Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q3 2021 Earnings Presentation
29 slides from Annaly Capital Management's earnings presentation, Oct 28, 2021
Slide 1: Third Quarter 2021 Investor Presentation
ANNALY Third Quarter 2021 Investor Presentation October 27, 2021
Slide 2: 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 and is being furnished in connection with Annaly’s Third Quarter 2021 earnings rele
Slide 3: Third quarter 2021 highlights
▪ Earnings available for distribution* of $0.28 per average common share for the quarter, down $0.02 quarter-over-quarter with dividend coverage of +125% ▪ Book value per common share of $8.39, up $0.02 quarter-over-quarter ▪ Economic return and tangible economic return of 2.9% for the third quarter
Slide 4: Quarterly financial and portfolio metrics
Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Earnings Available GAAP for Distribution* 2.09% 2.04% Book Value per Share Dividend Yield(1) Q2 2021 Q3 2021 Total Portfolio(2) Capital Allocation(3) Average Yield on Interest Earning Assets (ex. PAA)* 2.76% ARC 2.63% Agency Credit
Slide 5: Total portfolio and capital allocation
$94.2 billion(1) ```` $13.7 billion $87.1 billion $1.9 billion $9.6 billion $1.2 billion Countercyclical / Defensive Non-Cyclical / Defensive $4.3 billion $2.9 billion Cyclical / Growth Source: Company filings. Financial data as of September 30, 2021. Detailed endnotes and a glossary of defined term
Slide 6: Market Environment & Annaly Positioning
Market Environment & Annaly Positioning ANNALY
Slide 7: U.S. economy lost recovery momentum in Q3
Number of Unemployed as Share of Job Openings, Ratio(1) ▪ The U.S. economy lost recovery momentum in Q3 7 amid an increase in U.S. COVID cases, ongoing 6 supply chain pressures and labor market frictions. 5 Meanwhile, inflation readings remain elevated 4 Sep’21 Estimate(2): ▪ The labor market remain
Slide 8: Annaly activity since the beginning of 2021
OBX 2021-J2 OBX 2021-NQM3 Prime Jumbo | Jul 2021 Non-QM | Aug 2021 At-the-Market Common Equity OBX 2021-INV1 OBX 2021-J3 Inaugural U.S. Middle Market Lending Offerings(1) Agency Investor | Sep 2021 Prime Jumbo | Oct 2021 Fund featuring Annaly co-investment, comprised of $2.3 billion in MML Strategy
Slide 9: Business Update
Business Update ANNALY
Slide 10: Agency portfolio overview and market commentary
▪ Annaly’s Agency Portfolio is made up of high quality and liquid ▪ Agency MBS performed well during the quarter as a result of clarity securities, predominately specified pools, TBAs and derivatives from the Fed around the taper and continued demand for yield ▪ Portfolio benefits from in-house prop
Slide 11: Annaly Agency Portfolio: $87.1 billion in assets
▪ Annaly Agency Portfolio: $87.1 billion in assets at the end of Q3 2021, an increase of 3% compared to Q2 2021 ▪ Annaly’s Agency MBS portfolio increased during the quarter as we redeployed capital from the sale of the Commercial Real Estate Business − Primarily added TBAs (2.0% - 3.0%) given contin
Slide 12: Annaly MSR Portfolio: $575 million in assets
▪ Annaly MSR Portfolio: $575 million in assets at the end of Q3 2021(1), an increase of 41% compared to Q2 2021 ▪ MSR investment is complementary to Annaly’s Agency MBS strategy as it offers attractive unlevered yields and provides a mechanism to hedge mortgage basis risk from basis volatility and p
Slide 13: Residential credit securitization program and housing market
▪ Programmatic securitization sponsor of new origination, residential ▪ Housing market fundamentals continue to display strength with the whole loans with twenty deals comprising $7.9 billion of issuance since Case-Shiller and FHFA home price indices posting record gains, both the beginning of 2018
Slide 14: Annaly Residential Credit Portfolio: $4.3 billion in assets
▪ Annaly Residential Credit Portfolio: $4.3 billion in assets at the end of Q3 2021, an increase of 3% compared to Q2 2021 − The composition consists of a $3.2 billion securities portfolio and $1.1 billion whole loan portfolio − Economic portfolio is now larger than it was pre-COVID, up over 70% sin
Slide 15: Middle market lending strategy and portfolio statistics
▪ Execute on a disciplined credit focused investment strategy comprised predominantly of 1st and 2nd lien loans ▪ Maintain strong relationships with top U.S. based private equity firms to generate repeat deal flow 29 48 $41mm Private Equity Portfolio Borrowers Avg. Investment ▪ Experienced investmen
Slide 16: Middle Market Lending Strategy: $2.3 billion in assets
▪ Middle Market Lending Strategy: $2.3 billion in assets at the end of Q3 2021, comprised of $1.9 billion(1) at AMML and $0.4bn at ACOM Fund − AMML closed three deals in Q3 2021 totaling ~$150 million in commitments while one borrower repaid − ACOM Fund provides additional capital to enable growth i
Slide 17: Annaly CMBX & CMBS Portfolio: $757 million in assets
▪ Annaly CMBX & CMBS Portfolio: $757 million in assets at the end of Q3 2021, an increase of 13% compared to Q2 2021 ▪ Q3 2021 was characterized by increased new issue and secondary supply that was met with robust investor demand − At the end of the quarter and heading into Q4 2021, macro headwinds
Slide 18: Financial Highlights and Trends
Financial Highlights and Trends ANNALY
Slide 19: Quarterly financial summary (unaudited)
Unaudited For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 GAAP net income (loss) per average common share(1) $0.34 ($0.23) $1.23 $0.60 $0.70 Earnings available for distribution per average common share* (1) $0.28 $0.30 $0.29 $0.30 $0.32 Dividends declared per common share $
Slide 20: Investment portfolio detail (unaudited)
Unaudited, dollars in thousands For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Agency mortgage-backed securities $62,818,079 $66,468,519 $69,637,229 $74,067,059 $74,915,167 Residential credit risk transfer securities 787,235 827,328 930,983 532,403 411,538 Non-Agency mortg
Slide 21: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations ANNALY
Slide 22: Earnings Available for Distribution definition
Beginning with the quarter ended June 30, 2021, the Company has relabeled “Core Earnings (excluding PAA)” as “Earnings Available for Distribution” (“EAD”). The definition of Earnings Available for Distribution is identical to the definition of Core Earnings (excluding PAA) from prior reporting perio
Slide 23: GAAP net income to EAD reconciliation
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 substitute for, or superior to, financia
Slide 24: Premium amortization and interest reconciliations
Unaudited, dollars in thousands For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Premium Amortization Reconciliation Premium amortization expense $233,429 $320,108 ($11,891) $239,118 $248,718 Less: PAA cost (benefit) 60,726 153,607 (214,570) 39,101 33,879 Premium amortizatio
Slide 25: Economic leverage ratio reconciliation
Unaudited, dollars in thousands For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Economic leverage ratio reconciliation Repurchase agreements $55,475,420 $60,221,067 $61,202,477 $64,825,239 $64,633,447 Other secured financing 729,555 909,655 922,605 917,876 861,373 Debt issu
Slide 26: Glossary and Endnotes
Glossary and Endnotes ANNALY
Slide 27: Glossary of defined terms
ACOM: Refers to Annaly Credit Opportunities Management MSR: Refers to Mortgage Servicing Rights AMML: Refers to Annaly Middle Market Lending Group NIM: Refers to Net Interest Margin ARC: Refers to Annaly Residential Credit Group Non-QM: Refers to a Non-Qualified Mortgage CRE CLO: Refers to Commercia
Slide 28: Endnotes
Page 3 Page 5 (cont’d) 1. Includes a $382mm residential whole loan securitization in July 2021, a $356mm residential whole loan 2. Represents the capital allocation for each of the investment strategies and is calculated as the difference securitization in August 2021, a $320mm residential whole loa
Slide 29: Endnotes and non-GAAP reconciliations
Page 15 1. Represents current AMML portfolio data as of September 30, 2021 and does not include ACOM assets. Non-GAAP Reconciliations 2. Average Investment Size based on AMML principal balance outstanding as of September 30, 2021. Page 23 3. Represents leverage rather than economic leverage and incl
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