Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q1 2024 Earnings Presentation
28 slides from Annaly Capital Management's earnings presentation, Apr 25, 2024
Slide 1: First Quarter 2024 Investor Presentation
ANNALY First Quarter 2024 Investor Presentation April 24, 2024
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 First Quarter 2024 earnings rel
Slide 3: First quarter 2024 highlights
Earnings available for distribution* of $0.64 per average common share for the quarter Book value per common share of $19.73 Declared quarterly common stock cash dividend of $0.65 per share Economic return of 4.8% for the first quarter Economic leverage* of 5.6x, down from 5.7x in the four
Slide 4: Key metrics and portfolio snapshot
Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Earnings Available 1.58% GAAP for Distribution* 1.43% Book Value per Share Dividend Yield(1) Q4 2023 Q1 2024 Total Portfolio(2) Capital Allocation(3) Average Yield on Interest Earning Assets (ex. PAA)* ARC 4.87% 21% 4.64% Total Sto
Slide 5: Three investment strategies: Agency, Residential Credit, MSR
Invests in Agency MBS & Agency CMBS Invests predominantly in Non-Agency Invests in Mortgage Servicing Rights, securities collateralized by residential or residential mortgage assets within the which provide the obligation to service commercial mortgages, guaranteed by securitized product and whole l
Slide 6: Market outlook and investment themes
Mortgage spreads remain attractive on an Home price appreciation remains above trend, up Recent higher-than-expected returns earned on absolute and relative basis and offer new money 4.6% year-over-year(2), given tight inventory/ MSR have been driven by fundamental asset returns above historic
Slide 7: Residential Credit and MSR platform positioning
Largest non-bank issuer of Prime Jumbo & Expanded Credit MBS since the beginning of 2024(1) 12th largest Agency MBS Servicer(2) in the first quarter, up – Correspondent channel is one of the largest platforms from 15th largest in the fourth quarter in the expanded credit market with more than 20
Slide 8: U.S. economy and Federal Reserve policy
Change in non-farm payrolls(1), '000 Core PCE Change(2), % The U.S. economy remained robust in the 1,000 0.7 7 first quarter, with growth and labor market 0.6 6 data coming in better than expected, 750 0.5 5 suggesting the economy can continue to withstand elevated Federal Funds rate levels 0.4 4
Slide 9: Business Update
Business Update ANNALY Zz
Slide 10: Agency portfolio overview
Annaly’s Agency portfolio is made up of high quality and liquid Agency MBS spreads tightened modestly during the quarter as a result securities, predominantly specified pools, TBAs and derivatives of declining volatility and an improved technical environment, despite a selloff in rates Portfol
Slide 11: Agency Portfolio: $64.7 billion in assets
Annaly’s Agency Portfolio: $64.7 billion in assets at the end of Q1 2024, a slight decrease of 2% compared to Q4 2023 Portfolio activity was focused on the continued rotation up in coupon through the addition of high-quality specified pools, while modestly increasing TBA exposure − Annaly ended
Slide 12: Residential Credit securitization and market update
Programmatic securitization sponsor of new origination, residential The Non-Agency RMBS market experienced spread tightening in the first whole loans with 59 deals comprising nearly $23.8 billion of issuance quarter given increased issuance and strong investor demand priced since the beginning o
Slide 13: Annaly Residential Credit Portfolio: $6.2 billion in assets
Annaly Residential Credit Portfolio: $6.2 billion in assets(1) at the end of Q1 2024, up 4% from Q4 2023 − Consists of a $4.6 billion securities portfolio and a $1.6 billion whole loan portfolio(1) Record quarter of whole loan settlements with approximately $2.4 billion(2) of loans purchased acr
Slide 14: MSR portfolio strategy and market
MSR portfolio complements Annaly’s Agency MBS strategy by offering Bulk volumes remained high in the first quarter, though were down from an attractive yield while providing a hedge to mortgage basis volatility elevated levels seen in the fourth quarter and slower discount prepayment speeds − Su
Slide 15: Annaly MSR Portfolio: $2.7 billion in assets
Annaly MSR Portfolio: $2.7 billion in assets at the end of Q1 2024, in line with the prior quarter and up 47% year-over-year − Portfolio experienced modest mark-to-market gains throughout the quarter With the lowest WAC among the top 20 servicers(1), Annaly continues to exhibit historically low
Slide 16: Financial Highlights and Trends
Financial Highlights and Trends ANNALY Zz
Slide 17: Quarterly financial highlights
Unaudited For the quarters ended 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 (1) GAAP net income (loss) per average common share $0.85 ($0.88) ($1.21) $0.27 ($1.79) (1) Earnings available for distribution per average common share * $0.64 $0.68 $0.66 $0.72 $0.81 Dividends declared per common s
Slide 18: Balance sheet summary by quarter
Unaudited (dollars in thousands) For the quarters ended 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Agency mortgage-backed securities $63,542,230 $66,308,788 $66,591,536 $67,764,264 $65,623,534 Residential credit risk transfer securities 871,421 974,059 982,951 1,064,401 1,085,384 Non-Agency
Slide 19: Interest rate and MBS spread sensitivity
Unaudited The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of March 31, 2024 and December 31, 2023, respectively The interest rate sensitivity reflects instantaneous parallel shifts in rates The MBS spread sensitivity shifts MBS spreads instantaneously an
Slide 20: Appendix | Non-GAAP Reconciliations
Appendix | Non-GAAP Reconciliations ANNALY Zz
Slide 21: Earnings Available for Distribution definition
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 amortization of intangibles, n
Slide 22: 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, financ
Slide 23: Premium amortization and interest reconciliations
Unaudited (dollars in thousands) For the quarters ended 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Premium Amortization Reconciliation Premium amortization expense $26,732 $51,247 $24,272 $33,105 $56,534 Less: PAA cost (benefit) (3,013) 19,148 (6,062) (11,923) 491 Premium amortization expens
Slide 24: Economic leverage ratio reconciliation
Unaudited (dollars in thousands) For the quarters ended 3/31/2024 12/31/2023 9/30/2023 6/30/2023 3/31/2023 Economic leverage ratio reconciliation Repurchase agreements $58,975,232 $62,201,543 $64,693,821 $61,637,600 $60,993,018 Other secured financing 600,000 500,000 500,000 500,000 250,000 Debt iss
Slide 25: Glossary and Endnotes
Glossary and Endnotes ANNALY Zz
Slide 26: Glossary of defined terms
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 Available
Slide 27: Endnotes
Page 3 Page 6 (cont’d) 1. Comprised of $5.3bn of unencumbered assets, which represents Annaly’s excess liquidity and defined as assets 2. Based on seasonally adjusted data from the Zillow U.S. Home Value Index for the period ended March 31, 2024. that have not been pledged or securitized (generally
Slide 28: Endnotes: Non-GAAP Reconciliations
Page 14 1. Based on data from Wall Street Research as of April 18, 2024 Non-GAAP Reconciliations 2. Portfolio excludes retained servicing on whole loans within the Residential Credit portfolio. Page 22 3. Information aggregated from 2024 Fannie Mae and Freddie Mac monthly loan level files by eMBS se
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