Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q4 2018 Earnings Presentation
25 slides from Annaly Capital Management's earnings presentation, Feb 13, 2019
Slide 1: Fourth Quarter 2018 Financial Summary
Fourth Quarter 2018 Financial Summary February 13, 2019
Slide 2: Safe Harbor Notice
Safe Harbor Notice 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 referen
Slide 3: Q4 2018 Financial Snapshot
Q4 2018 Financial Snapshot Unaudited, dollars in thousands except per share amounts For the quarters ended 12/31/2018 9/30/2018 GAAP net income per average common share (1) ($1.74) $0.29 Core earnings (excluding PAA) per average common share *(1) $0.29 $0.30 Core earnings per average common share *(
Slide 4: Portfolio Data
Portfolio Data Unaudited, dollars in thousands For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Agency mortgage-backed securities $90,752,995 $89,290,128 $86,593,058 $88,579,097 $90,551,763 Credit risk transfer securities 552,097 688,521 563,796 628,942 651,764 Non-agency m
Slide 5: Financing and Capital Data
Financing and Capital Data Unaudited, dollars in thousands except per share amounts For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Repurchase agreements $81,115,874 $79,073,026 $75,760,655 $78,015,431 $77,696,343 Other secured financing 4,183,311 4,108,547 3,760,487 3,830
Slide 6: Income Statement Data
Income Statement Data Unaudited, dollars in thousands except per share amounts For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Total interest income $859,674 $816,596 $776,806 $879,487 $745,423 Total interest expense 586,774 500,973 442,692 367,421 318,711 Net interest inc
Slide 7: Key Earnings Metrics
Key Earnings Metrics Unaudited, dollars in thousands except per share amounts For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Dividends declared per common share $0.30 $0.30 $0.30 $0.30 $0.30 Total common and preferred dividends declared (1) $426,816 $397,163 $380,677 $381
Slide 8: Components of Economic Net Interest Income
Components of Economic Net Interest Income Unaudited, dollars in thousands For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Interest income: Residential Securities $708,146 $680,037 $662,750 $779,588 $654,387 Residential mortgage loans 27,703 21,184 18,868 15,505 10,750 Com
Slide 9: GAAP Net Income to Core Earnings Reconciliation
GAAP Net Income to Core Earnings Reconciliation Unaudited, dollars in thousands For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 GAAP net income (loss) $(2,254,872) $385,429 $595,887 $1,327,704 $746,771 Net income (loss) attributable to noncontrolling interests 17 (149) (32
Slide 10: Quarter-Over-Quarter Changes in Key Metrics
Quarter-Over-Quarter Changes in Key Metrics Unaudited For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Book value per common share, beginning of period $10.03 $10.35 $10.53 $11.34 $11.42 Net income (loss) available (related) to common stockholders (1) (1.74) 0.29 0.49 1.12
Slide 11: Quarter-Over-Quarter Changes in Key Metrics (cont'd)
Quarter-Over-Quarter Changes in Key Metrics (cont’d) Unaudited For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Prior quarter net interest spread 1.13% 1.15% 1.55% 1.14% 0.97% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.08% 0.13
Slide 12: Quarter-Over-Quarter Changes in Annualized Return on Average Equity
Quarter-Over-Quarter Changes in Annualized Return on Average Equity Unaudited For the quarters ended 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Prior quarter annualized GAAP return (loss) on average equity 10.73% 17.20% 36.86% 20.58% 10.98% Quarter-over-quarter changes in contribution: Coup
Slide 13: Residential Investments and TBA Derivative Overview
Residential Investments and TBA Derivative Overview as of December 31, 2018 Unaudited, dollars in thousands Agency Fixed-Rate Securities (Pools) Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Years to Maturity Face Value % (3) Coupon Amortized Cost Fair Value
Slide 14: Residential Investments & TBA Derivative Overview (cont'd)
Residential Investments & TBA Derivative Overview as of December 31, 2018 (cont’d) Unaudited, dollars in thousands Agency Interest-Only Collateralized Mortgage-Backed Obligations Current Notional Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Type Value % (1) Coupon Amortized Cost
Slide 15: Residential Credit Investments Detail
(1) Residential Credit Investments Detail as of December 31, 2018 Unaudited, dollars in thousands Payment Structure Investment Characteristics Estimated Credit 60+ Product Fair Value Senior Subordinate Coupon Enhancement Delinquencies 3M VPR Agency Credit Risk Transfer $524,414 $— $524,414 5.78% 1.1
Slide 16: Commercial Real Estate Overview
Commercial Real Estate Overview as of December 31, 2018 Unaudited, dollars in thousands GAAP Non-GAAP Number of Weighted Avg Weighted Avg Economic Levered Mortgage Debt & Preferred Equity Investments Investments Carrying Value % of Portfolio LTV(1) Life (years)(2) Interest(3) Return Senior Mortgages
Slide 17: Middle Market Lending Overview
Middle Market Lending Overview as of December 31, 2018 Unaudited, dollars in thousands Industry Dispersion Size Dispersion Floating Industry Fixed Rate Rate Total Position Size Amount Percentage Aircraft and Parts $— $41,342 $41,342 $0 - $20 million $345,134 18.3% Arrangement of Transportation of Fr
Slide 18: Hedging and Liabilities
Hedging and Liabilities as of December 31, 2018 Unaudited, dollars in thousands Interest Rate Swaps (1) Interest Rate Swaptions Current Weighted Avg. Weighted Avg. Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Maturity Notional Pay Rate Receive Rate Years to Maturity
Slide 19: Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity
Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity Unaudited Assumptions: ▪ The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of December 31, 2018 and September 30, 2018 ▪ The interest rate sensitivity reflects instantaneous parallel shifts in rates ▪
Slide 20: Appendix
ANN ALY Appendix
Slide 21: Non-GAAP Reconciliations
Non-GAAP Reconciliations Unaudited, dollars in thousands * 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 22: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont'd) Unaudited, dollars in thousands For the quarters ended, 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017 Economic Metrics (excluding PAA) Average interest earning assets $107,232,861 $101,704,957 $102,193,435 $101,979,042 $100,247,589 Interest income (excluding P
Slide 23: Endnotes
Endnotes Beginning with the quarter ended September 30, 2018, the Company updated its calculation of core Page 2 (continued) earnings and related metrics to reflect changes to its portfolio composition and operations, including the (7) Net interest margin represents the sum of the Company's interest
Slide 24: Endnotes (continued)
Endnotes (continued) Page 5 Page 8 (continued) (1) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to (5) TBA dollar roll income and CMBX coupon income each represent a component of Net gains the quarter ended March 31, 2018, this metric included the net i
Slide 25: Endnotes (continued)
Endnotes (continued) Page 15 (1) Based on an internal valuation or the most recent third party appraisal, which may be prior to loan origination/purchase date or at the time of underwriting. (2) Maturity dates assume all of the borrowers' extension options are exercised for the commercial real estat
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