Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q3 2016 Earnings Presentation
25 slides from Annaly Capital Management's earnings presentation, Nov 2, 2016
Slide 1: Third Quarter 2016 Investor Presentation
Third Quarter 2016 Investor Presentation November 2, 2016
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 referenc
Slide 3: Overview
ANNALY | Overview
Slide 4: The Case for Owning Annaly
The Case for Owning Annaly Relative Valuation More Attractive than Size and Other Yield Sectors Given ~15x Size of Median mREIT Performance / Liquidity Favorable Performance, Yield and Valuation Leverage Profile Four Distinct Businesses Recent Hatteras Acquisition Diversification Designed to
Slide 5: Benefits of Diversification
Benefits of Diversification Expansion of Annaly’s capital into credit as well as diversification within the Agency portfolio has helped to produce more stable returns and protect book value Book Value Protection Stability of Core Earnings(1) 6.0% 5.1% $0.40 4.0% 3.0% 2.3% $0.34 2.0% 1.3% $0.33 $0.33
Slide 6: Stability of Annaly's Core Earnings vs. Other Yield Investments
Stability of Annaly’s Core Earnings(1) vs. Other Yield Investments Despite heightened market volatility, Annaly has continued to offer stable core earnings over the past 2 years, particularly when compared to other yield strategies 200% 185% 180% 2-Year Variability of Adjusted Earnings(1)(2) 160% 14
Slide 7: Annaly's Strong Balance Sheet and Liquidity
Annaly’s Strong Balance Sheet and Liquidity Annaly’s liability profile and large capital base provide the Company with a unique competitive advantage Total Capitalization of $78+ bn At 128 days, represents one of the longest weighted average maturities in the mREIT sector(1) RCap, in place since
Slide 8: Annaly's Diversified Financing Sources
Annaly’s Diversified Financing Sources Annaly continues to maintain one of the most diverse funding profiles in the real estate finance sector Top 5 mREITs of each sector by market cap Agency Hybrid Commercial Agency & Non-Agency Repo 100% 100% 20% FHLB(1) 20% 40% 0% Broker-Dealer 20% 0% 0% Cr
Slide 9: Efficiency of Operating Model
Efficiency of Operating Model Annaly’s diversified platform operates more efficiently than the average internally and externally managed mREIT From 2012 through annualized 1H 2016, Annaly significantly outperformed its mREIT peers with respect to operating expenditures as a percentage of assets an
Slide 10: Annaly's Performance vs. Other Yield Investments
Annaly’s Performance vs. Other Yield Investments Annaly’s current investment team has outperformed all other yield options since 2014 60.0% 43.9% 40.0% 33.9% 28.4% 20.0% 24.3% Total Return 8.4% – (0.7%) (20.0%) (18.1%) (40.0%) (60.0%) Annaly mREITs Utilities MLPs Asset Managers Banks S&P 500 Source:
Slide 11: Market Positioning
~ ANNALY’ Market Positioning 10
Slide 12: Post-Crisis Regulation Has Had a Meaningful Impact on Banks
Post-Crisis Regulation Has Had a Meaningful Impact on Banks… Regulation Key Takeaways Current regulatory climate has forced fundamental changes to banks’ business models Common Equity Tier 1 (CET1) Asset management, advisory, electronic trading, Capital payments and clearing business are more at
Slide 13: And Annaly is Well Positioned for the New Regulatory Environment
…And Annaly is Well Positioned for the New Regulatory Environment FNMA Mortgage Portfolio Balance and Portfolio Cap ($bn)(1) $800 GSEs continue to shrink their portfolios by mandate $600 Given punitive capital charges, banks have Residential bought merely 3% of the almost $20 billion $400 shed b
Slide 14: Annaly's Diversification Strategy Now Has Scale and Impact
Annaly’s Diversification Strategy Now Has Scale and Impact As Annaly has continued its diversification effort across asset classes, the credit-focused business lines are now of meaningful size in their respective industries $12,000 #1 $6,000 Annaly MML now larger than 24 publicly $11,000 traded BDCs
Slide 15: Sum of the Parts Capital Diversification
Sum of the Parts Capital Diversification Annaly is positioned as a permanent capital solution for the redistribution of MBS, residential credit, commercial real estate assets and institutional loans Commercial Real Middle Market Agency Residential Credit Estate Lending $ Amount / % of Total $10.6bn
Slide 16: Q3 2016 Business Update
ANNALY Q3 2016 Business Update 15
Slide 17: Macro Economic & Interest Rate Market Outlook
Macro Economic & Interest Rate Market Outlook Yields are rising off lows amid changing perceptions around fiscal stimulus/ Central Bank policy Low growth has led to an increased focus on implementing structural reforms given apparent limits to monetary policy accommodation After reaching long-te
Slide 18: Agency MBS Portfolio
Agency MBS Portfolio As of Q3 2016, the market value of the Agency portfolio was approximately $91 billion in assets, inclusive of the TBA position Approximately 94% of the Agency portfolio is positioned in securities with prepayment protection Agency MBS performed well in Q3 given declining i
Slide 19: Residential Credit Portfolio
Residential Credit Portfolio As of Q3 2016, the portfolio grew to $2.4 billion in assets and is comprised of the following sectors: Credit Risk Transfer (CRT): Expect liquidity to continue to improve as more investors enter the sector; CRT is now the most efficient way to express long credit vie
Slide 20: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio As of Q3 2016, the commercial real estate portfolio was approximately $2.4 billion in assets(1) The combination of a significant decline in new acquisition activity by sponsors, a volatile marketplace and a cautious stance on credit has resulted in a decrease in
Slide 21: Middle Market Lending Portfolio
Middle Market Lending Portfolio As of Q3 2016, the middle market lending portfolio grew to over $700 million in assets A combination of repeat sponsor business, sectors of origination focus and larger ownership positions resulted in increased new deal origination during Q3 2016 Unlevered portf
Slide 22: Performance Highlights and Trends
Performance Highlights and Trends Unaudited, dollars in thousands except per share amounts For the quarters ended September 30, June 30, March 31, December 31, September 30, 2016 2016 2016 2015 2015 GAAP earnings per common share $0.70 ($0.32) ($0.96) $0.69 ($0.68) *(1) Core earnings per common shar
Slide 23: Appendix: Non-GAAP Reconciliation
Appendix: Non-GAAP Reconciliation 22 22
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations Unaudited, dollars in thousands except per share amounts For the quarters ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2016 2016 2016 2015 2015 2015 2015 2014 2014 2014 GAAP to Core Reconciliation GAAP net income (loss) $
Slide 25: Non-GAAP Reconciliations (Cont'd)
Non-GAAP Reconciliations (Cont’d) Unaudited, dollars in thousands except per share amounts For the quarters ended Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, 2016 2016 2016 2015 2015 2015 2015 2014 2014 2014 Core Interest Income Reconciliation Total i
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