Annaly Capital Management, Inc. Reports 4th Quarter 2025 Results

NEW YORK--( BUSINESS WIRE)--Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company") today announced its financial results for the quarter and year ended December 31, 2025.

Financial Highlights

Business Highlights

Fourth Quarter 2025 Highlights

Full-Year 2025 Highlights

Investment and Strategy

Financing and Capital

"2025 was a solid year for Annaly as we delivered a 20% economic return and 40% total shareholder return underscoring the resilience and strength of our diversified housing finance model," remarked Chief Executive Officer & Co-Chief Investment Officer David Finkelstein. "Our portfolio grew by nearly 30% as we successfully deployed accretive capital raised across our three investment strategies, primarily into Agency MBS.

"Our Agency business benefited from meaningful spread tightening, supported by strong fund flows, improved fundamentals and a more favorable operating environment. Our Residential Credit platform generated record production from our whole loan correspondent channel and securitization platform, which continues to gain market share through the introduction of innovative structured transactions. Moreover, we were the second largest buyer of conventional MSR last year, growing our differentiated portfolio of low note rate, high credit-quality loans while expanding our network of subservicing and recapture partners. We enter 2026 well-positioned to continue this momentum given the constructive environment and believe our platform will continue to provide enhanced risk-adjusted returns."

(1)

Total portfolio represents Annaly’s investments that are on-balance sheet as well as investments that are off-balance sheet in which Annaly has economic exposure. Assets exclude assets transferred or pledged to securitization vehicles of $32.1 billion, include TBA purchase contracts (market value) of $3.3 billion, include unsettled MSR commitments of $152 million, include $3.2 billion of retained securities that are eliminated in consolidation and are shown net of participations issued totaling $1.9 billion. MSR commitments represent the market value of deals where Annaly has executed a letter of intent. There can be no assurance whether these deals will close or when they will close.

(2)

Dedicated capital for each of the investment strategies is calculated as the difference between each investment strategy’s allocated assets, which include TBA purchase contracts, and liabilities.

(3)

Comprised of $7.8 billion of unencumbered assets, which represents Annaly’s excess liquidity and defined as assets that have not been pledged or securitized (generally including cash and cash equivalents, Agency MBS, CRT, Non-Agency MBS, residential mortgage loans, MSR, reverse repurchase agreements, other unencumbered financial assets and capital stock), and $1.5 billion of fair value of collateral pledged for future advances.

(4)

Based on information aggregated from 2025 Fannie Mae and Freddie Mac monthly loan level files by eMBS servicing transfer data as of December 31, 2025. Excludes transfer activity related to platform acquisitions.

(5)

Issuer ranking data from Inside Nonconforming Markets for 2024 to 2025 (January 16, 2026 issue). Used with permission.

(6)

Net of sales agent commissions and other offering expenses.

(7)

Represents gross proceeds before deducting the underwriting discount and other estimated offering expenses. Includes the underwriters’ exercise of their overallotment option to purchase additional shares of stock.

Financial Performance

The following table summarizes certain key performance indicators as of and for the quarters ended December 31, 2025, September 30, 2025 and December 31, 2024:

December 31, 2025

September 30, 2025

December 31, 2024

Book value per common share

20.21

19.25

19.15

GAAP net income per average common share (1)

1.40

1.21

0.78

Annualized GAAP return on average equity (2)

26.14

23.69

15.00

GAAP leverage at period-end (3)

7.2:1

7.1:1

Net interest margin (4)

1.18

0.97

0.75

Average yield on interest earning assets (5)

5.42

5.40

5.36

Average GAAP cost of interest bearing liabilities (6)

4.49

4.73

4.96

Net interest spread

0.93

0.67

0.40

Non-GAAP metrics *

Earnings available for distribution per average common share (1)

0.74

0.73

0.72

Annualized EAD return on average equity

14.28

14.70

14.27

Economic leverage at period-end (3)

5.6:1

5.7:1

5.5:1

Net interest margin (excluding PAA) (4)

1.69

1.70

1.71

Average yield on interest earning assets (excluding PAA) (5)

5.44

5.46

5.26

Average economic cost of interest bearing liabilities (6)

3.95

3.96

3.79

Net interest spread (excluding PAA)

1.49

1.50

1.47

* Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information.

(1) Net of dividends on preferred stock. The quarter ended December 31, 2025 excludes, and the quarter ended September 30, 2025 includes, cumulative and undeclared dividends of $3.7 million on the Company's 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock (the “Series J Preferred Stock”) as of September 30, 2025.

(2) Annualized GAAP return on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return on average equity is 6.53%, 5.92%, and 3.75% for the quarters ended December 31, 2025, September 30, 2025, and December 31, 2024, respectively.

(3) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, structured repurchase transactions (included within Debt issued by securitization vehicles) and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued are non-recourse to us and are excluded from economic leverage.

(4) Net interest margin represents interest income less interest expense divided by average Interest Earning Assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income and less economic interest expense divided by the sum of average Interest Earning Assets plus average outstanding TBA contract balances. PAA represents the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities.

(5) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA).

(6) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Other Information

This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Such statements include those relating to the Company’s future performance, macro outlook, the interest rate and credit environments, tax reform and future opportunities. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities ("MBS") and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of the Company’s assets; changes in business conditions and the general economy; the Company’s ability to grow its residential credit business; the Company's ability to grow its mortgage servicing rights business; credit risks related to the Company’s investments in credit risk transfer securities and residential mortgage-backed securities and related residential mortgage credit assets; risks related to investments in mortgage servicing rights; the Company’s ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting the Company’s business; the Company’s ability to maintain its qualification as a REIT for U.S. federal income tax purposes; the Company’s ability to maintain its exemption from registration under the Investment Company Act of 1940; and operational risks or risk management failures by us or critical third parties, including cybersecurity incidents. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.

Annaly is a leading diversified capital manager with investment strategies across mortgage finance. Annaly’s principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly is internally managed and has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Additional information on the company can be found at www.annaly.com.

We use our website ( www.annaly.com) and LinkedIn account ( www.linkedin.com/company/annaly-capital-management) as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about Annaly when you enroll your email address by visiting the "News & Insights" section of our website, then clicking on "Subscribe" and completing the email notification form. Our website, any alerts and social media channels are not incorporated by reference into, and are not a part of, this document.

The Company prepares an investor presentation and financial supplement for the benefit of its shareholders. Please refer to the investor presentation for definitions of both GAAP and non-GAAP measures used in this news release. Both the Fourth Quarter 2025 Investor Presentation and the Fourth Quarter 2025 Financial Supplement can be found at the Company’s website ( www.annaly.com) in the "Investors" section under "Investor Presentations."

Conference Call

The Company will hold the fourth quarter 2025 earnings conference call on January 29, 2026 at 9:00 a.m. Eastern Time. Participants are encouraged to pre-register for the conference call to receive a unique PIN to gain immediate access to the call and bypass the live operator. Pre-registration may be completed by accessing the pre-registration link found on the "Investors" section of the Company's website at www.annaly.com, or by using the following link: https://dpregister.com/sreg/10205561/10307df7934. Pre-registration may be completed at any time, including up to and after the call start time.

For participants who would like to join the call but have not pre-registered, access is available by dialing 844-735-3317 within the U.S., or 412-317-5703 internationally, and requesting the "Annaly Earnings Call."

There will also be an audio webcast of the call on www.annaly.com. A replay of the call will be available for one week following the conference call. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 2000321. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on News & Insights, then select Subscribe and complete the email notification form.

Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands, except per share data)

December 31,

2025

September 30,

2025

June 30,

2025

March 31,

2025

December 31,

2024 (1)

(unaudited)

Assets

Cash and cash equivalents

2,037,838

2,096,696

2,058,845

1,833,528

1,488,027

Securities

91,287,630

85,062,725

73,500,626

70,361,364

69,756,447

Loans, net

5,020,784

4,008,299

3,722,272

3,860,555

3,546,902

Mortgage servicing rights

3,645,865

3,476,181

3,281,190

3,272,902

2,909,134

Interests in MSR

28,626

35,833

—

Assets transferred or pledged to securitization vehicles

32,067,433

29,512,309

27,021,790

24,464,281

21,973,188

Derivative assets

115,533

47,899

149,690

67,257

225,351

Reverse repurchase agreements

34,389

35,004

—

Receivable for unsettled trades

1,031

185,916

1,134,896

2,523

2,201,447

Principal and interest receivable

926,660

959,435

830,535

836,946

1,069,038

Intangible assets, net

6,726

7,398

8,071

8,743

9,416

Other assets

437,323

433,877

433,977

407,247

377,434

Total assets

135,609,838

125,861,572

112,141,892

105,115,346

103,556,384

Liabilities and stockholders’ equity

Liabilities

Repurchase agreements

81,865,723

75,118,963

66,541,378

61,659,460

65,688,923

Other secured financing

1,075,000

1,025,000

900,000

750,000

Debt issued by securitization vehicles

28,918,753

26,601,790

24,107,249

21,802,193

19,540,678

Participations issued

1,932,655

1,831,657

1,556,900

1,748,273

1,154,816

U.S. Treasury securities sold, not yet purchased

2,396,724

2,442,570

2,528,167

2,519,125

2,470,629

Derivative liabilities

53,755

199,100

425,993

181,065

59,586

Payable for unsettled trades

2,059,386

2,604,278

1,538,526

2,304,774

308,282

Interest payable

380,688

285,080

256,245

285,858

268,317

Dividends payable

494,881

476,737

449,453

421,637

375,932

Other liabilities

272,362

279,818

238,618

208,453

242,269

Total liabilities

119,449,927

110,864,993

98,667,529

92,030,838

90,859,432

Stockholders’ equity

Preferred stock, par value $0.01 per share (2)

1,802,480

1,536,569

Common stock, par value $0.01 per share (3)

7,070

6,811

6,421

6,023

5,784

Additional paid-in capital

27,927,113

27,352,976

26,520,657

25,749,468

25,257,716

Accumulated other comprehensive income (loss)

(488,566

)

(624,387

)

(740,046

)

(787,402

)

(1,017,682

)

Accumulated deficit

(13,157,325

)

(13,626,983

)

(13,942,302

)

(13,509,942

)

(13,173,146

)

Total stockholders’ equity

16,090,772

14,910,897

13,381,299

12,994,716

12,609,241

Noncontrolling interests

69,139

85,682

93,064

89,792

87,711

Total equity

16,159,911

14,996,579

13,474,363

13,084,508

12,696,952

Total liabilities and equity

135,609,838

125,861,572

112,141,892

105,115,346

103,556,384

(1) Derived from the audited consolidated financial statements at December 31, 2024.

(2) 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 28,800,000 shares authorized, issued and outstanding. 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 17,000,000 shares authorized, issued and outstanding. 6.75% Series I Preferred Stock - Includes 17,700,000 shares authorized, issued and outstanding, and beginning with the quarter ended September 30, 2025, 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock - Includes 11,500,000 shares authorized, and 11,000,000 issued and outstanding.

(3) Includes 1,456,750,000 shares authorized. Includes 706,972,452 shares issued and outstanding at December 31, 2025; 681,052,317 shares issued and outstanding at September 30, 2025; 642,076,127 shares issued and outstanding at June 30, 2025; 602,338,286 shares issued and outstanding at March 31, 2025; and 578,357,118 shares issued and outstanding at December 31, 2024.

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands, except per share data)

(Unaudited)

For the quarters ended

December 31,

2025

September 30,

2025

June 30,

2025

March 31,

2025

December 31,

2024

Net interest income

Interest income

1,690,707

1,532,497

1,418,893

1,317,108

1,338,880

Interest expense

1,324,128

1,256,747

1,145,693

1,097,137

1,151,592

Net interest income

366,579

275,750

273,200

219,971

187,288

Net servicing income

Servicing and related income

156,131

141,356

141,670

140,435

127,224

Servicing and related expense

16,485

15,104

14,571

14,113

11,648

Net servicing income

139,646

126,252

127,099

126,322

115,576

Other income (loss)

Net gains (losses) on investments and other

289,428

561,927

83,503

810,812

(2,010,426

)

Net gains (losses) on derivatives

251,799

(92,308

)

(388,785

)

(977,867

)

2,215,680

Other, net

13,952

13,959

15,812

7,398

19,339

Total other income (loss)

555,179

483,578

(289,470

)

(159,657

)

224,593

General and administrative expenses

Compensation expense

39,279

38,393

36,583

37,297

33,955

Other general and administrative expenses

11,928

11,947

13,435

10,767

10,019

Total general and administrative expenses

51,207

50,340

50,018

48,064

43,974

Income (loss) before income taxes

1,010,197

835,240

60,811

138,572

483,483

Income taxes

(7,754

)

(7,823

)

440

8,267

10,407

Net income (loss)

1,017,951

843,063

60,371

130,305

473,076

Net income (loss) attributable to noncontrolling interests

4,457

10,618

3,272

6,081

(8,976

)

Net income (loss) attributable to Annaly

1,013,494

832,445

57,099

124,224

482,052

Dividends on preferred stock (1)

42,387

41,127

37,260

37,157

38,704

Net income (loss) available (related) to common stockholders

971,107

791,318

19,839

87,067

443,348

Net income (loss) per share available (related) to common stockholders

Basic

1.40

1.21

0.03

0.15

0.78

Diluted

1.40

1.20

0.03

0.15

0.78

Weighted average number of common shares outstanding

Basic

693,011,031

656,335,974

620,208,712

587,149,704

569,201,592

Diluted

695,034,348

657,856,427

621,103,218

588,420,998

570,651,985

Other comprehensive income (loss)

Net income (loss)

1,017,951

843,063

60,371

130,305

473,076

Unrealized gains (losses) on available-for-sale securities

74,992

113,281

33,559

164,877

(337,121

)

Reclassification adjustment for net (gains) losses included in net income (loss)

60,829

2,378

13,797

65,403

31,642

Other comprehensive income (loss)

135,821

115,659

47,356

230,280

(305,479

)

Comprehensive income (loss)

1,153,772

958,722

107,727

360,585

167,597

Comprehensive income (loss) attributable to noncontrolling interests

4,457

10,618

3,272

6,081

(8,976

)

Comprehensive income (loss) attributable to Annaly

1,149,315

948,104

104,455

354,504

176,573

Dividends on preferred stock (1)

42,387

41,127

37,260

37,157

38,704

Comprehensive income (loss) attributable to common stockholders

1,106,928

906,977

67,195

317,347

137,869

(1) The quarter ended December 31, 2025 excludes, and the quarter ended September 30, 2025 includes, cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025.

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(dollars in thousands, except per share data)

For the years ended

December 31, 2025

December 31, 2024 (1)

(unaudited)

Net interest income

Interest income

5,959,205

4,840,034

Interest expense

4,823,705

4,592,238

Net interest income

1,135,500

247,796

Net servicing income

Servicing and related income

579,592

485,406

Servicing and related expense

60,273

49,469

Net servicing income

519,319

435,937

Other income (loss)

Net gains (losses) on investments and other

1,745,670

(1,849,585

)

Net gains (losses) on derivatives

(1,207,161

)

2,269,301

Other, net

51,121

94,935

Total other income (loss)

589,630

514,651

General and administrative expenses

Compensation expense

151,552

130,403

Other general and administrative expenses

48,077

40,953

Total general and administrative expenses

199,629

171,356

Income (loss) before income taxes

2,044,820

1,027,028

Income taxes

(6,870

)

15,260

Net income (loss)

2,051,690

1,011,768

Net income (loss) attributable to noncontrolling interests

24,428

9,862

Net income (loss) attributable to Annaly

2,027,262

1,001,906

Dividends on preferred stock

157,931

154,551

Net income (loss) available (related) to common stockholders

1,869,331

847,355

Net income (loss) per share available (related) to common stockholders

Basic

2.92

1.62

Diluted

2.92

1.62

Weighted average number of common shares outstanding

Basic

639,513,399

521,737,554

Diluted

641,042,741

522,747,610

Other comprehensive income (loss)

Net income (loss)

2,051,690

1,011,768

Unrealized gains (losses) on available-for-sale securities

386,709

(244,278

)

Reclassification adjustment for net (gains) losses included in net income (loss)

142,407

561,996

Other comprehensive income (loss)

529,116

317,718

Comprehensive income (loss)

2,580,806

1,329,486

Comprehensive income (loss) attributable to noncontrolling interests

24,428

9,862

Comprehensive income (loss) attributable to Annaly

2,556,378

1,319,624

Dividends on preferred stock (1)

157,931

154,551

Comprehensive income (loss) attributable to common stockholders

2,398,447

1,165,073

(1) Derived from the audited consolidated financial statements at December 31, 2024.

Key Financial Data

The following table presents key metrics of the Company’s portfolio, liabilities and hedging positions, and performance as of and for the quarters ended December 31, 2025, September 30, 2025 and December 31, 2024:

December 31, 2025

September 30, 2025

December 31, 2024

Portfolio related metrics

Fixed-rate Residential Securities as a percentage of total Residential Securities

99%

98%

Adjustable-rate and floating-rate Residential Securities as a percentage of total Residential Securities

Weighted average experienced CPR for the period

9.7%

8.6%

8.7%

Weighted average projected long-term CPR at period-end

10.8%

10.4%

8.6%

Liabilities and hedging metrics

Weighted average days to maturity on repurchase agreements outstanding at period-end

Hedge ratio (1)

90%

92%

100%

Weighted average pay rate on interest rate swaps at period-end (2)

3.15%

3.16%

3.11%

Weighted average receive rate on interest rate swaps at period-end (2)

3.92%

4.27%

4.50%

Weighted average net rate on interest rate swaps at period-end (2)

(0.77%)

(1.11%)

(1.39%)

GAAP leverage at period-end (3)

7.2:1

7.1:1

GAAP capital ratio at period-end (4)

11.9%

12.3%

Performance related metrics

Book value per common share

$ 20.21

$ 19.25

$ 19.15

GAAP net income per average common share (5)

$ 1.40

$ 1.21

$ 0.78

Annualized GAAP return on average equity (6)

26.14%

23.69%

15.00%

Net interest margin (7)

1.18%

0.97%

0.75%

Average yield on interest earning assets (8)

5.42%

5.40%

5.36%

Average GAAP cost of interest bearing liabilities (9)

4.49%

4.73%

4.96%

Net interest spread

0.93%

0.67%

0.40%

Dividend declared per common share

$ 0.70

$ 0.65

Annualized dividend yield (10)

12.52%

13.85%

14.21%

Non-GAAP metrics *

Earnings available for distribution per average common share (5)

$ 0.74

$ 0.73

$ 0.72

Annualized EAD return on average equity (excluding PAA)

14.28%

14.70%

14.27%

Economic leverage at period-end (3)

5.6:1

5.7:1

5.5:1

Economic capital ratio at period end (4)

14.9%

14.8%

Net interest margin (excluding PAA) (7)

1.69%

1.70%

1.71%

Average yield on interest earning assets (excluding PAA) (8)

5.44%

5.46%

5.26%

Average economic cost of interest bearing liabilities (9)

3.95%

3.96%

3.79%

Net interest spread (excluding PAA)

1.49%

1.50%

1.47%

* Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information.

(1) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding long receiver swaptions), futures and U.S. Treasury securities sold, not yet purchased, relative to repurchase agreements, other secured financing, cost basis of TBA derivatives outstanding and net forward purchases (sales) of investments; excludes MSR and the effects of term financing, both of which serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration differences in duration between assets and liabilities.

(2) Excludes forward starting swaps.

(4) GAAP capital ratio is computed as total equity divided by total assets. Economic capital ratio is computed as total equity divided by total economic assets. Total economic assets include the implied market value of TBA derivatives and are net of debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued.

(5) Net of dividends on preferred stock. The quarter ended December 31, 2025 excludes, and the quarter ended September 30, 2025 includes, cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025.

(6) Annualized GAAP return on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return on average equity is 6.53%, 5.92% and 3.75% for the quarters ended December 31, 2025, September 30, 2025, and December 31, 2024, respectively.

(7) Net interest margin represents interest income less interest expense divided by average interest earning assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances.

(8) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA).

(9) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).

(10) Based on the closing price of the Company’s common stock of $22.36, $20.21 and $18.30 at December 31, 2025, September 30, 2025 and December 31, 2024, respectively.

The following table contains additional information on our investment portfolio as of the dates presented:

For the quarters ended

December 31, 2025

September 30, 2025

December 31, 2024

Agency mortgage-backed securities

89,628,654

83,317,819

67,434,068

Residential credit risk transfer securities

213,800

330,647

754,915

Non-agency mortgage-backed securities

1,445,176

1,414,259

1,493,186

Commercial mortgage-backed securities

—

74,278

Total securities

91,287,630

85,062,725

69,756,447

Residential mortgage loans

5,020,784

4,008,299

3,546,902

Total loans, net

5,020,784

4,008,299

3,546,902

Mortgage servicing rights

3,645,865

3,476,181

2,909,134

Interests in MSR

28,626

35,833

—

Residential mortgage loans transferred or pledged to securitization vehicles

32,067,433

29,512,309

21,973,188

Assets transferred or pledged to securitization vehicles

32,067,433

29,512,309

21,973,188

Total investment portfolio

132,050,338

122,095,347

98,185,671

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company provides the following non-GAAP measures:

These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP. While intended to offer a fuller understanding of the Company’s results and operations, non-GAAP financial measures also have limitations. For example, the Company may calculate its non-GAAP metrics, such as earnings available for distribution, or the PAA, differently than its peers making comparative analysis difficult. Additionally, in the case of non-GAAP measures that exclude the PAA, the amount of amortization expense excluding the PAA is not necessarily representative of the amount of future periodic amortization nor is it indicative of the term over which the Company will amortize the remaining unamortized premium. Changes to actual and estimated prepayments will impact the timing and amount of premium amortization and, as such, both GAAP and non-GAAP results.

These non-GAAP measures provide additional detail to enhance investor understanding of the Company’s period-over-period operating performance and business trends, as well as for assessing the Company’s performance versus that of industry peers. Additional information pertaining to the Company’s use of these non-GAAP financial measures, including discussion of how each such measure may be useful to investors, and reconciliations to their most directly comparable GAAP results are provided below.

Earnings available for distribution, earnings available for distribution attributable to common stockholders, earnings available for distribution per average common share and annualized EAD return on average equity

The Company's principal business objective is to generate net income for distribution to its stockholders and to preserve capital through prudent selection of investments and continuous management of its portfolio. The Company generates net income by earning a net interest spread on its investment portfolio, which is a function of interest income from its investment portfolio less financing, hedging and operating costs. Earnings available for distribution, which is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items), and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items) and excludes (g) the premium amortization adjustment ("PAA") representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities is used by the Company's management and, the Company believes, used by analysts and investors to measure its progress in achieving its principal business objective.

The Company seeks to fulfill this objective through a variety of factors including portfolio construction, the degree of market risk exposure and related hedge profile, and the use and forms of leverage, all while operating within the parameters of the Company's capital allocation policy and risk governance framework.

The Company believes these non-GAAP measures provide management and investors with additional details regarding the Company’s underlying operating results and investment portfolio trends by (i) making adjustments to account for the disparate reporting of changes in fair value where certain instruments are reflected in GAAP net income (loss) while others are reflected in other comprehensive income (loss) and (ii) by excluding certain unrealized, non-cash or episodic components of GAAP net income (loss) in order to provide additional transparency into the operating performance of the Company’s portfolio. In addition, EAD serves as a useful indicator for investors in evaluating the Company's performance and ability to pay dividends. Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders’ equity, provides investors with additional detail on the earnings available for distribution generated by the Company’s invested equity capital.

The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented:

For the quarters ended

December 31, 2025

September 30, 2025

December 31, 2024

(dollars in thousands, except per share data)

GAAP net income (loss)

1,017,951

843,063

473,076

Adjustments to exclude reported realized and unrealized (gains) losses

Net (gains) losses on investments and other (1)

(288,630

)

(560,957

)

2,010,664

Net (gains) losses on derivatives (2)

(104,405

)

284,199

(1,958,777

)

Other adjustments

Amortization of intangibles

672

673

671

Non-EAD (income) loss allocated to equity method investments (3)

405

376

(652

)

Transaction expenses and non-recurring items (4)

7,223

8,117

6,251

Income tax effect of non-EAD income (loss) items

(9,456

)

(6,742

)

5,594

TBA dollar roll income (5)

4,813

9,019

2,086

MSR amortization (6)

(77,955

)

(72,081

)

(64,497

)

EAD attributable to noncontrolling interests

(4,027

)

(4,175

)

(2,114

)

Premium amortization adjustment cost (benefit)

6,627

18,390

(25,287

)

Earnings available for distribution *

553,218

519,882

447,015

Dividends on preferred stock (7)

42,387

41,127

38,704

Earnings available for distribution attributable to common stockholders *

510,831

478,755

408,311

GAAP net income (loss) per average common share

1.40

1.21

0.78

Earnings available for distribution per average common share *

0.74

0.73

0.72

Annualized GAAP return (loss) on average equity (8)

26.14

23.69

15.00

Annualized EAD return on average equity *

14.28

14.70

14.27

* Represents a non-GAAP financial measure.

(1) Includes write-downs or recoveries on investments which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss).

(2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $147.4 million, $191.9 million and $256.9 million for the quarters ended December 31, 2025, September 30, 2025 and December 31, 2024, respectively.

(3) The Company excludes non-EAD (income) loss allocated to equity method investments, which represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other, net.

(4) Represents costs incurred in connection with securitizations of residential whole loans.

(5) TBA dollar roll income represents a component of Net gains (losses) on derivatives.

(6) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period.

(7) The quarter ended December 31, 2025 excludes, and the quarter ended September 30, 2025 includes, cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025.

(8) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 6.53%, 5.92%, and 3.75% for the quarters ended December 31, 2025, September 30, 2025, and December 31, 2024, respectively.

For the years ended

December 31, 2025

December 31, 2024

(dollars in thousands, except per share data)

GAAP net income (loss)

2,051,690

1,011,768

Adjustments to exclude reported realized and unrealized (gains) losses

Net (gains) losses on investments and other (1)

(1,743,411

)

1,849,607

Net (gains) losses on derivatives (2)

1,923,641

(1,066,394

)

Other adjustments

Amortization of intangibles

2,690

Non-EAD (income) loss allocated to equity method investments (3)

525

506

Transaction expenses and non-recurring items (4)

27,828

20,283

Income tax effect of non-EAD income (loss) items

(7,840

)

3,444

TBA dollar roll income (5)

32,359

2,815

MSR amortization (6)

(281,273

)

(233,698

)

EAD attributable to noncontrolling interests

(14,797

)

(12,155

)

Premium amortization adjustment cost (benefit)

33,451

(14,241

)

Earnings available for distribution *

2,024,863

1,564,625

Dividends on preferred stock

157,931

154,551

Earnings available for distribution attributable to common stockholders *

1,866,932

1,410,074

GAAP net income (loss) per average common share

2.92

1.62

Earnings available for distribution per average common share *

2.92

2.70

Annualized GAAP return (loss) on average equity

14.57

8.53

Annualized EAD return on average equity *

14.47

13.28

* Represents a non-GAAP financial measure.

(1) Includes write-downs or recoveries on investments which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss).

(2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $716.5 million and $1.2 billion for the years ended December 31, 2025 and 2024, respectively.

(4) Includes costs incurred in connection with securitizations of residential whole loans.

(5) TBA dollar roll income represents a component of Net gains (losses) on other derivatives and financial instruments.

From time to time, the Company enters into TBA forward contracts as an alternate means of investing in and financing Agency mortgage-backed securities. A TBA contract is an agreement to purchase or sell, for future delivery, an Agency mortgage-backed security with a specified issuer, term and coupon. A TBA dollar roll represents a transaction where TBA contracts with the same terms but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the "drop". The drop is a reflection of the expected net interest income from an investment in similar Agency mortgage-backed securities, net of an implied financing cost, that would be foregone as a result of settling the contract in the later month rather than in the earlier month. The drop between the current settlement month price and the forward settlement month price occurs because in the TBA dollar roll market, the party providing the financing is the party that would retain all principal and interest payments accrued during the financing period. Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency mortgage-backed security less an implied financing cost.

TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions. The fair value of TBA derivatives is based on methods similar to those used to value Agency mortgage-backed securities. The Company records TBA derivatives at fair value on its Consolidated Statements of Financial Condition and recognizes periodic changes in fair value in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives.

TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract. Although accounted for as derivatives, TBA dollar rolls capture the economic equivalent of net interest income, or carry, on the underlying Agency mortgage-backed security (interest income less an implied cost of financing). TBA dollar roll income is reported as a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

Premium Amortization Expense

In accordance with GAAP, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities, excluding interest-only securities, multifamily and reverse mortgages, taking into account estimates of future principal prepayments in the calculation of the effective yield. The Company recalculates the effective yield as differences between anticipated and actual prepayments occur. Using third-party model and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security’s acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period.

The Company’s GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of the Company’s non-GAAP metrics exclude the effect of the PAA, which quantifies the component of premium amortization representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term CPR.

The following table illustrates the impact of the PAA on premium amortization expense for the Company’s Residential Securities portfolio and residential securities transferred or pledged to securitization vehicles, for the quarters ended December 31, 2025, September 30, 2025 and December 31, 2024:

For the quarters ended

December 31, 2025

September 30, 2025

December 31, 2024

(dollars in thousands)

Premium amortization expense (accretion)

41,367

36,719

8,196

Less: PAA cost (benefit)

6,627

18,390

(25,287

)

Premium amortization expense (excluding PAA)

34,740

18,329

33,483

Economic leverage and economic capital ratios

The Company uses capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on its assets and the cost of its borrowings and hedging activities. The Company’s capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for its stockholders while maintaining appropriate liquidity to support its business and meet the Company’s financial obligations under periods of market stress. To maintain its desired capital profile, the Company utilizes a mix of debt and equity funding. Debt funding may include the use of repurchase agreements, loans, securitizations, participations issued, lines of credit, asset backed lending facilities, corporate bond issuance, convertible bonds or other liabilities. Equity capital primarily consists of common and preferred stock.

The Company’s economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, structured repurchase transactions (included within Debt issued by securitization vehicles) and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued are non-recourse to us and are excluded from economic leverage.

The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating the Company’s economic leverage ratio for the periods presented:

As of

December 31, 2025

September 30, 2025

December 31, 2024

Economic leverage ratio reconciliation

(dollars in thousands)

Repurchase agreements

81,865,723

75,118,963

65,688,923

Other secured financing

1,075,000

1,025,000

750,000

Debt issued by securitization vehicles

28,918,753

26,601,790

19,540,678

Participations issued

1,932,655

1,831,657

1,154,816

U.S Treasury securities sold, not yet purchased

2,396,724

2,442,570

2,470,629

Total GAAP debt

116,188,855

107,019,980

89,605,046

Less Non-recourse debt:

Debt issued by securitization vehicles (1)

(28,651,989

)

(26,601,790

)

(19,540,678

)

Participations issued

(1,932,655

)

(1,831,657

)

(1,154,816

)

Total recourse debt

85,604,211

78,586,533

68,909,552

Plus / (Less):

Cost basis of TBA derivatives

3,252,601

3,981,439

3,158,058

Payable for unsettled trades

2,059,386

2,604,278

308,282

Receivable for unsettled trades

(1,031

)

(185,916

)

(2,201,447

)

Economic debt *

90,915,167

84,986,334

70,174,445

Total equity

16,159,911

14,996,579

12,696,952

Economic leverage ratio *

5.6:1

5.7:1

5.5:1

* Represents a non-GAAP financial measure.

(1) Non-recourse debt excludes debt issued by securitization vehicles related to structured repurchase transactions.

The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating the Company’s economic capital ratio for the periods presented:

As of

December 31, 2025

September 30, 2025

December 31, 2024

Economic capital ratio reconciliation

(dollars in thousands)

Total GAAP assets

135,609,838

125,861,572

103,556,384

Less:

Gross unrealized gains on TBA derivatives (1)

(17,648

)

(24,074

)

(8,635

)

Debt issued by securitization vehicles (2)

(28,651,989

)

(26,601,790

)

(19,540,678

)

Participations issued

(1,932,655

)

(1,831,657

)

(1,154,816

)

Plus:

Implied market value of TBA derivatives

3,257,086

3,991,915

3,136,154

Total economic assets *

108,264,632

101,395,966

85,988,409

Total equity

16,159,911

14,996,579

12,696,952

Economic capital ratio *

14.9%

14.8%

* Represents a non-GAAP financial measure.

(1) Included in Derivative assets in the Company’s Consolidated Statements of Financial Condition.

(2) Excludes debt issued by securitization vehicles related to structured repurchase transactions.

Interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA)

Interest income (excluding PAA) represents interest income excluding the effect of the PAA, and serves as the basis for deriving average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA), which are discussed below. The Company believes this measure provides management and investors with additional detail to enhance their understanding of the Company’s operating results and trends by excluding the component of premium amortization expense representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities (other than interest-only securities, multifamily and reverse mortgages), which can obscure underlying trends in the performance of the portfolio.

Economic interest expense includes GAAP interest expense, the net interest component of interest rate swaps (which includes net interest on variation margin related to interest rate swaps) and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). The Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. Accordingly, adding the net interest component of interest rate swaps to interest expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of the Company's financing strategy. The Company may use market agreed coupon ("MAC") interest rate swaps in which the Company may receive or make a payment at the time of entering into such interest rate swap to compensate for the off-market nature of such interest rate swap. In accordance with GAAP, upfront payments associated with MAC interest rate swaps are not reflected in the net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss).

Similarly, economic net interest income (excluding PAA), as computed below, provides investors with additional information to enhance their understanding of the net economics of our primary business operations.

For the quarters ended

December 31, 2025

September 30, 2025

December 31, 2024

Interest income (excluding PAA) reconciliation

(dollars in thousands)

GAAP interest income

1,690,707

1,532,497

1,338,880

Premium amortization adjustment

6,627

18,390

(25,287

)

Interest income (excluding PAA) *

1,697,334

1,550,887

1,313,593

Economic interest expense reconciliation

GAAP interest expense

1,324,128

1,256,747

1,151,592

Add:

Net interest component of interest rate swaps and net interest on initial margin related to interest rate swaps (1)

(159,973

)

(205,030

)

(272,305

)

Economic interest expense *

1,164,155

1,051,717

879,287

Economic net interest income (excluding PAA) reconciliation

Interest income (excluding PAA) *

1,697,334

1,550,887

1,313,593

Less:

Economic interest expense *

1,164,155

1,051,717

879,287

Economic net interest income (excluding PAA) *

533,179

499,170

434,306

* Represents a non-GAAP financial measure.

(1) Interest on initial margin related to interest rate swaps is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA), net interest margin (excluding PAA) and average economic cost of interest bearing liabilities

Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances, provide management with additional measures of the Company’s profitability that management relies upon in monitoring the performance of the business.

Disclosure of these measures, which are presented below, provides investors with additional detail regarding how management evaluates the Company’s performance.

For the quarters ended

December 31, 2025

September 30, 2025

December 31, 2024

Economic metrics (excluding PAA)

(dollars in thousands)

Average interest earning assets

124,781,771

113,522,223

99,876,810

Interest income (excluding PAA) *

1,697,334

1,550,887

1,313,593

Average yield on interest earning assets (excluding PAA) *

5.44

5.46

5.26

Average interest bearing liabilities

115,319,739

103,994,302

90,773,953

Economic interest expense *

1,164,155

1,051,717

879,287

Average economic cost of interest bearing liabilities *

3.95

3.96

3.79

Economic net interest income (excluding PAA) *

533,179

499,170

434,306

Net interest spread (excluding PAA) *

1.49

1.50

1.47

Interest income (excluding PAA) *

1,697,334

1,550,887

1,313,593

TBA dollar roll income

4,813

9,019

2,086

Economic interest expense *

(1,164,155

)

(1,051,717

)

(879,287

)

Subtotal

537,992

508,189

436,392

Average interest earnings assets

124,781,771

113,522,223

99,876,810

Average TBA contract balances

2,182,985

6,356,708

2,013,666

Subtotal

126,964,756

119,878,931

101,890,476

Net interest margin (excluding PAA) *

1.69

1.70

1.71

* Represents a non-GAAP financial measure.