Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q4 2017 Earnings Presentation
29 slides from Annaly Capital Management's earnings presentation, Feb 14, 2018
Slide 1: Fourth Quarter 2017 Investor Presentation
Fourth Quarter 2017 Investor Presentation February 14, 2018
Slide 2: Safe Harbor Notice
Safe Harbor Notice This presentation, other written or oral communications, 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 referen
Slide 3: Overview
Overview ANNALY
Slide 4: Annaly is a Leading Diversified Capital Manager
Annaly is a Leading Diversified Capital Manager Residential Commercial Real Middle Market Agency Credit Estate Lending The Annaly Agency Group The Annaly Commercial The Annaly Residential The Annaly Middle invests in agency MBS Real Estate Group Credit Group invests in Market Lending Group collatera
Slide 5: Annaly by the Numbers
Annaly by the Numbers Outperformance Dividend Stability Size & Scale 32% 17 $13.8bn Annaly declared its 17th Annaly’s 2017 total return is Annaly’s market cap is greater consecutive $0.30 dividend in ~50% better than both S&P 500 than the 24 smallest mREITs Q4 2017 and mREIT sector average(1) combin
Slide 6: Recent Accomplishments and Developments
Recent Accomplishments and Developments Annaly has achieved a number of significant strategic and organizational milestones over the past twelve months Market Leading Capital Raises $816 Million $720 Million $857 Million $425 Million Common Equity Follow-On 6.95% Series F Fixed-to- Common Equity Fol
Slide 7: Fourth Quarter 2017 Financial Highlights
Fourth Quarter 2017 Financial Highlights Earnings Per Share Dividend Per Share Book Value Per Share Net Interest Margin (ex. PAA)* Core GAAP (ex. PAA)* $0.30 $11.34 1.51% $0.62 | $0.31 Earnings & Book Value Return on Equity Dividend Yield 2017 Economic Return(1) 1.47% Core GAAP (ex. PAA)* 10.09% 12.
Slide 8: Annaly's Continued Focus on Corporate Responsibility and Governance
Annaly’s Continued Focus on Corporate Responsibility and Governance Management Ownership and Annaly Bloomberg Gender Equality Capital Impact Partners Shareholder Alignment Board of Directors Index On-Going Management Enhancements and 2018 Index Inclusion Q4 2017 New Partnership Purchases Refreshment
Slide 9: Investment Highlights
Investment Highlights ANNALY
Slide 10: Advantages of Annaly's Shared Capital Model
Advantages of Annaly’s Shared Capital Model Annaly’s diversification, scale and liquidity coupled with an established investment platform provide a unique opportunity in today’s markets Size & Scale 20x the market capitalization size of the median mREIT(1) Annaly utilizes a multitude of funding sour
Slide 11: Annaly Advantages | Size & Scale
Annaly Advantages | Size & Scale Since Annaly announced the acquisition of Hatteras Financial Corp. (“Hatteras”) in April 2016, the number of mREITs has fallen by 15% and the industry market capitalization has grown by nearly $14.4bn $14,000 $12,000 Growth Consolidation Size Since the Hatteras
Slide 12: Annaly Advantages | Liquidity & Unmatched Financing Sources and Capital
Annaly Advantages | Liquidity & Unmatched Financing Sources and Capital Annaly’s superior liquidity position and financing flexibility provides it with unique competitive advantages Unencumbered Assets ($bn)(1) $9.1 $4.8 $2.9 $2.2 $2.5 $1.8 $0.9 $1.1 $1.0 $0.7 $0.6 $0.7 $0.3 $0.7 $0.2 $0.2 A B C D E
Slide 13: Annaly Advantages | Diversification through Internal Growth
Annaly Advantages | Diversification through Internal Growth Annaly’s diversification strategy is now made up of 36 investment options Notable Product 2013 2014 2015 2016 2017 Additions Commercial Completed Securitized Non- Residential Agency and Non- Real Estate Restructuring of Agency MBS Whole Loa
Slide 14: Annaly Advantages | Operating Efficiency
Annaly Advantages | Operating Efficiency Annaly benefits from its scale and diversification, operating at significantly lower cost levels than smaller, monoline business models Operating Expenses as a % of Core Earnings (excluding PAA)(1)(2) 90.0% 86.7% 26.5% 80.0% 73.1% 16.1% 70.0% 60.0% NLY Peer C
Slide 15: Annaly Advantages | Returns and Outperformance
Annaly Advantages | Returns and Outperformance Annaly outperformed all other yield options in 2017 Cumulative Current Price to Total Return Book Ratio Annaly 31.8% 1.04x 35.0% Asset Managers 29.0% 2.24x S&P 21.8% 3.30x mREITs 20.3% 1.02x 31.8% 30.0% Banks 18.6% 1.46x 29.0% Utilities 6.5% 2.22x MLPs
Slide 16: Macro Outlook & Positioning
Macro Outlook & Positioning ANNALY
Slide 17: Macro Outlook | Interest Rate Environment
Macro Outlook | Interest Rate Environment Fed hikes priced in to short-term yields(1) Supply could raise long-term yields(2) “The Committee expects that economic conditions will evolve in a “We do not foresee a need to alter our balance sheet normalization manner that will warrant gradual increases
Slide 18: Macro Outlook | Credit Environment
Macro Outlook | Credit Environment Annaly is positioned to capitalize on numerous opportunities in the credit markets Supportive housing fundamentals have 15 Months Supply (months) vs. Existing Inventories ($mm)(1) $4 contributed to strong performance of Annaly’s $3 existing portfolio, while tight
Slide 19: Macro Outlook | Tax Reform – Impact on Yield Sector Returns
Macro Outlook | Tax Reform – Impact on Yield Sector Returns Individual mortgage REIT investors should benefit from a significant decrease in dividend tax burden due to 20% REIT pass-through income deduction included in Tax Cuts and Jobs Act Annaly retail investors projected to see Effective Dividend
Slide 20: Annaly's Opportunity
Annaly’s Opportunity Annaly is positioned to capitalize on industry and macro evolution Industry/Macro Factors Annaly’s Business Annaly Positioning Provides: Permanent Capital Solution Fed Exit Agency Efficient Shared Capital Model Residential GSE Risk Sharing Credit Low Beta as Volatility Inc
Slide 21: Business Update
Business Update ANNALY
Slide 22: Agency MBS Portfolio
Agency MBS Portfolio The Agency portfolio was net unchanged at $107.3 billion in assets at the end of Q4 2017(1) Focused on rotating into higher quality specified pools while selling roughly 20% of the TBA position Economic leverage declined as a result of lower TBA balances and higher levels
Slide 23: Residential Credit Portfolio
Residential Credit Portfolio The Residential Credit portfolio grew to $2.8 billion at the end of Q4 2017, an ~6% increase from Q3 2017 The whole loan portfolio has grown to more than $900mm on balance sheet since Q3 2016 Expect whole loans to remain the largest growth component for the Residen
Slide 24: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio The Commercial Real Estate portfolio was net unchanged at $2.0 billion in assets at the end of Q4 2017 Assets continue to perform as the supply/demand fundamentals in the U.S. Commercial Real Estate market remain favorable New investment activity has been moder
Slide 25: Middle Market Lending Portfolio
Middle Market Lending Portfolio The Middle Market Lending portfolio grew to over $1.0 billion in assets at the end of Q4 2017, an ~18% increase from Q3 2017 Second lien exposure has increased to 44% as AMML has more acutely focused on targeting second lien investments with cash flow characterist
Slide 26: Performance Highlights and Trends
Performance Highlights and Trends Unaudited, dollars in thousands except per share amounts For the quarters ended December 31, September 30, June 30, March 31, December 31, 2017 2017 2017 2017 2016 (1) GAAP net income (loss) per average common share $0.62 $0.31 ($0.01) $0.41 $1.79 Core earnings (exc
Slide 27: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations
Slide 28: Non-GAAP Reconciliations
Non-GAAP Reconciliations 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 substitute for,
Slide 29: 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
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