Annaly Capital Management, Inc. Reports 3rd Quarter 2020 Results
4:15 PM ET 10/28/20 | BusinessWire
NEW YORK--(BUSINESS WIRE)--October 28, 2020--
Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company"
today announced its financial results for the quarter ended September 30, 2020.
Financial Highlights
-- GAAP net income of $0.70 per average common share for the quarter, up
from $0.58 in the prior quarter
-- Core earnings (excluding PAA) of $0.32 per average common share for the
quarter, up 18.5% from the prior quarter
-- GAAP return on average equity of 29.0% and core return on average equity
(excluding PAA) of 13.8% for the quarter
-- Book value per common share of $8.70, up 3.7% from the prior quarter
-- Economic leverage of 6.2x, down from 6.4x in the prior quarter
-- Declared quarterly common stock cash dividend of $0.22 per share
-- Economic return of 6.3% for the third quarter
Business Highlights
Investment and Strategy
-- Capital allocation to Agency increased to 80% of dedicated equity capital,
which was largely driven by residential credit securitizations; highly
liquid Agency portfolio relatively unchanged at $96.3 billion and 94% of
Annaly's total assets(1)
-- Credit businesses remain conservatively positioned and are performing
well on improving economic indicators; will look to be opportunistic
amidst steady improvement in deal flow and sector activity
-- Total loan loss reserves (CECL and specific) declined by $22 million
largely driven by a stronger economic forecast compared to the prior
quarter
Financing and Capital
-- $8.8 billion of unencumbered assets, including cash and unencumbered
Agency MBS of $6.9 billion
-- Average GAAP cost of interest bearing liabilities and average economic
cost of interest bearing liabilities declined 36 basis points to 0.60%
and 0.93%, respectively
-- Annaly Residential Credit Group completed two residential whole loan
securitizations totaling $1.0 billion in the third quarter, bringing
aggregate issuances to over $5.0 billion since the beginning of 2018(2)
-- Repurchased $209 million of common stock year-to-date(3)
Corporate Responsibility & Governance
-- Demonstrated improved cost efficiency metrics relative to the second
quarter following the completion of the Internalization
-- Published inaugural Corporate Responsibility Report subsequent to quarter
end, highlighting Annaly's leadership across ESG practices and outlining
future goals and commitments for Annaly's five key ESG areas
-- Named first Head of Inclusion and established an Inclusion Support
Committee of executives, which represents the latest in a series of steps
to enhance Annaly's diversity initiatives and generate stronger returns
for our shareholders
"We are quite optimistic about the operating environment for our business - particularly for Agency MBS - due to low interest rate volatility, strong carry and the lowest financing costs we've seen in the last decade," stated David Finkelstein, Chief Executive Officer and Chief Investment Officer. "We took advantage of the rebound in risk sentiment to further enhance our cost of capital and liquidity profile - completing two securitizations totaling $1 billion. Amidst this backdrop, Annaly delivered a strong 6.3% quarterly economic return to shareholders driven by an increase in book value through proactive management of our portfolio and generated core earnings $0.10 higher than the dividend. These solid results were derived with lower leverage, and with nearly $7 billion of highly liquid unencumbered assets, we are poised to take advantage of opportunities we see across our market-leading platform."
"Additionally, I am proud that we published our inaugural Corporate Responsibility Report earlier this month on the 23rd anniversary of Annaly's IPO. The report showcases Annaly's accomplishments across key areas of ESG related to corporate governance, responsible investments, human capital and inclusion initiatives. We believe continued progress in these endeavors is critical in order to support long-term performance."
(1) Assets represent Annaly's investments that are on balance sheet, net of
securitized debt of consolidated VIEs, as well as investments that are
off-balance sheet in which the Company has economic exposure. Assets
include TBA purchase contracts (market value) of $21.1 billion and CMBX
derivatives (market value) of $471.9 million and are shown net of
securitized debt of consolidated VIEs of $6.0 billion.
(2) Includes three residential whole loan securitizations totaling $1.1
billion in 2018, five residential whole loan securitizations totaling
$2.1 billion in 2019 and four residential whole loan securitizations
totaling $1.8 billion in 2020.
(3) Share repurchases are under Annaly's current authorized share
repurchase program that expires in December 2020. Amounts exclude fees
and commissions and include $34 million of repurchases that settled
subsequent to quarter end.
Financial Performance
The following table summarizes certain key performance indicators as of and for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019:
September 30, June 30, September 30,
2020 2020 2019
Book value per
common share $ 8.70 $ 8.39 $ 9.21
Economic leverage
at period-end
(1) 6.2:1 6.4:1 7.7:1
GAAP net income
(loss) per
average common
share (2) $ 0.70 $ 0.58 $ (0.54)
Annualized GAAP
return (loss) on
average equity 29.02% 25.84% (19.32%)
Net interest
margin (3) 2.15% 1.89% 0.48%
Average yield on
interest earning
assets (4) 2.70% 2.77% 2.89%
Average GAAP cost
of interest
bearing
liabilities (5) 0.60% 0.96% 2.58%
Net interest
spread 2.10% 1.81% 0.31%
Non-GAAP metrics *
Core earnings
(excluding PAA)
per average
common share
(2) $ 0.32 $ 0.27 $ 0.21
Annualized core
return on
average equity
(excluding PAA) 13.79% 12.82% 8.85%
Net interest
margin
(excluding PAA)
(3) 2.05% 1.88% 1.10%
Average yield on
interest earning
assets
(excluding PAA)
(4) 2.86% 3.01% 3.26%
Average economic
cost of interest
bearing
liabilities (5) 0.93% 1.29% 2.28%
Net interest
spread
(excluding PAA) 1.93% 1.72% 0.98%
---
* Represents a non-GAAP financial measure. Please refer to the "Non-GAAP
Financial Measures" section for additional information.
(1) Computed as the sum of recourse debt, cost basis of to-be-announced
("TBA" and CMBX derivatives outstanding, and net forward purchases
(sales) of investments divided by total equity. Recourse debt consists
of repurchase agreements and other secured financing (excluding certain
non-recourse credit facilities). Securitized debt, certain credit
facilities (included within other secured financing) and mortgages
payable are non-recourse to the Company and are excluded from this
measure.
(2) Net of dividends on preferred stock. The quarter ended September 30,
2019 excludes cumulative and undeclared dividends of $0.3 million on
the Company's Series I Preferred Stock as of June 30, 2019.
(3) Net interest margin represents interest income less interest expense
divided by average Interest Earning Assets. Net interest margin
(excluding PAA) represents the sum of interest income (excluding PAA)
plus TBA dollar roll income and CMBX coupon income less interest
expense and the net interest component of interest rate swaps divided
by the sum of average Interest Earning Assets plus average outstanding
TBA contract and CMBX balances. PAA represents 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.
(4) Average yield on interest earning assets represents annualized interest
income divided by average interest earning assets. Average interest
earning assets reflects the average amortized cost of our investments
during the period. Average yield on interest earning assets (excluding
PAA) is calculated using annualized interest income (excluding PAA).
(5) Average GAAP cost of interest bearing liabilities represents annualized
interest expense divided by average interest bearing liabilities.
Average interest bearing liabilities reflects the average balances
during the period. Average economic cost of interest bearing
liabilities represents annualized economic interest expense divided by
average interest bearing liabilities. Economic interest expense is
comprised of GAAP interest expense and the net interest component of
interest rate swaps.
Other Information
(MORE TO FOLLOW) Dow Jones Newswires
October 28, 2020 16:15 ET (20:15 GMT)
4:15 PM ET 10/28/20 | BusinessWire
NEW YORK--(BUSINESS WIRE)--October 28, 2020--
Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company"
today announced its financial results for the quarter ended September 30, 2020. Financial Highlights
-- GAAP net income of $0.70 per average common share for the quarter, up
from $0.58 in the prior quarter
-- Core earnings (excluding PAA) of $0.32 per average common share for the
quarter, up 18.5% from the prior quarter
-- GAAP return on average equity of 29.0% and core return on average equity
(excluding PAA) of 13.8% for the quarter
-- Book value per common share of $8.70, up 3.7% from the prior quarter
-- Economic leverage of 6.2x, down from 6.4x in the prior quarter
-- Declared quarterly common stock cash dividend of $0.22 per share
-- Economic return of 6.3% for the third quarter
Business Highlights
Investment and Strategy
-- Capital allocation to Agency increased to 80% of dedicated equity capital,
which was largely driven by residential credit securitizations; highly
liquid Agency portfolio relatively unchanged at $96.3 billion and 94% of
Annaly's total assets(1)
-- Credit businesses remain conservatively positioned and are performing
well on improving economic indicators; will look to be opportunistic
amidst steady improvement in deal flow and sector activity
-- Total loan loss reserves (CECL and specific) declined by $22 million
largely driven by a stronger economic forecast compared to the prior
quarter
Financing and Capital
-- $8.8 billion of unencumbered assets, including cash and unencumbered
Agency MBS of $6.9 billion
-- Average GAAP cost of interest bearing liabilities and average economic
cost of interest bearing liabilities declined 36 basis points to 0.60%
and 0.93%, respectively
-- Annaly Residential Credit Group completed two residential whole loan
securitizations totaling $1.0 billion in the third quarter, bringing
aggregate issuances to over $5.0 billion since the beginning of 2018(2)
-- Repurchased $209 million of common stock year-to-date(3)
Corporate Responsibility & Governance
-- Demonstrated improved cost efficiency metrics relative to the second
quarter following the completion of the Internalization
-- Published inaugural Corporate Responsibility Report subsequent to quarter
end, highlighting Annaly's leadership across ESG practices and outlining
future goals and commitments for Annaly's five key ESG areas
-- Named first Head of Inclusion and established an Inclusion Support
Committee of executives, which represents the latest in a series of steps
to enhance Annaly's diversity initiatives and generate stronger returns
for our shareholders
"We are quite optimistic about the operating environment for our business - particularly for Agency MBS - due to low interest rate volatility, strong carry and the lowest financing costs we've seen in the last decade," stated David Finkelstein, Chief Executive Officer and Chief Investment Officer. "We took advantage of the rebound in risk sentiment to further enhance our cost of capital and liquidity profile - completing two securitizations totaling $1 billion. Amidst this backdrop, Annaly delivered a strong 6.3% quarterly economic return to shareholders driven by an increase in book value through proactive management of our portfolio and generated core earnings $0.10 higher than the dividend. These solid results were derived with lower leverage, and with nearly $7 billion of highly liquid unencumbered assets, we are poised to take advantage of opportunities we see across our market-leading platform."
"Additionally, I am proud that we published our inaugural Corporate Responsibility Report earlier this month on the 23rd anniversary of Annaly's IPO. The report showcases Annaly's accomplishments across key areas of ESG related to corporate governance, responsible investments, human capital and inclusion initiatives. We believe continued progress in these endeavors is critical in order to support long-term performance."
(1) Assets represent Annaly's investments that are on balance sheet, net of
securitized debt of consolidated VIEs, as well as investments that are
off-balance sheet in which the Company has economic exposure. Assets
include TBA purchase contracts (market value) of $21.1 billion and CMBX
derivatives (market value) of $471.9 million and are shown net of
securitized debt of consolidated VIEs of $6.0 billion.
(2) Includes three residential whole loan securitizations totaling $1.1
billion in 2018, five residential whole loan securitizations totaling
$2.1 billion in 2019 and four residential whole loan securitizations
totaling $1.8 billion in 2020.
(3) Share repurchases are under Annaly's current authorized share
repurchase program that expires in December 2020. Amounts exclude fees
and commissions and include $34 million of repurchases that settled
subsequent to quarter end.
Financial Performance
The following table summarizes certain key performance indicators as of and for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019:
September 30, June 30, September 30,
2020 2020 2019
Book value per
common share $ 8.70 $ 8.39 $ 9.21
Economic leverage
at period-end
(1) 6.2:1 6.4:1 7.7:1
GAAP net income
(loss) per
average common
share (2) $ 0.70 $ 0.58 $ (0.54)
Annualized GAAP
return (loss) on
average equity 29.02% 25.84% (19.32%)
Net interest
margin (3) 2.15% 1.89% 0.48%
Average yield on
interest earning
assets (4) 2.70% 2.77% 2.89%
Average GAAP cost
of interest
bearing
liabilities (5) 0.60% 0.96% 2.58%
Net interest
spread 2.10% 1.81% 0.31%
Non-GAAP metrics *
Core earnings
(excluding PAA)
per average
common share
(2) $ 0.32 $ 0.27 $ 0.21
Annualized core
return on
average equity
(excluding PAA) 13.79% 12.82% 8.85%
Net interest
margin
(excluding PAA)
(3) 2.05% 1.88% 1.10%
Average yield on
interest earning
assets
(excluding PAA)
(4) 2.86% 3.01% 3.26%
Average economic
cost of interest
bearing
liabilities (5) 0.93% 1.29% 2.28%
Net interest
spread
(excluding PAA) 1.93% 1.72% 0.98%
---
* Represents a non-GAAP financial measure. Please refer to the "Non-GAAP
Financial Measures" section for additional information.
(1) Computed as the sum of recourse debt, cost basis of to-be-announced
("TBA"
and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists
of repurchase agreements and other secured financing (excluding certain
non-recourse credit facilities). Securitized debt, certain credit
facilities (included within other secured financing) and mortgages
payable are non-recourse to the Company and are excluded from this
measure.
(2) Net of dividends on preferred stock. The quarter ended September 30,
2019 excludes cumulative and undeclared dividends of $0.3 million on
the Company's Series I Preferred Stock as of June 30, 2019.
(3) Net interest margin represents interest income less interest expense
divided by average Interest Earning Assets. Net interest margin
(excluding PAA) represents the sum of interest income (excluding PAA)
plus TBA dollar roll income and CMBX coupon income less interest
expense and the net interest component of interest rate swaps divided
by the sum of average Interest Earning Assets plus average outstanding
TBA contract and CMBX balances. PAA represents 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.
(4) Average yield on interest earning assets represents annualized interest
income divided by average interest earning assets. Average interest
earning assets reflects the average amortized cost of our investments
during the period. Average yield on interest earning assets (excluding
PAA) is calculated using annualized interest income (excluding PAA).
(5) Average GAAP cost of interest bearing liabilities represents annualized
interest expense divided by average interest bearing liabilities.
Average interest bearing liabilities reflects the average balances
during the period. Average economic cost of interest bearing
liabilities represents annualized economic interest expense divided by
average interest bearing liabilities. Economic interest expense is
comprised of GAAP interest expense and the net interest component of
interest rate swaps.
Other Information
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October 28, 2020 16:15 ET (20:15 GMT)
