Executive Summary

Q4 delivered GAAP diluted EPS of $0.78 and EAD of $0.72 per share; book value per share decreased 2% QoQ to $19.15 while economic return was 1.3% . Net interest margin improved materially as financing costs fell and the yield curve steepened: NIM rose to 0.75% (+69 bps QoQ); NIM ex‑PAA to 1.71% (+19 bps QoQ) .
Portfolio mix tilted toward higher-coupon Agency MBS and continued expansion in Residential Credit and MSR; total portfolio $80.9B, including $70.6B Agency, Credit $7.0B (+8% QoQ), MSR $3.3B (+17% QoQ) . Hedging gains offset Agency and Credit marks; CFO quantified per‑share contributions of −$4.14 (Agency), −$0.26 (Credit), +$3.74 (Hedges), +$0.21 (MSR) .
Dividend declared at $0.65; management indicated confidence the dividend is “safe” for 2025 and Q1 EAD run‑rate should be “contextual with Q4,” supporting coverage and stability .
Near‑term stock reaction catalysts: improving NIM and spread metrics, visible dividend coverage, and continued capital deployment into Agency and MSR amid lower spread volatility and decreasing financing costs .

What Went Well and What Went Wrong

What Went Well
- EAD per share increased to $0.72; management highlighted lower borrowing costs (average repo rate −57 bps QoQ) and higher coupon income as drivers of stronger run‑rate earnings: “earnings available for distribution per share increased significantly to $0.72… average repo rate decreased 57 bps” . NIM ex‑PAA improved to 1.71% (+19 bps QoQ) .
- Residential Credit momentum: record whole loan locks ($5.4B) and settlements ($4.0B) in Q4; 4 securitizations ($2.3B) recorded tightest AAA spread of the year (115 bps over Treasuries); 2024 cumulative issuance: 21 deals totaling $11B and $1.1B proprietary assets .
- MSR portfolio growth and performance: MSR market value +17% QoQ to $3.3B; valuation multiple increased ~3% QoQ to ~5.7; realized CPR 3.7% and delinquencies ~50 bps supported durable cash flows in a low‑note‑rate book (3.2%) .
What Went Wrong
- Agency and Credit marks weighed on GAAP book value and segment P&L in Q4; CFO quantified per‑share losses: Agency −$4.14, Residential Credit −$0.26, with hedge gains largely offsetting these declines .
- Book value per share fell 2% QoQ to $19.15 (pre‑dividend), reflecting spread/mark dynamics despite improved NIM and financing costs .
- GAAP NIM is still modest at 0.75%, and spread tightening remains contingent on lower rate volatility and incremental bank demand; management continues to hedge the long end given fragility and heavy Treasury issuance (~$2T net), which could pressure rates .

Financial Results

Metric	Q4 2023	Q3 2024	Q4 2024
Interest Income ($USD Millions)	$990.4	$1,229.3	$1,338.9
Interest Expense ($USD Millions)	$1,043.9	$1,215.9	$1,151.6
Net Interest Income ($USD Millions)	$(53.6)	$13.4	$187.3
Diluted EPS ($USD)	$(0.88)	$0.05	$0.78
EAD per Avg Common Share ($USD)	$0.68	$0.66	$0.72
Net Interest Margin (%)	(0.25%)	0.06%	0.75%
Net Interest Margin (ex‑PAA) (%)	1.58%	1.52%	1.71%
Net Interest Spread (ex‑PAA) (%)	1.22%	1.32%	1.47%

Balance Sheet & Cost Metrics	Q4 2023	Q3 2024	Q4 2024
Book Value per Common Share ($USD)	$19.44	$19.54	$19.15
GAAP Leverage (x)	6.8x	6.9x	7.1x
Economic Leverage (x)	5.7x	5.7x	5.5x
Avg Economic Cost of Interest‑Bearing Liabilities (%)	3.42%	3.93%	3.79%
Avg Yield on Interest Earning Assets (ex‑PAA) (%)	4.64%	5.25%	5.26%

Segment / Portfolio ($USD Millions)	Q4 2023	Q3 2024	Q4 2024
Agency Mortgage‑Backed Securities	$66,308.8	$69,150.4	$67,434.1
Residential Mortgage Loans (net)	$2,353.1	$2,305.6	$3,546.9
Mortgage Servicing Rights	$2,122.2	$2,693.1	$2,909.1
Assets Transferred/Pledged to Securitization Vehicles	$13,307.6	$21,044.0	$21,973.2
Total Investment Portfolio	$87,396.5	$97,742.9	$98,185.7

KPIs	Q4 2023	Q3 2024	Q4 2024
Weighted Avg Experienced CPR (%)	6.3%	7.6%	8.7%
Weighted Avg Projected Long‑Term CPR (%)	9.4%	11.9%	8.6%
Hedge Ratio (%)	106%	101%	100%
Weighted Avg Days to Maturity on Repos (days)	44	34	32
Swap Pay / Receive / Net Rates (%)	3.04 / 5.31 / (2.27)	3.05 / 4.94 / (1.89)	3.11 / 4.50 / (1.39)
Dividend Declared per Common Share ($USD)	$0.65	$0.65	$0.65

Non‑GAAP adjustments context: PAA provided a $25.3M benefit in Q4 vs a $21.4M cost in Q3, driving cleaner ex‑PAA yield/margin comparisons; premium amortization expense ex‑PAA remained stable ($33.5M vs $32.1M in Q3) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Common Share ($)	Q4 2024 / declared	$0.65	$0.65 (declared)	Maintained
Dividend Outlook	FY 2025	Not provided	“Dividend… feels safe” per CEO	Affirmed confidence
EAD Run‑Rate	Q1 2025	Not provided	“Earnings… will be contextual with Q4”	Directional update
Leverage / Hedging Profile	FY 2025	Not provided	Maintain low leverage (economic 5.5x) and conservative long‑end hedging	Policy reiterated

Note: The company did not issue formal quantitative guidance ranges for revenue, margins, OpEx, OI&E or tax rate in Q4 disclosures .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q2 2024)	Previous Mentions (Q3 2024)	Current Period (Q4 2024)	Trend
Macro rates & spread volatility	More dovish Fed signaling; encouraged by inflation data; positioned for volatility moderation	Onset of Fed cutting cycle; Agency spreads benefited; equity raised deployed into Agency	Bear steepening; spreads range‑bound; lower spread vol (<1 bp/day); outlook constructive	Improving carry; contained spread vol
Agency MBS allocation / up‑in‑coupon	Opportunistic adds; continued migration up in coupon	Agency portfolio +$6.4B QoQ; up‑in‑coupon specified pools/TBAs	Rotated into 6s/6.5s; ~50% holdings at 5.5%+ coupons	Continued shift to higher coupons
Residential Credit production/securitization	Record locks $4.1B; YTD locks $7.8B > 2023 total	Record whole loans; 18 securitizations YTD	Locks $5.4B; settlements $4.0B; 4 deals $2.3B; AAA at +115 bps	Accelerating volumes; tight execution
MSR growth/performance	MSR +5% QoQ to $2.8B	MSR ~$2.8B; subservicing partnership with Rocket	MSR $3.3B (+17% QoQ); valuation multiple ~5.7; low CPR/delinquencies	Expanding; resilient performance
Funding & warehouse capacity	$4.2B capacity	$5.0B capacity; committed up	$5.4B capacity incl. $2.2B committed; post‑Q4 MSR upsize $250M	Increasing flexibility/liquidity
Regulatory/GSE reform	Not highlighted	Not highlighted	Management: material hurdles to GSE transformation; possible footprint reduction creates private credit opportunities	Monitoring; opportunity for private capital

Management Commentary

“Annaly generated an economic return of 11.9% in 2024 supported by strong performance from each of our three investment strategies… our outlook for 2025 is optimistic… Agency MBS continues to provide attractive returns… Residential Credit and MSR portfolios are well‑positioned for further growth” — CEO David Finkelstein .
“Earnings available for distribution per share increased significantly to $0.72… due to lower borrowing costs as our average repo rate decreased 57 basis points… NIS ex‑PAA improved to 1.47% and NIM ex‑PAA to 1.71%” — CFO Serena Wolfe .
“We proactively managed duration extension by increasing hedges at the long end… plan to maintain a conservative hedge profile… leveraging a diversified and liquid hedge portfolio” — CEO David Finkelstein .

Q&A Highlights

EAD run‑rate and ROE: EAD $0.72 aligns with ~15% net ROE; Q1 earnings expected to be contextual with Q4; no long‑term guidance provided .
Dividend coverage: Management confident dividend is “safe” for 2025; emphasis on durability and Board evaluation each quarter .
MSR market dynamics: Lower industry profitability increases MSR supply from originators; Annaly positioned as reliable capital partner; demand has risen but relationships and scale provide advantage .
Hedging and Treasury supply: Maintain hedges at the long end amid expected ~$2T net Treasury issuance and term premium; spreads fair/inexpensive with some room for tightening if vol declines and bank demand picks up .
Volatility outlook: Rate vol likely range‑bound; spread vol materially lower than 2022–2023; broader participation (banks, money managers, REITs) supports balanced Agency market .
Book value update: Intra‑week book value “a little over 2%” inclusive of dividend accrual as of call week, indicating early Q1 momentum; qualitative color only .

Estimates Context

S&P Global consensus estimates for Q4 2024 were unavailable at time of writing due to data access constraints. As a result, explicit vs‑consensus EPS/revenue comparisons cannot be provided. Values would have been retrieved from S&P Global if accessible.

Key Takeaways for Investors

Earnings quality improved: EAD rose to $0.72 with NIM/NIS expanding as financing costs fell and up‑in‑coupon rotation lifted asset yields; this supports dividend coverage near‑term .
Defensive positioning: Long‑end hedge concentration and low economic leverage (5.5x) mitigate rate risk amid heavy Treasury issuance and macro fragility .
Agency remains the marginal dollar: Management continues to favor higher‑coupon specified pools with better convexity; TBAs minimal given roll financing .
Residential Credit platform scale: Record locks/settlements and tight AAA spreads underpin double‑digit ROEs; whole‑loan/conduit leadership creates proprietary asset flow .
MSR ballast: Growing MSR book with low note rate (3.2%) and modest prepay/delinquencies provides durable cash flows and portfolio diversification .
Liquidity optionality: ~$6.9B assets available for financing and expanded warehouse capacity in Credit/MSR create flexibility to deploy into spread opportunities .
Watch catalysts: Further NIM improvement if repo/swaps drift lower; potential spread tightening if vol stays contained and bank demand rises; continued dividend stability likely a key stock support .

ANNALY CAPITAL MANAGEMENT INC (NLY)·Q4 2024 Earnings Summary