Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Investor Presentation (July 2022)
40 slides from Annaly Capital Management's investor presentation, Jul 20, 2022
Slide 1: Onslow Bay Financial LLC
ANNALY Onslow Bay Financial LLC July 20, 2022
Slide 2: Forward-Looking Statements
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. This presentation is provided for investors in Annaly for informational purposes o
Slide 3: Annaly Capital Management Overview
Annaly Capital Management Overview ANNALY’
Slide 4: Annaly investment strategies: Agency, MSR and Residential Credit
Invests in Agency MBS collateralized by Invests in Mortgage Servicing Rights, Invests in Non-Agency residential residential mortgages, which are which provide the right to service mortgage assets within the securitized guaranteed by Fannie Mae, Freddie Mac residential loans in exchange for a product
Slide 5: Annaly Agency Portfolio: $76.1 billion in assets at end of Q1 2022
▪ Annaly Agency Portfolio: $76.1 billion in assets at the end of Q1 2022, a decrease of 6% compared to Q4 2021 ▪ During the first quarter, Annaly’s notional holdings were roughly unchanged and portfolio activity focused on shifting up in coupon − Annaly reduced exposure to lower coupons (30-year 2.0
Slide 6: Annaly Mortgage Servicing Rights Portfolio
▪ Annaly Mortgage Servicing Rights (“MSR”) Portfolio: $1.2 billion(1) in assets at the end of Q1 2022, an increase of 91% compared to Q4 2021 − Purchased $426 million of MSR during the first quarter through bulk and flow MSR relationships − Portfolio experienced $180 million of mark-to-market gains
Slide 7: Annaly Residential Credit Portfolio: $4.4 billion in assets
▪ Annaly Residential Credit Portfolio: $4.4 billion in assets at the end of Q1 2022, a decrease of 6% compared to Q4 2021 driven primarily by whole loan securitizations − The composition consists of a $3.5 billion securities portfolio and $0.9 billion whole loan portfolio (1) − Securities portfolio
Slide 8: ESG highlights
Of residential housing investments American homes Financed(2) Community development projects financed through a joint venture partnership with Capital Impact Partners ✓ Published climate-related disclosures outlining ✓ Became a signatory of the CEO Action for ✓ Continued to provide supplemental disc
Slide 9: Onslow Bay Financial LLC
Onslow Bay Financial LLC ANNALY’
Slide 10: Onslow Bay overview and Residential Credit Portfolio
▪ Annaly Residential Credit Portfolio: $4.4 billion in assets at the end of Q1 2022 − The composition consists of a $3.5 billion securities portfolio and $0.9 billion whole loan portfolio ▪ Onslow Bay Financial LLC (“Onslow Bay”) is a wholly owned subsidiary of Annaly and is the entity through which
Slide 11: Whole loan acquisition strategy and portfolio management
▪ Onslow Bay’s whole loan acquisition strategy and proactive portfolio management is guided by strong internal governance processes and credit discipline through meticulous asset selection, surveillance, oversight and risk management ▪ Onslow Bay purchases closed, funded, performing residential loan
Slide 12: Originator relationships and counterparty requirements
▪ Origination partners offer Onslow Bay a pool of closed, ▪ Originators lock loans "best efforts" in accordance with funded whole loans underwritten to their own underwriting Onslow Bay’s published guidelines and pricing. guidelines. Onslow Bay may place credit or income verification overlays on the
Slide 13: Top non-agency securitization issuers and rankings
1 JPMorgan Chase $27,544.6 1 Bayview $7,972.0 2 Goldman Sachs $14,970.0 2 Onslow Bay Financial $6,343.5 3 Flagstar Bank $7,973.5 3 Rocket Mortgage $5,482.5 4 Bayview $7,972.0 4 Invictus Capital Partners $5,342.7 5 Onslow Bay Financial $6,343.5 5 Redwood Trust $4,877.6 6 Rocket Mortgage $5,482.5 6 An
Slide 14: Top servicers and mortgage market rankings
1 WELLS FARGO $681,353.1 1 PENNYMAC CORP $498,748.1 2 PENNYMAC CORP $498,748.1 2 ROCKET MORTGAGE $498,647.2 3 ROCKET MORTGAGE $498,647.2 3 NEWREZ/CALIBER $482,776.2 4 NEWREZ/CALIBER $482,776.2 4 LAKEVIEW/BAYVIEW LOAN SERVICING $374,038.7 5 CHASE HOME FINANCE $474,606.2 5 FREEDOM MORTGAGE CORP $342,0
Slide 15: Onslow Bay website and LinkedIn
www.onslowbayfinancial.com ▪ The Onslow Bay website provides an overview of the whole loan programs offered, as well as a matrix comparing underwriting criteria − A quick quote tool allows users to input terms of a loan and receive indicative guidance on what programs the loan would fit ▪ Visit the
Slide 16: Onslow Bay Performance
Onslow Bay Performance ANNALY’
Slide 17: Successful Proactive Deferral Program reduced COVID delinquencies by 76%
1.8% 1.68% 16% 1.65% Successful Proactive Deferral 1.6% 14% Program reduced COVID 1.4% 12% Delinquencies by 76% 1.2% 10% 1.0% 0.90% 0.92% 8% 0.8% 6% 2.02% 0.53% 0.56% 0.6% 0.49% 4% 0.85% 0.42% 0.4% 0.28% 0.25% 2% 0.2% 0% 0.0% 1/1/2019 7/1/2019 1/1/2020 7/1/2020 1/1/2021 7/1/2021 1/1/2022 2018 Vintag
Slide 18: OBX Non-QM prepayment speeds versus industry peers
▪ GWAC alone is not a great predictor of Non-QM prepays, OBX Non-QM speeds are in line with industry peers despite ~55bps lower GWAC OBX 14 3,209 22 4.56 581 751 25.8 27.0 24.0 25.9 27.2 29.0 30.0 IMPRL 7 1,825 8 4.83 429 733 14.1 11.7 11.1 16.5 16.3 12.9 12.7 COLT 16 3,646 11 4.83 563 739 18.0 19.1
Slide 19: Non-QM/EXP collateral LTV and risk layering
▪ Over 50% of Annaly’s Non-QM/EXP collateral has an Original LTV less than 70% and only 12% had an Original LTV greater than 80% ▪ OBX securitizations maintain more equity and have favorable risk layers compared to other benchmark issuers 0.5% 0.4% 1.0% 0.8% 1.2% 1.5% 1.7% 0.3% 1.1% 0.0% 8.4% 3.9% 1
Slide 20: Annaly retains over 10% of OBX securitizations
▪ In aggregate, Annaly has traditionally retained >10% of the fair market value of OBX securitizations at issuance, more than 2x the mandated risk retention amount − Annaly and Annaly managed funds have retained over $1.1bn of OBX bonds by market value as of quarter end (1) − Majority of bonds retai
Slide 21: OBX shelf outstanding collateral balance
▪ The Onslow Bay shelf (OBX) has over $7bn of current outstanding collateral balance in the Non-Agency market − 5th highest issuer ▪ Programmatic securitization strategy is expected to grow outstanding collateral securitized throughout various market cycles ▪ Over 100 unique investors participated i
Slide 22: Onslow Bay Securitization Program
Onslow Bay Securitization Program ANNALY’
Slide 23: Programmatic issuer of Non-QM/Expanded Prime securities
▪ Annaly is a programmatic issuer of Non-QM/Expanded Prime Securities while also being opportunistic in the Agency Eligible Investor and Prime Jumbo markets ▪ Onslow Bay has historically securitized using either the Modified Sequential or Straight Sequential structures under the NQM shelf Onslow Bay
Slide 24: OBX 2021-2022 NQM securitization terms
2 OBX 2022-NQM6 OBX 2022-NQM5 OBX 2022-NQM4 OBX 2022-NQM3 OBX 2022-NQM2 OBX 2022-NQM1 OBX 2021-NQM4 OBX 2021-NQM3 OBX 2021-NQM2 Issue Date June-22 Jun-22 May-22 Mar-22 Feb-22 Jan-22 Nov-21 Aug-21 Jun-21 Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ E
Slide 25: OBX 2018-2020 EXP securitization terms
OBX 2020-EXP3 OBX 2020-EXP2 OBX 2020-EXP1 OBX 2019-EXP3 OBX 2019-EXP2 OBX 2019-EXP1 OBX 2018-EXP2 OBX 2018-EXP1 Issue Date Sep-20 Jul-20 Feb-20 Oct-19 Jul-19 Apr-19 Oct-18 Aug-18 Collateral Type Expanded Prime Expanded Prime Expanded Prime Expanded Prime Expanded Prime Expanded Prime Expanded Prime
Slide 26: OBX 2021-2022 INV and Prime Jumbo securitization terms
OBX 2022-INV4 OBX 2022-J1 OBX 2022-INV3 OBX 2022-INV2 OBX 2022-INV1 OBX 2021-INV3 OBX 2021-INV2 OBX 2021-J3 OBX 2021-INV1 OBX 2021-J2 OBX 2021-J1 Issue Date May-22 May-22 Mar-22 Feb-22 Jan-22 Nov-21 Oct-21 Oct-21 Sep-21 Jul-21 Apr-21 Agency Agency Agency Agency Collateral Type Prime Jumbo Agency Inv
Slide 27: Onslow Bay Acquisitions: Correspondent Channel
Onslow Bay Acquisitions: Correspondent Channel ANNALY’
Slide 28: Correspondent channel loan program guidelines
Min Loan Amt 150k 150k 125k 150k Max Loan Amt $3.0mm $3.0mm $2.0mm $2.0mm Housing Event >=4+ Years >=2+ Years Housing Event 3+ Years Per FNMA/FHMLC Mortgage History 0x30x12 2x30x12, 1x60x24 0x30x12 Per FNMA/FHMLC 5/6 ARM, 7/6 ARM, 30 Year Fix, 5/6 ARM, 7/6 ARM, 30 Year Fix, 5/6 ARM, 7/6 ARM, 30 Year
Slide 29: Correspondent LTV matrix, 4+ years housing event
<= $1.0mm 90 85 85 80 75 75 <= $1.5mm 90 85 85 75 75 75 740 <= $2.0mm 85 80 80 75 70 70 <= $2.5mm 80 75 75 70 65 65 <= $3.0mm 75 70 70 65 60 60 <= $1.0mm 90 85 85 80 75 75 <= $1.5mm 90 85 85 75 75 75 720 <= $2.0mm 85 80 80 75 70 70 <= $2.5mm 80 75 75 70 65 65 <= $3.0mm 75 70 70 65 60 60 <= $1.0mm 90
Slide 30: Correspondent LTV matrix by payment history
<= $1.0mm 90 80 80 80 75 75 <= $1.0mm 85 80 80 75 70 70 <= $1.5mm 85 80 80 75 70 70 740 <= $1.5mm 80 75 75 70 65 65 740 <= $2.0mm 80 75 75 70 70 70 <= $2.5mm 75 75 75 65 65 65 <= $2.0mm 75 N/A N/A N/A N/A N/A <= $3.0mm 70 70 70 N/A N/A N/A <= $1.0mm 85 80 80 75 70 70 <= $1.0mm 90 80 80 80 75 75 720
Slide 31: Correspondent LTV matrix, 3+ years housing event
<= $1.0mm 80 80 75 75 75 70 70 65 60 740 <= $1.5mm 80 75 70 70 70 65 65 65 60 <= $2.0mm 75 75 60 65 65 N/A N/A N/A N/A <= $1.0mm 80 80 75 75 75 70 70 65 60 720 <= $1.5mm 80 75 70 70 70 65 65 65 60 <= $2.0mm 75 75 60 65 65 N/A N/A N/A N/A <= $1.0mm 80 80 75 75 75 65 65 65 60 700 <= $1.5mm 75 75 70 70
Slide 32: Agency and jumbo investor program limits
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% 700 75 50% Agency Limit 2-4 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) Agency Limit 2–4 Unit $150,000 700 70 50% (#Units / State) 700 80 50% $1 Above Agen
Slide 33: 1 Unit investor program limits
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) 700 80 50% 1 Unit $1 Above Agency Jumbo Balance $2,000,000 680 75 50% 660 70 50% 1 Unit $1 Above Agency Jumbo Balance $2,000,000 700 75 50% Note: Onslow Bay does al
Slide 34: Onslow Bay Acquisitions: Bulk Purchases
Onslow Bay Acquisitions: Bulk Purchases ANNALY’
Slide 35: Bulk purchase program guidelines
Agency Eligible Max Loan Amt $3.0mm $3.0mm $2.0mm $2.0mm Housing Event >=4+ Years >=2+ Years Housing Event 3+ Years Per FNMA/FHMLC Mortgage History 0x30x12 2x30x12, 1x60x24 0x30x12 Per FNMA/FHMLC 5/6 ARM, 7/6 ARM, 30 Year Fix, 5/6 ARM, 7/6 ARM, 30 Year Fix, 5/6 ARM, 7/6 ARM, 30 Year Fix, Product Typ
Slide 36: Bulk LTV matrix, 4+ years housing event
<= $1.0mm 90 90 90 85 80 80 <= $1.5mm 90 90 90 80 80 80 740 <= $2.0mm 90 85 85 80 75 75 <= $2.5mm 85 80 80 75 70 70 <= $3.0mm 80 75 75 70 65 65 <= $1.0mm 90 90 90 85 80 80 <= $1.5mm 90 90 90 80 80 80 720 <= $2.0mm 90 85 85 80 75 75 <= $2.5mm 85 80 80 75 70 70 <= $3.0mm 80 75 75 70 65 65 <= $1.0mm 90
Slide 37: Bulk LTV matrix by payment history
<= $1.0mm 90 85 85 85 80 80 <= $1.0mm 90 85 85 80 75 75 <= $1.5mm 90 85 85 80 75 75 85 80 80 75 70 70 740 <= $1.5mm 740 <= $2.0mm 85 80 80 75 75 75 <= $2.0mm 80 N/A N/A N/A N/A N/A <= $2.5mm 80 80 80 70 70 70 <= $3.0mm 75 75 75 N/A N/A N/A <= $1.0mm 90 85 85 80 75 75 <= $1.0mm 90 85 85 85 80 80 720
Slide 38: Bulk LTV matrix, 3+ years housing event
<= $1.0mm 85 85 80 80 80 75 75 70 65 740 <= $1.5mm 85 80 75 75 75 70 70 70 65 <= $2.0mm 80 80 65 70 70 N/A N/A N/A N/A <= $1.0mm 85 85 80 80 80 75 75 70 65 720 <= $1.5mm 85 80 75 75 75 70 70 70 65 <= $2.0mm 80 80 65 70 70 N/A N/A N/A N/A <= $1.0mm 85 85 80 80 80 70 70 70 65 700 <= $1.5mm 80 80 75 75
Slide 39: Agency and jumbo investor program limits
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% 700 75 50% Agency Limit 2-4 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) Agency Limit 2–4 Unit $150,000 700 70 50% (#Units / State) 700 80 50% $1 Above Agen
Slide 40: 1 Unit investor program limits
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) 700 80 50% 1 Unit $1 Above Agency Jumbo Balance $2,000,000 680 75 50% 660 70 50% 1 Unit $1 Above Agency Jumbo Balance $2,000,000 700 75 50% Note: Onslow Bay does al
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