Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q3 2020 Earnings Presentation
25 slides from Annaly Capital Management's earnings presentation, Oct 28, 2020
Slide 1: Third Quarter 2020 Financial Summary
Third Quarter 2020 Financial Summary October 28, 2020 © Copyright 2020 Annaly Capital Management, Inc. All rights reserved.
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 Third Quarter
Slide 3: Financial Snapshot
Financial Snapshot Unaudited, dollars in thousands except per share amounts For the quarters ended 09/30/2020 6/30/2020 GAAP net income (loss) per average common share (1) $0.70 $0.58 (1) Income Statement Core earnings (excluding PAA) per average common share * $0.32 $0.27 Annualized GAAP return (lo
Slide 4: Portfolio Data
Portfolio Data Unaudited, dollars in thousands For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Agency mortgage-backed securities $74,915,167 $76,761,800 $78,456,846 $112,893,367 $114,462,524 Credit risk transfer securities 411,538 362,901 222,871 531,322 474,765 Non-agency
Slide 5: Financing and Capital Data
Financing and Capital Data Unaudited, dollars in thousands except per share amounts For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Repurchase agreements $64,633,447 $67,163,598 $72,580,183 $101,740,728 $102,682,104 Other secured financing 861,373 1,538,996 1,805,428 4,455,
Slide 6: Income Statement Data
Income Statement Data Unaudited, dollars in thousands except per share amounts For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Total interest income $562,443 $584,812 $555,026 $1,074,214 $919,299 Total interest expense 115,126 186,032 503,473 620,058 766,905 Net interest in
Slide 7: Key Earnings Metrics
Key Earnings Metrics Unaudited, dollars in thousands except per share amounts For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Dividends declared per common share $0.22 $0.22 $0.25 $0.25 $0.25 Total common and preferred dividends declared (1) $344,684 $345,481 $393,328 $393,
Slide 8: Components of Economic Net Interest Income
Components of Economic Net Interest Income * Unaudited, dollars in thousands For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Interest income: Residential Securities $439,502 $457,684 $410,380 $923,653 $784,228 Residential mortgage loans 42,508 42,871 47,557 47,377 37,673 Co
Slide 9: GAAP Net Income to Core Earnings (excluding PAA) Reconciliation
GAAP Net Income to Core Earnings (excluding PAA)* Reconciliation Unaudited, dollars in thousands For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 GAAP net income (loss) $1,015,548 $856,234 ($3,640,189) $1,209,742 ($747,169) Net income (loss) attributable to noncontrolling in
Slide 10: Quarter-Over-Quarter Changes in Key Metrics
Quarter-Over-Quarter Changes in Key Metrics Unaudited For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Book value per common share, beginning of period $8.39 $7.50 $9.66 $9.21 $9.33 Net income (loss) available (related) to common stockholders 0.70 0.58 (2.57) 0.82 (0.54) Oth
Slide 11: Quarter-Over-Quarter Changes in Key Metrics (continued)
Quarter-Over-Quarter Changes in Key Metrics (continued) Unaudited For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Prior quarter net interest margin (excluding PAA) * 1.88% 1.18% 1.41% 1.10% 1.28% Quarter-over-quarter changes in contribution: Net Interest Coupon on average i
Slide 12: Quarter-Over-Quarter Changes in Annualized Return on Average Equity
Quarter-Over-Quarter Changes in Annualized Return on Average Equity Unaudited For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Prior quarter annualized GAAP return (loss) on average equity 25.84% (102.17%) 31.20% (19.32%) (45.13%) Quarter-over-quarter changes in contribution
Slide 13: Residential Investments & TBA Derivative Overview
Residential Investments & TBA Derivative Overview as of September 30, 2020 Unaudited, dollars in thousands Agency Fixed-Rate Securities (Pools) Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Years to Maturity Face Value % (3) Coupon Amortized Cost Fair Value
Slide 14: Residential Investments & TBA Derivative Overview (continued)
Residential Investments & TBA Derivative Overview as of September 30, 2020 (continued) Unaudited, dollars in thousands Agency Interest-Only Collateralized Mortgage-Backed Obligations Current Notional Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Type Value % (1) Coupon Amortized
Slide 15: Residential Credit Investments Detail
(1) Residential Credit Investments Detail as of September 30, 2020 Unaudited, dollars in thousands Payment Structure Investment Characteristics Estimated Credit 60+ Product Fair Value Senior Subordinate Coupon Enhancement Delinquencies 3M VPR Agency Credit Risk Transfer $397,665 $— $397,665 4.37% 0.
Slide 16: Commercial Real Estate Overview
Commercial Real Estate Overview as of September 30, 2020 Unaudited, dollars in thousands GAAP Non-GAAP Number of Weighted Avg Weighted Avg Economic Levered Investment Portfolio Investments Book Values % of Portfolio LTV (1) Life (years) (2) Interest (3) Return (4) Loans Senior Mortgages 18 $450,177
Slide 17: Middle Market Lending Overview
Middle Market Lending Overview as of September 30, 2020 Unaudited, dollars in thousands Industry Dispersion Size Dispersion Industry Total (1) Computer Programming, Data Processing & Other Computer Related Services 409,644 Position Size Amount Percentage Management and Public Relations Services 257,
Slide 18: Hedging and Liabilities
Hedging and Liabilities as of September 30, 2020 Unaudited, dollars in thousands Current Weighted Avg. Weighted Avg. Weighted Avg. Maturity Notional (1)(2) Pay Rate Receive Rate Years to Maturity(3) 0 to 3 years $ 17,816,700 0.14 % 0.41 % 2.27 Interest Rate > 3 to 6 years 7,255,000 0.69 % 0.09 % 3.8
Slide 19: Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity
Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity Unaudited Assumptions: ▪ The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of September 30, 2020 and June 30, 2020 ▪ The interest rate sensitivity reflects instantaneous parallel shifts in rates ▪ The
Slide 20: Appendix
Appendix ANNALY
Slide 21: Non-GAAP Reconciliations
Non-GAAP Reconciliations 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, or superior to, financial measures computed in accordanc
Slide 22: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Premium Amortization Reconciliation Premium amortization expense $248,718 $270,688 $616,937 $171,447 $376,306 Less: PAA cost (benefit) 33,879 51,742 290,722
Slide 23: Non-GAAP Reconciliations (continued)
Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Economic Metrics (excluding PAA) Average interest earning assets $83,286,119 $84,471,839 $116,063,895 $121,801,951 $127,207,668 Interest income (excluding PA
Slide 24: Endnotes
Endnotes Page 2 Page 4 (continued) (1) Net of dividends on preferred stock. (4) Measures total notional balances of interest rate swaps, interest rate swaptions (2) Debt consists of repurchase agreements, other secured financing, securitized debt and (excluding receiver swaptions) and futures relati
Slide 25: Endnotes (continued)
Endnotes (continued) Page 9 Page 15 (1) Represents the opening adjustment to retained earnings upon adoption of Accounting (1) Based on an internal valuation or the most recent third party appraisal, which may be prior to Standards Update 2016-13 Financial instruments - Credit losses (Topic 326): lo
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