Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q2 2022 Earnings Presentation
29 slides from Annaly Capital Management's earnings presentation, Jul 28, 2022
Slide 1: Second Quarter 2022 Investor Presentation
Second Quarter 2022 Investor Presentation July 27, 2022
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 Second Quarte
Slide 3: Recent Achievements and Performance Highlights
Recent Achievements and Performance Highlights Annaly produced strong earnings and robust dividend coverage in the second quarter despite sustained market volatility Earnings available for distribution* of $0.30 per average common share for the quarter, up $0.02 from the prior quarter with dividen
Slide 4: Second Quarter 2022 Financial Highlights
Second Quarter 2022 Financial Highlights Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Earnings Available 2.20% GAAP for Distribution* $0.22 2.04% Earnings & Book Value $0.55 | $0.30 Book Value per Share Dividend Yield(1) $5.90 14.9% Q1 2022 Q2 2022 Total Portfolio(2) Capital
Slide 5: Annaly Investment Strategies
Annaly Investment Strategies Total Portfolio: $82.3 billion(1) | Total Shareholders’ Equity: $11.0 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: Market Environment & Annaly Positioning
Market Environment & Annaly Positioning
Slide 7: The Macroeconomic State of Affairs
The Macroeconomic State of Affairs The economy is showing signs of a slowdown in light of meaningfully higher interest rates, yet more tightening is likely until inflation slows Q2 2022 Market and Economic Developments Federal Reserve is delivering the fastest series of rate hikes in a generation… Q
Slide 8: The State of the Housing Market
The State of the Housing Market Declining affordability is driving a slowdown in housing activity, but structural supply/demand imbalance suggests a moderation in home price appreciation rather than pronounced declines Outlook for the Housing Market Housing activity is slowing sharply from the eleva
Slide 9: Annaly's Established Presence Throughout Housing Finance
Annaly’s Established Presence Throughout Housing Finance Onslow Bay, Annaly’s wholly-owned subsidiary, is a leader across the Residential Credit and MSR landscape, efficiently building on momentum from its recently-launched residential whole loan correspondent channel and MSR platform Residential Cr
Slide 10: Annaly Publishes Third Corporate Responsibility Report
Annaly Publishes Third Corporate Responsibility Report Annaly’s 2021 Corporate Responsibility Report demonstrates its continued focus on setting and measuring progress on ESG goals and commitment to providing increased disclosure and transparency Enhanced the Company’s executive compensation progr
Slide 11: Business Update
Business Update ANNALY Zz
Slide 12: Agency | Business Update
Agency | Business Update While Agency MBS performance faced persistent headwinds during the quarter, relative value returned to the market via performance of specified pools, which represent the majority of Annaly’s portfolio Strategic Approach Market Trends Annaly’s Agency Portfolio is made up of
Slide 13: Agency | Portfolio Summary
Agency | Portfolio Summary Annaly Agency Portfolio: $74.9 billion in assets at the end of Q2 2022, a modest decrease of 2% compared to Q1 2022 Consistent with the prior quarter, Annaly’s portfolio activity remained focused on shifting up in coupon to take advantage of improved carry and wider sp
Slide 14: MSR | Business Update
MSR | Business Update As the fourth largest MSR purchaser during the first half of 2022, Annaly continues to gain market share in the sector Strategic Approach Market Trends MSR portfolio is complementary to Annaly’s Agency MBS strategy MSR bulk volumes remained elevated during the quarter and t
Slide 15: MSR | Portfolio Summary
MSR | Portfolio Summary Annaly grew its MSR portfolio by $502 million during the quarter and over $1 billion year-to-date Annaly MSR Portfolio: $1.7 billion(1) in assets at the end of Q2 2022, an increase of 41% compared to Q1 2022 − Purchased $450 million of MSR during the second quarter − Portfo
Slide 16: Residential Credit | Business Update
Residential Credit | Business Update Annaly Residential Credit Group continues to generate substantial activity through its correspondent channel and securitization platform and the portfolio is well-positioned to withstand the anticipated slowdown in the housing market Strategic Approach Market Tre
Slide 17: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary Annaly Residential Credit Portfolio: $4.8 billion in assets at the end of Q2 2022, an increase of 10% compared to Q1 2022 driven primarily by securities purchases, in particular NPL/RPL and CRT securities − The composition consists of a $4.0 billion securitie
Slide 18: Financial Highlights and Trends
Financial Highlights and Trends
Slide 19: Financial Highlights and Trends
Financial Highlights and Trends Unaudited For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 (1) GAAP net income (loss) per average common share $0.55 $1.37 $0.27 $0.34 ($0.23) Earnings available for distribution per average common share*(1) $0.30 $0.28 $0.28 $0.28 $0.30 Divid
Slide 20: Financial Highlights and Trends (cont'd)
Financial Highlights and Trends (cont’d) Unaudited (dollars in thousands) For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Agency mortgage-backed securities $55,593,336 $57,787,141 $60,525,605 $62,818,079 $66,468,519 Residential credit risk transfer securities 965,714 845,80
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 depre
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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Premium Amortization Reconciliation Premium amortization expense ($4,869) ($25,353) $219,172 $233,429 $320,108 Less: PAA cost (benefit) (127,521) (179,516) 57,
Slide 25: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited (dollars in thousands) For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Economic leverage ratio reconciliation Repurchase agreements $51,364,097 $52,626,503 $54,769,643 $55,475,420 $60,221,067 Other secured financing - 914,255 903,
Slide 26: Glossary and Endnotes
Glossary and Endnotes ANNALY Zz
Slide 27: Glossary
Glossary ARC: Refers to Annaly Residential Credit Group Non-QM: Refers to a Non-Qualified Mortgage CRT: Refers to Credit Risk Transfer Securities OBX: Refers to Onslow Bay Securities EAD: Refers to Earnings Available for Distribution Re-Performing Loan A type of loan in which payments were previousl
Slide 28: Endnotes
Endnotes Page 3 Page 5 1. Issuer ranking data from Inside Nonconforming Markets for the first half of 2022. 1. Total portfolio represents Annaly’s investments that are on-balance sheet as well as investments that are 2. Represents a $250mm committed credit facility and a $250mm accordion for total c
Slide 29: Endnotes (cont'd)
Endnotes (cont’d) Page 15 1. Includes limited partnership interests in two MSR funds, one of which is reported in Other Assets, and Non-GAAP Reconciliations unsettled commitments of $190mm. MSR commitments represent the market value of deals where Page 23 Annaly has executed a letter of intent. Ther
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