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Annaly Capital Management owns mortgage investments rather than earning fees for managing customers’ money. Most of its portfolio consists of securities backed by residential mortgages with guarantees from Fannie Mae, Freddie Mac or Ginnie Mae. Mortgage borrowers’ interest payments flow through these investments to Annaly, and interest is its main source of income. The guarantees on these securities are central to its business.
Annaly also owns residential loans and securities without those guarantees, as well as mortgage servicing rights. These rights entitle it to part of the interest borrowers pay; outside servicers handle collections and borrower interactions rather than Annaly itself.
Annaly borrows against its assets, mainly through short-term secured arrangements called repurchase agreements. Its earnings depend on investment yields exceeding borrowing and hedging costs, and on lenders continuing to renew financing. Much of its funding reprices sooner than its investments. As a real estate investment trust, or REIT, it must distribute most of its taxable income and meet rules governing its assets and income, limiting what it can retain and invest in. Its exemption from investment-company regulation also restricts it largely to real-estate-related assets.
The risk section is the longest, dullest part of the filing. This keeps only what can really hurt you: where it hits, how hard, when it plays out.
Every company claims an edge. Each one is checked against hard numbers like margins and returns: which hold, and which line gives way first.
AGNC Investment and Annaly both collect income from mostly government-backed mortgage securities and borrow against them through repurchase agreements, so mortgage spreads and borrowing costs affect both. Watch AGNC’s funding costs for pressure on the income Annaly can keep after paying lenders.
Dynex Capital and Annaly both rely heavily on government-backed securities funded by single-family borrowers’ mortgage payments, making their portfolios sensitive to the same rate and early-repayment changes. Dynex’s fixed-rate residential mortgage securities are the part to watch for clues about Annaly’s Agency holdings.
ARMOUR Residential REIT and Annaly both borrow against government-backed mortgage securities to amplify investment income and use hedges to manage interest-rate risk. ARMOUR’s borrowing and hedging costs help show how much of the income from homeowners’ mortgage payments survives those costs.
Invesco Mortgage Capital and Annaly both finance government-backed mortgage securities and keep the difference between investment income and funding costs. Watch Invesco’s spread between asset returns and funding costs: it shows the earnings pressure facing this shared business.
Orchid Island Capital and Annaly both use borrowing to earn income from government-backed residential mortgage securities, whose values and payments change with rates and homeowners’ early repayments. Orchid’s income from its leveraged mortgage portfolio is a useful comparison for Annaly’s Agency business.
PennyMac Mortgage Investment Trust mirrors more of Annaly’s business than an Agency-only investor: both hold government-backed mortgage securities, residential credit investments and rights to receive fees from servicing homeowners’ loans. Watch PennyMac’s servicing-rights income and mortgage-credit performance alongside Annaly’s corresponding businesses.
Chimera Investment and Annaly both borrow to invest in residential loans, guaranteed and non-guaranteed mortgage securities, and rights to receive mortgage-servicing fees. Chimera’s investment interest income after borrowing costs is the relevant comparison for Annaly, rather than its fees from advising institutions.
MFA Financial and Annaly both buy and finance residential loans and mortgage securities, tying their returns to borrowers’ repayments and borrowing costs. MFA’s whole-loan performance is especially relevant to Annaly’s residential credit business, rather than its much larger Agency portfolio.
Redwood Trust and Annaly’s Onslow Bay both buy residential loans and package them into securities sold to mortgage-credit investors, exposing them to the same investor demand. Watch Redwood’s income from loan sales and securitizations for a comparison with Onslow Bay’s loan-to-securities business.
Rithm Capital keeps the right to earn fees for servicing loans it originates and sells, while Annaly invests in those rights; both therefore depend on servicing cash flows and how quickly homeowners repay early. Rithm’s servicing revenue is the relevant comparison for Annaly’s servicing-rights income, not its gains from selling newly originated loans.
Ellington Financial and Annaly both earn investment income from mortgage loans and securities, so mortgage-credit performance connects their results. Watch Ellington’s mortgage investments rather than its overall earnings, which also include substantial non-mortgage investments and Longbridge’s reverse-mortgage business.
Adamas Trust and Annaly both invest in residential mortgage assets, with returns tied to borrowers’ repayments and the gap between investment income and financing costs. Adamas’s investment-portfolio income is the closer comparison for Annaly than Constructive’s revenue from making and selling loans to real estate investors.
Annaly Capital Management. Inc. earningsThis company
Annaly earns from the spread between mortgage investment income and financing costs, as well as mortgage servicing, and this report will show how much each contributes to its earnings.
Read net interest income (asset interest income after financing interest expense) alongside net servicing income (servicing revenue after related expenses). If both rise, the investment spread and servicing business are each adding to earnings; if net interest income falls and servicing cannot make up the difference, financing costs or asset yields are squeezing core income. Separate investment and derivative gains or losses from those two measures: they can swing reported net income without showing that either business has strengthened or weakened in the same way.
Rithm Capital Corp. earningsRITM
Rithm Capital earns fees for servicing loans while Annaly invests in mortgage servicing rights, so Rithm’s servicing revenue and costs will show how the cash flows in this shared business are holding up.
See whether Rithm’s servicing revenue covers the costs of servicing loans, and whether borrowers are repaying early faster. Steady revenue with controlled costs suggests servicing cash flows are holding up, which is relevant to Annaly’s mortgage servicing rights; weaker revenue or faster early repayment points to shorter or smaller fee streams. Rithm has a different business mix, so its overall earnings are not a substitute for Annaly’s servicing-rights income.
AGNC Investment Corp. Depositary Shares Each Representing a 1/1,000th Interest in a Share of 7.75% Series G Fixed-Rate Reset Cumulative Redeemable Preferred Stock earningsAGNCL
AGNC Investment and Annaly both use repurchase-agreement borrowing to hold government-backed mortgage securities, so AGNC’s funding costs will show how much pressure their shared business’s spread faces.
Compare AGNC’s borrowing costs with the interest income from its mortgage securities. If funding costs rise faster, more of the asset income goes to lenders, pointing to greater spread pressure for Annaly’s much larger Agency business; if asset income keeps pace, that pressure is lighter. The companies’ portfolios and hedges differ, so this is a read on their shared market conditions, not Annaly’s own results.
Fed Interest Rate Decision
The Fed’s rate decision signals how the cost of short-term borrowing may change for Annaly, which borrows to invest in mortgage assets and earns income from the gap between their yields and its funding costs.
Expected4.0%Last release4.0%
If it comes in above expectations
If the policy rate is higher than expected, Annaly’s short-term and floating-rate funding may become more expensive, narrowing the gap with yields on its longer-term, often fixed-rate mortgage assets and reducing net interest income.
If it comes in below expectations
If the policy rate is lower than expected, Annaly’s short-term and floating-rate funding may become cheaper, widening the gap with yields on its longer-term, often fixed-rate mortgage assets and supporting net interest income.
Redwood Trust, Inc. earningsRWT
Redwood Trust and Annaly’s Onslow Bay both package residential loans into securities for sale, so Redwood’s loan sales and securitizations will show investor demand for this kind of credit.
Look at whether Redwood’s loan sales and securitizations remain active and whether the economics hold up. Steady activity and returns suggest credit investors are still willing to buy these loan assets, giving Annaly’s Onslow Bay a more open route to package loans for sale and free up capital; fewer deals or weaker returns point to a harder outlet and capital tied up for longer. Redwood and Onslow Bay are separate platforms, so this is a demand signal, not a direct measure of Annaly’s results.
MFA Financial, Inc earningsMFA
MFA Financial and Annaly both invest in residential loans, so MFA’s whole-loan performance will show how borrower payments and credit losses are affecting this shared asset class.
Look at delinquencies, defaults and losses on MFA’s residential whole loans. Steady payments and contained credit losses suggest interest income is more likely to continue and principal losses are less likely, a constructive signal for Annaly’s residential credit assets; rising delinquencies and losses point to lower income and pressure on asset values. The companies’ loan portfolios differ, so treat this as a read on borrower credit conditions, not Annaly’s own loan performance.
