Annaly Q2 Earnings Beat Estimates, Net Interest Income Improves Y/Y

Net income available to common stockholders was $781.6 million compared with $19.8 million in the year-ago period.

Inside Annaly’s Q2 Headlines

NII was $488.2 million in the reported quarter, which lagged the Zacks Consensus Estimate by 4.1%. In the prior-year quarter, the company reported NII of $273.2 million.

Net interest spread (excluding PAA) of 1.50% in the second quarter increased from 1.47% in the prior-year quarter.

Annaly’s BVPS was $20.15 as of June 30, 2026, up from $18.45 in the prior-year quarter. At the end of the reported quarter, the company’s economic capital ratio was 14.9%, up from 14.3% in the prior-year quarter.

In the second quarter, the weighted average actual constant prepayment rate was 11.6%, up from 8.7% in the year-ago quarter.

Annaly generated an annualized EAD return on average equity of 15.12% in the second quarter, which increased from the prior-year quarter’s 14.86%.

The company’s total portfolio was $109.4 billion in the quarter, including a $95 billion Agency portfolio. The Residential Credit portfolio was $10.4 billion, while the MSR portfolio was $4.1 billion.

NLY Keeps Leverage Conservative With Ample Liquidity

Annaly maintained a disciplined leverage profile in the quarter, with GAAP leverage at 7.4X, up from 7.3X in the prior quarter, and economic leverage at 5.6X, down from 5.7X. The company also reported total stockholders’ equity of $16.9 billion as of the quarter-end.

Liquidity remained a focal point, given ongoing macro and rate uncertainty. Annaly ended the quarter with $9.6 billion in total assets available for financing, including $5.5 billion in cash and unencumbered Agency MBS. The company also increased financing capacity in its Residential Credit business by $740 million through expanded credit facilities.

Annaly Hedging Rises Amid Macro Uncertainty

Against an uncertain rate environment, NLY adopted a more defensive hedge posture. The company ended the quarter with a hedge ratio of 97%, up from 87% in the prior quarter, while its hedge portfolio increased to $92 billion from $81 billion.

Funding costs were mixed during the quarter. Average GAAP costs of interest-bearing liabilities declined one basis point sequentially to 4.28%, while average economic costs increased three basis points to 3.96%. The net interest margin, excluding PAA, was 1.76% compared with 1.71% in the second quarter of 2025. Average yield on interest-earning assets, excluding the premium amortization adjustment, was 5.46%, up from 5.41% in the year-ago quarter.

NLY Leans on Dividend Coverage & Capital Raising

A key highlight for income-focused investors was that earnings again exceeded the common dividend. Annaly increased its quarterly common stock cash dividend to 75 cents per share for the second quarter from 70 cents in the year-ago period, supported by its earnings available for distribution.

The company also leaned on equity issuance to support growth. Annaly raised $447 million through its at-the-market sales program during the quarter, which it characterized as accretive, and largely deployed the capital into higher-coupon TBA securities and specified pools.

Our Take on NLY

Annaly’s second-quarter results benefited from higher net interest income, stronger net income and an improved net interest margin. While book value per share and the economic capital ratio rose year over year, higher economic funding costs and faster prepayment activity are likely to keep returns sensitive in the near term.

NLY currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Dates of Annaly’s Peers

AGNC Investment Corp. AGNC reported second-quarter 2026 net spread and dollar roll income per common share of 40 cents, topping the Zacks Consensus Estimate by 5.3%. The metric increased 5.3% from the year-ago quarter’s 38 cents.

AGNC’s results benefited from higher NII, an increase in tangible net book value per share (BVPS) and growth in the investment portfolio. However, a lower net interest spread, a rise in the weighted average cost of funds and elevated prepayment rates were concerning.

Starwood Property Trust, Inc. STWD is expected to post second-quarter 2026 results on Aug. 06.

Over the past seven days, the Zacks Consensus Estimate for STWD’s quarterly earnings has been unchanged at 41 cents per share.

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