Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q4 2019 Earnings Presentation
33 slides from Annaly Capital Management's earnings presentation, Feb 12, 2020
Slide 1: Fourth Quarter 2019 Investor Presentation
Fourth Quarter 2019 Investor Presentation February 12, 2020
Slide 2: Important Notices
Important Notices This presentation is issued by Annaly Capital Management, Inc. ("Annaly"), a 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 2019 quarterly repor
Slide 3: Annaly is a Leading Diversified Capital Manager
Annaly is a Leading Diversified Capital Manager The diversification, scale and liquidity of Annaly’s complementary investment businesses provide a broad range of opportunities in today’s markets $15+ billion 4 Investment Strategies Permanent Capital(2) Agency, Residential Credit, Commercial Real Est
Slide 4: Fourth Quarter 2019 Financial Highlights
Fourth Quarter 2019 Financial Highlights Earnings (Loss) per Share Dividend per Share / Yield(1) Net Interest Margin Net Interest Margin Core (ex. PAA)* GAAP (ex. PAA)* 1.67% $0.25 / 10.6% $0.82 | $0.26 1.41% Earnings & 1.10% Book Value Book Value per Share Economic Return – Q4 / FY 0.75% $9.66 7.6%
Slide 5: Focus on Creating Shareholder Value
Focus on Creating Shareholder Value Since the beginning of 2019, Annaly achieved a number of performance and governance milestones that furthered its alignment of interests and continued to promote shareholder value Performance Shareholder Value ✓ 14.1% economic return for the year, the highest sinc
Slide 6: Recent Developments: Internalization Transaction
Recent Developments: Internalization Transaction
Slide 7: Overview of Internalization Transaction
Overview of Internalization Transaction Internalization underscores Annaly’s commitment to further align interests of shareholders and continues efforts around enhancing governance practices • Definitive agreement to acquire its external manager, Annaly Management Company LLC (the “Manager”), and tr
Slide 8: Internalization Best Positions Annaly for Long-Term Success
Internalization Best Positions Annaly for Long-Term Success ✓ Stronger alignment of incentives between management and shareholders Alignment of ✓ Eliminates any potential conflicts of interest inherent in an external management Interests structure ✓ Equity compensation for senior executives further
Slide 9: Internalization is the Next Step in Progression of Shareholder Alignment
Internalization is the Next Step in Progression of Shareholder Alignment Annaly has made several important governance enhancements to promote shareholder value and support transparency over the last few years 2017 2018 Established Adopted an Adopted Enhanced corporate Adopted bylaw Publication of Co
Slide 10: Internalization Expected to Enhance Annaly's Cost Structure Over Long Term
Internalization Expected to Enhance Annaly’s Cost Structure Over Long Term Internalization is expected to drive additional long-term savings Operating Expense (“OpEx”) as % of Equity ▪ Annaly’s operating expense is Annaly’s Long-Term already lower than peers: Target(1): 1.60%-1.75% – 2.6x more effic
Slide 11: Market Environment & Annaly Positioning
Market Environment & Annaly Positioning
Slide 12: 2020 Macro Outlook
2020 Macro Outlook The macro outlook remains constructive at the onset of 2020 Outlook What Does it Mean for Annaly? ▪ IMF recently confirmed outlook of low but ▪ Continued economic expansion is supportive of underlying stable global growth(1) fundamentals of Annaly’s credit businesses ▪ U.S. econom
Slide 13: Business Update
Business Update ANNALY
Slide 14: 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 guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae securitized product and w
Slide 15: Agency | Business Update
Agency | Business Update The Agency portfolio has diversified both assets and hedges over time in order to better support earnings and book value Strategic Approach Market Trends ▪ Annaly’s Agency Portfolio is made up of high quality and relatively ▪ We remain constructive on Agency MBS spreads give
Slide 16: Agency | Portfolio Summary
Agency | Portfolio Summary ▪ Annaly Agency Portfolio: $120.3 billion in assets at the end of Q4 2019, a moderate decrease from Q3 2019 ▪ The portfolio mix continues to be predominately concentrated in 30-year fixed rate securities ▪ ~81% of the portfolio was positioned in securities with relatively
Slide 17: Residential Credit | Business Update
Residential Credit | Business Update Annaly’s Residential Credit strategy continues to evolve with 55% of the Residential Credit portfolio created through our whole loan platform and our ability to be a programmatic RMBS issuer Strategic Approach Market Trends ▪ Focus on creating our own investments
Slide 18: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary ▪ Annaly Residential Credit Portfolio: $3.9 billion at the end of Q4 2019, an increase of 20% from Q3 2019 ▪ $465.5 million securitization closed during the quarter, demonstrating Annaly’s ability to optimize funding and building on our reputation as a programm
Slide 19: Commercial Real Estate | Business Update
Commercial Real Estate | Business Update Institutional commercial real estate platform with thoughtful and sustained exposure to investment options that span the capital structure Strategic Approach Portfolio Evolution (1) ▪ Cautious approach to new investments given length of cycle and Q4 2014 Q4 2
Slide 20: Commercial Real Estate | Portfolio Summary
Commercial Real Estate | Portfolio Summary ▪ Annaly Commercial Real Estate Portfolio: $2.3 billion in assets at the end of Q4 2019, reflecting an increase of 31% from Q3 2019 and a slight decrease of 5%(1) from Q4 2018 ▪ New investment activity outpaced paydowns during 2019 ▪ $1.2 billion of new inv
Slide 21: Middle Market Lending | Business Update
Middle Market Lending | Business Update The Annaly Middle Market Lending portfolio has more than doubled since the beginning of 2018, driven by access to private equity platform investment opportunities and proprietary deal flow Strategic Approach AMML by the Numbers ▪ Execute on a disciplined credi
Slide 22: Middle Market Lending | Portfolio Summary
Middle Market Lending | Portfolio Summary ▪ Annaly Middle Market Lending Portfolio: $2.1 billion in assets at the end of Q4 2019, relatively flat compared to Q3 2019, and up 14% since the beginning of the year despite a 41% decline in sponsored loan volume industry-wide year-over-year(1) ▪ 2019 has
Slide 23: Performance Highlights and Trends
Performance Highlights and Trends
Slide 24: Performance Highlights and Trends
Performance Highlights and Trends Unaudited For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 (1) GAAP net income (loss) per average common share $0.82 ($0.54) ($1.24) ($0.63) ($1.74) (1) Core earnings (excluding PAA) per average common share* $0.26 $0.21 $0.25 $0.29 $0.29 (
Slide 25: Performance Highlights and Trends (cont'd)
Performance Highlights and Trends (cont’d) Unaudited, dollars in thousands For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Agency mortgage-backed securities $112,893,367 $114,462,524 $118,202,040 $103,093,526 $90,752,995 Credit risk transfer securities 531,322 474,765 491,
Slide 26: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations
Slide 27: Non-GAAP Reconciliations
Non-GAAP Reconciliations The Company calculates “core earnings”, a non-GAAP measure, 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 and amortization expense on real
Slide 28: 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 29: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited, dollars in thousands For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Premium Amortization Reconciliation Premium amortization expense $171,447 $376,306 $318,587 $247,446 $220,131 Less: PAA cost (benefit) (83,892) 117,152 139,763
Slide 30: Glossary and Endnotes
Glossary and Endnotes ANNALY
Slide 31: Glossary
Glossary ACREG: Refers to Annaly Commercial Real Estate Group mREITs or mREIT Peers: Represents constituents of the BBREMTG Index*, excluding Annaly Agency Peers: Represents companies comprising the Agency sector within the BBREMTG Index*(1) NIM: Refers to Net Interest Margin AMML: Refers to Annaly
Slide 32: Endnotes
Endnotes Page 3 Page 10 1. Assets represent Annaly’s portfolio of investments on its balance sheet, including TBA purchase 1. Represents Management's estimates of long-term operating expense projections for the internalization contracts (market value) of $6.9bn, mortgage servicing rights (“MSRs”) of
Slide 33: Endnotes (cont'd)
Endnotes (cont’d) Page 17 Page 24 1. Includes 3 residential whole loan securitizations totaling $1.1bn in 2018, 5 residential whole loan 1. Net of dividends on preferred stock. The quarter ended September 30, 2019 excludes, and the quarter securitizations totaling $2.1 billion in 2019 and a $364.6mm
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