Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q4 2020 Earnings Presentation
32 slides from Annaly Capital Management's earnings presentation, Feb 10, 2021
Slide 1: Fourth Quarter 2020 Investor Presentation
Fourth Quarter 2020 Investor Presentation February 10, 2021
Slide 2: Important Notices
Important Notices This presentation is issued by Annaly Capital Management, Inc. ("Annaly"), an internally-managed, publicly traded company that has elected to be taxed as a real estate investment trust for federal income tax purposes and is being furnished in connection with Annaly’s Fourth Quarter
Slide 3: Recent Achievements and Performance Highlights
Recent Achievements and Performance Highlights Annaly delivered strong results amidst a more constructive environment across markets in which we operate Core earnings (ex. PAA)* of $0.30 per share up 15.4% year-over-year with dividend coverage of approximately 140% Financial Performance Book val
Slide 4: Fourth Quarter 2020 Financial Highlights
Fourth Quarter 2020 Financial Highlights Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Core 2.05% GAAP (ex. PAA)* $0.22 1.98% Earnings & $0.60 | $0.30 Book Value Book Value per Share Dividend Yield(1) $8.92 10.4% Q3 2020 Q4 2020 Total Portfolio(2) Capital Allocation(3) Average
Slide 5: Prudent Capital Structure Positioning
Prudent Capital Structure Positioning We manage our overall risk profile through three forms of leverage we have available to enhance returns Annaly’s Approach to Leverage Fourth Quarter Actions Evaluate the relative Monitor the relative Have rotated investments higher up the capital structure
Slide 6: 2020: Leading with Purpose and Impact
2020: Leading with Purpose and Impact During this time of considerable global challenges, Annaly has chosen to lead with purpose and impact Completed Management Internalization Published Inaugural Corporate Responsibility Report In Q2 2020, we completed our management internalization, which provid
Slide 7: Current Value Proposition
Current Value Proposition Liquidity in the global system has made it increasingly difficult to find responsible yield… U.S. Aggregate Index Yield (%) and Duration (Years)(1) 8.0% 7 7.0% 6 6.0% 5 5.0% Yield 4 4.0% Duration Yield Compression 3 3.0% Broadly 2.0% 2 1.0% 1 – – 2000 2001 2002 2003 2004 20
Slide 8: Market Environment
Market Environment ANNALY
Slide 9: The Macroeconomic State of Affairs
The Macroeconomic State of Affairs Despite current lull in economic recovery, vaccine and stimulus sow hope for material comeback in 2021 U.S. GDP Growth is expected to make a meaningfully faster recovery from the COVID-19 The economic impact of COVID-19 induced recession than following the 2008/09
Slide 10: Financing Environment Supports Returns
Financing Environment Supports Returns Financing costs are at the lowest levels in a decade, providing additional support for Annaly’s return profile Repo Financing Repo financing costs are at the lowest levels in our history Shortened the maturity of the repo portfolio at the start of 2020 Re
Slide 11: Business Update
Business Update ANNALY
Slide 12: Annaly Investment Strategies
Annaly Investment Strategies The Annaly Agency Group invests in Agency MBS The Annaly Residential Credit Group invests in Non- collateralized by residential mortgages which are Agency residential mortgage assets within the securitized guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae product and w
Slide 13: Agency | Business Update
Agency | Business Update Agency MBS benefits from strong market demand and a relatively contained interest rate outlook; stable funding continues to be a tailwind for the sector Strategic Approach Market Trends Annaly’s Agency Portfolio is made up of high quality and liquid Strong demand for Age
Slide 14: Agency | Portfolio Summary
Agency | Portfolio Summary Annaly Agency Portfolio: $94.6 billion in assets at the end of Q4 2020, reflecting a modest decrease of 2% from Q3 2020 The majority of runoff in the portfolio was reinvested in low-coupon TBAs and specified pools − Rotated out of the 2.5% - 3.0% TBAs on deteriorating
Slide 15: Residential Credit | Business Update
Residential Credit | Business Update Annaly Residential Credit Group’s proactive asset management focus has resulted in compelling performance following COVID-related volatility in the spring of 2020; remains well-positioned to capitalize on current market dynamics that support the business strategy
Slide 16: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary Annaly Residential Credit Portfolio: $2.5 billion in assets at the end of Q4 2020, an increase of 31% compared to Q3 2020 − The composition consists of a $2.1 billion securities portfolio and $346 million whole loan portfolio Purchased nearly $400 million o
Slide 17: Commercial Real Estate | Business Update
Commercial Real Estate | Business Update Institutional commercial real estate platform with well-managed investments across the capital structure Strategic Approach Market Trends Cautious approach to new investments; premium on cash flow and Performance across property sectors has diverged with
Slide 18: Commercial Real Estate | Portfolio Summary
Commercial Real Estate | Portfolio Summary Annaly Commercial Real Estate Portfolio: $2.3 billion(1) in assets at the end of Q4 2020, a decrease of 7% compared to Q3 2020 − Inclusive of loans contributed to the managed CRE CLO, assets under management at the end of Q4 2020 totaled $2.9 billion, dow
Slide 19: Middle Market Lending | Business Update
Middle Market Lending | Business Update AMML performed well amidst the pandemic demonstrating the merits of our disciplined, credit-intensive approach Strategic Approach AMML by the Numbers Execute on a disciplined credit focused investment strategy comprised Current Portfolio predominantly of 1st
Slide 20: Middle Market Lending | Portfolio Summary
Middle Market Lending | Portfolio Summary Annaly Middle Market Lending Portfolio: $2.2 billion(1) in assets at the end of Q4 2020, an increase of 9% compared to Q3 2020 and a 4% increase year over year New issue execution increased at year-end rounding out a strong year of origination and perfor
Slide 21: Financial Highlights and Trends
Financial Highlights and Trends
Slide 22: Financial Highlights and Trends
Financial Highlights and Trends Unaudited For the quarters ended 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019 GAAP net income (loss) per average common share(1) $0.60 $0.70 $0.58 ($2.57) $0.82 (1) Core earnings (excluding PAA) per average common share* $0.30 $0.32 $0.27 $0.21 $0.26 Dividends
Slide 23: Financial Highlights and Trends (cont’d)
Financial Highlights and Trends (cont’d) Unaudited, dollars in thousands For the quarters ended 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019 Agency mortgage-backed securities $74,067,059 $74,915,167 $76,761,800 $78,456,846 $112,893,367 Residential credit risk transfer securities 532,403 411,5
Slide 24: Credit Reserves Driven by Adoption of CECL Accounting Standard
Credit Reserves Driven by Adoption of CECL Accounting Standard Q4 2020 allowance roughly unchanged given stabilizing macro environment Credit Reserves on Funded Loan Portfolio Commentary 12/31/20 CECL accounting standard: 9/30/20 Ending Q4 2020 12/31/20 Ending Loan ($mm) Allowance Allowance Allowa
Slide 25: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations
Slide 26: Non-GAAP Reconciliations
Non-GAAP Reconciliations Core earnings (excluding PAA), a non-GAAP measure, is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) realized amortization of MSRs, (d) other income (loss) (excluding depreciation expense related to commercial r
Slide 27: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Unaudited, dollars in thousands except per share amounts To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company provides non-GAAP financial measures. These measures should not be considered a substi
Slide 28: Non-GAAP Reconciliations (cont’d)
Non-GAAP Reconciliations (cont’d) Unaudited, dollars in thousands For the quarters ended 12/31/2020 9/30/2020 6/30/2020 3/31/2020 12/31/2019 Premium Amortization Reconciliation Premium amortization expense $239,118 $248,718 $270,688 $616,937 $171,447 Less: PAA cost (benefit) 39,101 33,879 51,742 290
Slide 29: Glossary and Endnotes
Glossary and Endnotes ANNALY
Slide 30: Glossary
Glossary ACREG: Refers to Annaly Commercial Real Estate Group LCF: Refers to Last Cash Flow Agency Peers: Represents companies comprising the Agency Legacy: Refers to residential credit securities whose sector within the BBREMTG Index*(1) underlying collateral was securitized prior to 2009 AMML: Ref
Slide 31: Endnotes
Endnotes Page 3 Page 12 1. Assets represent Annaly’s investments that are on balance sheet, net of debt issued by securitization vehicles, 1. Assets represent Annaly’s investments that are on balance sheet, net of debt issued by securitization vehicles, as as well as investments that are off-balance
Slide 32: Endnotes (cont’d)
Endnotes (cont’d) Page 20 1. Includes $39.6 million of general reserves on funded exposures under CECL at December 31, 2020. Non-GAAP Reconciliations 2. Internal risk ratings are based on AMML’s Credit Rating Policy, which assigns ratings of 1-9 based on leverage Page 27 and fixed charge coverage ra
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