Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Debt Investor Presentation (October 2023)
52 slides from Annaly Capital Management's debt investor presentation, Oct 10, 2023
Slide 1: Onslow Bay Financial LLC
ANNALY Onslow Bay Financial LLC October 2023
Slide 2: Disclaimer and Forward-Looking Statements
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. This presentation is provided for investors in Annaly for informational purposes o
Slide 3: Annaly Capital Management Overview
Annaly Capital Management Overview ANNALY
Slide 4: Annaly investment strategies: Agency, MSR and Residential Credit
Invests in Agency MBS collateralized by Invests in Mortgage Servicing Rights, Invests in Non-Agency residential residential mortgages, which are which provide the right to service mortgage assets within the securitized guaranteed by Fannie Mae, Freddie Mac residential loans in exchange for a portion
Slide 5: Agency portfolio of high quality and liquid securities
▪ Annaly’s Agency portfolio is made up of high quality and liquid ▪ During the second quarter, Agency MBS spreads were volatile given securities, predominately specified pools, TBAs and derivatives FDIC sales of regional bank holdings, debt ceiling negotiations and uncertainty around central bank ra
Slide 6: MSR portfolio complements Agency MBS strategy
▪ MSR portfolio complements Annaly’s Agency MBS strategy by offering ▪ MSR trading volumes remained robust in the second quarter as high an attractive yield while providing a hedge to mortgage basis volatility levels of supply were well absorbed by the market and slower discount prepayment speeds −
Slide 7: Programmatic securitization sponsor of residential whole loans
▪ Programmatic securitization sponsor of new origination, residential ▪ The Non-Agency RMBS market experienced spread tightening in the whole loans with 47 deals comprising over $18.5 billion of issuance second quarter as the credit outlook improved, the sector experienced priced since the beginning
Slide 8: 25th anniversary as a public company and ESG commitment
In 2022, Annaly celebrated its 25th anniversary as a public company, representing twenty-five years of leading with purpose. Since our founding, Annaly has recognized that a commitment to ESG principles is an important American homes financed(1) factor in delivering value and superior returns to our
Slide 9: Onslow Bay Financial LLC
Onslow Bay Financial LLC ANNALY
Slide 10: Onslow Bay Financial LLC overview
▪ Onslow Bay Financial LLC (“Onslow Bay”) is a wholly owned subsidiary of Annaly Capital Management Inc (“Annaly”) ▪ Onslow Bay Financial is the entity through which Annaly purchases loans, issues securitizations (OBX shelf) and owns mortgage servicing rights (“MSR”) − Onslow Bay is a Fannie Mae app
Slide 11: Securitization as asset generation strategy
▪ Annaly utilizes the securitization market as an asset generation strategy and to achieve long-term, nonrecourse, non-mark-to-market financing ▪ The strategy generates investments tailored to our desired credit preferences with control over diligence, origination partners, servicers and loss mitiga
Slide 12: Non-Agency issuance league tables
1 JPMorgan Chase $14,417.5 1 Annaly Capital/Onslow Bay $10,057.4 2 Annaly Capital/Onslow Bay $10,057.4 2 Invictus Capital Partners $9,451.8 3 Invictus Capital Partners $9,451.8 3 Blue River Mortgage/Angelo Gordon $5,178.7 4 Goldman Sachs $8,942.5 4 Angel Oak $4,730.8 5 Blue River Mortgage/Angelo Gor
Slide 13: Mortgage servicer and originator rankings
1 Chase $951.2 1 Lakeview Loan Servicing $584.8 2 Wells Fargo & Company $876.1 2 PennyMac Loan Services $576.5 3 Lakeview Loan Servicing $584.8 3 NewRez/Caliber $540.8 4 PennyMac Loan Services $576.5 4 Rocket Mortgage $462.0 5 NewRez/Caliber $540.8 5 Freedom Mortgage Corp. $459.7 6 Rocket Mortgage $
Slide 14: ESG disclosures on securitizations
▪ Starting in 2022, Onslow Bay started providing ESG disclosures on its securitizations based upon guidance from the Sustainability Accounting Standards Board (“SASB”) Accounting Metrics under the Mortgage Finance Accounting Standard − SASB recommends disclosure of financial sustainability informati
Slide 15: Onslow Bay program announcements
Onslow Bay Financial Oo Onslow Bay Financial 1,228 followers Effective August 7, Onslow Bay is pleased to announce the addition of our Closed End Second Lien Program ("CES"). Please reach out to Onslow Bay is pleased to announce the addition of our Closed End Second Lien Program to our exis robust o
Slide 16: Onslow Bay website and LinkedIn
www.onslowbayfinancial.com ▪ The Onslow Bay website provides an overview of the whole loan programs offered, as well as a matrix comparing underwriting criteria − A quick quote tool allows users to input terms of a loan and receive indicative guidance on what programs the loan would fit ▪ Visit the
Slide 17: Onslow Bay Strategy & Performance (OBX)
Onslow Bay Strategy & Performance (““OBX”) ANNALY
Slide 18: Correspondent channel has achieved scale
($ in millions) ▪ Annaly Residential Credit Group’s $9,686 correspondent channel, launched in April 2021, has achieved scale with 180+ $7,452 Record counterparties onboarded Quarterly Loan ▪ Correspondent channel volumes remain Lock Volume $5,949 robust with $4.7 billion of locks in YTD $4,952 2023
Slide 19: Sourcing loans that meet credit preferences
▪ Onslow Bay proactively sources loans that meet our desired credit preferences through multiple levers: guidelines, pricing, risk tolerance and the type of originators we onboard ▪ Onslow Bay, despite industry wide declining mortgage origination volumes, has been able to maintain both volumes and c
Slide 20: Credit remains strong after tightening
▪ Onslow Bay credit remains strong as a result of credit tightening throughout 2022 and 2023 10% ▪ After a series of guideline credit restrictions, Onslow Bay recently allowed for modest expansions to better align with the market ▪ Despite the recent guideline expansion, approximately ~10% of loans
Slide 21: Issuer credit comparison and delinquency
Issuance 7,680 12,973 7,233 6,405 2,332 PRKCM 5 1,618 1.07% OBX 17 5,959 1.11% WA FICO 747 735 737 740 729 EFMT 11 2,477 1.35% WA LTV 70.2 71.0 72.3 72.1 70.3 NRZT 12 2,066 1.39% FICO < 700 13.5% 21.7% 21.1% 18.4% 24.9% ARRW 7 1,605 1.61% FICO < 680 6.4% 13.0% 12.4% 8.3% 15.1% GCAT 18 4,454 1.61% SG
Slide 22: Portfolio collateral characteristics
Expanded Prime 78.0% 8.35 749 73 19.3% 15.9% 30.3% 4.5% 10.3% 14.4% 5.3% 0.2% DSCR 22.0% 8.45 752 64 100.0% 33.5% 19.1% 3.3% 7.6% 0.0% 0.0% 0.0% Agency 0.0% 7.21 779 53 100.0% 9.9% 90.1% 0.0% 0.0% 0.0% 0.0% 0.0% Total 100.0% 8.37 750 71 36.9% 19.7% 28.0% 4.3% 9.7% 11.3% 4.2% 0.2% Primary Residence 5
Slide 23: OBX deal performance summary
OBX 2018-1 3/29/2018 $326,553,472 $61,682,163 0.1889 10% Clean Up OBX 2018-EXP1 8/1/2018 $383,451,234 $62,386,228 0.1627 10% Call, 5% Call OBX 2018-EXP2 10/31/2018 $384,027,255 $71,600,407 0.1864 10% Call, 5% Call OBX 2019-INV1 1/31/2019 $393,961,409 $71,648,330 0.1819 10% Call, 5% Call OBX 2019-EXP
Slide 24: Whole loan acquisition strategy and governance
▪ Onslow Bay’s whole loan acquisition strategy and proactive portfolio management is guided by strong internal governance processes and credit discipline through meticulous asset selection, surveillance, oversight and risk management ▪ Onslow Bay & Annaly, as Sponsor and risk retainer respectively,
Slide 25: Originator and counterparty requirements
▪ Origination partners offer Onslow Bay a pool of closed, ▪ Originators lock loans "best efforts" in accordance with funded whole loans underwritten to their own underwriting Onslow Bay’s published guidelines and pricing. Loans with guidelines. Onslow Bay may place credit or income delivered credit
Slide 26: Onslow Bay Securitization Program
Onslow Bay Securitization Program ANNALY
Slide 27: Programmatic issuer of Non-QM/Expanded Prime securities
▪ Onslow is a programmatic issuer of Non-QM/Expanded Prime Securities while also being opportunistic in the Agency Eligible Investor market ▪ Onslow issues Prime Jumbo securitizations through proprietary partnerships ▪ Onslow Bay has historically securitized using either the Modified Sequential or S
Slide 28: OBX 2023-NQM deal summary
OBX 2023-NQM8 OBX 2023-NQM7 OBX 2023-NQM6 OBX 2023-NQM5 OBX 2023-NQM4 OBX 2023-NQM3 OBX 2023-NQM2 OBX 2023-NQM1 Issue Date Oct-23 Sep-23 Jul-23 Jun-23 May-23 Apr-23 Feb-23 Jan-23 Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded
Slide 29: OBX 2022-NQM deal summary
OBX 2022-NQM9 OBX 2022-NQM8 OBX 2022-NQM7 OBX 2022-NQM6 OBX 2022-NQM5 OBX 2022-NQM4 OBX 2022-NQM3 OBX 2022-NQM2 OBX 2022-NQM1 Issue Date Dec-22 Sep-22 Aug-22 Jun-22 Jun-22 May-22 Mar-22 Feb-22 Jan-22 Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Prime/ Expanded Expanded Ex
Slide 30: OBX 2018-2021 NQM and EXP deal summary
OBX 2021-NQM4 OBX 2021-NQM3 OBX 2021-NQM2 OBX 2021-NQM1 OBX 2020-EXP3 OBX 2020-EXP2 OBX 2020-EXP1 OBX 2019-EXP3 OBX 2019-EXP2 OBX 2019-EXP1 OBX 2018-EXP2 OBX 2018-EXP1 Issue Date Nov-21 Aug-21 Jun-21 Mar-21 Sep-20 Jul-20 Feb-20 Oct-19 Jul-19 Apr-19 Oct-18 Aug-18 Expanded Expanded Expanded Expanded E
Slide 31: OBX Agency Investor and Prime Jumbo deals 2022-2023
OBX 2023-INV1 OBX 2023-J1 OBX 2022-INV5 OBX 2022-J2 OBX 2022-INV4 OBX 2022-J1 OBX 2022-INV3 OBX 2022-INV2 OBX 2022-INV1 Issue Date May-23 Feb-23 Nov-22 Jul-22 May-22 May-22 Mar-22 Feb-22 Jan-22 Agency Agency Agency Agency Agency Collateral Type Agency Investor Prime Jumbo Prime Jumbo Prime Jumbo Inv
Slide 32: OBX Agency Investor and Prime Jumbo deals 2019-2021
OBX 2021-INV3 OBX 2021-INV2 OBX 2021-J3 OBX 2021-INV1 OBX 2021-J2 OBX 2021-J1 OBX 2020-INV1 OBX 2019-INV2 OBX 2019-INV1 Issue Date Nov-21 Oct-21 Oct-21 Sep-21 Jul-21 Apr-21 Jan-20 Jun-19 Jan-19 Collateral Type Agency Investor Agency Investor Prime Jumbo Agency Investor Prime Jumbo Prime Jumbo Agency
Slide 33: Onslow Bay Acquisitions: Correspondent Channel
Onslow Bay Acquisitions: Correspondent Channel ANNALY
Slide 34: Correspondent program guidelines
Min Loan Amt $150k $150k $125k $250k $150k $70k $150k Max Loan Amt $3.5mm $3.0mm $2.0mm $2.0mm $1.0mm $500k $2.25mm Housing Event >=4+ Years >=2+ Years Housing Event 3+ Years 4+ Years 4+ Years 4+ Years Per FNMA/FHMLC Mortgage History 0x30x12 2x30x12, 1x60x24 0x30x12 0x30x12 0x30x12 0X30X12 Per FNMA/
Slide 35: Expanded Prime LTV matrix
<= $1.0mm 90 85 85 80 80 75 <= $1.5mm 85 85(1) 85(1) 75 75 75 <= $2.0mm 85 80 80 75 70 70 740 <= $2.5mm 80 75 75 70 65 65 <= $3.0mm 75 70 70 65 60 60 <= $3.5mm 65 60 N/A N/A N/A N/A <= $1.0mm 85 85 85 75 75 75 <= $1.5mm 85 85(1) 85(1) 75 75 75 <= $2.0mm 80 80 80 70 70 70 720 <= $2.5mm 80 75 75 70 65
Slide 36: Sharp program LTV matrices
<= $1.0mm 90 85 85 75 75 75 <= $1.0mm 85 80 80 75 70 70 <= $1.5mm 85 80 80 75 70 70 740 <= $1.5mm 80 75 75 70 65 65 740 <= $2.0mm 80 75 75 70 70 70 <= $2.5mm 75 75 75 65 65 65 <= $2.0mm 75 N/A N/A N/A N/A N/A <= $3.0mm 70 70 70 60 60 60 <= $1.0mm 85 80 80 75 70 70 <= $1.0mm 85 80 80 75 75 75 720 <=
Slide 37: Expanded Prime Plus LTV matrix
<= $1.0mm 80 80 75 75 75 70 75 75 65 740 <= $1.5mm 75 75 70 70 70 65 70 70 60 <= $2.0mm 75 75 60 65 65 60 65 65 60 <= $1.0mm 80 80 75 75 75 70 70 70 60 720 <= $1.5mm 75 75 70 70 70 65 65 65 60 <= $2.0mm 75 75 60 65 65 N/A N/A N/A N/A <= $1.0mm 75 75 70 75 75 65 65 65 60 700 <= $1.5mm 75 75 70 70 70
Slide 38: Program LTV matrix
<= $1.0mm 75 75 70 740 <= $1.5mm 75 75 70 <= $2.0mm 75 75 60 <= $1.0mm 75 75 70 720 <= $1.5mm 75 75 70 <= $2.0mm 75 75 60 <= $1.0mm 75 75 70 700 <= $1.5mm 75 75 70 <= $2.0mm 70 70 60 <= $1.0mm 75 75 65 680 <= $1.5mm 70 70 60 <= $2.0mm 65 65 N/A $250,000 – $2,000,000 6 Months Payment History 0x30x12
Slide 39: DSCR Plus guidelines
680+ FICO <= $1.0mm 65 65 60 65 65 60 Foreign Credit <= $1.0mm 65 65 60 65 65 60 Product Type 3/6 ARM, 5/6 ARM, 7/6 ARM, 10/6 ARM, 15 Yr. Fixed, 30 Yr. Fixed Loan Amount $1.0mm max; $150k min Occupancy 2nd Home & Investment Max DTI 45% DSCR Calculation Gross Rent/PITIA Min DSCR 1.00 Housing Event Se
Slide 40: Closed End Second Lien guidelines
$70–$250k 740 85 Owner Occupied 700 80 $70–$500k 680 75 740 80 2nd Home $70–$500k 680 75 740 75 Investor $70–$500k 700 70 Product Type 10 Year Fixed, 15 Year Fixed, 20 Year Fixed, 30 Year Loan Amount $70k Min, $500k Max Occupancy Primary Residence, 2nd Home, Investment Max LTV/Min FICO 85%/680 Max D
Slide 41: Agency Investor guidelines
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% 700 75 50% Agency Limit 2-4 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) Agency Limit 2–4 Unit $150,000 700 70 50% (#Units / State) $1 Above Agency 700 80 5
Slide 42: Prime Jumbo guidelines
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) 700 80 50% 1 Unit $1 Above Agency Jumbo Balance $2,250,000 680 75 50% 660 70 50% 1 Unit $1 Above Agency Jumbo Balance $2,250,000 700 75 50% Note: Onslow Bay does al
Slide 43: Onslow Bay Acquisitions: Bulk Purchases
Onslow Bay Acquisitions: Bulk Purchases ANNALY
Slide 44: Bulk purchase program guidelines
Max Loan Amt $3.5mm $3.0mm $2.0mm $2.0mm $1.0mm $500k $2.0mm Housing Event >=4+ Years >=2+ Years Housing Event 3+ Years 4+ Years 4+ Years 4+ Years Per FNMA/FHMLC Mortgage History 0x30x12 2x30x12, 1x60x24 0x30x12 0x30x12 0x30x12 0X30X12 Per FNMA/FHMLC 3/6 ARM, 5/6 ARM, 7/6 ARM, 3/6 ARM, 5/6 ARM, 7/6
Slide 45: Bulk Expanded Prime LTV matrix
<= $1.0mm 90 90 90 85 85 80 <= $1.5mm 90 90 90 80 80 80 <= $2.0mm 90 85(1) 85(1) 80 75 75 740 <= $2.5mm 85 80 80 75 70 70 <= $3.0mm 80 75 75 70 65 65 <= $3.5mm 70 65 N/A N/A N/A N/A <= $1.0mm 70 65 N/A N/A N/A N/A <= $1.5mm 90 90(1) 90(1) 80 80 80 <= $2.0mm 90 90 90 80 80 80 720 <= $2.5mm 85 85 85 7
Slide 46: Bulk Sharp program LTV matrices
<= $1.0mm 90 90 90 80 80 80 <= $1.0mm 90 85 85 80 75 75 <= $1.5mm 90 85 85 80 75 75 740 <= $1.5mm 85 80 80 75 70 70 740 <= $2.0mm 85 80 80 75 75 75 <= $2.5mm 80 80 80 70 70 70 <= $2.0mm 80 N/A N/A N/A N/A N/A <= $3.0mm 75 75 75 65 65 65 <= $1.0mm 90 85 85 80 75 75 <= $1.0mm 90 85 85 80 80 80 720 <=
Slide 47: Bulk Expanded Prime Plus LTV matrix
<= $1.0mm 85 85 80 80 80 75 80 80 70 740 <= $1.5mm 80 80 75 75 75 70 75 75 65 <= $2.0mm 80 80 65 70 70 65 70 70 65 <= $1.0mm 85 85 80 80 80 75 75 75 65 720 <= $1.5mm 80 80 75 75 75 70 70 70 65 <= $2.0mm 80 80 65 70 70 N/A N/A N/A N/A <= $1.0mm 80 80 75 80 80 70 70 70 65 700 <= $1.5mm 80 80 75 75 75
Slide 48: Bulk program LTV matrix
<= $1.0mm 80 80 75 740 <= $1.5mm 80 80 75 <= $2.0mm 80 80 65 <= $1.0mm 80 80 75 720 <= $1.5mm 80 80 75 <= $2.0mm 80 80 65 <= $1.0mm 80 80 75 700 <= $1.5mm 80 80 75 <= $2.0mm 75 75 65 <= $1.0mm 80 80 70 680 <= $1.5mm 75 75 65 <= $2.0mm 70 70 N/A Payment History 0x30x12 Housing Event Seasoning 4+ Year
Slide 49: Bulk foreign credit guidelines
680+ FICO <= $1.0mm 65 65 65 65 65 65 Foreign Credit <= $1.0mm 65 65 65 65 65 65 Housing Event Seasoning 4+ Years Note: Onslow Bay does allow for exceptions to underwriting guidelines as long as the exception is based upon reasonable and documented compensating factors. 49
Slide 50: Bulk Closed End Second Lien guidelines
$70–$250k 740 85 Owner Occupied 700 85 $70–$500k 680 80 740 85 2nd Home $70–$500k 680 80 740 80 Investor $70–$500k 700 75 $70,000 - $500,000 Not Required Payment History 0x30x12 Not Required Housing Event Seasoning 4+ Years Additional Financed Properties Note: Onslow Bay does allow for exceptions to
Slide 51: Bulk Agency Investor guidelines
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% 700 75 50% Agency Limit 2-4 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) Agency Limit 2–4 Unit $150,000 700 70 50% (#Units / State) 700 80 50% $1 Above Agen
Slide 52: Bulk Prime Jumbo guidelines
700 80 50% Agency Limit 1 Unit $150,000 680 75 50% (#Units / State) 660 70 50% Agency Limit 1 Unit $150,000 700 75 50% (#Units / State) 700 80 50% 1 Unit $1 Above Agency Jumbo Balance $2,250,000 680 75 50% 660 70 50% 1 Unit $1 Above Agency Jumbo Balance $2,250,000 700 75 50% Note: Onslow Bay does al
Annaly Capital Management — Debt Investor Presentation (October 2023) on 6ix