Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q1 2021 Earnings Presentation
30 slides from Annaly Capital Management's earnings presentation, Apr 29, 2021
Slide 1: First Quarter 2021 Investor Presentation
First Quarter 2021 Investor Presentation April 28, 2021
Slide 2: Important Notices
Important Notices This presentation is issued by Anna ly Capita l Management, Inc. ("Anna ly"), an internally-mana ged, publicly traded com pany that has elected to be ta xed as a real estate investment trust for federal income tax purposes and is be ing furnished in connection with A nnaly’s First
Slide 3: Recent Achievements and Performance Highlights
Recent Achievements and Performance Highlights Annaly delivered strong results despite an approximately 80 basis point selloff in rates during the first quarter Core earnings (ex. PAA)* of $0.29 per share, down $0.01 from the prior quarter with dividend coverage of +130% Financial Book value per
Slide 4: First Quarter 2021 Financial Highlights
First Quarter 2021 Financial Highlights Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Core GAAP (ex. PAA)* $0.22 1.98% 1.91% Earnings & $1.23 | $0.29 Book Value Book Value per Share Dividend Yield(1) $8.95 10.2% Q4 2020 Q1 2021 Total Portfolio(2) Capital Allocation(3) Average
Slide 5: Annaly's Planned Divestiture of Our Commercial Real Estate Business
Annaly’s Planned Divestiture of Our Commercial Real Estate Business Recent Activity During Q4 2020, we opportunistically sold a portion of our skilled nursing facilities for a sale price of $150 million On March 25, 2021, Annaly entered into a definitive agreement to sell substantially all of th
Slide 6: Annaly Investment Strategies | Overview
Annaly Investment Strategies | Overview Annaly’s core investment strategy remains committed to a diversified model with highly complementary and compatible returns Assets(1) : $92.6 billion Assets: $2.1 billion Capital(2) : $10.2 billion Capital(2) : $1.2 billion Strategy: Countercyclical / Defensiv
Slide 7: Annaly Investment Strategies | Optionality Provides Competitive Advantage
Annaly Investment Strategies | Optionality Provides Competitive Advantage The combination of our business strategies is intended to enhance risk-adjusted returns over time through investment optionality and risk management Economic and market perspectives provide lens into residential and commerci
Slide 8: Expansion of Investment in Housing Finance
Expansion of Investment in Housing Finance We are focused on strategically expanding our leadership across all aspects of the housing market The size and scale we have in the Agency business, coupled with our deep relationships and expertise in our Residential Credit business, empower us to be the
Slide 9: Market Environment
Market Environment ANNALY
Slide 10: The Macroeconomic State of Affairs
The Macroeconomic State of Affairs U.S. economy is expected to make a strong economic recovery, which has pressured yield levels higher; asset valuations remain tight on record stimulus, strong bank demand and healthy balance sheets The labor market recovery is expected to accelerate in coming month
Slide 11: Business Update
Business Update ANNALY
Slide 12: Agency | Business Update
Agency | Business Update Despite the meaningful selloff and curve steepening experienced during the quarter, Agency MBS outlook remains constructive and continues to benefit from strong market demand and ongoing Fed support Strategic Approach Market Trends Annaly’s Agency Portfolio is made up of h
Slide 13: Agency | Portfolio Summary
Agency | Portfolio Summary Annaly Agency Portfolio: $92.6 billion in assets at the end of Q1 2021, reflecting a modest decrease of 2% from Q4 2020 Approximately half of the reinvested runoff in the portfolio was in specified pools, with the other half reinvested into TBAs Given the increase in
Slide 14: Residential Credit | Business Update
Residential Credit | Business Update Annaly’s Residential Credit business continues to expand its product sourcing and operational capabilities to take advantage of opportunities currently available in the residential housing market Strategic Approach Market Trends Programmatic securitization spon
Slide 15: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary Annaly Residential Credit Portfolio: $3.4 billion in assets at the end of Q1 2021, an increase of 37% compared to Q4 2020 − The composition consists of a $2.9 billion securities portfolio and $529 million whole loan portfolio Purchased approximately $900 mi
Slide 16: Middle Market Lending | Business Update
Middle Market Lending | Business Update AMML continues to perform well with improving portfolio metrics demonstrating our disciplined, credit-intensive approach Strategic Approach AMML by the Numbers Execute on a disciplined credit focused investment strategy comprised Current Portfolio predominan
Slide 17: Middle Market Lending | Portfolio Summary
Middle Market Lending | Portfolio Summary Annaly Middle Market Lending Portfolio: $2.1 billion(1) in assets at the end of Q1 2021, a decrease of 7% compared to Q4 2020 as a result of a strong wave of refinancing in the absence of any meaningful new issue M&A The portfolio continues to exhibit st
Slide 18: CMBX & Conduit CMBS | Portfolio Summary
CMBX & Conduit CMBS | Portfolio Summary Annaly expects to maintain exposure to commercial real estate through accretive and efficient strategies within the securities portfolio Following the closing of the Commercial Real Estate platform sale, Annaly expects to maintain a presence in CMBS Q1 202
Slide 19: Financial Highlights and Trends
Financial Highlights and Trends
Slide 20: Financial Highlights and Trends
Financial Highlights and Trends Unaudited For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 (1) GAAP net income (loss) per average common share $1.23 $0.60 $0.70 $0.58 ($2.57) (1) Core earnings (excluding PAA) per average common share* $0.29 $0.30 $0.32 $0.27 $0.21 Dividends
Slide 21: Financial Highlights and Trends (cont'd)
Financial Highlights and Trends (cont’d) Unaudited, dollars in thousands For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Agency mortgage-backed securities $69,637,229 $74,067,059 $74,915,167 $76,761,800 $78,456,846 Residential credit risk transfer securities 930,983 532,403
Slide 22: Credit Reserves Driven by Adoption of CECL Accounting Standard
Credit Reserves Driven by Adoption of CECL Accounting Standard Q1 2021 allowance decreased significantly given the reversal of ACREG reserves due to the planned divestiture(1) Credit Reserves on Funded Loan Portfolio Commentary 3/31/21 CECL accounting standard: 12/31/20 Ending Q1 2021 3/31/21 Endi
Slide 23: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations Core earnings (excluding PAA), a non-GAAP measure, is defined 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 expense related to commercial r
Slide 25: 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 26: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited, dollars in thousands For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Premium Amortization Reconciliation Premium amortization expense ($11,891) $239,118 $248,718 $270,688 $616,937 Less: PAA cost (benefit) (214,570) 39,101 33,879
Slide 27: Glossary and Endnotes
Glossary and Endnotes ANNALY
Slide 28: Glossary
Glossary ACREG: Refers to Annaly Commercial Real Estate Group Legacy: Refers to residential credit securities whose underlying collateral was securitized prior to 2009 Agency Peers: Represents companies comprising the Agency Middle Market Represents companies comprising the S&P BDC sector within the
Slide 29: Endnotes
Endnotes Pag e 3 1. Includes a $257mm residential whole loan securitization in March 2021 and a $354mm residential whole Pag e 10 securitization in April 2021. 1. Based on April 14, 2021 data from the U.S. Bureau of Economic Analysis retrieved via Haver Analytics. 2. Total portfolio represents Annal
Slide 30: Endnotes (cont'd)
Endnotes (cont’d) Pag e 20 1. Net of dividends on preferred stock. Non-GAAP Reconciliations 2. Net interest margin represents interest income less interest expense divided by average interest earning assets. Pag e 25 Net interest margin (excluding PAA) represents the sum of the Company's interest in
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