Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q3 2019 Earnings Presentation
33 slides from Annaly Capital Management's earnings presentation, Oct 30, 2019
Slide 1: Third Quarter 2019 Investor Presentation
Third Quarter 2019 Investor Presentation October 30, 2019
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 Third Quarter 2019 quarterly report
Slide 3: Overview
Overview ANNALY
Slide 4: 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 5: 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 6: Third Quarter 2019 Financial Highlights
Third Quarter 2019 Financial Highlights Earnings (Loss) per Share Dividend per Share Net Interest Margin Net Interest Margin Core (ex. PAA)* GAAP (ex. PAA)* $0.25 1.28% Earnings & ($0.54) | $0.21 0.87% 1.10% 0.75% Book Value Book Value per Share Dividend Yield(1) $9.21 11.36% Q2 2019 Q3 2019 Q2 2019
Slide 7: Annaly's Advantages | Key Benefits of Our Large, Diversified Model
Annaly’s Advantages | Key Benefits of Our Large, Diversified Model The combination of the four business strategies is intended to enhance risk-adjusted returns over time through investment optionality and risk management Informed economic and market Deep credit focus and expertise shared perspective
Slide 8: Investment Highlights
Investment Highlights ANNALY
Slide 9: Annaly Advantages | Internal & External Growth
Annaly Advantages | Internal & External Growth Annaly continues to grow through strategic acquisitions, partnerships and expanded origination capabilities Internal & External Growth Permanent Capital Growth Since 2014(4) Annaly’s permanent capital has grown by nearly $3bn and it has paid 3 Acquisiti
Slide 10: Annaly Advantages | Benefits of Diversification
Annaly Advantages | Benefits of Diversification Annaly’s economic return - generated with less leverage - has outperformed Agency Peers across different time periods, demonstrating the durability of its model Economic Return Annaly vs. Agency Peers: Difference in Annual Economic Return Since 2014 Cu
Slide 11: Annaly Advantages | Capital Optimization
Annaly Advantages | Capital Optimization Annaly’s diversified financing sources and disciplined capital markets activity provide a competitive advantage in any market environment Diversified Financing Sources Share Repurchase Total Capitalization Available Financing 9/30/2019: $125.3bn(1) Options In
Slide 12: Annaly Advantages | Driving a Culture of Excellence
Annaly Advantages | Driving a Culture of Excellence Annaly is dedicated to supporting a culture of excellence through the development of its human capital, as well as positively impacting communities through responsible investment Development & Retention Ownership Culture Responsible Investments 100
Slide 13: Annaly Advantages | Commitment to Diversity & Inclusion
Annaly Advantages | Commitment to Diversity & Inclusion Studies suggest commitment to promoting a culture of diversity and inclusion leads to lower future earnings volatility and higher returns on equity(1) Commitment to Diversity and Inclusion Women’s Leadership Event | September 2019 Annaly’s Wo
Slide 14: Market Environment & Annaly Positioning
Market Environment & Annaly Positioning
Slide 15: Annaly's Opportunity
Annaly’s Opportunity Annaly is positioned to capitalize on macro trends and industry developments Industry / Macro Factors Trend Overview Annaly Positioning Forward looking indicators point to further 37% lower beta than Yield Sectors and 46% State of the Economy slowdown in growth lower than th
Slide 16: State of the Economy & Macro Outlook
State of the Economy & Macro Outlook Recent period was characterized by outsized volatility amid economic slowdown and geopolitical uncertainties; monetary policy expected to remain accommodative U.S. Economic Data Monetary Policy Geopolitical Situation Economic growth has slowed in light of The
Slide 17: Repo Market Update
Repo Market Update Despite recent volatility in repo markets, Annaly has continued to fund its balance sheet at efficient levels demonstrating its market expertise Annaly’s Positioning Overnight funding levels trading in parity to Fed Funds reached a Market noteworthy high of 10% during the week o
Slide 18: How Do We Invest in Credit in This Market?
How Do We Invest in Credit in This Market? In the current market environment Annaly has continued to generate alpha through credit investments by finding pockets of high quality opportunities Key Characteristics of Recent Deal Activity RESIDENTIAL CREDIT MIDDLE MARKET LENDING COMMERCIAL REAL ESTATE
Slide 19: Business Update
Business Update ANNALY
Slide 20: Agency | Portfolio Summary
Agency | Portfolio Summary Annaly Agency Portfolio: $125.9 billion in assets at the end of Q3 2019, a decrease of 2% from Q2 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 att
Slide 21: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary Annaly Residential Credit Portfolio: $3.2 billion at the end of Q3 2019, an increase of 4% from Q2 2019 Closed a $463.4 million securitization during the quarter, demonstrating Annaly’s ability to optimize funding and building on our track record as a progr
Slide 22: Commercial Real Estate | Portfolio Summary
Commercial Real Estate | Portfolio Summary Annaly Commercial Real Estate Portfolio: $1.8 billion in assets at the end of Q3 2019, a 2% decrease from Q2 2019 100% of the ramp proceeds from the $857 million actively managed CRE CLO issued in Q1 2019 were successfully utilized by the end of Q3 2019
Slide 23: Middle Market Lending | Portfolio Summary
Middle Market Lending | Portfolio Summary Annaly Middle Market Lending Portfolio: $2.1 billion in assets at the end of Q3 2019, an increase of 16% from Q2 2019 AMML remains disciplined in its credit intensive approach, focusing on top private equity sponsor relationships in defensive, non- discr
Slide 24: Performance Highlights and Trends
Performance Highlights and Trends Unaudited For the quarters ended 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 GAAP net income (loss) per average common share (1) ($0.54) ($1.24) ($0.63) ($1.74) $0.29 Core earnings (excluding PAA) per average common share* (1) $0.21 $0.25 $0.29 $0.29 $0.30 Co
Slide 25: Performance Highlights and Trends (cont'd)
Performance Highlights and Trends (cont’d) Unaudited, dollars in thousands For the quarters ended 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Agency mortgage-backed securities $114,462,524 $118,202,040 $103,093,526 $90,752,995 $89,290,128 Credit risk transfer securities 474,765 491,969 607,94
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 9/30/2019 6/30/2019 3/31/2019 12/31/2018 9/30/2018 Premium Amortization Reconciliation Premium amortization expense $376,306 $318,587 $247,446 $220,131 $187,537 Less: PAA cost (benefit) 117,152 139,763 81,871 45
Slide 30: Glossary
Glossary ACREG: Refers to Annaly Commercial Real Estate Group Ginnie Mae: Refers to the Government National Mortgage Association Agency Peers: Represents companies comprising the Agency sector GSE: Refers to Government Sponsored Enterprise within the BBREMTG Index*(1) Hybrid Peers: Represents compan
Slide 31: Endnotes
Endnotes Page 4 Page 9 1. Assets represent Annaly’s portfolio of investments on its balance sheet, including to be announced 1. Acquisitions include Annaly’s $876mm acquisition of CreXus Investment Corp. (closed May 2013), (“TBA”) purchase contracts (market value) of $11.0bn, mortgage servicing righ
Slide 32: Endnotes (cont'd)
Endnotes (cont’d) Page 12 Page 17 (cont’d) 1. Survey results based on annual internal surveys conducted by Perceptyx from 2015 through 2018. 4. Reflects Arcola’s funding rate experienced from September 16, 2019 to September 18, 2019 relative to 2. Financial services sector data per United States Dep
Slide 33: Endnotes (cont'd)
Endnotes (cont’d) Page 24 Page 29 1. Net of dividends on preferred stock. The quarter ended September 30, 2019 excludes, and the quarter 1. Average cost of interest bearing liabilities represents annualized economic interest expense divided by ended June 30, 2019 includes, cumulative and undeclared
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