; potential regulatory reform (SLR, Basel reproposal) seen as a tailwind for swap spread widening later this year .
Leverage stance: Weighing wider spreads vs elevated volatility; keep leverage “inside of 6 turns” until volatility subsides; portfolio would still generate double-digit returns if spreads tighten 25 bps .
Coupon posture and prepay risk: Bias to intermediate coupons (4s/4.5s) for convexity; specified pools in higher coupons as pay-ups normalize; prepay speeds can spike faster than 2019 with modest rate moves .
Housing/PLS: Regional HPA softness near-term but fundamentals solid; PLS market resilient—Annaly priced non-QM deal amid equity selloff with >20 investors .
Capital deployment: Marginal dollar going to Agency MBS while continuing OBX conduit growth; MSR growth opportunistic based on pricing/supply .

Estimates Context

EPS: Q1 2025 Primary EPS actual $0.72 vs $0.698 consensus (beat). Street tracks EAD-like metric for mREIT EPS; GAAP EPS was $0.15 . Values retrieved from S&P Global.*
Revenue: Q1 2025 actual $244.54M vs $418.52M consensus (miss). For mREITs, standardized “revenue” differs from net interest/other income presentation, so we prioritize EAD and margin spread metrics for operating performance. Values retrieved from S&P Global.*
Forward: Q2 2025 Primary EPS consensus ~$0.712; Company expects dividend sustainability based on funding cost tailwinds and asset yields, with conservative leverage . Values retrieved from S&P Global.*

Key Takeaways for Investors

Dividend confidence: EAD held at $0.72 and management expects to maintain $0.70 per quarter in 2025, supported by lower repo costs and stable NIM ex-PAA near the high end of recent range .
Risk management first: 95% hedge ratio, conservative leverage (econ 5.7x) and ~$7.5B financing capacity position Annaly to navigate tariff-related volatility and spread moves .
Agency MBS skew: Focus on intermediate TBAs (4s/4.5s) for convexity and carry; potential upside if volatility subsides and swap spreads widen on regulatory reform .
OBX engine continues: Programmatic securitization with inaugural HELOC deal improves funding and expands addressable product set; robust locks/fundings underpin continued credit asset manufacturing at mid-teens ROEs .
MSR ballast: Low-note-rate, low-delinquency MSR continues to provide stable earnings, with optionality to add on favorable pricing/supply .
Watch macro catalysts: Trade/tariff path, rate volatility, and regulatory timeline (SLR/Basel) are the near-term drivers of MBS/spread direction and leverage appetite .
Tactical implication: Bias to expect steady dividend and disciplined book value management; upside if spreads retrace and funding costs continue to normalize; downside if volatility persists and overwhelms hedge offsets .

Footnote: *Values retrieved from S&P Global.

ANNALY CAPITAL MANAGEMENT INC (NLY)·Q1 2025 Earnings Summary