Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q3 2017 Earnings Presentation
30 slides from Annaly Capital Management's earnings presentation, Nov 1, 2017
Slide 1: Third Quarter 2017 Investor Presentation
Third Quarter 2017 Investor Presentation November 1, 2017
Slide 2: Forward-looking statements
This presentation, other written or oral communications, and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future peri
Slide 3: Overview
Overview ANNALY
Slide 4: Annaly at a glance
Source: Bloomberg, Company filings. Financial data as of September 30, 2017. Market data as of October 25, 2017.Agency assets include to be announced (“TBA”) purchase contracts (market value) and MSRs. ACREG assets are exclusive of consolidated variable interest entities (“VIEs”) associated with B-P
Slide 5: 2017 capital raised through common and preferred offerings
In 2017, Annaly successfully raised over $2.4 billion through two separate overnight common stock offerings and a marketed preferred stock offering Source: Bloomberg and Dealogic. Note: All comparative data as of respective pricing dates and all market data as of launch dates (unless otherwise indic
Slide 6: Constructive Investment Environment Persists
Constructive Investment Environment Persists We expect the immediate market impact of Fed tapering to be minimal and, over time, we believe the Fed’s exit from the market will continue to result in attractive investment returns for Annaly Current macro environment indicates continued, measured globa
Slide 7: Balanced Macro Environment
Better economic fundamentals are balanced by strong demand for safe fixed income assets Balanced Macro Environment Annaly benefits from the broader environment backdrop as rates are unlikely to move significantly in either direction U.S. expansion continues, now supported by improved global growthRo
Slide 8: Fed Exit and central bank purchases
Market data as of October 25, 2017.Approximately $9 trillion in developed market debt continues to trade at negative rates.Net sovereign bond issuance figures based on IMF World Economic Outlook data. Agency MBS net issuance sourced from eMBS. Central bank purchases are based on annual changes in re
Slide 9: Factors Impacting Volatility
Volatility has declined despite the Fed taper announcement, the partisanship in Washington D.C. and geopolitical uncertainty for a number of potential reasonsEconomic data has shown reduced levels of volatility and continues to signal economic expansionCentral banks have significantly improved their
Slide 10: Agency MBS hedge adjusted returns remain favorable
Strong performance has resulted in modest spread tightening for Agency MBSCurrent returns remain favorable in the 9% – 11% range amidst low levels of volatilityThe liquidity of Agency MBS allows for flexible rotation into other sectors as market dynamics change There continue to be attractive invest
Slide 11: Annaly Investment Highlights
Annaly Investment Highlights
Slide 12: Current Annaly Investment Thesis
Current Annaly Investment Thesis Annaly’s diversification strategy and proven investment platform provide a unique opportunity in today’s markets Annaly’s diversification into credit and floating rate assets enhances the Company’s stability, performance and optionality, differentiating the Company o
Slide 13: Evolution of Annaly's Diversified Model
Since the beginning of 2014, Annaly has increased its capital dedicated to credit assets from 11% to 23% at Q3 2017 and has further diversified its Agency exposure to floating rate assets Floating Rate & Credit Portfolio Evolution (Q4 2013 – Q3 2017) Source: Company filings, Bloomberg. Note: Financi
Slide 14: Industry Leading Size and Liquidity
Source: Bloomberg. Note: Market data as of October 25, 2017. ADTV represents the average daily value ($mm) traded for the trailing 3 months. Annaly is an industry leader in size with a market cap greater than $13.6bn Annaly’s 3 month ADTV is larger than that of the smallest 25 mREITs in aggregate An
Slide 15: Demonstrated Resiliency – Scaled Diversification Enhances Stability
Source: Bloomberg and Company filings. Includes all companies in the respective Agency, Hybrid, and Commercial sectors of the BBREMTG as of October 25, 2017.Dividend Stability measures the change in dividend from Q4 2013 to Q3 2017.Book Value Stability measures the change in book value from Q4 2013
Slide 16: Stability of Annaly's Core Earnings vs. Other Yield Investments
Stability of Annaly’s Core Earnings vs. Other Yield Investments Despite heightened market volatility, Annaly has continued to offer stable core earnings(1) over the past 3 years, particularly when compared to other yield strategies Source: Bloomberg, Company filings, SNL Financial. Note: Financials
Slide 17: Operational Efficiency
Note: Financial data for the year to date period ended June 30, 2017. Operating expense is defined as: (i) for internally-managed peers, the sum of compensation and benefits, general and administrative expenses (“G&A”) and other operating expenses, and (ii) for externally-managed peers, the sum of n
Slide 18: Commitment to Strong Corporate Governance & Social Responsibility
Commitment to Strong Corporate Governance & Social Responsibility Annaly Board of Directors External Annaly CEO, Kevin Keyes, named Chairman of the Board, effective January 1, 2018Announced the addition of Katie Beirne Fallon and Vicki Brinson Williams to the Board, effective January 1, 2018 With ne
Slide 19: Stock Ownership Culture Aligns Interests of Employees with Shareholders
Source: Bloomberg, SNL, Company filings.Note: Data shown as of most recent proxy filing available.Note: mREIT sector represent the BBREMTG. Bank sector represent the KBW Bank Index, S&P represent the SPX Index. Data as of October 25, 2017.Reflects voluntary ownership commitment, which is 50% higher
Slide 20: Returns and Outperformance
Source: Bloomberg. mREITs represent the BBREMTG. Equity REITs represent BBREIT Index. Utilities represent the Russell 3000 Utilities Index. MLPs represent the Alerian MLP Index. Asset Managers represent the S&P 500 Asset Management and Custody Bank Index. Banks represent the KBW Bank Index. S&P repr
Slide 21: Relative Valuation – Annaly vs. Other Yield Sectors
Relative Valuation – Annaly vs. Other Yield Sectors Source: Bloomberg. MLPs represent the Alerian MLP Index. Utilities represent the Russell 3000 Utilities Index. Equity REITS represent the S&P 500 REITS Industry Index. Banks represent the KBW Bank Index. S&P represent the SPX Index. Asset Managers
Slide 22: Business Update
Business Update ANNALY
Slide 23: Agency MBS Portfolio
Pass Through Coupon Type Agency MBS Portfolio Note: Data as of September 30, 2017. Percentages based on fair market value and may not sum to 100% due to rounding.Includes TBA purchase contracts and MSRs.“High Quality Spec” protection is defined as pools backed by original loan balances of up to $125
Slide 24: Residential Credit Portfolio
Note: Data as of September 30, 2017. Percentages based on fair market value and reflect economic interest in securitizations. Jumbo 2.0 includes the economic interest of certain positions that are classified as residential mortgage loans within our consolidated financial statements. Percentages may
Slide 25: Commercial Real Estate Portfolio
Commercial Real Estate Portfolio Note: Data as of September 30, 2017. Percentages based on economic interest and may not sum to 100% due to rounding. Portfolio data excludes consolidated VIEs associated with B Piece commercial mortgage-backed securities and includes CMBS conduit securities.Other rep
Slide 26: Middle Market Lending Portfolio
Middle Market Lending Portfolio Lien Position Industry(1) Loan Size(2) The Middle Market Lending portfolio grew to $856 million in assets during Q3 2017, an ~11% increase from Q2 2017Despite reduced M&A activity and a technical imbalance with increased capital raising, fund flows and new issue CLOs,
Slide 27: Performance Highlights and Trends
Performance Highlights and Trends Unaudited, dollars in thousands except per share amounts *Represents a non-GAAP financial measure; see Appendix.Net of dividends on preferred stock, including cumulative and undeclared dividends on the Company’s Series F Preferred stock of $8.3 million for the quart
Slide 28: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations
Slide 29: Non-GAAP Reconciliations
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, financial measures computed in accordance with GAAP. These non-GA
Slide 30: Non-GAAP Reconciliations (Cont'd)
Non-GAAP Reconciliations (Cont’d) 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, financial measures computed in
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