Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q3 2020 Earnings Presentation
30 slides from Annaly Capital Management's earnings presentation, Oct 29, 2020
Slide 1: Third Quarter 2020 Investor Presentation
Third Quarter 2020 Investor Presentation October 28, 2020
Slide 2: Important Notices
Important Notices 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
Slide 3: Recent Achievements and Performance Highlights
Recent Achievements and Performance Highlights Annaly’s portfolio delivered strong results as economy continued path to recovery Core earnings (ex. PAA)* up 18.5% from the prior quarter Financial Performance Book value up 3.7% from the prior quarter Economic return of 6.3% for the third quarte
Slide 4: Third Quarter 2020 Financial Highlights
Third Quarter 2020 Financial Highlights Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Core 2.05% GAAP (ex. PAA)* $0.22 Earnings & $0.70 | $0.32 1.88% Book Value Book Value per Share Dividend Yield(1) $8.70 12.4% Q2 2020 Q3 2020 Total Portfolio(2) Capital Allocation(3) Average
Slide 5: Annaly Publishes Inaugural Corporate Responsibility Report
Annaly Publishes Inaugural Corporate Responsibility Report Subsequent to quarter end, Annaly published its inaugural Corporate Responsibility report for the year 2019 demonstrating the Company’s commitment to ESG best practices 2019 Corporate Responsibility Report Highlights Introduces supplementa
Slide 6: Market Environment
Market Environment ANNALY
Slide 7: The Macroeconomic State of Affairs
The Macroeconomic State of Affairs U.S. economic output recovered at faster than anticipated rates in the third quarter but with headwinds on the horizon, Annaly remains conservatively positioned to withstand volatility Personal incomes had been supported by unemployment benefits, an effect that is
Slide 8: Business Update
Business Update ANNALY
Slide 9: Annaly Investment Strategies
Annaly Investment Strategies The Annaly Agency Group invests in Agency MBS The Annaly Residential Credit Group invests in Non- collateralized by residential mortgages which are Agency residential mortgage assets within the securitized guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae product and w
Slide 10: Agency | Business Update
Agency | Business Update Agency MBS sector benefits from strong technical factors, low interest rate volatility and stable funding, which have helped offset the negative headwind to the sector of continued elevated prepayment speeds Strategic Approach Market Trends Annaly’s Agency Portfolio is mad
Slide 11: Agency | Portfolio Summary
Agency | Portfolio Summary Annaly Agency Portfolio: $96.3 billion in assets at the end of Q3 2020, unchanged from Q2 2020 The portfolio mix continues to be predominantly concentrated in 30-year fixed rate securities Further shift down in coupon over the course of the quarter, with a reduction
Slide 12: Credit Businesses Well-Positioned Amidst Continued Economic Uncertainty
Credit Businesses Well-Positioned Amidst Continued Economic Uncertainty Annaly's credit businesses are relatively lower levered, with high quality portfolios that have positioned them well in the face of a potential slowdown in the economic recovery Key Credit Characteristics Commentary Monthly D60+
Slide 13: Residential Credit | Business Update
Residential Credit | Business Update Annaly’s Residential Credit business continues to programmatically securitize and focus on the asset management of our underlying loans Strategic Approach Market Trends Programmatic securitization sponsor of new origination, residential Residential Credit ass
Slide 14: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary Annaly Residential Credit Portfolio: $1.9 billion in assets at the end of Q3 2020, down 28% from Q2 2020 driven by the $1.0 billion of securitizations completed during the quarter − The composition consists of a $1.7 billion securities portfolio and $153 mill
Slide 15: Commercial Real Estate | Business Update
Commercial Real Estate | Business Update Institutional commercial real estate platform with thoughtful and sustained exposure to investment options that span the capital structure Strategic Approach Market Trends Cautious approach to new investments; premium on cash flow and Commercial property
Slide 16: Commercial Real Estate | Portfolio Summary
Commercial Real Estate | Portfolio Summary Annaly Commercial Real Estate Portfolio: $2.5 billion(1) in assets at the end of Q3 2020, relatively flat from Q2 2020 − Inclusive of loans contributed to the managed CRE CLO, assets under management at the end of Q3 2020 totaled $3.1 billion, virtually u
Slide 17: Middle Market Lending | Business Update
Middle Market Lending | Business Update AMML activity was limited this quarter given our disciplined approach, but new issue execution is expected to increase as M&A activity picks up and the market continues to stabilize Strategic Approach AMML by the Numbers Execute on a disciplined credit focus
Slide 18: Middle Market Lending | Portfolio Summary
Middle Market Lending | Portfolio Summary Annaly Middle Market Lending Portfolio: $2.1 billion(1) in assets at the end of Q3 2020, down slightly compared to Q2 2020 While AMML has remained disciplined throughout the pandemic, new issue execution is expected to increase at year end given attracti
Slide 19: Financial Highlights and Trends
Financial Highlights and Trends
Slide 20: Financial Highlights and Trends
Financial Highlights and Trends Unaudited For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 GAAP net income (loss) per average common share(1) $0.70 $0.58 ($2.57) $0.82 ($0.54) (1) Core earnings (excluding PAA) per average common share* $0.32 $0.27 $0.21 $0.26 $0.21 Dividends
Slide 21: Financial Highlights and Trends (cont'd)
Financial Highlights and Trends (cont’d) Unaudited, dollars in thousands For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Agency mortgage-backed securities $74,915,167 $76,761,800 $78,456,846 $112,893,367 $114,462,524 Credit risk transfer securities 411,538 362,901 222,871 5
Slide 22: Credit Reserves Driven by CECL Accounting Standard
Credit Reserves Driven by CECL Accounting Standard Q3 2020 allowance decreased primarily due to improving economic assumptions Credit Reserves on Funded Loan Portfolio Commentary 9/30/20 CECL accounting standard: 6/30/20 Ending Q3 2020 9/30/20 Ending Loan ($mm) Allowance Allowance Allowance(1) Car
Slide 23: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations
Slide 24: Non-GAAP Reconciliations
Non-GAAP Reconciliations Core earnings (excluding PAA), 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) realized amortization of MSRs, (d) other income (loss) (excluding depreciation expense related to commercial r
Slide 25: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) 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 substi
Slide 26: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited, dollars in thousands For the quarters ended 9/30/2020 6/30/2020 3/31/2020 12/31/2019 9/30/2019 Premium Amortization Reconciliation Premium amortization expense $248,718 $270,688 $616,937 $171,447 $376,306 Less: PAA cost (benefit) 33,879 51,742 290,722 (83
Slide 27: Glossary and Endnotes
Glossary and Endnotes ANNALY
Slide 28: Glossary
Glossary ACREG: Refers to Annaly Commercial Real Estate Group Legacy: Refers to residential credit securities whose underlying collateral was securitized prior to 2009 Agency Peers: Represents companies comprising the Agency Middle Market Represents companies comprising the S&P BDC sector within the
Slide 29: Endnotes
Endnotes Page 3 Page 11 1. Includes three residential whole loan securitizations totaling $1.1bn in 2018, five residential whole loan 1. Includes TBA purchase contracts and MSRs. securitizations totaling $2.1bn in 2019 and four residential whole loan securitizations totaling $1.8bn in 2. Includes TB
Slide 30: Endnotes (cont'd)
Endnotes (cont’d) Page 18 Page 22 (cont’d) 1. Includes $39.7mm of general reserves under CECL at September 30, 2020. 3. Data from economic forecasts are taken directly from third-party data sources. Unemployment rate and 2. New financing is inclusive of change of control transactions, or add-ons wit
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