Annaly earnings available for distribution exceeded its common dividend in the third quarter of 2026, but that coverage contrasted with a sharp decline in book value. The mortgage real estate investment trust reported a negative 7.6% economic return and book value of $17.86 per common share for the quarter ended September 30, in results announced October 20, 2026.
Key Takeaways
- Earnings available for distribution of $0.80 per share exceeded the declared $0.75 common dividend.
- Book value per common share fell 11.4% from June 30, while GAAP results swung to a loss.
- Annaly raised $757 million in common equity and completed a $442.5 million preferred-stock redemption after quarter-end.
Table of Contents
- Annaly earnings show dividend coverage despite GAAP loss
- Book value declines as leverage and funding costs rise
- Capital raising accompanies a diversified mortgage portfolio
- Conclusion
Annaly earnings show dividend coverage despite GAAP loss
Annaly’s third-quarter 2026 results showed earnings available for distribution, or EAD, of $0.80 per average common share, up from $0.79 in the second quarter and $0.73 a year earlier. That left a five-cent margin over the declared quarterly common dividend.
EAD is a non-GAAP measure, not the same as GAAP profit or cash flow. Annaly reported a GAAP loss of $1.36 per average common share, compared with income of $1.06 in the preceding quarter and $1.21 in the third quarter of 2025.
Chief Executive Officer and Co-Chief Investment Officer David Finkelstein described the quarter as challenging for fixed-income markets. He highlighted EAD exceeding the common dividend, but one quarter’s coverage does not establish the level of future distributions.
| Item | Details |
|---|---|
| Agency portfolio | $91.8 billion at September 30, 2026 |
| Residential Credit portfolio | $10.4 billion at September 30, 2026 |
| Whole-loan correspondent channel | Record quarterly loan fundings of $5.8 billion |
| Residential Credit securitizations | Twelve transactions totaling a quarterly record $7.4 billion |
| Warehouse capacity | $8.3 billion across Residential Credit and mortgage servicing rights, including $2.8 billion committed |
Book value declines as leverage and funding costs rise
Book value per common share declined from $20.15 at June 30 to $17.86 at September 30, a drop of approximately 11.4%. The negative economic return underscores the distinction between earning enough to cover a dividend and preserving shareholder book value.
GAAP leverage increased to 8.0 times from 7.4 times, while economic leverage rose to 5.9 times from 5.6 times. Annaly also reported a higher average economic cost of interest-bearing liabilities, at 4.03%, compared with 3.96% in the second quarter.
Its non-GAAP net interest margin excluding premium amortization adjustments narrowed to 1.69% from 1.76%. That measure moved in the opposite direction from GAAP net interest margin, which increased to 1.54% from 1.47%.
Capital raising accompanies a diversified mortgage portfolio
Annaly raised $757 million through its at-the-market common-stock sales program, net of commissions and offering expenses. It also announced the redemption of its $442.5 million Series I preferred stock during the quarter; the redemption was completed on October 1, 2026.
The company’s total investment portfolio stood at $106.5 billion. The $4.3 billion market value reported for mortgage servicing rights represented one strategy within that portfolio, rather than the value of the entire portfolio.
Annaly said it actively adjusted hedges, primarily by adding Treasury futures, and ended the quarter with a 100% hedge ratio. Management said it would remain disciplined on capital allocation, leverage, liquidity and hedging.
Conclusion
Annaly maintained quarterly dividend coverage on its EAD measure, but lower book value and higher leverage left a mixed performance picture. The company scheduled its earnings call for October 21, with a replay available for one week afterward, providing a near-term opportunity to review management’s discussion of the results.
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