Company: NLY-PF
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001043219-25-000012
Chunk: 2

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 2
Chunk 2
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 Management68Counterparty Risk Management69Operational Risk Management69Compliance, Regulatory and Legal Risk Management71Critical Accounting Estimates71Valuation of Financial Instruments71Residential Securities71Residential Mortgage Loans72MSR72Interest Rate Swaps72Revenue Recognition72Consolidation of Variable Interest Entities73Use of Estimates73Glossary of Terms74

39

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIESItem 2. Management’s Discussion and Analysis 

Overview

We are a leading diversified capital manager with investment strategies across mortgage finance. Our principal business objective is to generate net income for distribution to our stockholders and optimize our returns through prudent management of our diversified investment strategies. We are an internally-managed Maryland corporation founded in 1997 that has elected to be taxed as a REIT. Our common stock is listed on the New York Stock Exchange under the symbol “NLY.”

We use our capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities.

For a full discussion of our business, refer to the section titled “Business Overview” in our most recent Annual Report on Form 10-K.

Business Environment 

The U.S. economy remained resilient in the third quarter of 2025 (“Q3 2025”), with growth roughly on pace with the prior quarter (“Q2 2025”) ahead of a government shutdown that began October 1, 2025, which has delayed official economic data for September. Growth was supported by healthy consumer spending, particularly from high earners, and strong business investment related to artificial intelligence (“AI”), despite lingering uncertainty around tariffs and immigration. Inflation remained well above the Federal Reserve’s (the “Fed”) inflation target, though the anticipated uptick in goods inflation resulting from higher tariffs has been more muted than expected thus far. However, labor market conditions weakened, with hiring slowing to roughly 30,000 jobs per month for the period between June and August 2025. Although the unemployment rate has moved only slightly higher over the same period, the Fed cut interest rates at its Federal Open Market Committee (“FOMC”) meeting in September as the outlook highlights growing risks to the Fed’s employment mandate.  

U.S. Treasury yields fell modestly in Q3 2025 and the yield curve steepened, as markets expected modestly lower policy rates going forward. In addition, concerns about the U.S. debt outlook eased following the passage of tax reform in