Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q2 2016 Earnings Presentation
29 slides from Annaly Capital Management's earnings presentation, Aug 3, 2016
Slide 1: Second Quarter 2016 Investor Presentation
Second Quarter 2016 Investor Presentation August 3, 2016
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 referenc
Slide 3: Overview
ANNALY | Overview
Slide 4: Annaly is a Leading Real Estate Finance Company
Annaly is a Leading Real Estate Finance Company Largest mREIT with a $12 billion equity base, $13 billion Business Profile pro forma post Hatteras acquisition Sector Assets ($bn) Capital(1) ($bn) Sector Rank(2) Permanent capital solution for the redistribution of Agency(3) $78.2 $9.1 #1 mortgage
Slide 5: Diversified Business Model: $3 Trillion Total Market Opportunity
Diversified Business Model: $3 Trillion Total Market Opportunity Annaly is positioned as a permanent capital solution for the redistribution of MBS, residential credit, commercial real estate assets and corporate loans GSE (1) / Federal Reserve (2) CRE Maturities & New Originations(3) Corporate Loan
Slide 6: Sum-of-the-Parts Capital Diversification
Sum-of-the-Parts Capital Diversification Balancing the liquidity of the Agency strategy with the durability of multiple credit strategies Commercial Real Residential Middle Market Agency Estate Credit Lending Assets(1) $78.2bn $2.5bn $1.7bn $0.7bn Dedicated $9.1bn $1.4bn $0.7bn $0.7bn Capital(2) Sec
Slide 7: Significant Financing Advantages
Significant Financing Advantages Annaly has a variety of potential financing sources for each asset class in which the Company invests Agency Commercial Real Resi Credit Middle MMLMarket Agency Residential Credit Estate Lending Securitization Potential Repo Credit Facilities Repo Credit Fa
Slide 8: Annaly is an Industry Leading, Liquid Alternative Asset Manager
Annaly is an Industry Leading, Liquid Alternative Asset Manager Recent Hatteras (“HTS”) Size and Acquisition Demonstrates External 15x Size of Median mREIT Consolidator Liquidity Growth and Ability to be Opportunistic Four Distinct Operating Valuation More Attractive than Diversification Bus
Slide 9: Comparative Performance and Valuation Update
Comparative Performance and Valuation Update 9 9
Slide 10: Annaly vs. Other Yield Investments – Performance
Annaly vs. Other Yield Investments – Performance Annaly’s current investment team has outperformed all other yield options since 2014 60.0% 46.8% 40.0% 41.6% 26.3% 20.0% 24.1% Total Return – 3.6% (0.6%) (20.0%) (18.5%) (40.0%) (60.0%) Annaly mREITs Utilities MLPs Asset Managers Banks S&P 500 Note: M
Slide 11: Annaly vs. Other Yield Investments – Valuation
Annaly vs. Other Yield Investments – Valuation Annaly pays a superior dividend yield with a more conservative valuation compared to other income-oriented sectors Asset mREITs Utilities MLPs Banks Managers Average $11.1 $1.5 $12.2 $6.3 $22.2 $48.1 Market Cap ($bn) Dividend Yield 10.9% 10.8% 3.5% 7.2%
Slide 12: Annaly Has Outperformed in Periods of Heightened Volatility
Annaly Has Outperformed in Periods of Heightened Volatility… China Stock Financial Greek Debt Market Brexit Recession Crisis Crisis Turbulence 90 800% 80 700% 70 600% 60 500% Total Return VIX Index 50 400% 40 300% 30 200% 20 100% 10 0% 0 -100% Oct-97 Aug-99 Jul-01 May-03 Apr-05 Feb-07 Jan-09 Nov-10
Slide 13: Providing Investors with a Consistent Liquidity Profile
…Providing Investors with a Consistent Liquidity Profile Annaly has historically served as a more liquid investment vehicle compared to traditional peer groups and other yield oriented sectors 3.0% 2.5% Liquidity as % of Market Cap 2.0% 1.5% 1.0% 0.5% 0.0% 2001 Recession 2007 - 2009 Financial Crisis
Slide 14: Q2 2016 Business Update
ANNALY Q2 2016 Business Update 14
Slide 15: Progress on Our Strategy in 2016
Progress on Our Strategy in 2016 On July 12, 2016 Annaly completed its acquisition of Hatteras Financial Corp. for approximately $1.5 billion External Growth Represents largest mREIT acquisition in history Added complementary assets to Annaly’s existing investment portfolio Diversified Agenc
Slide 16: Performance Highlights and Trends
Performance Highlights and Trends Unaudited, dollars in thousands except per share amounts For the quarters ended June 30, March 31, December 31, September 30, June 30, 2016 2016 2015 2015 2015 GAAP earnings per common share ($0.32) ($0.96) $0.69 ($0.68) $0.93 (1) Core earnings per common share* $0.
Slide 17: Annaly Operating Performance
Annaly Operating Performance 2014 – 2016 Total Return YTD(1) 13.1% 6.9% (4.0%) 4.0% (1.1%) (8.8%) 10.6% (1.9%) 12.6% 10.9% 46.8% S&P 2.6% 2.3% 2.3% 7.2% (2.1%) 1.7% (6.7%) 5.9% (5.1%) 2.1% 13.8% Financials $0.40 $0.33 $0.33 $0.34 $0.33 $0.30 $0.31 $0.30 $0.30 $0.29 $0.29 NLY Core EPS * $0.20 $0.20 $
Slide 18: Macro Economic & Interest Rate Market Outlook
Macro Economic & Interest Rate Market Outlook Geopolitical risks and record monetary accommodation pushed U.S. yields to record lows Heightened Uncertainty Means Hesitant Central Banks Foreign Demand Led to Further Rate Rally Increased geopolitical risks threaten economic growth Continued bid fo
Slide 19: Agency MBS Portfolio Update
Agency MBS Portfolio Update As of Q2 2016, the market value of Agency portfolio was approximately $78 billion in assets, inclusive of the TBA position Approximately 92% of the portfolio is positioned in securities with prepayment protection MBS performed well over the course of Q2 2016 in ligh
Slide 20: Residential Credit Portfolio Update
Residential Credit Portfolio Update As of Q2 2016, the portfolio grew to just over $1.7 billion in assets and is comprised of the following sectors: Credit Risk Transfer (CRT): Expect supply to remain in line with expectations in coming months and pick up modestly in Q4/early 2017 as faster prep
Slide 21: Commercial Real Estate Portfolio Update
Commercial Real Estate Portfolio Update As of Q2 2016, the commercial real estate portfolio was approximately $2.5 billion in assets(1) The combination of a significant decline in new acquisition activity by sponsors, a volatile marketplace and a cautious stance on credit led us to slow originat
Slide 22: Middle Market Lending Portfolio Update
Middle Market Lending Portfolio Update As of Q2 2016, the middle market lending portfolio grew to approximately $700 million in assets A combination of repeat sponsor business, sectors of origination focus and larger hold positions have garnered demonstrably increased new deal flow during the la
Slide 23: Hatteras Update
ANNALY Hatteras Update 23
Slide 24: Annaly Acquisition of Hatteras Financial Corp
Annaly Acquisition of Hatteras Financial Corp Largest Mortgage REIT to Mortgage REIT Transaction Ever, by Deal Value and Target Asset Value Closed $1.5 Billion Third Largest Transaction in the Entire REIT Sector Acquisition of Since the Financial Crisis, by Target Asset Value Third Largest Spe
Slide 25: Annaly Pro Forma Portfolio
Annaly Pro Forma Portfolio Assets Capital(1) Sector ($bn) ($bn) Asset Type(3) Pass Through Coupon Type CMOs >=4.00% Agency IO / MSR / 1% 15 & 20Yr: 4% $93.9 $10.1 24% 3.5% MBS(2) IIO 5% 2% <=3.00% 4% Commercial Agency $2.5 $1.4 3.5% Real Estate(2) <=3.00% 30yr Fixed 15% 27% MBS ARM PT Residential 15
Slide 26: Mortgage REIT Industry Landscape
Mortgage REIT Industry Landscape Annaly’s market capitalization is 15x the median mREIT market cap $12,000 $11,000 $10,000 Current mREIT Total Market Cap: $54.0bn NLY as % of Total Market Cap: 20.6% $9,000 $8,000 Market Cap Range # of Companies % of Total Market Cap Market Cap ($mm) $7,000 Greater t
Slide 27: Appendix: Non-GAAP Reconciliation
Appendix: Non-GAAP Reconciliation 27 27
Slide 28: Non-GAAP Reconciliations
Non-GAAP Reconciliations Unaudited, dollars in thousands except per share amounts For the quarters ended June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 GAAP to Core Reconciliation GAAP net income (loss)
Slide 29: Non-GAAP Reconciliations (Cont'd)
Non-GAAP Reconciliations (Cont’d) Unaudited, dollars in thousands except per share amounts For the quarters ended June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, Dec. 31, Sept. 30, June 30, March 31, 2016 2016 2015 2015 2015 2015 2014 2014 2014 2014 Core Interest Income Reconciliation Total
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