Annaly Capital Management Inc. · NYSE:NLY
Annaly Capital Management — Q2 2021 Earnings Presentation
30 slides from Annaly Capital Management's earnings presentation, Jul 29, 2021
Slide 1: Second Quarter 2021 Investor Presentation
Second Quarter 2021 Investor Presentation July 28, 2021
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 Second Quarter
Slide 3: Important Notices (cont'd)
Important Notices (cont’d) Updates to Financial Disclosures This presentation includes certain non-GAAP financial measures, including earnings available for distribution (see below). We believe the non-GAAP financial measures are useful for management, investors, analysts, and other interested parti
Slide 4: Recent Achievements and Performance Highlights
Recent Achievements and Performance Highlights Annaly continued to have robust dividend coverage with earnings available for distribution growing quarter-over-quarter Earnings available for distribution* (formerly core earnings (excluding PAA)) of $0.30 per average common share for the quarter, up
Slide 5: Second Quarter 2021 Financial Highlights
Second Quarter 2021 Financial Highlights Earnings per Share Dividend per Share Net Interest Margin (ex. PAA)* Earnings Available 2.09% GAAP for Distribution* $0.22 1.91% Earnings & Book Value ($0.23) | $0.30 Book Value per Share Dividend Yield(1) $8.37 9.9% Q1 2021 Q2 2021 Total Portfolio(2) Capital
Slide 6: Annaly Investment Strategies
Annaly Investment Strategies Assets(1): $84.5 billion Assets(1): $2.1 billion Capital(2): $9.7 billion Capital(2): $1.3 billion Strategy: Countercyclical / Defensive Strategy: Non-Cyclical / Defensive Invests in Agency MBS collateralized by The Annaly residential mortgages which are guaranteed by Fa
Slide 7: Market Environment & Annaly Positioning
Market Environment & Annaly Positioning
Slide 8: The Macroeconomic State of Affairs
The Macroeconomic State of Affairs U.S. economic recovery has led to strong Q2 inflation prints, yet interest rates rallied led by the long end of the yield curve A robust economic recovery is underway Forward interest rates are not pricing a sustained level of high inflation U.S. Treasury 5-year, 5
Slide 9: Housing Finance Expansion | Residential Whole Loan Correspondent Aggregation
Housing Finance Expansion | Residential Whole Loan Correspondent Aggregation Annaly has expanded its residential whole loan acquisition sources by initiating in-house aggregation through its Onslow Bay correspondent channel Onslow Bay Correspondent Launch During the quarter, Onslow Bay Financial L
Slide 10: Housing Finance Expansion | MSR Buildout
Housing Finance Expansion | MSR Buildout Annaly continues to grow its MSR platform, which is a strong complement to its core Agency business MSR investment is complementary to Annaly’s Agency MBS strategy − Offers attractive unlevered yields − Provides a mechanism to hedge mortgage basis risk from
Slide 11: Annaly Publishes Second Corporate Responsibility Report
Annaly Publishes Second Corporate Responsibility Report Annaly’s 2020 Corporate Responsibility Report demonstrates its continued focus on ESG endeavors and provides an update on Annaly’s ESG goals and commitments Corporate Governance Human Capital Formalized the Board of Directors’ Appointed our
Slide 12: Business Update
Business Update ANNALY
Slide 13: Agency | Business Update
Agency | Business Update Annaly prudently managed its Agency portfolio amidst a challenging environment for Agency MBS given widening on lower rates, rising volatility and continued elevated speeds and supply Strategic Approach Market Trends Annaly’s Agency Portfolio is made up of high quality and
Slide 14: Agency | Portfolio Summary
Agency | Portfolio Summary Annaly Agency Portfolio: $84.5 billion in assets at the end of Q2 2021, a decrease of 9% compared to Q1 2021 Given tight mortgage spreads, portfolio paydowns were largely not reinvested during the second quarter Annaly rotated out of lower coupon TBAs (1.5% and 2.0%)
Slide 15: Residential Credit | Business Update
Residential Credit | Business Update Annaly’s Residential Credit business is well-positioned to broaden its leadership in the residential housing market Strategic Approach Market Trends Programmatic securitization sponsor of new origination, residential Non-Agency gross issuance of ~$50 billion
Slide 16: Residential Credit | Portfolio Summary
Residential Credit | Portfolio Summary Annaly Residential Credit Portfolio: $4.2 billion in assets at the end of Q2 2021, an increase of 22% compared to Q1 2021 − The composition consists of a $3.1 billion securities portfolio and $1.1 billion whole loan portfolio Purchased approximately $1.0 bi
Slide 17: Middle Market Lending | Business Update
Middle Market Lending | Business Update AMML was active during the quarter with six deals closed with an average commitment size of $76 million Strategic Approach AMML by the Numbers Execute on a disciplined credit focused investment strategy comprised Current Portfolio predominantly of 1st and 2n
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 Q2 2021, in line with Q1 2021 − Closed six deals in Q2 2021, including acting as Lead Arranger and Administrative Agent on a $715 million senior secured credit facility that wa
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 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 GAAP net income (loss) per average common share(1) ($0.23) $1.23 $0.60 $0.70 $0.58 Earnings available for distribution ("EAD") per average common share*(1) $0.30 $0.29 $0.30 $0.32 $0.2
Slide 21: Financial Highlights and Trends (cont'd)
Financial Highlights and Trends (cont’d) Unaudited, dollars in thousands For the quarters ended 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Agency mortgage-backed securities $66,468,519 $69,637,229 $74,067,059 $74,915,167 $76,761,800 Residential credit risk transfer securities 827,328 930,983
Slide 22: Appendix: Non-GAAP Reconciliations
Appendix: Non-GAAP Reconciliations
Slide 23: Non-GAAP Reconciliations
Non-GAAP Reconciliations The Company has relabeled “Core Earnings (excluding PAA)” as “Earnings Available for Distribution” (“EAD”). The definition of Earnings Available for Distribution is identical to the definition of Core Earnings (excluding PAA) from prior reporting periods. As such, Earnings A
Slide 24: 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 25: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited, dollars in thousands For the quarters ended 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Premium Amortization Reconciliation Premium amortization expense $320,108 ($11,891) $239,118 $248,718 $270,688 Less: PAA cost (benefit) 153,607 (214,570) 39,101
Slide 26: Non-GAAP Reconciliations (cont'd)
Non-GAAP Reconciliations (cont’d) Unaudited, dollars in thousands For the quarters ended 6/30/2021 3/31/2021 12/31/2020 9/30/2020 6/30/2020 Economic Leverage Ratio Reconciliation Repurchase agreements $60,221,067 $61,202,477 $64,825,239 $64,633,447 $67,163,598 Other secured financing 909,655 922,605
Slide 27: Glossary and Endnotes
Glossary and Endnotes ANNALY
Slide 28: Glossary
Glossary AMML: Refers to Annaly Middle Market Lending Group Non-QM: Refers to a Non-Qualified Mortgage ARC: Refers to Annaly Residential Credit Group Non-Performing Loan A loan that is close to defaulting or is in default (“NPL”): CRT: Refers to Credit Risk Transfer Securities OBX Securities: Refers
Slide 29: Endnotes
Endnotes Page 4 Page 13 1. Includes a $354mm residential whole loan securitization in April 2021, a $376mm residential whole loan 1. Represents Agency's hedging profile and does not reflect Annaly's full hedging activity. securitization in June 2021 and a $382mm residential whole loan securitization
Slide 30: Endnotes (cont'd)
Endnotes (cont’d) Page 20 1. Net of dividends on preferred stock. Non-GAAP Reconciliations 2. Net interest margin represents interest income less interest expense divided by average interest earning Page 24 assets. Net interest margin (excluding PAA) represents the sum of the Company's interest inco
Annaly Capital Management — Q2 2021 Earnings Presentation on 6ix