Oct 21, 2026 earnings call — Q3 results and strategy across agency, resi, MSR
Annaly reported a negative 7.6% economic return for Q3, while EAD was $0.80 per share, again exceeding the $0.75 dividend.
Revenue $-0.9B (est $0.6B) · EPS $0.80 (est $0.77)
Key quotes
"On the liability side, as rates moved higher, we responded by adding to our hedge position, primarily in treasury futures, to keep our overall interest rate exposure contained."
"Our Onslow Bay correspondent channel delivered another strong quarter, with $7 billion of lock volume and $5.8 billion of fundings, our highest quarterly funding volume since the channel's inception more than 5 years ago."
"On the MSR front, the change in return from the prior quarter is largely driven by all rates rising. As capital is deployed, that capital earns a higher rate of return."
Analyst Q&A 9
book value and dividend coverage
Q (Bose George · KBW): Analyst asked for an update on mark-to-market book value and how expected returns compare to the required ROE to cover the dividend.
A: As of Friday, excluding the dividend accrual, they were up about 2% and inclusive of the dividend closer to 3%, and it's been sideways since. Management said they outearned in Q3, expect to outearn in Q4, did not de-lever in Q3, and that the current portfolio delivers the dividend.
"As it stands today, we did not de-lever in Q3, notwithstanding the volatility, and the current portfolio delivers the dividend." — David Finkelstein (CEO)
where to deploy capital
Q (Crispin Love · Piper Sandler): Analyst asked what drove the slight increase in market-level returns and where the company is most interested in adding incremental capital, ranked across the three businesses.
A: They said returns across the three businesses are incrementally higher and the order of capital allocation is Resi first, Agency second, and MSR third. Srini said Agency spreads widened about 20 basis points; Mike said resi can earn 13%-16% returns with $0.06-$0.07 equity retention and other financing options; Ken said MSR returns rose because rates and higher float income.
"The order is Resi first, close second Agency, and then not far behind is MSR." — David Finkelstein (CEO)
Agency vs peers and non-QM changes
Q (Doug Harter · BTIG): Analyst asked how the Agency portfolio performed versus peers and whether there have been structural changes or shifts in the investor base in residential credit.
A: David said Agency performance was largely clustered with peers and many were deliberate about managing duration and hedging. Mike said top-of-stack resi spreads moved slightly wider to about 150 post-quarter, the AAA bond structure modestly changed to a full sequential, and the non-QM market remains healthy with $95 billion of issuance this year versus $80 billion last year.
"The AAA bond, which traditionally is pro rata with the double A and the single A, has turned into a full sequential." — Mike Fania
home equity securitization pricing
Q (Jason Stewart · Compass Point): Analyst asked about the recent uptick in home equity securitization volume and how the firm sizes that asset and how the market prices the liabilities today.
A: Mike said total non-agency issuance is about $220 billion and close-end seconds plus HELOCs are about $33 billion of that, with their correspondent production about 5%-6%. He said those assets trade at large premiums and that to aggregate them you often need to pay 106, 107 dollar prices; AAA close-end second pricing is about 5 to 10 basis points inside non-QM AAA.
"Close-end seconds and HELOCs, they trade at very large premiums. Even to be able to aggregate them through a correspondent, you need to be willing to pay 106, 107 type dollar prices." — Mike Fania
MSR role and housing outlook
Q (Marissa Lobo · UBS): Analyst asked whether MSRs should be seen as standalone return assets or mainly as diversification, and asked about the home price outlook and assumptions behind the 13%-16% residential credit return.
A: Ken said MSRs serve both purposes: standalone return and a hedge for model error, because slower-than-expected speeds help MSR and hurt Agency MBS. Mike said the 13%-16% resi return is modeled to about a 20% lifetime speed and roughly 75 basis points of cumulative loss; he noted if mortgage rates stay at 7.375% to 7.5% housing can go negative a couple points, but their portfolio metrics (average borrower close to $400K equity, 64 mark to market LTV, D60+ 160 basis points) make that manageable.
"Consider if speeds come in slower than expected, that is always good for MSR, and that is in today's market with the mortgage universe at a discount, just not good for the Agency MBS portfolio." — Ken Adler
MSR valuation and market demand
Q (Rich Shane · JPMorgan): Analyst asked how empirical models and structural changes (volumes, capacity, AI) are affecting MSR valuation, demand, and where attractive opportunities exist.
A: David said origination profitability is low, which pushes originators to sell MSRs, and that a newly created MSR is valued between a point and a point and a half depending on loan type. Ken said demand is bifurcated: banks are strong buyers of certain MSR types and capital participants like them trade actively; they have sold into rich bank bids and still have appetite to add MSR, and they price conservatively.
"The value of a newly created MSR today is somewhere, depending on the loan type, between a point and a point and a half." — David Finkelstein (CEO)
GSE activity and TBA risk
Q (Jason Weaver · Jones Trading): Analyst asked if the GSEs have been active or stepped back in purchases in recent weeks and asked about risk-reward in current coupon TBAs given prepayment risk.
A: David said post-August evidence is anecdotal but they have heard the GSEs have been involved and that the GSEs still have dry powder with about $140 billion under PSPA caps. Srini said they bought TBAs mainly in five and a half and sixes, which are discount coupons, and noted TBAs are getting more negatively convex as more collateral is carved into specified pools, so they typically swap TBAs into specified pools over time.
"Anecdotally, we have heard that they have been involved in the market." — David Finkelstein (CEO)
overall risk appetite
Q (Kenneth Lee · RBC): Analyst asked how management would characterize overall risk appetite given the current rate outlook and the trade-off between market volatility and return opportunity across assets.
A: David said they are reasonably optimistic, see a new higher floor for rates but think there is a ceiling, and expect volatility to come down with implied vols falling as realized vols moderate. He said they let leverage increase organically this past quarter, are comfortable with current leverage, and have a little capacity to increase it tactically while generating required returns.
"Our view is that things are going to stabilize or continue to stabilize, and you will see implied vols coming down because realized vols are a little bit lower." — David Finkelstein (CEO)
non-QM origination outlook
Q (Trevor Cranston · Citizens JMP): Analyst asked how higher mortgage rates, if they hold, will impact the non-QM market and origination volumes going forward versus recent quarters.
A: Mike said non-QM originations this year should be about $150 billion to $175 billion, likely toward the higher end, and total mortgage origination about $1.9 trillion to $2 trillion. He expects non-QM to remain about 8%-9% of originations now because the market is purchase-driven and investor-heavy, but that share would shrink if mortgage rates rally sharply.
"I would expect it to continue to be 8%-9% of originations at this point." — Mike Fania