Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q4 2023 Earnings Presentation
29 slides from Annaly Capital Management's earnings presentation, Feb 8, 2024
Slide 1: Fourth Quarter 2023 Investor Presentation
Fourth Quarter 2023 Investor Presentation February 7, 2024
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 Fourth Quarte
Slide 3: Recent Achievements and Performance Highlights
Recent Achievements and Performance Highlights Annaly generated a strong economic return and earnings that outpaced the dividend despite elevated market volatility Earnings available for distribution* of $0.68 per average common share for the quarter, up $0.02 from the prior quarter Financial Bo
Slide 4: Fourth Quarter 2023 Financial Highlights
Fourth Quarter 2023 Financial Highlights Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Earnings Available GAAP for Distribution* $0.65 1.48% 1.58% Earnings & Book Value ($0.88) | $0.68 Book Value per Share Dividend Yield(1) $19.44 13.4% Q3 2023 Q4 2023 Total Portfolio(2) Capit
Slide 5: Annaly Investment Strategies
Annaly Investment Strategies Total Portfolio: $74.3 billion(1) | Total Shareholders’ Equity: $11.3 billion Mortgage Residential Agency Servicing Credit Rights Invests in Agency MBS collateralized by Invests in Mortgage Servicing Rights, Invests in Non-Agency residential residential mortgages, which
Slide 6: Illustrative Returns & Market Dynamics Across Annaly's Investment Strategies
Illustrative Returns & Market Dynamics Across Annaly's Investment Strategies In the current environment, Annaly’s investment strategies offer attractive new money returns Agency Residential Credit MSR Current Illustrative Market Levered Returns(1) 14%–16% 12%–15% 10%–12% Key Market Dynamics & Commen
Slide 7: Onslow Bay 2023 Strategic Milestones
Onslow Bay 2023 Strategic Milestones Onslow Bay has firmly established itself as a leader in the Residential Credit and MSR markets with significant growth in 2023 Key Milestones Across Our Housing Finance Expansion Strategy Onslow Bay has issued 54 securitizations since 2018, totaling over $21 bi
Slide 8: Market Environment
Market Environment ANNALY Zz
Slide 9: The Macroeconomic State of Affairs
The Macroeconomic State of Affairs The Federal Reserve has begun to discuss easing of monetary policy in an attempt to facilitate a “soft landing” amidst slowing inflation Q4 2023 Market and Economic Developments Inflation is slowing and will likely reach the Federal Reserve’s target range this year
Slide 10: Business Update
Business Update ANNALY Zz
Slide 11: Agency | Business Update
Agency | Business Update Annaly’s portfolio continued to shift up in coupon during the fourth quarter through the addition of high-quality specified pools while Annaly also grew its Agency CMBS portfolio Strategic Approach Market Trends Annaly’s Agency portfolio is made up of high quality and liqu
Slide 12: Agency | Portfolio Summary
Agency | Portfolio Summary Annaly’s Agency Portfolio: $65.7 billion in assets at the end of Q4 2023, a decrease of 4% compared to Q3 2023 Portfolio additions were focused on production coupon specified pools and Agency CMBS while rotating out of TBAs − Annaly ended the quarter with 48% of the po
Slide 13: Residential Credit | Business Update
Residential Credit | Business Update Annaly’s Residential Credit portfolio grew in the fourth quarter through record production from its whole loan correspondent channel, all while continuing to be a programmatic securitization issuer Strategic Approach Market and Credit Trends Programmatic securi
Slide 14: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary Annaly Residential Credit Portfolio: $5.7 billion in assets at the end of Q4 2023, up 9% from Q3 2023 and up 14% year-over-year − Consists of a $4.5 billion securities portfolio and a $1.2 billion whole loan portfolio(1) Record quarter of whole loan settlem
Slide 15: MSR | Business Update
MSR | Business Update Annaly was a top five buyer of MSR in 2023, with bulk and flow sourcing capabilities, and Annaly continued to expand its footprint throughout the space Strategic Approach Market Trends MSR portfolio complements Annaly’s Agency MBS strategy by offering Bulk activity remained
Slide 16: MSR | Portfolio Summary
MSR | Portfolio Summary Annaly’s MSR portfolio grew by ~$400 million in the fourth quarter and nearly $900 million through 2023 Annaly MSR Portfolio: $2.7 billion(1) in assets at the end of Q4 2023, an 18% increase quarter-over-quarter and a 50% increase year-over-year − Purchased over $500 millio
Slide 17: Financial Highlights and Trends
Financial Highlights and Trends
Slide 18: Financial Highlights and Trends
Financial Highlights and Trends Unaudited For the quarters ended 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 (1) GAAP net income (loss) per average common share ($0.88) ($1.21) $0.27 ($1.79) ($1.96) (1) Earnings available for distribution per average common share* $0.68 $0.66 $0.72 $0.81 $0.
Slide 19: Financial Highlights and Trends (cont'd)
Financial Highlights and Trends (cont’d) Unaudited (dollars in thousands) For the quarters ended 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 Agency mortgage-backed securities $66,308,788 $66,591,536 $67,764,264 $65,623,534 $62,274,895 Residential credit risk transfer securities 974,059 982,9
Slide 20: Quarter-Over-Quarter Interest Rate & MBS Spread Sensitivity
Quarter-Over-Quarter Interest Rate & MBS Spread Sensitivity Unaudited The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of December 31, 2023 and September 30, 2023, respectively The interest rate sensitivity reflects instantaneous parallel shifts in rates
Slide 21: Appendix | Non-GAAP Reconciliations
Appendix | Non-GAAP Reconciliations
Slide 22: Non-GAAP Reconciliations
Non-GAAP Reconciliations Earnings Available for Distribution (“EAD”), 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) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding amort
Slide 23: 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 subs
Slide 24: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited (dollars in thousands) For the quarters ended 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 Premium Amortization Reconciliation Premium amortization expense $51,247 $24,272 $33,105 $56,534 $38,829 Less: PAA cost (benefit) 19,148 (6,062) (11,923) 491
Slide 25: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited (dollars in thousands) For the quarters ended 12/31/2023 9/30/2023 6/30/2023 3/31/2023 12/31/2022 Economic leverage ratio reconciliation Repurchase agreements $62,201,543 $64,693,821 $61,637,600 $60,993,018 $59,512,597 Other secured financing 500,000 500,0
Slide 26: Glossary and Endnotes
Glossary and Endnotes ANNALY Zz
Slide 27: Glossary
Glossary ARC: Refers to Annaly Residential Credit Group PCE Refers to Personal Consumption Expenditure CRT: Refers to Credit Risk Transfer Securities Re-Performing Loan A type of loan in which payments were previously (“RPL”): delinquent by at least 90 days but have resumed EAD: Refers to Earnings A
Slide 28: Endnotes
Endnotes Page 3 Page 6 1. Comprised of $5.2bn of unencumbered assets, which represents Annaly’s excess liquidity and defined as assets 1. Levered return assumptions are for illustrative purposes only and attempt to represent current market asset that have not been pledged or securitized (generally i
Slide 29: Endnotes (cont'd)
Endnotes (cont’d) Page 14 1. Excludes participations issued totaling $1.1bn. Non-GAAP Reconciliations 2. Whole loans settled include loans from a joint venture with a sovereign wealth fund. Page 23 3. Includes a $414mm and $496mm whole loan securitization that priced in January 2024 and a $412mm who
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