Annaly Q2 Earnings Jump 33%
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What's fascinating about this is Annaly Capital Management (NLY -1. 34%), a large mortgage real estate investment trust (REIT) focused on Agency mortgage-backed securities, reported its second-quarter results on July...
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real estate
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July 28, 2025
10:55 AM
The Motley Fool
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What's fascinating this is Annaly Capital Management (NLY -1. 34%), a large mortgage real estate investment trust (REIT) focused on Agency mortgage-backed securities, reported its second-quarter results on July 23, 2025, in light of current trends
The headline result was earnings available for distribution (EAD), a non-GAAP measure, of $0, in this volatile climate
This was slightly above the analyst consensus of $0
Earnings available for distribution attributable to common holders was $452
Furthermore, Additionally, Book value per slipped further to $18
Furthermore, 45 versus $19, considering recent developments. 25 a year earlier, a trend the company has not reversed
However, The quarter showed continued stable performance, with moderate earnings growth and portfolio expansion offset by book value attrition and still-compressed fit margins
MetricQ2 2025Q2 2025 EstimateQ2 2024Y/Y ChangeEAD per $0 (which is quite significant), in this volatile climate. 6 million$502, amid market uncertainty. 99 million$339. 98 million33
Additionally, 1%Book value per $18. 2%)Dividend per $0. 7%Source: Annaly Capital Management (which is quite significant), in this volatile climate
Additionally, Meanwhile, Note: Analysts' consensus estimates for the quarter vided by FactSet
On the other hand, EAD = Earnings available for distribution, amid market uncertainty
Annaly Capital Management and Its ModelAnnaly Capital Management is a mortgage REIT (real estate investment trust) based in the United States (this bears monitoring)
Moreover, It invests mainly in Agency mortgage-backed securities (MBS), which are bonds backed by pools of loans guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae
In addition to Agency MBS, Annaly operates in two other asset : non-Agency residential loans (Residential Credit) and mortgage servicing rights (MSR), which are rights to administer mortgage payments on behalf of investors
This tells us that company’s model relies on earning the spread between the income it receives from these investments and the cost to borrow funds, a measure called net interest margin
Annaly uses a combination of equity and debt, employing financial leverage to magnify returns (something worth watching), considering recent developments
Key factors influencing its success include effective asset allocation across its three lines, risk management to control exposure to interest rate changes, and maintaining access to stable funding sources
Furthermore, Compliance with REIT rules -- such as distributing at least 90% of taxable income as dividends -- is also a core consideration
Quarter in Review: Portfolio Expansion, Margins, and Book Value TrendsDuring Q2 2025, Annaly expanded its overall investment portfolio to $89 (noteworthy indeed)
Meanwhile, 5 billion, with Agency MBS accounting for 89% of the total
The Agency MBS segment saw sequential growth of 6%
This was driven by increased capital allocation to these securities amid attractive returns and stable prepayment activity
In contrast, Annaly’s Agency portfolio remained focused on securities with coupons in the 4
The weighted average coupon on Agency holdings was 4
Nevertheless, This remained relatively unchanged from the prior quarter
Residential Credit, which includes non-Agency residential mortgage loans and related securitizations, held steady at $6, given the current landscape. 6 billion in assets (quite telling)
Annaly’s Residential Credit Group a record 15 securitizations year to date, totaling $7. 6 billion in ceeds for the first half of 2025, underscoring its position as the largest non-bank issuer in this category
The mortgage servicing rights portfolio stayed at $3. 3 billion in market value
The company serviced 680,000 loans with a total unpaid principal balance of $218 (which is quite significant). 6 billion as of June 30, 2025, and continued to benefit from low delinquencies and stable fundamentals
However, From a fitability perspective, net interest margin (excluding premium amortization adjustment, or PAA—a nical accounting adjustment) edged up to 1. 71% from 1, considering recent developments. 69% last quarter
Furthermore, This figure reflects the difference between Annaly’s average yield on investments, which reached 5. 41% (non-GAAP), and its average economic funding cost, which rose slightly to 3
Moreover, 94%, a reflection of continued market pressure on the spread between asset yields and borrowing costs
Book value per, a measure of net assets divided by s outstanding and a critical metric for REIT investors, declined for three consecutive quarters
Book value per slipped 4. 2% from $19, in today's market environment. 45 over the past year, the third consecutive quarterly decline, given the current landscape
Annaly’s economic return—a non-GAAP measure that includes changes in book value plus the dividend, divided by the prior period’s book value—was 0, amid market uncertainty
Risk Management, Capital Structure, and DividendsAnnaly’s leverage, meaning its use of borrowed funds to enhance returns, held steady at an economic leverage ratio of 5, in light of current trends
The company's liquidity position was robust, with $7 (noteworthy indeed), amid market uncertainty. 4 billion in assets available to finance the portfolio, including $4 (this bears monitoring)
In contrast, 7 billion in cash and unencumbered Agency MBS
Annaly also gressed with hedging strategies designed to mitigate interest rate risk, maintaining a hedge ratio of 92% on its $72 billion hedge portfolio, given current economic conditions
According to company data, as of June 30, 2025, a 25 basis point tightening in MBS spreads would boost net asset value by 10, given current economic conditions. 2%, while a 75 basis point rate increase would lower value by 3. 1% as of June 30, 2025 (fascinating analysis), in this volatile climate
Annaly continued its strategic apach to capital raising, adding $761 million of common equity through its at-the-market issuance gram
The company’s cost of funds remained nearly unchanged, with average GAAP cost of interest-bearing liabilities recorded at 4, in today's financial world. 76% and the economic cost at 3
The quarterly dividend was increased 7. 7% from $0, considering recent developments
Additionally, 70 per over the past year and was fully covered by distributable earnings
This leads to the conclusion that company the quarter with $13 (an important development), in today's financial world. 4 billion in total stockholders’ equity
Dividend coverage is a particularly important factor for REIT investors, as regulations require Annaly to pay out at least 90% of taxable income to keep its REIT
Moreover, Current Challenges and Look AheadManagement did not vide formal financial guidance for the next quarter or full year
In recent statements, leadership highlighted plans to keep its current dividend “all else equal” and emphasized a continued focus on liquidity and conservative leverage until volatility fades
The stated intent is to allocate additional capital mainly toward Agency MBS investments and to remain disciplined in credit quality and funding decisions, in light of current trends
For the coming periods, investors should track book value per, net interest margin, and developments in the housing and mortgage
Market ary from Annaly indicated that housing inventory has increased and price appreciation has slowed, but borrower credit quality remains high and delinquencies are low
What the re reveals is company expects to continue managing risk conservatively while maintaining its diversified asset apach
Absent er guidance, monitoring any shifts in dividend policy, book value trends, and leverage ratios will be important for observers assessing Annaly’s performance in the months ahead
Meanwhile, Revenue and net income presented using U
Meanwhile, Generally accepted accounting principles (GAAP) unless otherwise noted, in light of current trends.
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