Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the
"Company") today announced its financial results for the quarter
and year ended December 31, 2023.
Financial Highlights
- GAAP net income (loss) of ($0.88) per average common share for
the quarter; ($3.61) per average common share for the full year
2023
- Earnings available for distribution ("EAD") of $0.68 per
average common share for the quarter; $2.86 per average common
share for the full year 2023
- Economic return of 10.1% for the fourth quarter; economic
return of 6.0% for the full year 2023
- Book value per common share of $19.44
- GAAP leverage of 6.8x, down from 7.1x in the prior quarter;
economic leverage of 5.7x, down from 6.4x in the prior quarter
- Declared quarterly common stock cash dividend of $0.65 per
share
Business Highlights
Fourth Quarter 2023 Highlights
- Total portfolio of $74.3 billion, including $65.7 billion in
highly liquid Agency portfolio(1)
- Annaly's Agency portfolio decreased modestly by 4%, with
portfolio activity focused on the continued rotation up in coupon,
reduction of TBA position and growth of Agency CMBS position
- Annaly's Agency portfolio represents 62% of dedicated equity
capital(2), down from 64% in the prior quarter
- Reduced interest rate hedges as portfolio duration contracted
amidst strong fixed income performance; hedge ratio decreased from
115% to 106% during the quarter
- Annaly's Residential Credit portfolio increased 9% to $5.7
billion(1), representing 20% of dedicated equity capital(2)
- Continued growth driven by strong performance from our
correspondent channel; quarterly lock volume of $2.7 billion and
$1.8 billion of whole loans settled during the quarter, 90% of
which were acquired through our correspondent channel
- Annaly's Mortgage Servicing Rights ("MSR") portfolio increased
18% quarter-over-quarter to $2.7 billion(1) in assets, representing
18% of dedicated equity capital(2)
- Annaly MSR Group upsized existing credit facilities by $500
million during the quarter
- Average GAAP cost of interest bearing liabilities increased 10
basis points to 5.37% and average economic cost of interest bearing
liabilities increased 14 basis points to 3.42%
quarter-over-quarter
- Weighted average days to maturity for repurchase agreements
decreased to 44 days from 52 days in the prior quarter
- $6.2 billion of total assets available for financing(3),
including cash and unencumbered Agency MBS of $3.8 billion
Full-Year 2023 Highlights
Investment and Strategy
- Annaly's Agency portfolio activity focused on shifting up in
coupon throughout 2023 (share of portfolio in 5.0% or above coupons
increased from 31% to 48% year-over-year), while rotating out of
our TBA position throughout the year in favor of specified
pools
- Annaly's Residential Credit portfolio increased by 14%
year-over-year, driven by $4.7 billion of whole loan purchases in
2023, of which $3.9 billion were acquired through our correspondent
channel
- As the fifth largest purchaser(4) of MSR in 2023, Annaly's MSR
portfolio grew by 50% year-over-year
Financing and Capital
- Continued to proactively manage leverage profile throughout the
year amidst substantial volatility; economic leverage decreased
from 6.3x at the end of 2022 to 5.7x at year-end
- Annaly Residential Credit Group priced 16 whole loan
securitizations totaling $6.3 billion since the beginning of
2023(5)
- Annaly remains the largest non-bank issuer and the second
largest issuer overall of Prime Jumbo and Expanded Credit MBS from
the beginning of 2022 through 2023 year-end(6)
- Raised $674 million of accretive common equity through the
Company’s at-the-market (“ATM”) sales program(7)
Corporate Responsibility & Governance
- Published fourth ESG Report titled 25 Years of Purposeful
Housing Finance Leadership
- Expanded Board of Directors with election of three new
Independent Directors: Martin Laguerre, Manon Laroche and Scott
Wede
- Annaly's Board of Directors is currently 83% independent with
58% of members identifying as women and/or racially/ethnically
diverse
"Annaly delivered a 10.1% economic return in the fourth quarter
as interest rates declined and mortgage-related assets exhibited
strong performance,” remarked David Finkelstein, Annaly’s Chief
Executive Officer and Chief Investment Officer. “More broadly, we
are proud to have generated a 6.0% economic return in 2023 through
what was another historically volatile year in fixed income
markets. We view this performance as a testament to Annaly’s
diversified housing finance model and prudent portfolio and risk
management.
"Importantly, we continued to make progress in expanding our
capabilities and leadership across housing finance as we further
scaled our Residential Credit and MSR businesses last year.
Throughout 2023, we increased our capital allocation to our
non-Agency strategies largely driven by nearly $5 billion of whole
loan purchases and $925 million(8) of MSR acquisitions. We continue
to believe the synergies between our three investment strategies
will allow Annaly to generate superior risk-adjusted returns across
a variety of economic environments. As the Federal Reserve likely
shifts to a more accommodative monetary policy in 2024, we are
encouraged by the improving operating environment we have
experienced in recent months and are optimistic on the outlook for
each of our businesses."
(1)
Total portfolio represents Annaly’s
investments that are on-balance sheet as well as investments that
are off-balance sheet in which Annaly has economic exposure. Assets
reflect TBA purchase contracts (market value) of ($0.6) billion,
exclude assets transferred or pledged to securitization vehicles of
$13.3 billion and include unsettled MSR commitments of $0.5
million and $1.4 billion of retained securities that are
eliminated in consolidation and are shown net of participations
issued totaling $1.1 billion. MSR commitments represent the
market value of deals where Annaly has executed a letter of intent.
There can be no assurance whether these deals will close or when
they will close.
(2)
Capital allocation for each of the
investment strategies is calculated as the difference between each
investment strategy’s allocated assets, which include TBA purchase
contracts, and liabilities. Dedicated capital allocations as of
December 31, 2023 exclude commercial real estate assets.
(3)
Represents $5.2 billion of unencumbered
assets, which represents Annaly’s excess liquidity and defined as
assets that have not been pledged or securitized (generally
including cash and cash equivalents, Agency MBS, CRT, Non-Agency
MBS, residential mortgage loans, MSR, reverse repurchase
agreements, other unencumbered financial assets and capital stock),
and $1.0 billion of fair value of collateral pledged for future
advances.
(4)
Information aggregated from 2023 Fannie
Mae and Freddie Mac monthly loan level files by eMBS servicing
transfer data as of December 31, 2023.
(5)
Includes a $414 million and $496 million
whole loan securitization that priced in January 2024 and a $412
million whole loan securitization that priced in February 2024.
(6)
Issuer ranking data from Inside
Nonconforming Markets for 2022 through 2023 year end (January 5,
2024 issue).
(7)
Net of sales agent commissions and
excluding other offering expenses.
(8)
Includes unsettled commitments of $518
million. MSR commitments represent the market value of deals where
Annaly has executed a letter of intent. There can be no assurance
whether these deals will close or when they will close.
Financial Performance
The following table summarizes certain key performance
indicators as of and for the quarters ended December 31, 2023,
September 30, 2023 and December 31, 2022:
December 31, 2023
September 30, 2023
December 31, 2022
Book value per common share
$
19.44
$
18.25
$
20.79
GAAP net income (loss) per average common
share (1)
$
(0.88
)
$
(1.21
)
$
(1.96
)
Annualized GAAP return (loss) on average
equity (2)
(14.21
%)
(20.18
%)
(31.78
%)
GAAP leverage at period-end (3)
6.8:1
7.1:1
6.0:1
Net interest margin (4)
(0.25
%)
(0.20
%)
0.65
%
Average yield on interest earning assets
(5)
4.55
%
4.49
%
3.86
%
Average GAAP cost of interest bearing
liabilities (6)
5.37
%
5.27
%
3.71
%
Net interest spread
(0.82
%)
(0.78
%)
0.15
%
Non-GAAP metrics *
Earnings available for distribution per
average common share (1)
$
0.68
$
0.66
$
0.89
Annualized EAD return on average
equity
13.76
%
12.96
%
16.19
%
Economic leverage at period-end (3)
5.7:1
6.4:1
6.3:1
Net interest margin (excluding PAA)
(4)
1.58
%
1.48
%
1.90
%
Average yield on interest earning assets
(excluding PAA) (5)
4.64
%
4.46
%
3.82
%
Average economic cost of interest bearing
liabilities (6)
3.42
%
3.28
%
2.11
%
Net interest spread (excluding PAA)
1.22
%
1.18
%
1.71
%
*
Represents a non-GAAP financial measure.
Please refer to the "Non-GAAP Financial Measures" section for
additional information.
(1)
Net of dividends on preferred stock.
(2)
Annualized GAAP return (loss) on average
equity annualizes realized and unrealized gains and (losses) which
may not be indicative of full year performance, unannualized GAAP
return (loss) on average equity is (3.55%), (5.04%), and (7.95%)
for the quarters ended December 31, 2023, September 30, 2023, and
December 31, 2022, respectively.
(3)
GAAP leverage is computed as the sum of
repurchase agreements, other secured financing, debt issued by
securitization vehicles, participations issued, and U.S. Treasury
securities sold, not yet purchased divided by total equity.
Economic leverage is 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, other
secured financing, and US Treasury securities, sold, not yet
purchased. Debt issued by securitization vehicles and
participations issued are non-recourse to the Company and are
excluded from economic leverage.
(4)
Net interest margin represents interest
income less interest expense divided by average Interest Earning
Assets. Net interest margin does not include net interest component
of interest rate swaps. 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.
(5)
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).
(6)
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
This news release 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. Such statements include those
relating to the Company’s future performance, macro outlook, the
interest rate and credit environments, tax reform and future
opportunities. Actual results could differ materially from those
set forth in forward-looking statements due to a variety of
factors, including, but not limited to, changes in interest rates;
changes in the yield curve; changes in prepayment rates; the
availability of mortgage-backed securities ("MBS") and other
securities for purchase; the availability of financing and, if
available, the terms of any financing; changes in the market value
of the Company’s assets; changes in business conditions and the
general economy; the Company’s ability to grow its residential
credit business; the Company's ability to grow its mortgage
servicing rights business; credit risks related to the Company’s
investments in credit risk transfer securities and residential
mortgage-backed securities and related residential mortgage credit
assets; risks related to investments in mortgage servicing rights;
the Company’s ability to consummate any contemplated investment
opportunities; changes in government regulations or policy
affecting the Company’s business; the Company’s ability to maintain
its qualification as a REIT for U.S. federal income tax purposes;
the Company’s ability to maintain its exemption from registration
under the Investment Company Act of 1940; and operational risks or
risk management failures by us or critical third parties, including
cybersecurity incidents. 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.
Annaly is a leading diversified capital manager with investment
strategies across mortgage finance. Annaly’s principal business
objective is to generate net income for distribution to its
stockholders and to optimize its returns through prudent management
of its diversified investment strategies. Annaly is internally
managed and has elected to be taxed as a real estate investment
trust, or REIT, for federal income tax purposes. Additional
information on the company can be found at www.annaly.com.
We use our website (www.annaly.com) and LinkedIn account
(www.linkedin.com/company/annaly-capital-management) as channels of
distribution of company information. The information we post
through these channels may be deemed material. Accordingly,
investors should monitor these channels, in addition to following
our press releases, SEC filings and public conference calls and
webcasts. In addition, you may automatically receive email alerts
and other information about Annaly when you enroll your email
address by visiting the "Investors" section of our website, then
clicking on "Investor Resources" and selecting "Email Alerts" to
complete the email notification form. Our website, any alerts and
social media channels are not incorporated by reference into, and
are not a part of, this document.
The Company prepares an investor presentation and supplemental
financial information for the benefit of its shareholders. Please
refer to the investor presentation for definitions of both GAAP and
non-GAAP measures used in this news release. Both the Fourth
Quarter 2023 Investor Presentation and the Fourth Quarter 2023
Supplemental Information can be found at the Company’s website
(www.annaly.com) in the "Investors" section under "Investor
Presentations."
Conference Call
The Company will hold the fourth quarter 2023 earnings
conference call on February 8, 2024 at 9:00 a.m. Eastern Time.
Participants are encouraged to pre-register for the conference call
to receive a unique PIN to gain immediate access to the call and
bypass the live operator. Pre-registration may be completed by
accessing the pre-registration link found on the homepage or
"Investors" section of the Company's website at www.annaly.com, or
by using the following link:
https://dpregister.com/sreg/10185614/fb5fd41a36. Pre-registration
may be completed at any time, including up to and after the call
start time.
For participants who would like to join the call but have not
pre-registered, access is available by dialing 844-735-3317 within
the U.S., or 412-317-5703 internationally, and requesting the
"Annaly Earnings Call."
There will also be an audio webcast of the call on
www.annaly.com. A replay of the call will be available for one week
following the conference call. The replay number is 877-344-7529
for domestic calls and 412-317-0088 for international calls and the
conference passcode is 4036599. If you would like to be added to
the e-mail distribution list, please visit www.annaly.com, click on
Investors, then select Email Alerts and complete the email
notification form.
Financial Statements
ANNALY CAPITAL MANAGEMENT,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
FINANCIAL CONDITION
(dollars in thousands, except
per share data)
December 31, 2023
September 30,
2023
June 30, 2023
March 31, 2023
December 31, 2022 (1)
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Assets
Cash and cash equivalents
$
1,412,148
$
1,241,122
$
1,236,872
$
1,794,173
$
1,576,714
Securities
69,613,565
69,860,730
71,202,461
69,238,185
65,789,907
Loans, net
2,353,084
1,793,140
1,154,320
1,642,822
1,809,832
Mortgage servicing rights
2,122,196
2,234,813
2,018,896
1,790,980
1,748,209
Assets transferred or pledged to
securitization vehicles
13,307,622
11,450,346
11,318,419
10,277,588
9,121,912
Derivative assets
162,557
549,833
457,119
400,139
342,064
Receivable for unsettled trades
2,710,224
1,047,566
787,442
679,096
575,091
Principal and interest receivable
1,222,705
1,158,648
944,537
773,722
637,301
Intangible assets, net
12,106
12,778
15,163
15,921
16,679
Other assets
311,029
299,447
195,248
219,391
233,003
Total assets
$
93,227,236
$
89,648,423
$
89,330,477
$
86,832,017
$
81,850,712
Liabilities and stockholders’
equity
Liabilities
Repurchase agreements
$
62,201,543
$
64,693,821
$
61,637,600
$
60,993,018
$
59,512,597
Other secured financing
500,000
500,000
500,000
250,000
250,000
Debt issued by securitization vehicles
11,600,338
9,983,847
9,789,282
8,805,911
7,744,160
Participations issued
1,103,835
788,442
492,307
673,431
800,849
U.S. Treasury securities sold, not yet
purchased
2,132,751
—
—
—
—
Derivative liabilities
302,295
97,616
156,182
473,515
204,172
Payable for unsettled trades
3,249,389
2,214,319
4,331,315
3,259,034
1,157,846
Interest payable
287,937
198,084
140,620
118,395
325,280
Dividends payable
325,052
321,629
321,031
321,023
412,113
Other liabilities
179,005
173,608
74,795
28,657
74,269
Total liabilities
81,882,145
78,971,366
77,443,132
74,922,984
70,481,286
Stockholders’ equity
Preferred stock, par value $0.01 per share
(2)
1,536,569
1,536,569
1,536,569
1,536,569
1,536,569
Common stock, par value $0.01 per share
(3)
5,001
4,948
4,939
4,939
4,683
Additional paid-in capital
23,672,391
23,572,996
23,550,346
23,543,091
22,981,320
Accumulated other comprehensive income
(loss)
(1,335,400
)
(2,694,776
)
(2,382,531
)
(2,550,614
)
(3,708,896
)
Accumulated deficit
(12,622,768
)
(11,855,267
)
(10,933,044
)
(10,741,863
)
(9,543,233
)
Total stockholders’ equity
11,255,793
10,564,470
11,776,279
11,792,122
11,270,443
Noncontrolling interests
89,298
112,587
111,066
116,911
98,983
Total equity
11,345,091
10,677,057
11,887,345
11,909,033
11,369,426
Total liabilities and equity
$
93,227,236
$
89,648,423
$
89,330,477
$
86,832,017
$
81,850,712
(1)
Derived from the audited consolidated
financial statements at December 31, 2022.
(2)
6.95% Series F Fixed-to-Floating Rate
Cumulative Redeemable Preferred Stock - Includes 28,800,000 shares
authorized, issued and outstanding. 6.50% Series G
Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock -
Includes 17,000,000 shares authorized, issued and outstanding.
6.75% Series I Preferred Stock - Includes 17,700,000 shares
authorized, issued and outstanding.
(3)
Includes 1,468,250,000 shares authorized.
Includes 500,080,287 shares issued and outstanding at December 31,
2023, 494,814,038 shares issued and outstanding at September 30,
2023, 493,893,288 shares issued and outstanding at June 30, 2023,
493,880,938 shares issued and outstanding at March 31, 2023,
468,309,810 shares issued and outstanding at December 31, 2022.
ANNALY CAPITAL MANAGEMENT,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except
per share data)
(Unaudited)
For the quarters ended
December 31, 2023
September 30,
2023
June 30, 2023
March 31, 2023
December 31,
2022
Net interest income
Interest income
$
990,352
$
1,001,485
$
921,494
$
818,250
$
798,934
Interest expense
1,043,902
1,046,819
953,457
798,787
663,847
Net interest income
(53,550
)
(45,334
)
(31,963
)
19,463
135,087
Net servicing income
Servicing and related income
98,474
97,620
83,790
84,273
82,040
Servicing and related expense
11,219
9,623
8,930
7,880
7,659
Net servicing income
87,255
87,997
74,860
76,393
74,381
Other income (loss)
Net gains (losses) on investments and
other
1,894,744
(2,713,126
)
(1,308,948
)
1,712
(1,124,924
)
Net gains (losses) on derivatives
(2,301,911
)
2,127,430
1,475,325
(900,752
)
84,263
Loan loss (provision) reversal
—
—
—
219
(7,258
)
Business divestiture-related gains
(losses)
—
—
—
—
(13,013
)
Other, net
22,863
26,250
9,105
15,498
7,569
Total other income (loss)
(384,304
)
(559,446
)
175,482
(883,323
)
(1,053,363
)
General and administrative
expenses
Compensation expense
29,502
30,064
30,635
29,391
29,714
Other general and administrative
expenses
9,399
9,845
12,280
11,437
13,291
Total general and administrative
expenses
38,901
39,909
42,915
40,828
43,005
Income (loss) before income
taxes
(389,500
)
(556,692
)
175,464
(828,295
)
(886,900
)
Income taxes
1,732
12,392
14,277
11,033
(86
)
Net income (loss)
(391,232
)
(569,084
)
161,187
(839,328
)
(886,814
)
Net income (loss) attributable to
noncontrolling interests
12,511
(6,879
)
(5,846
)
4,928
1,548
Net income (loss) attributable to
Annaly
(403,743
)
(562,205
)
167,033
(844,256
)
(888,362
)
Dividends on preferred stock
37,181
36,854
35,766
31,875
29,974
Net income (loss) available (related)
to common stockholders
$
(440,924
)
$
(599,059
)
$
131,267
$
(876,131
)
$
(918,336
)
Net income (loss) per share available
(related) to common stockholders
Basic
$
(0.88
)
$
(1.21
)
$
0.27
$
(1.79
)
$
(1.96
)
Diluted
$
(0.88
)
$
(1.21
)
$
0.27
$
(1.79
)
$
(1.96
)
Weighted average number of common
shares outstanding
Basic
499,871,725
494,330,361
494,165,256
489,688,364
468,250,672
Diluted
499,871,725
494,330,361
494,358,982
489,688,364
468,250,672
Other comprehensive income
(loss)
Net income (loss)
$
(391,232
)
$
(569,084
)
$
161,187
$
(839,328
)
$
(886,814
)
Unrealized gains (losses) on
available-for-sale securities
1,024,637
(825,286
)
(294,045
)
675,374
445,896
Reclassification adjustment for net
(gains) losses included in net income (loss)
334,739
513,041
462,128
482,908
1,276,644
Other comprehensive income
(loss)
1,359,376
(312,245
)
168,083
1,158,282
1,722,540
Comprehensive income (loss)
968,144
(881,329
)
329,270
318,954
835,726
Comprehensive income (loss) attributable
to noncontrolling interests
12,511
(6,879
)
(5,846
)
4,928
1,548
Comprehensive income (loss)
attributable to Annaly
955,633
(874,450
)
335,116
314,026
834,178
Dividends on preferred stock
37,181
36,854
35,766
31,875
29,974
Comprehensive income (loss)
attributable to common stockholders
$
918,452
$
(911,304
)
$
299,350
$
282,151
$
804,204
ANNALY CAPITAL MANAGEMENT,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except
per share data)
For the years ended
December 31, 2023
December 31, 2022 (1)
(unaudited)
Net interest income
Interest income
$
3,731,581
$
2,778,887
Interest expense
3,842,965
1,309,735
Net interest income
(111,384
)
1,469,152
Net servicing income
Servicing and related income
364,157
246,926
Servicing and related expense
37,652
25,145
Net servicing income
326,505
221,781
Other income (loss)
Net gains (losses) on investments and
other
(2,125,618
)
(4,602,456
)
Net gains (losses) on derivatives
400,092
4,859,174
Loan loss (provision) reversal
219
20,660
Business divestiture-related gains
(losses)
—
(40,258
)
Other, net
73,716
6,667
Total other income (loss)
(1,651,591
)
243,787
General and administrative
expenses
Compensation expense
119,592
112,703
Other general and administrative
expenses
42,961
50,026
Total general and administrative
expenses
162,553
162,729
Income (loss) before income
taxes
(1,599,023
)
1,771,991
Income taxes
39,434
45,571
Net income (loss)
(1,638,457
)
1,726,420
Net income (loss) attributable to
noncontrolling interests
4,714
1,095
Net income (loss) attributable to
Annaly
(1,643,171
)
1,725,325
Dividends on preferred stock
141,676
110,623
Net income (loss) available (related)
to common stockholders
$
(1,784,847
)
$
1,614,702
Net income (loss) per share available
(related) to common stockholders
Basic
$
(3.61
)
$
3.93
Diluted
$
(3.61
)
$
3.92
Weighted average number of common
shares outstanding
Basic
494,541,323
411,348,484
Diluted
494,541,323
411,621,758
Other comprehensive income
(loss)
Net income (loss)
$
(1,638,457
)
$
1,726,420
Unrealized gains (losses) on
available-for-sale securities
580,680
(8,204,542
)
Reclassification adjustment for net
(gains) losses included in net income (loss)
1,792,816
3,537,236
Other comprehensive income
(loss)
2,373,496
(4,667,306
)
Comprehensive income (loss)
735,039
(2,940,886
)
Comprehensive income (loss) attributable
to noncontrolling interests
4,714
1,095
Comprehensive income (loss)
attributable to Annaly
730,325
(2,941,981
)
Dividends on preferred stock
141,676
110,623
Comprehensive income (loss)
attributable to common stockholders
$
588,649
$
(3,052,604
)
(1) Derived from the audited consolidated
financial statements at December 31, 2022.
Key Financial Data
The following table presents key metrics of the Company’s
portfolio, liabilities and hedging positions, and performance as of
and for the quarters ended December 31, 2023, September 30, 2023
and December 31, 2022:
December 31, 2023
September 30, 2023
December 31, 2022
Portfolio related metrics
Fixed-rate Residential Securities as a
percentage of total Residential Securities
98
%
98
%
98
%
Adjustable-rate and floating-rate
Residential Securities as a percentage of total Residential
Securities
2
%
2
%
2
%
Weighted average experienced CPR for the
period
6.3
%
7.3
%
7.5
%
Weighted average projected long-term CPR
at period-end
9.4
%
7.1
%
7.8
%
Liabilities and hedging metrics
Weighted average days to maturity on
repurchase agreements outstanding at period-end
44
52
27
Hedge ratio (1)
106
%
115
%
107
%
Weighted average pay rate on interest rate
swaps at period-end (2)
3.04
%
2.61
%
1.74
%
Weighted average receive rate on interest
rate swaps at period-end (2)
5.31
%
5.27
%
4.28
%
Weighted average net rate on interest rate
swaps at period-end (2)
(2.27
%)
(2.66
%)
(2.54
%)
GAAP leverage at period-end (3)
6.8:1
7.1:1
6.0:1
GAAP capital ratio at period-end (4)
12.2
%
11.9
%
13.9
%
Performance related metrics
Book value per common share
$
19.44
$
18.25
$
20.79
GAAP net income (loss) per average common
share(5)
$
(0.88
)
$
(1.21
)
$
(1.96
)
Annualized GAAP return (loss) on average
equity(6)
(14.21
%)
(20.18
%)
(31.78
%)
Net interest margin (7)
(0.25
%)
(0.20
%)
0.65
%
Average yield on interest earning assets
(8)
4.55
%
4.49
%
3.86
%
Average GAAP cost of interest bearing
liabilities (9)
5.37
%
5.27
%
3.71
%
Net interest spread
(0.82
%)
(0.78
%)
0.15
%
Dividend declared per common share
$
0.65
$
0.65
$
0.88
Annualized dividend yield (10)
13.42
%
13.82
%
16.70
%
Non-GAAP metrics *
Earnings available for distribution per
average common share (5)
$
0.68
$
0.66
$
0.89
Annualized EAD return on average equity
(excluding PAA)
13.76
%
12.96
%
16.19
%
Economic leverage at period-end (3)
5.7:1
6.4:1
6.3:1
Economic capital ratio at period end
(4)
14.0
%
13.1
%
13.4
%
Net interest margin (excluding PAA)
(7)
1.58
%
1.48
%
1.90
%
Average yield on interest earning assets
(excluding PAA) (8)
4.64
%
4.46
%
3.82
%
Average economic cost of interest bearing
liabilities (9)
3.42
%
3.28
%
2.11
%
Net interest spread (excluding PAA)
1.22
%
1.18
%
1.71
%
*
Represents a non-GAAP financial measure.
Please refer to the "Non-GAAP Financial Measures" section for
additional information.
(1)
Measures total notional balances of
interest rate swaps, interest rate swaptions (excluding receiver
swaptions), futures and U.S. Treasury securities sold, not yet
purchased, relative to repurchase agreements, other secured
financing, cost basis of TBA derivatives outstanding and net
forward purchases (sales) of investments; excludes MSR and the
effects of term financing, both of which serve to reduce interest
rate risk. Additionally, the hedge ratio does not take into
consideration differences in duration between assets and
liabilities.
(2)
Excludes forward starting swaps.
(3)
GAAP leverage is computed as the sum of
repurchase agreements, other secured financing, debt issued by
securitization vehicles, participations issued, and U.S. Treasury
securities sold, not yet purchased divided by total equity.
Economic leverage is 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, other
secured financing, and U.S. Treasury securities sold, not yet
purchased. Debt issued by securitization vehicles and
participations issued are non-recourse to the Company and are
excluded from economic leverage.
(4)
GAAP capital ratio is computed as total
equity divided by total assets. Economic capital ratio is computed
as total equity divided by total economic assets. Total economic
assets include the implied market value of TBA derivatives and are
net of debt issued by securitization vehicles.
(5)
Net of dividends on preferred stock.
(6)
Annualized GAAP return (loss) on average
equity annualizes realized and unrealized gains and (losses) which
may not be indicative of full year performance, unannualized GAAP
return (loss) on average equity is (3.55%), (5.04%), and (7.95%)
for the quarters ended December 31, 2023, September 30, 2023, and
December 31, 2022, respectively.
(7)
Net interest margin represents interest
income less interest expense divided by average interest earning
assets. Net interest margin does not include net interest component
of interest rate swaps. 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 TBA contract
and CMBX balances.
(8)
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).
(9)
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.
(10)
Based on the closing price of the
Company’s common stock of $19.37, $18.81 and $21.08 at December 31,
2023, September 30, 2023 and December 31, 2022,
respectively.
The following table contains additional information on our
investment portfolio as of the dates presented:
For the quarters ended
December 31, 2023
September 30, 2023
December 31, 2022
Agency mortgage-backed securities
$
66,308,788
$
66,591,536
$
62,274,895
Residential credit risk transfer
securities
974,059
982,951
997,557
Non-agency mortgage-backed securities
2,108,274
2,063,861
1,991,146
Commercial mortgage-backed securities
222,444
222,382
526,309
Total securities
$
69,613,565
$
69,860,730
$
65,789,907
Residential mortgage loans
$
2,353,084
$
1,793,140
$
1,809,832
Total loans, net
$
2,353,084
$
1,793,140
$
1,809,832
Mortgage servicing rights
$
2,122,196
$
2,234,813
$
1,748,209
Residential mortgage loans transferred or
pledged to securitization vehicles
13,307,622
11,450,346
9,121,912
Assets transferred or pledged to
securitization vehicles
$
13,307,622
$
11,450,346
$
9,121,912
Total investment portfolio
$
87,396,467
$
85,339,029
$
78,469,860
Non-GAAP Financial
Measures
To supplement its consolidated financial statements, which are
prepared and presented in accordance with U.S. generally accepted
accounting principles ("GAAP"), the Company provides the following
non-GAAP measures:
- earnings available for distribution ("EAD");
- earnings available for distribution attributable to common
stockholders;
- earnings available for distribution per average common
share;
- annualized EAD return on average equity;
- economic leverage;
- economic capital ratio;
- interest income (excluding PAA);
- economic interest expense;
- economic net interest income (excluding PAA);
- average yield on interest earning assets (excluding PAA);
- average economic cost of interest bearing liabilities;
- net interest margin (excluding PAA); and
- net interest spread (excluding PAA).
These measures should not be considered a substitute for, or
superior to, financial measures computed in accordance with GAAP.
While intended to offer a fuller understanding of the Company’s
results and operations, non-GAAP financial measures also have
limitations. For example, the Company may calculate its non-GAAP
metrics, such as earnings available for distribution, or the PAA,
differently than its peers making comparative analysis difficult.
Additionally, in the case of non-GAAP measures that exclude the
PAA, the amount of amortization expense excluding the PAA is not
necessarily representative of the amount of future periodic
amortization nor is it indicative of the term over which the
Company will amortize the remaining unamortized premium. Changes to
actual and estimated prepayments will impact the timing and amount
of premium amortization and, as such, both GAAP and non-GAAP
results.
These non-GAAP measures provide additional detail to enhance
investor understanding of the Company’s period-over-period
operating performance and business trends, as well as for assessing
the Company’s performance versus that of industry peers. Additional
information pertaining to the Company’s use of these non-GAAP
financial measures, including discussion of how each such measure
may be useful to investors, and reconciliations to their most
directly comparable GAAP results are provided below.
Earnings available for distribution, earnings available for
distribution attributable to common stockholders, earnings
available for distribution per average common share and annualized
EAD return on average equity
The Company's principal business objective is to generate net
income for distribution to its stockholders and to preserve capital
through prudent selection of investments and continuous management
of its portfolio. The Company generates net income by earning a net
interest spread on its investment portfolio, which is a function of
interest income from its investment portfolio less financing,
hedging and operating costs. Earnings available for distribution,
which is defined as the sum of (a) economic net interest income,
(b) TBA dollar roll income and CMBX coupon income, (c) net
servicing income less realized amortization of MSR, (d) other
income (loss) (excluding 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 is used by the
Company's management and, the Company believes, used by analysts
and investors to measure its progress in achieving its principal
business objective.
The Company seeks to fulfill this objective through a variety of
factors including portfolio construction, the degree of market risk
exposure and related hedge profile, and the use and forms of
leverage, all while operating within the parameters of the
Company's capital allocation policy and risk governance
framework.
The Company believes these non-GAAP measures provide management
and investors with additional details regarding the Company’s
underlying operating results and investment portfolio trends by (i)
making adjustments to account for the disparate reporting of
changes in fair value where certain instruments are reflected in
GAAP net income (loss) while others are reflected in other
comprehensive income (loss) and (ii) by excluding certain
unrealized, non-cash or episodic components of GAAP net income
(loss) in order to provide additional transparency into the
operating performance of the Company’s portfolio. In addition, EAD
serves as a useful indicator for investors in evaluating the
Company's performance and ability to pay dividends. Annualized EAD
return on average equity, which is calculated by dividing earnings
available for distribution over average stockholders’ equity,
provides investors with additional detail on the earnings available
for distribution generated by the Company’s invested equity
capital.
The following table presents a reconciliation of GAAP financial
results to non-GAAP earnings available for distribution for the
periods presented:
For the quarters ended
December 31, 2023
September 30, 2023
December 31, 2022
(dollars in thousands, except
per share data)
GAAP net income (loss)
$
(391,232
)
$
(569,084
)
$
(886,814
)
Adjustments to exclude reported
realized and unrealized (gains) losses
Net (gains) losses on investments and
other (1)
(1,887,795
)
2,710,208
1,124,924
Net (gains) losses on derivatives (2)
2,681,288
(1,732,753
)
202,337
Loan loss provision (reversal)
—
—
7,258
Business divestiture-related (gains)
losses
—
—
13,013
Other adjustments
Amortization of intangibles
673
2,384
758
Non-EAD (income) loss allocated to equity
method investments (3)
197
(140
)
(306
)
Transaction expenses and non-recurring
items (4)
2,319
1,882
807
Income tax effect of non-EAD income (loss)
items
1,484
9,444
(418
)
TBA dollar roll income and CMBX coupon
income (5)
1,720
(1,016
)
34,767
MSR amortization (6)
(48,358
)
(49,073
)
(38,633
)
EAD attributable to noncontrolling
interests
(4,014
)
(3,811
)
(1,548
)
Premium amortization adjustment cost
(benefit)
19,148
(6,062
)
(8,136
)
Earnings available for distribution
*
375,430
361,979
448,009
Dividends on preferred stock
37,181
36,854
29,974
Earnings available for distribution
attributable to common stockholders *
$
338,249
$
325,125
$
418,035
GAAP net income (loss) per average
common share
$
(0.88
)
$
(1.21
)
$
(1.96
)
Earnings available for distribution per
average common share *
$
0.68
$
0.66
$
0.89
Annualized GAAP return (loss) on
average equity (7)
(14.21
%)
(20.18
%)
(31.78
%)
Annualized EAD return on average equity
*
13.76
%
12.96
%
16.19
%
*
Represents a non-GAAP financial
measure.
(1)
Includes write-downs or recoveries on
investments which are reported in Other, net in the Company's
Consolidated Statement of Comprehensive Income (Loss).
(2)
The adjustment to add back Net (gains)
losses on derivatives does not include the net interest component
of interest rate swaps which is reflected in earnings available for
distribution. The net interest component of interest rate swaps
totaled $379.4 million, $394.7 million and $286.6 million for the
quarters ended December 31, 2023, September 30, 2023 and
December 31, 2022, respectively.
(3)
The Company excludes non-EAD (income) loss
allocated to equity method investments, which represents the
unrealized (gains) losses allocated to equity interests in a
portfolio of MSR, which is a component of Other, net.
(4)
Represents costs incurred in connection
with securitizations of residential whole loans.
(5)
TBA dollar roll income and CMBX coupon
income each represent a component of Net gains (losses) on
derivatives. CMBX coupon income totaled $0.0 million, $0.0 million
and $1.1 million for the quarters ended December 31, 2023,
September 30, 2023 and December 31, 2022,
respectively.
(6)
MSR amortization utilizes purchase date
cash flow assumptions and actual unpaid principal balances and is
calculated as the difference between projected MSR yield income and
net servicing income for the period.
(7)
Annualized GAAP return (loss) on average
equity annualizes realized and unrealized gains and (losses) which
may not be indicative of full year performance, unannualized GAAP
return (loss) on average equity is (3.55%), (5.04%), and (7.95%)
for the quarters ended December 31, 2023, September 30, 2023, and
December 31, 2022, respectively.
For the years ended
December 31, 2023
December 31, 2022
(dollars in thousands, except
per share data)
GAAP net income (loss)
$
(1,638,457
)
$
1,726,420
Adjustments to exclude reported
realized and unrealized (gains) losses
Net (gains) losses on investments and
other (1)
2,137,538
4,602,456
Net (gains) losses on derivatives (2)
1,184,961
(4,493,013
)
Loan loss provision (reversal) (3)
(219
)
(22,923
)
Business divestiture-related (gains)
losses
—
40,258
Other adjustments
Amortization of intangibles
4,573
3,948
Non-EAD (income) loss allocated to equity
method investments (4)
354
(15,499
)
Transaction expenses and non-recurring
items (5)
8,209
7,620
Income tax effect of non-EAD income (loss)
items
31,570
46,070
TBA dollar roll income and CMBX coupon
income (6)
20,621
431,475
MSR amortization (7)
(182,151
)
(114,992
)
EAD attributable to noncontrolling
interests
(14,639
)
(1,095
)
Premium amortization adjustment cost
(benefit)
1,654
(360,587
)
Earnings available for distribution
*
1,554,014
1,850,138
Dividends on preferred stock
141,676
110,623
Earnings available for distribution
attributable to common stockholders *
$
1,412,338
$
1,739,515
GAAP net income (loss) per average
common share
$
(3.61
)
$
3.93
Earnings available for distribution per
average common share *
$
2.86
$
4.23
Annualized GAAP return (loss) on
average equity
(14.33
)%
14.86
%
Annualized EAD return on average equity
*
13.71
%
16.02
%
*
Represents a non-GAAP financial
measure.
(1)
Includes write-downs or recoveries on
investments which are reported in Other, net in the Company's
Consolidated Statement of Comprehensive Income (Loss).
(2)
The adjustment to add back Net (gains)
losses on derivatives does not include the net interest component
of interest rate swaps which is reflected in earnings available for
distribution. The net interest component of interest rate swaps
totaled $1.6 billion and $366.2 million for the years ended
December 31, 2023 and 2022, respectively.
(3)
Includes $0.0 million and ($2.3) million
of loss provision (reversal) on the Company’s unfunded loan
commitments for the years ended December 31, 2023 and 2022,
respectively.
(4)
The Company excludes non-EAD (income) loss
allocated to equity method investments, which represents the
unrealized (gains) losses allocated to equity interests in a
portfolio of MSR, which is a component of Other, net.
(5)
Includes costs incurred in connection with
securitizations of residential whole loans.
(6)
TBA dollar roll income and CMBX coupon
income each represent a component of Net gains (losses) on other
derivatives and financial instruments. CMBX coupon income totaled
$1.5 million and $4.4 million for the years ended December 31, 2023
and 2022, respectively.
(7)
MSR amortization utilizes purchase date
cash flow assumptions and actual unpaid principal balances and is
calculated as the difference between projected MSR yield income and
net servicing income for the period.
From time to time, the Company enters into TBA forward contracts
as an alternate means of investing in and financing Agency
mortgage-backed securities. A TBA contract is an agreement to
purchase or sell, for future delivery, an Agency mortgage-backed
security with a specified issuer, term and coupon. A TBA dollar
roll represents a transaction where TBA contracts with the same
terms but different settlement dates are simultaneously bought and
sold. The TBA contract settling in the later month typically prices
at a discount to the earlier month contract with the difference in
price commonly referred to as the "drop". The drop is a reflection
of the expected net interest income from an investment in similar
Agency mortgage-backed securities, net of an implied financing
cost, that would be foregone as a result of settling the contract
in the later month rather than in the earlier month. The drop
between the current settlement month price and the forward
settlement month price occurs because in the TBA dollar roll
market, the party providing the financing is the party that would
retain all principal and interest payments accrued during the
financing period. Accordingly, TBA dollar roll income generally
represents the economic equivalent of the net interest income
earned on the underlying Agency mortgage-backed security less an
implied financing cost.
TBA dollar roll transactions are accounted for under GAAP as a
series of derivatives transactions. The fair value of TBA
derivatives is based on methods similar to those used to value
Agency mortgage-backed securities. The Company records TBA
derivatives at fair value on its Consolidated Statements of
Financial Condition and recognizes periodic changes in fair value
in Net gains (losses) on derivatives in the Consolidated Statements
of Comprehensive Income (Loss), which includes both unrealized and
realized gains and losses on derivatives.
TBA dollar roll income is calculated as the difference in price
between two TBA contracts with the same terms but different
settlement dates multiplied by the notional amount of the TBA
contract. Although accounted for as derivatives, TBA dollar rolls
capture the economic equivalent of net interest income, or carry,
on the underlying Agency mortgage-backed security (interest income
less an implied cost of financing). TBA dollar roll income is
reported as a component of Net gains (losses) on derivatives in the
Consolidated Statements of Comprehensive Income (Loss).
The CMBX index is a synthetic tradable index referencing a
basket of 25 commercial mortgage-backed securities ("CMBS") of a
particular rating and vintage. The CMBX index allows investors to
take a long exposure (referred to as selling protection) or short
exposure (referred to as buying protection) on the respective
basket of CMBS securities and is structured as a "pay-as-you-go"
contract whereby the protection buyer pays to the protection seller
a standardized running coupon on the contracted notional amount.
The Company reports income (expense) on CMBX positions in Net gains
(losses) on derivatives in the Consolidated Statements of
Comprehensive Income (Loss). The coupon payments received or paid
on CMBX positions are equivalent to interest income (expense) and
therefore included in earnings available for distribution.
Premium Amortization Expense
In accordance with GAAP, the Company amortizes or accretes
premiums or discounts into interest income for its Agency
mortgage-backed securities, excluding interest-only securities,
multifamily and reverse mortgages, taking into account estimates of
future principal prepayments in the calculation of the effective
yield. The Company recalculates the effective yield as differences
between anticipated and actual prepayments occur. Using third-party
model and market information to project future cash flows and
expected remaining lives of securities, the effective interest rate
determined for each security is applied as if it had been in place
from the date of the security’s acquisition. The amortized cost of
the security is then adjusted to the amount that would have existed
had the new effective yield been applied since the acquisition
date. The adjustment to amortized cost is offset with a charge or
credit to interest income. Changes in interest rates and other
market factors will impact prepayment speed projections and the
amount of premium amortization recognized in any given period.
The Company’s GAAP metrics include the unadjusted impact of
amortization and accretion associated with this method. Certain of
the Company’s non-GAAP metrics exclude the effect of the PAA, which
quantifies the component of premium amortization representing the
cumulative impact on prior periods, but not the current period, of
quarter-over-quarter changes in estimated long-term CPR.
The following table illustrates the impact of the PAA on premium
amortization expense for the Company’s Residential Securities
portfolio and residential securities transferred or pledged to
securitization vehicles, for the quarters ended December 31, 2023,
September 30, 2023 and December 31, 2022:
For the quarters ended
December 31, 2023
September 30, 2023
December 31, 2022
(dollars in thousands)
Premium amortization expense
(accretion)
$
51,247
$
24,272
$
38,829
Less: PAA cost (benefit)
19,148
(6,062
)
(8,136
)
Premium amortization expense (excluding
PAA)
$
32,099
$
30,334
$
46,965
Economic leverage and economic capital ratios
The Company uses capital coupled with borrowed funds to invest
primarily in real estate related investments, earning the spread
between the yield on its assets and the cost of its borrowings and
hedging activities. The Company’s capital structure is designed to
offer an efficient complement of funding sources to generate
positive risk-adjusted returns for its stockholders while
maintaining appropriate liquidity to support its business and meet
the Company’s financial obligations under periods of market stress.
To maintain its desired capital profile, the Company utilizes a mix
of debt and equity funding. Debt funding may include the use of
repurchase agreements, loans, securitizations, participations
issued, lines of credit, asset backed lending facilities, corporate
bond issuance, convertible bonds or other liabilities. Equity
capital primarily consists of common and preferred stock.
The Company’s economic leverage ratio is computed as the sum of
recourse debt, cost basis of 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, and U.S. Treasury securities sold, not yet
purchased. Debt issued by securitization vehicles and
participations issued are non-recourse to the Company and are
excluded from economic leverage.
The following table presents a reconciliation of GAAP debt to
economic debt for purposes of calculating the Company’s economic
leverage ratio for the periods presented:
As of
December 31, 2023
September 30, 2023
December 31, 2022
Economic leverage ratio
reconciliation
(dollars in thousands)
Repurchase agreements
$
62,201,543
$
64,693,821
$
59,512,597
Other secured financing
500,000
500,000
250,000
Debt issued by securitization vehicles
11,600,338
9,983,847
7,744,160
Participations issued
1,103,835
788,442
800,849
U.S Treasury securities sold, not yet
purchased
2,132,751
—
—
Total GAAP debt
$
77,538,467
$
75,966,110
$
68,307,606
Less Non-Recourse Debt:
Debt issued by securitization vehicles
$
(11,600,338
)
$
(9,983,847
)
$
(7,744,160
)
Participations issued
(1,103,835
)
(788,442
)
(800,849
)
Total recourse debt
$
64,834,294
$
65,193,821
$
59,762,597
Plus / (Less):
Cost basis of TBA and CMBX derivatives
$
(555,221
)
$
1,965,117
$
11,050,351
Payable for unsettled trades
3,249,389
2,214,319
1,157,846
Receivable for unsettled trades
(2,710,224
)
(1,047,566
)
(575,091
)
Economic debt *
$
64,818,238
$
68,325,691
$
71,395,703
Total equity
$
11,345,091
$
10,677,057
$
11,369,426
Economic leverage ratio *
5.7:1
6.4:1
6.3:1
* Represents a non-GAAP financial
measure.
The following table presents a reconciliation of GAAP total
assets to economic total assets for purposes of calculating the
Company’s economic capital ratio for the periods presented:
As of
December 31, 2023
September 30, 2023
December 31, 2022
Economic capital ratio
reconciliation
(dollars in thousands)
Total GAAP assets
$
93,227,236
$
89,648,423
$
81,850,712
Less:
Gross unrealized gains on TBA derivatives
(1)
(20,689
)
(7,232
)
(17,056
)
Debt issued by securitization vehicles
(11,600,338
)
(9,983,847
)
(7,744,160
)
Plus:
Implied market value of TBA
derivatives
(573,602
)
1,925,614
10,578,676
Total economic assets *
$
81,032,607
$
81,582,958
$
84,668,172
Total equity
$
11,345,091
$
10,677,057
$
11,369,426
Economic capital ratio *
14.0
%
13.1
%
13.4
%
* Represents a non-GAAP financial
measure.
(1) Included in Derivative assets in the
Company’s Consolidated Statements of Financial Condition.
Interest income (excluding PAA), economic interest expense
and economic net interest income (excluding PAA)
Interest income (excluding PAA) represents interest income
excluding the effect of the PAA, and serves as the basis for
deriving average yield on interest earning assets (excluding PAA),
net interest spread (excluding PAA) and net interest margin
(excluding PAA), which are discussed below. The Company believes
this measure provides management and investors with additional
detail to enhance their understanding of the Company’s operating
results and trends by excluding the component of premium
amortization expense 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 (other than
interest-only securities, multifamily and reverse mortgages), which
can obscure underlying trends in the performance of the
portfolio.
Economic interest expense includes GAAP interest expense and the
net interest component of interest rate swaps. The Company uses
interest rate swaps to manage its exposure to changing interest
rates on its repurchase agreements by economically hedging cash
flows associated with these borrowings. Accordingly, adding the net
interest component of interest rate swaps to interest expense, as
computed in accordance with GAAP, reflects the total contractual
interest expense and thus, provides investors with additional
information about the cost of the Company's financing strategy. The
Company may use market agreed coupon ("MAC") interest rate swaps in
which the Company may receive or make a payment at the time of
entering into such interest rate swap to compensate for the
off-market nature of such interest rate swap. In accordance with
GAAP, upfront payments associated with MAC interest rate swaps are
not reflected in the net interest component of interest rate swaps
in the Company's Consolidated Statements of Comprehensive Income
(Loss).
Similarly, economic net interest income (excluding PAA), as
computed below, provides investors with additional information to
enhance their understanding of the net economics of our primary
business operations.
For the quarters ended
December 31, 2023
September 30, 2023
December 31, 2022
Interest income (excluding PAA)
reconciliation
(dollars in thousands)
GAAP interest income
$
990,352
$
1,001,485
$
798,934
Premium amortization adjustment
19,148
(6,062
)
(8,136
)
Interest income (excluding PAA)
*
$
1,009,500
$
995,423
$
790,798
Economic interest expense
reconciliation
GAAP interest expense
$
1,043,902
$
1,046,819
$
663,847
Add:
Net interest component of interest rate
swaps
(379,377
)
(394,677
)
(286,600
)
Economic interest expense *
$
664,525
$
652,142
$
377,247
Economic net interest income (excluding
PAA) reconciliation
Interest income (excluding PAA) *
$
1,009,500
$
995,423
$
790,798
Less:
Economic interest expense *
664,525
652,142
377,247
Economic net interest income (excluding
PAA) *
$
344,975
$
343,281
$
413,551
* Represents a non-GAAP financial
measure.
Average yield on interest earning assets (excluding PAA), net
interest spread (excluding PAA), net interest margin (excluding
PAA) and average economic cost of interest bearing
liabilities
Net interest spread (excluding PAA), which is the difference
between the average yield on interest earning assets (excluding
PAA) and the average economic cost of interest bearing liabilities,
which represents annualized economic interest expense divided by
average interest bearing liabilities, and net interest margin
(excluding PAA), which is calculated as 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 TBA contract and CMBX balances, provide management
with additional measures of the Company’s profitability that
management relies upon in monitoring the performance of the
business.
Disclosure of these measures, which are presented below,
provides investors with additional detail regarding how management
evaluates the Company’s performance.
For the quarters ended
December 31, 2023
September 30, 2023
December 31, 2022
Economic metrics (excluding
PAA)
(dollars in thousands)
Average interest earning assets
$
87,020,120
$
89,300,922
$
82,859,799
Interest income (excluding PAA) *
$
1,009,500
$
995,423
$
790,798
Average yield on interest earning assets
(excluding PAA) *
4.64
%
4.46
%
3.82
%
Average interest bearing liabilities
$
76,010,247
$
77,780,989
$
69,981,694
Economic interest expense *
$
664,525
$
652,142
$
377,247
Average economic cost of interest bearing
liabilities *
3.42
%
3.28
%
2.11
%
Economic net interest income (excluding
PAA) *
$
344,975
$
343,281
$
413,551
Net interest spread (excluding PAA) *
1.22
%
1.18
%
1.71
%
Interest income (excluding PAA) *
$
1,009,500
$
995,423
$
790,798
TBA dollar roll income and CMBX coupon
income
1,720
(1,016
)
34,767
Economic interest expense *
(664,525
)
(652,142
)
(377,247
)
Subtotal
$
346,695
$
342,265
$
448,318
Average interest earnings assets
$
87,020,120
$
89,300,922
$
82,859,799
Average TBA contract and CMBX balances
829,571
2,960,081
11,499,881
Subtotal
$
87,849,691
$
92,261,003
$
94,359,680
Net interest margin (excluding PAA)
*
1.58
%
1.48
%
1.90
%
* Represents a non-GAAP financial
measure.
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version on businesswire.com: https://www.businesswire.com/news/home/20240206402840/en/
Annaly Capital Management, Inc. Investor Relations 1-888-8Annaly
www.annaly.com
Grafico Azioni Annaly Capital Management (NYSE:NLY)
Storico
Da Gen 2025 a Feb 2025
Grafico Azioni Annaly Capital Management (NYSE:NLY)
Storico
Da Feb 2024 a Feb 2025
