ANNALY CAPITAL MANAGEMENT, INC. Third Quarter 2021 Financial Summary
October 27, 2021
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved.
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 2021 earnings release. This presentation is provided for investors in Annaly for informational purposes only and is not an offer to sell, or a solicitation of an offer to buy, any security or instrument.
Forward-Looking Statements
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 reference to a future period or periods or by the use of forward- looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, risks and uncertainties related to the COVID-19 pandemic, including as related to adverse economic conditions on real estate-related assets and financing conditions (and our outlook for our business in light of these conditions, which is uncertain); changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; operational risks or risk management failures by us or critical third parties, including cybersecurity incidents; our ability to grow our residential credit business; our ability to grow our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets and corporate debt; risks related to investments in MSR; our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; and our ability to maintain our exemption from registration under the Investment Company Act. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.
We routinely post important information for investors on our website, www.annaly.com. We intend to use this webpage as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. Annaly encourages investors, analysts, the media and others interested in Annaly to monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations, webcasts and other information we post from time to time on our website. To sign-up for email-notifications, please visit the "Email Alerts" section of our website, www.annaly.com, under the "Investors" section and enter the required information to enable notifications. The information contained on, or that may be accessed through, our webpage is not incorporated by reference into, and is not a part of, this document.
Past performance is no guarantee of future results. There is no guarantee that any investment strategy referenced herein will work under all market conditions. Prior to making any investment decision, you should evaluate your ability to invest for the long-term, especially during periods of downturns in the market. You alone assume the responsibility of evaluating the merits and risks associated with any potential investment or investment strategy referenced herein. To the extent that this material contains reference to any past specific investment recommendations or strategies which were or would have been profitable to any person, it should not be assumed that recommendations made in the future will be profitable or will equal the performance of such past investment recommendations or strategies. The information contained herein is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations for Annaly or any of its affiliates.
Regardless of source, information is believed to be reliable for purposes used herein, but Annaly makes no representation or warranty as to the accuracy or completeness thereof and does not take any responsibility for information obtained from sources outside of Annaly. Certain information contained in the presentation discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. | 1 |
Important Notices (continued)
Updates to Financial Disclosures
Commencing with the Company's financial results for the quarter ended June 30, 2021 and for subsequent reporting periods, the Company has relabeled "Core Earnings (excluding PAA)" as "Earnings Available for Distribution" ("EAD"). Earnings Available for Distribution, which is a non-GAAP financial measure intended to supplement the Company's financial results computed in accordance with U.S. generally accepted accounting principles ("GAAP"), replaces the Company's prior presentation of Core Earnings (excluding PAA). In addition, Core Earnings (excluding PAA) results from prior reporting periods have been relabeled Earnings Available for Distribution. In line with evolving industry practices, the Company believes the term Earnings Available for Distribution more accurately reflects the principal purpose of the measure than the term Core Earnings (excluding PAA) and serves as a useful indicator for investors in evaluating the Company's performance and its ability to pay dividends.
The definition of Earnings Available for Distribution is identical to the definition of Core Earning (excluding PAA) from prior reporting periods. As such, Earnings Available for Distribution is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) realized amortization of MSR, (d) other income (loss) (excluding depreciation expense related to commercial real estate and amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items) and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items) and excludes (g) the premium amortization adjustment ("PAA") representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company's Agency mortgage-backed securities.
Earnings Available for Distribution should not be considered a substitute for, or superior to, GAAP net income. Please refer to the "Non-GAAP Financial Measures" section for a detailed discussion of Earnings Available for Distribution.
Beginning with the quarter ended June 30, 2021, the Company began classifying certain portfolio activity- or volume-related expenses (including but not limited to brokerage and commission fees, due diligence costs and securitization expenses) as Other income (loss) rather than Other general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss) to better reflect the nature of the items. As such, prior periods have been conformed to the current presentation.
Divestiture of Commercial Real Estate Business
During the third quarter 2021, the Company completed the economic transfer and substantially all of the legal ownership transfer of the previously announced sale of substantially all of the assets that comprise the Commercial Real Estate Business for $2.33 billion (the "Sale"). The remaining assets of the Sale are expected to be legally transferred by the end of the fourth quarter 2021 subject to regulatory approvals and the Company intends to sell nearly all of the remaining assets that are not included in the Sale.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. | 2 |
Financial Snapshot
Unaudited, dollars in thousands except per share amounts | ||||
For the quarters ended | ||||
9/30/2021 | 6/30/2021 | |||
GAAPnet income (loss) per average common share (1) | $0.34 | ($0.23) | ||
Income Statement | Earningsavailable for distribution per average common share *(1) | $0.28 | $0.30 | |
AnnualizedGAAP return (loss) on average equity | 15.25% | (8.51%) | ||
AnnualizedEAD return on average equity* | 12.81% | 13.05% | ||
Balance Sheet
Portfolio
GAAP
Key Statistics
Non-GAAP
Key Statistics
Book value per common share | $8.39 | $8.37 | |
GAAP Leverage at period-end(2) | 4.4x | 4.7x | |
Economic leverage at period-end*(2) | 5.8x | 5.8x | |
GAAP capital ratio at period-end(3) | 17.9% | 16.6% | |
Economic capital ratio at period-end *(3) | 14.2% | 14.3% | |
Securities | $65,622,352 | $69,032,335 | |
Loans, net | 3,580,521 | 3,563,008 | |
Mortgage servicing rights (4) | 572,259 | 202,616 | |
Interests in MSR (5) | 57,530 | 49,035 | |
Assets transferred or pledged to securitization vehicles | 4,738,481 | 4,073,156 | |
Assets of disposal group held for sale ** | 238,042 | 3,302,001 | |
Totalresidential and commercial investments | $74,809,185 | $80,222,151 | |
Net interest margin (6) | 2.01% | 1.66% | |
Average yield on interest earning assets (7) | 2.29% | 1.97% | |
Average GAAP cost of interest bearing liabilities (8) | 0.32% | 0.35% | |
Net interest spread | 1.97% | 1.62% | |
Net | interest margin (excluding PAA) *(6) | 2.04% | 2.09% |
Averageyield on interest earning assets (excluding PAA) *(7) | 2.63% | 2.76% | |
Averageeconomic cost of interest bearing liabilities *(8) | 0.66% | 0.83% | |
Net interest spread (excluding PAA) * | 1.97% | 1.93% |
Efficiency | Operating expenses to earnings available for distribution * | 10.03% | 11.86% |
Annualized operating expenses as a % of average total assets | 0.22% | 0.26% | |
Annualized operating expenses as a % of average total equity | 1.28% | 1.55% |
______________
- Represents a non-GAAP financial measure.
- Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2.
Detailed endnotes are included within the Appendix at the end of this presentation. | © Copyright 2021 Annaly Capital Management, Inc. All rights reserved. | 3 |
Portfolio Data
Unaudited, dollars in thousands
Portfolio-
Related
Data
For the quarters ended | |||||||
9/30/2021 | 3/31/2021 | 12/31/2020 | 9/30/2020 | ||||
6/30/2021 | |||||||
Agencymortgage-backed securities | $62,818,079 | $66,468,519 | $69,637,229 | $74,067,059 | $74,915,167 | ||
Residentialcredit risk transfer securities | 787,235 | 827,328 | 930,983 | 532,403 | 411,538 | ||
Non-agencymortgage-backed securities | 1,747,932 | 1,582,323 | 1,277,104 | 972,192 | 717,602 | ||
Commercialmortgage-backed securities | 269,106 | 154,165 | 4,121 | 80,742 | 54,678 | ||
Totalsecurities | $65,622,352 | $69,032,335 | $71,849,437 | $75,652,396 | $76,098,985 | ||
Residentialmortgage loans | $1,686,268 | $1,029,929 | $528,868 | $345,810 | $152,959 | ||
Residentialmortgage loan warehouse facility | 1,431 | - | - | - | - | ||
Commercialreal estate debt and preferred equity | - | - | - | 498,081 | 573,504 | ||
Corporatedebt | 1,890,709 | 2,066,709 | 2,074,475 | 2,239,930 | 2,061,878 | ||
Corporatedebt, held for sale | 2,113 | 466,370 | - | - | - | ||
Totalloans, net | $3,580,521 | $3,563,008 | $2,603,343 | $3,083,821 | $2,788,341 | ||
Mortgage servicing rights | $572,259 | $202,616 | $113,080 | $100,895 | $207,985 | ||
Interestsin MSR | $57,530 | $49,035 | $- | $- | $- | ||
Agency mortgage-backed securities transferred or pledged to | $597,923 | $605,163 | $598,118 | $620,347 | $623,650 | ||
securitization vehicles | |||||||
Residential mortgage loans transferred or pledged to securitization | 4,140,558 | 3,467,993 | 3,170,804 | 3,249,251 | 3,588,679 | ||
vehicles | |||||||
Commercial real estate debt investments transferred or pledged to | - | - | - | 2,166,073 | 2,174,118 | ||
securitization vehicles | |||||||
Commercial real estate debt and preferred equity transferred or pledged | - | - | - | 874,349 | 882,955 | ||
to securitization vehicles | |||||||
Assetstransferred or pledged to securitization vehicles | $4,738,481 | $4,073,156 | $3,768,922 | $6,910,020 | $7,269,402 | ||
Real estate, net | $- | $- | $- | $656,314 | $790,597 | ||
Assetsof disposal group held for sale ** | $238,042 | $3,302,001 | $4,400,723 | $- | $- | ||
Totalinvestment portfolio | $74,809,185 | $80,222,151 | $82,735,505 | $86,403,446 | $87,155,310 | ||
Totalassets | $76,662,433 | $82,376,305 | $85,369,589 | $88,455,103 | $89,192,411 | ||
Average TBA contract and CMBX balances | $22,739,226 | $18,761,062 | $21,865,969 | $20,744,672 | $20,429,935 | ||
______________
** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2.
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Annaly Capital Management Inc. published this content on 27 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 October 2021 20:33:22 UTC.
