8-K: Annaly Capital Management Reports Q3 2026 Results

Annaly Capital Management announced its third quarter 2026 financial results, reporting a GAAP net loss per share but exceeding common stock dividends with Earnings Available for Distribution (EAD).

Summary

• Annaly Capital Management reported a GAAP net loss of ($1.36) per average common share for the third quarter ended September 30, 2026.
• Earnings Available for Distribution (EAD) were $0.80 per average common share, exceeding the declared common stock cash dividend of $0.75 per share.
• The company experienced an economic return (loss) of (7.6%) for the quarter.
• Book value per common share decreased to $17.86 from $20.15 in the prior quarter.
• GAAP leverage increased to 8.0x from 7.4x, while economic leverage rose to 5.9x from 5.6x.
• Total portfolio value stood at $106.5 billion, with $91.8 billion in the highly liquid Agency portfolio.
• Annaly Residential Credit portfolio was $10.4 billion, and the MSR portfolio increased to $4.3 billion.
• The company announced the redemption of its Series I Preferred Stock and raised $757 million through its at-the-market sales program.

Sentiment

Score: 6

Explanation: StockSavvy.ai views this as a neutral to slightly positive score, reflecting a challenging quarter with a net loss but demonstrating resilience and continued EAD generation above dividend payouts.

Positives

• Earnings Available for Distribution (EAD) of $0.80 per share exceeded the common stock dividend of $0.75 per share, demonstrating durable earnings power.
• The company maintained a disciplined risk posture with a 100% hedge ratio.
• Annaly Residential Credit continued strong production, with record loan fundings of $5.8 billion.
• The MSR portfolio increased to $4.3 billion.
• Annaly Residential Credit Group issued a record $7.4 billion across twelve securitizations.
• The company remained a leading issuer of Prime Jumbo and Expanded Credit MBS.
• Raised $757 million of accretive capital through the at-the-market sales program.
• CEO David Finkelstein highlighted flexibility due to cycle-low leverage and minimal duration exposure, enabling active portfolio management and attractive investments.

Negatives

• Reported a GAAP net loss of ($1.36) per average common share for the quarter.
• Book value per common share decreased significantly to $17.86 from $20.15 in the prior quarter.
• GAAP leverage increased to 8.0x from 7.4x, and economic leverage increased to 5.9x from 5.6x.
• Experienced an economic return (loss) of (7.6%) for the third quarter.
• Net gains (losses) on investments and other were a significant negative ($4,721,745 thousand).

Risks

• Challenging period for fixed income markets impacted results.
• Market-driven extension in the hedge portfolio required active management.
• Potential for future volatility in fixed income markets.
• Changes in interest rates and other market factors can impact prepayment speed projections and premium amortization.

Future Outlook

Management remains disciplined in capital allocation, leverage, liquidity, and the hedge portfolio. The company sees ample investment opportunities across its three strategies and believes its capital base, operating capabilities, and active portfolio management position it well to deploy capital and generate compelling risk-adjusted returns.

Management Comments

• "While the third quarter of 2026 was a challenging period for fixed income markets, which we were not immune to, we entered the quarter prepared for the volatility. Our cycle-low leverage and minimal duration exposure provided us with the flexibility to actively manage our portfolio while continuing to make attractive investments across our three strategies," remarked Chief Executive Officer & Co-Chief Investment Officer David Finkelstein.
• "Meanwhile, Annaly generated EAD of $0.80 per share, once again exceeding the common stock dividend and underscoring the durable earnings power of our platform."
• "Looking ahead, we remain disciplined in our approach to capital allocation, leverage, liquidity and our hedge portfolio. We continue to see ample investment opportunities across each of our three strategies and we believe Annalys deep capital base, differentiated operating capabilities and active portfolio management position us well to deploy capital and generate compelling risk-adjusted returns."

Industry Context

StockSavvy.ai notes that Annaly's results reflect the broader challenges faced by fixed-income markets in Q3 2026. The company's ability to maintain EAD above dividends despite a GAAP net loss highlights the resilience of its business model in a volatile environment, a common theme for mortgage REITs navigating interest rate fluctuations.

Comparison to Industry Standards

• Annaly's GAAP net loss per share of ($1.36) contrasts with positive net income reported by some diversified financial institutions, but is a common occurrence for mortgage REITs during periods of market stress.
• The EAD of $0.80 per share exceeding the $0.75 dividend is a key metric for mortgage REITs, indicating the ability to cover payouts from operational earnings, a standard benchmark for sustainability.
• The increase in GAAP leverage to 8.0x and economic leverage to 5.9x warrants monitoring, as higher leverage can amplify both gains and losses, a critical factor in assessing risk within the mortgage REIT sector.
• Annaly's position as the second largest issuer overall of Prime Jumbo and Expanded Credit MBS is a significant competitive advantage, outperforming many smaller non-bank issuers in this specific market segment.

Stakeholder Impact

• Shareholders: The decrease in book value and GAAP net loss may be concerning, but the continued EAD exceeding dividends provides some reassurance. Capital raised through ATM program could dilute existing shareholders if not managed effectively.
• Creditors: Increased leverage may raise concerns, but the company's focus on liquidity and risk management aims to ensure obligations are met.
• Employees: Continued investment and strategic management suggest ongoing operational stability.
• Customers (borrowers/investors): Strong production from the Residential Credit whole loan correspondent channel indicates continued engagement with market participants.

Next Steps

• Continue active management of the portfolio, hedge portfolio, leverage, and liquidity.
• Deploy capital to generate compelling risk-adjusted returns across three strategies.
• Hold third quarter 2026 earnings conference call on October 21, 2026.

Key Dates

Recommendation

The filing presents a mixed picture: a significant GAAP net loss and declining book value are concerning negatives. However, the company's ability to generate EAD above its dividend, maintain a strong hedge ratio, and raise capital provides some stability. The increased leverage is a point of caution. Given the challenging market conditions and the company's demonstrated ability to navigate them while covering dividends, a 'hold' recommendation is appropriate, pending further clarity on market stabilization and the impact of increased leverage.

Keywords

Annaly Capital Management, Q3 2026 Earnings, Mortgage Servicing Rights, Agency MBS, Residential Credit, Preferred Stock Redemption, Capital Raise, Leverage