Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Debt Investor Presentation (February 2024)
54 slides from Annaly Capital Management's debt investor presentation, February 2024
Slide 1: Onslow Bay Financial LLC February 2024
ANNALY Onslow Bay Financial LLC February 2024
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, Residential Credit, MSR
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: Annaly's Agency Portfolio at end of Q4 2023
▪ Annaly’s Agency Portfolio: $65.7 billion in assets at the end of Q4 2023, a decrease of 4% compared to Q3 2023 ▪ Portfolio additions were focused on production coupon specified pools and Agency CMBS while rotating out of TBAs − Annaly ended the quarter with 48% of the portfolio in 5.0% coupons and
Slide 6: Annaly Residential Credit Portfolio at end of Q4 2023
▪ Annaly Residential Credit Portfolio: $5.7 billion in assets at the end of Q4 2023, up 9% from Q3 2023 and up 14% year-over-year − Consists of a $4.5 billion securities portfolio and a $1.2 billion whole loan portfolio(1) ▪ Record quarter of whole loan settlements with approximately $1.8 billion(2)
Slide 7: Annaly MSR Portfolio at end of Q4 2023
▪ Annaly MSR Portfolio: $2.7 billion(1) in assets at the end of Q4 2023, an 18% increase quarter-over-quarter and a 50% increase year-over-year − Purchased over $500 million(1) across three bulk packages and began purchasing current coupon GSE flow MSR during the fourth quarter ▪ Annaly’s low WAC po
Slide 8: Annaly 25th anniversary and ESG progress
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 wholly owned subsidiary of Annaly
▪ 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 and financing
▪ 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: EU/UK risk retention and reporting
Annex 2 and Annex 12 reports are posted on the Custodian’s website for EU/UK investors on a quarterly basis Non-QM Non-QM Non-QM September 2023 October 2023 In compliance with the EU/UK November 2023 originator test, Annaly will retain a vertical 5% interest in EU/UK deals Additional EU/UK Risk Rete
Slide 13: Top non-agency securitization issuers league table
1 JPMorgan Chase $15,286.5 1 Onslow Bay Financial $11,147.2 2 Onslow Bay Financial $11,147.2 2 Invictus Capital Partners $11,020.6 3 Invictus Capital Partners $11,020.6 3 Blue River Mortgage/Angelo Gordon $5,178.7 4 Goldman Sachs $9,316.5 4 Angel Oak $5,128.0 5 Blue River Mortgage/Angelo Gordon $5,1
Slide 14: Top MSR and servicer rankings
1 LAKEVIEW/BAYVIEW LOAN SERVICING $644.5 1 LAKEVIEW/BAYVIEW LOAN SERVICING $644.5 2 CHASE HOME FINANCE $597.0 2 PENNYMAC CORP $588.5 3 PENNYMAC CORP $588.5 3 MR COOPER GROUP $531.7 4 WELLS FARGO $539.9 4 NEW REZ/CALIBER HOME LOANS $474.1 5 MR COOPER GROUP $531.7 5 ROCKET MORTGAGE $463.6 6 NEW REZ/CA
Slide 15: ESG disclosures on Onslow Bay securitizations
▪ Starting in 2022, Onslow Bay started providing ESG disclosures on its securitizations based upon guidance from the Sustainability Accounting Standards Board (“SASB”) Accounting Metrics under the Mortgage Finance Accounting Standard − SASB recommends disclosure of financial sustainability informati
Slide 16: Onslow Bay Financial LinkedIn program updates
Onslow Bay Financial | LinkedIn Program updat Onslow Bay Financial ey Onslow Bay Financial op OB eter Effective: September 4th; Onslow Bay'has made the following changes to We are thrilled to be attending IMB24, the Independent Mortgage Bankers our seller guidelines. Please reach out . ‘ Conference,
Slide 17: Onslow Bay website and LinkedIn
www.onslowbayfinancial.com ▪ The Onslow Bay website provides an overview of the whole loan programs offered, as well as a matrix comparing underwriting criteria − A quick quote tool allows users to input terms of a loan and receive indicative guidance on what programs the loan would fit ▪ Visit the
Slide 18: Onslow Bay Strategy & Performance (OBX)
Onslow Bay Strategy & Performance (““OBX”) ANNALY
Slide 19: Correspondent channel achieved scale
($ in millions) $12,542 ▪ Annaly Residential Credit Group’s $9,841 Record correspondent channel, launched in April Quarterly Loan 2021, has achieved scale with 200+ Lock Volume $7,452 counterparties onboarded $5,949 ▪ Correspondent channel volumes remain $4,952 robust with $7.6 billion of locks in 2
Slide 20: 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 originator selection ▪ Despite industry wide declining mortgage origination volumes, Onslow Bay has been able to maintain both volumes and credit throughou
Slide 21: Consistently strong credit profile with limited risk layering
▪ Onslow Bay has maintained a consistently strong credit profile with limited 5.0% risk layering throughout several market environments ▪ In 2022, Onslow Bay tightened our credit standards. As an example of that tightening, loans with a FICO below 700 and an LTV > 80% become 4.0% ineligible − In Q2
Slide 22: Issuance credit statistics and issuer comparison
Issuance 9,294 15,171 8,159 7,062 5,745 OBX 22 7,656 1.87% 0.0 GCAT 19 4,698 2.19% 0.2 WA FICO 748 736 736 739 743 MFRA 18 4,091 2.75% 0.1 WA LTV 70.0 70.5 72.3 72.1 69.7 BRAVO 16 3,700 2.80% 0.4 VERUS 38 13,456 2.91% 1.1 FICO < 700 12.7% 21.5% 21.7% 18.4% 15.9% CSMC 23 5,388 2.95% 3.9 FICO < 680 6.
Slide 23: Loan characteristics by program
Expanded Prime 64.4% 8.098 747 73 15.9% 17.7% 40.4% 6.1% 12.0% 7.6% 0.0% DSCR 33.1% 8.264 747 65 100.0% 38.2% 18.5% 4.7% 11.7% 0.0% 0.0% Sharp 1.2% 8.504 716 68 31.4% 36.9% 40.3% 31.0% 41.1% 4.4% 0.0% Agency 0.5% 7.434 758 70 36.1% 56.7% 10.0% 0.0% 0.0% 0.0% 0.0% Closed End Seconds 0.9% 9.992 731 23
Slide 24: OBX securitization deal list 2018-2021
OBX 2018-1 3/29/2018 $326,553,472 $59,620,151 0.18 10% Clean Up OBX 2018-EXP1 8/1/2018 $383,451,234 $59,121,977 0.15 10% Call, 5% Call OBX 2018-EXP2 10/31/2018 $384,027,255 $69,791,356 0.18 10% Call, 5% Call OBX 2019-INV1 1/31/2019 $393,961,409 $69,271,014 0.18 10% Call, 5% Call OBX 2019-EXP1 4/24/2
Slide 25: OBX securitization deal list 2022-2023
OBX 2022-NQM3 3/24/2022 $315,842,910 $287,808,988 0.91 30% or 3 Years OBX 2022-J1 5/6/2022 $389,334,473 $358,031,704 0.92 10% Call, 5% Call OBX 2022-NQM4 5/10/2022 $457,285,349 $409,502,452 0.90 30% or 3 Years OBX 2022-NQM5 6/3/2022 $390,775,427 $347,493,200 0.89 30% or 3 Years OBX 2022-INV4 6/9/202
Slide 26: Whole loan acquisition strategy and portfolio management
▪ 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 27: Correspondent origination and seller 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 28: Onslow Bay Securitization Program
Onslow Bay Securitization Program ANNALY
Slide 29: 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 30: OBX deal comparison 2023-2024
Issue Date Jan-24 Jan-24 Dec-23 Nov-23 Oct-23 Sep-23 Jul-23 Jun-23 May-23 Apr-23 Sponsor Onslow Bay Financial LLC % of Collateral Sourced from 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Partnerships Rating Agencies S&P/KBRA Fitch/KBRA Fitch/KBRA Fitch/KBRA Fitch/KBRA Fitch/KBRA Fitch/KBRA Fitch/KBRA Fitch/KBRA F
Slide 31: OBX deal comparison 2022-2023
Issue Date Feb-23 Jan-23 Dec-22 Sep-22 Aug-22 Jun-22 Jun-22 May-22 Mar-22 Feb-22 Jan-22 Sponsor Onslow Bay Financial LLC % of Collateral Sourced from 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Partnerships Rating Agencies Fitch Fitch /KBRA Fitch Fitch/KBRA Fitch/KBRA Fitch/KBRA Fitch/KBRA S&P/KBRA S&P/KBRA S&
Slide 32: OBX deal comparison 2018-2021
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 Sponsor Onslow Bay Financial LLC % of Collateral Sourced from 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Partnerships Rating Agencies Fitch/KBRA S&P/KBRA S&P/KBRA S&P/KBRA Fitch/DBRS Fitch Fitch/KBRA Fitch/KBRA F
Slide 33: Partnership deal comparison 2022-2024
Issue Date Feb-24 Nov-23 May-23 Feb-23 Nov-22 Jul-22 May-22 May-22 Mar-22 Feb-22 Sponsor Onslow Bay Financial LLC % of Collateral Sourced from 100% 100% 100% 100% 100% 100% 100% 100% 50% 100% Partnerships Rating Agencies Moody’s / KBRA Moody’s / KBRA Fitch / KBRA Moody’s / KBRA Moody’s / KBRA Fitch
Slide 34: Partnership deal comparison 2019-2022
Issue Date Jan-22 Nov-21 Oct-21 Oct-21 Sep-21 Jul-21 Apr-21 Jan-20 Jun-19 Jan-19 Sponsor Onslow Bay Financial LLC % of Collateral Sourced from Whole Loan Whole Loan Whole Loan 0% 0% 100% 0% 0% 100% Prime Jumbo Partnerships Purchases Purchases Purchases Rating Agencies Moody’s / KBRA Moody’s / DBRS M
Slide 35: Onslow Bay Acquisitions: Correspondent Channel
Onslow Bay Acquisitions: Correspondent Channel ANNALY
Slide 36: Correspondent program guidelines summary
Min Loan Amt $150k $150k $125k $250k $150k $70k $1 above Conforming $150k Max Loan Amt $3.5mm $3.0mm $2.0mm $2.0mm $1.0mm $500k $2.5mm $2.25mm Housing Event >=4+ Years >=2+ Years Housing Event 3+ Years 4+ Years 4+ Years 4+ Years 4+ Years Per FNMA/FHMLC Mortgage History 0x30x12 2x30x12, 1x60x24 0x30x
Slide 37: Program LTV matrix: Additional financed properties
<= $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 38: Program LTV matrix by FICO and loan amount
<= $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 39: Program LTV matrix 3+ year housing event seasoning
<= $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 40: Program LTV matrix 4+ year seasoning
<= $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 41: DSCR and foreign credit program 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 42: Closed-end second lien program 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 43: Agency investor program limits
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 44: Agency investor program limits, 1 unit
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 45: Onslow Bay Acquisitions: Bulk Purchases
Onslow Bay Acquisitions: Bulk Purchases ANNALY
Slide 46: Bulk program guidelines summary
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 47: Bulk LTV matrix by FICO and loan amount
<= $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 48: Bulk LTV matrix by payment history
<= $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 49: Bulk LTV matrix 3+ year seasoning
<= $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 50: Bulk LTV matrix 4+ year seasoning
<= $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 51: 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. 51
Slide 52: Bulk 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 53: Bulk Agency investor limits
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 54: Bulk Agency investor limits, 1 unit
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
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