Second Quarter 2024 Investor Presentation July 24, 2024 Important Notices 2 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 2024 earnings release. This presentation is provided for investors in Annaly for informational purposes only and is not an offer to sell, or a solicitat ...

This quarterly report represents an earnings surprise of 3.03%. A quarter ago, it was expected that this real estate investment trust would post earnings of $0.64 per share when it actually produced earnings of $0.64, delivering no surprise. Annaly, which belongs to the Zacks REIT and Equity Trust industry, posted revenues of $53.56 million for the quarter ended June 2024, missing the Zacks Consensus Estimate by 83.16%. This compares to year-ago revenues of $-31.96 million. The company has not been able to ...

[Q2 2024 Results Overview](index=1&type=section&id=Annaly%20Capital%20Management%2C%20Inc.%20Reports%202nd%20Quarter%202024%20Results) Annaly Capital Management, Inc. reported its second quarter 2024 results [Financial Highlights](index=1&type=section&id=Financial%20Highlights) Annaly reported a GAAP net loss of **($0.09)** per share but generated Earnings Available for Distribution (EAD) of **$0.68** per share for Q2 2024, achieving a positive economic return of **0.9%** for the quarter and **5.7%** year-to-date, while maintaining a quarterly dividend of **$0.65** per share, with book value per common share at **$19.25** and modest increases in both GAAP and economic leverage to **7.1x** and **5.8x** respectively Q2 2024 Financial Metrics | Metric | Q2 2024 Value | | :--- | :--- | | GAAP net income (loss) per share | ($0.09) | | Earnings available for distribution (EAD) per share | $0.68 | | Economic return | 0.9% | | Year-to-date economic return | 5.7% | | Book value per common share | $19.25 | | GAAP leverage | 7.1x | | Economic leverage | 5.8x | | Quarterly common stock dividend | $0.65 | [Business Highlights](index=1&type=section&id=Business%20Highlights) Annaly's business strategy in Q2 focused on opportunistically growing its Agency MBS portfolio and expanding its Residential Credit and MSR platforms, resulting in a total portfolio of **$74.8 billion** with the Agency portfolio increasing by **2%** quarter-over-quarter, record loan lock volume in the Residential Credit correspondent channel, and **5%** growth in the MSR portfolio's market value [Investment and Strategy](index=1&type=section&id=Investment%20and%20Strategy) The company strategically grew its Agency MBS portfolio and expanded its Residential Credit and MSR platforms - The total portfolio value is **$74.8 billion**, with the highly liquid Agency portfolio comprising **$66.0 billion**[5](index=5&type=chunk) - The Agency portfolio grew by **2%** QoQ due to opportunistic additions, with a focus on higher coupon, high-quality specified pools. It represents **58%** of dedicated equity capital[5](index=5&type=chunk) - The Residential Credit portfolio slightly decreased to **$5.9 billion** due to accretive sales, while the correspondent channel hit a record loan lock volume of **$4.1 billion** in Q2[5](index=5&type=chunk) - The Mortgage Servicing Rights (MSR) portfolio market value increased by **5%** QoQ to **$2.8 billion**, representing **22%** of dedicated equity capital[5](index=5&type=chunk) [Financing and Capital](index=1&type=section&id=Financing%20and%20Capital) Annaly maintained strong liquidity and increased financing capacity while managing its cost of liabilities - The company holds **$6.3 billion** of total assets available for financing, including **$3.5 billion** in cash and unencumbered Agency MBS[5](index=5&type=chunk) - Average economic cost of interest-bearing liabilities rose by **12 basis points** to **3.90%** QoQ[5](index=5&type=chunk) - Annaly increased its financing capacity by **$250 million**, bringing total warehouse capacity for its Residential Credit and MSR businesses to **$4.2 billion**[5](index=5&type=chunk) - The company remains the largest non-bank issuer of Prime Jumbo and Expanded Credit MBS since the beginning of 2023, having priced **13** whole loan securitizations totaling **$6.7 billion** in 2024[5](index=5&type=chunk)[7](index=7&type=chunk) [Corporate Responsibility & Governance](index=1&type=section&id=Corporate%20Responsibility%20%26%20Governance) The company published its fifth Corporate Responsibility Report, titled 'Powering American Homeownership,' highlighting its commitment to sustainable business practices and sound corporate governance - Published the fifth Corporate Responsibility Report, emphasizing commitment to sustainable practices, governance, and culture[4](index=4&type=chunk) [Financial Performance](index=3&type=section&id=Financial%20Performance) Annaly's financial performance in Q2 2024 saw a decrease in book value per common share and a GAAP net loss, but an increase in non-GAAP Earnings Available for Distribution (EAD) per share and a widened net interest margin [Key Performance Indicators](index=3&type=section&id=Key%20Performance%20Indicators) In Q2 2024, Annaly's book value per common share decreased to **$19.25** from **$19.73** in the prior quarter, with GAAP net income shifting to a loss of **($0.09)** per share from a gain of **$0.85** in Q1 2024, while non-GAAP Earnings Available for Distribution (EAD) per share increased to **$0.68** from **$0.64**, and the non-GAAP net interest margin (excluding PAA) widened to **1.58%** from **1.43%** due to a higher yield on assets Key Performance Indicators Comparison | Performance Indicator | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | **GAAP Metrics** | | | | | Book value per common share | $19.25 | $19.73 | $20.73 | | GAAP net income (loss) per share | $(0.09) | $0.85 | $0.27 | | GAAP leverage at period-end | 7.1:1 | 6.7:1 | 6.1:1 | | Net interest margin | 0.24% | (0.03%) | (0.15%) | | **Non-GAAP Metrics** | | | | | EAD per average common share | $0.68 | $0.64 | $0.72 | | Economic leverage at period-end | 5.8:1 | 5.6:1 | 5.8:1 | | Net interest margin (excl. PAA) | 1.58% | 1.43% | 1.66% | | Net interest spread (excl. PAA) | 1.24% | 1.09% | 1.45% | [Financial Statements](index=5&type=section&id=Financial%20Statements) Annaly's financial statements for Q2 2024 reflect an increase in total assets and liabilities, a slight decrease in total equity, and a shift to a net loss attributable to common stockholders [Consolidated Statements of Financial Condition (Balance Sheet)](index=5&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20CONDITION) As of June 30, 2024, Annaly's total assets increased to **$93.7 billion** from **$91.5 billion** in the prior quarter, primarily driven by a rise in assets transferred to securitization vehicles, while total liabilities also grew to **$82.4 billion** from **$80.0 billion** mainly due to increased repurchase agreements, leading to a slight decrease in total equity to **$11.3 billion** from **$11.5 billion** Consolidated Statements of Financial Condition (in thousands) | Balance Sheet Item (in thousands) | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Total assets | $93,668,577 | $91,483,546 | | Total liabilities | $82,405,673 | $79,987,433 | | Total equity | $11,262,904 | $11,496,113 | - Key asset changes QoQ include an increase in Securities to **$67.0B** (from **$66.5B**) and Mortgage servicing rights to **$2.8B** (from **$2.7B**)[17](index=17&type=chunk) - Key liability changes QoQ include an increase in Repurchase agreements to **$60.8B** (from **$59.0B**) and Debt issued by securitization vehicles to **$15.8B** (from **$13.7B**)[17](index=17&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)) For Q2 2024, Annaly reported a net loss attributable to common stockholders of **($46.6 million)**, or **($0.09)** per share, a sharp contrast to the net income of **$425.8 million**, or **$0.85** per share, in Q1 2024, primarily driven by net losses on investments not fully offset by gains on derivatives, though net interest income turned positive to **$53.6 million** from a loss of **($6.5 million)**, resulting in net income available to common stockholders of **$379.2 million**, or **$0.76** per share, for the first six months of 2024 Consolidated Statements of Comprehensive Income (in thousands) | Income Statement Item (in thousands) | Q2 2024 | Q1 2024 | Q2 2023 | | :--- | :--- | :--- | :--- | | Net interest income | $53,558 | $(6,451) | $(31,963) | | Net servicing income | $107,898 | $102,868 | $74,860 | | Total other income (loss) | $(113,467) | $406,384 | $175,482 | | Net income (loss) | $(8,833) | $465,174 | $161,187 | | Net income (loss) available to common stockholders | $(46,641) | $425,831 | $131,267 | | Basic net income (loss) per share | $(0.09) | $0.85 | $0.27 | Six Months Ended June 30 Income Summary (in thousands) | Six Months Ended June 30 (in thousands) | 2024 | 2023 | | :--- | :--- | :--- | | Net interest income | $47,107 | $(12,500) | | Net income (loss) | $456,341 | $(678,141) | | Net income (loss) available to common stockholders | $379,190 | $(744,864) | | Basic net income (loss) per share | $0.76 | $(1.51) | [Portfolio and Performance Metrics](index=8&type=section&id=Portfolio%20and%20Performance%20Metrics) Annaly's portfolio remains predominantly in fixed-rate residential securities, with an increased weighted average experienced CPR and a stable hedge ratio, alongside a shorter-term financing structure [Key Portfolio and Hedging Metrics](index=8&type=section&id=Key%20Financial%20Data) The company's portfolio remains predominantly in fixed-rate residential securities (**98%**), with the weighted average experienced CPR increasing to **7.4%** in Q2 2024 from **6.0%** in Q1, a stable hedge ratio at **98%**, and a decrease in weighted average days to maturity on repurchase agreements to **36** days Key Portfolio and Hedging Metrics | Metric | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Weighted average experienced CPR | 7.4% | 6.0% | 7.0% | | Weighted avg days to maturity on repos | 36 | 43 | 44 | | Hedge ratio | 98% | 97% | 105% | | Weighted avg pay rate on swaps | 3.13% | 3.20% | 2.50% | [Investment Portfolio Composition](index=9&type=section&id=Investment%20Portfolio%20Composition) As of Q2 2024, Annaly's total investment portfolio grew to **$90.3 billion**, with the core Agency mortgage-backed securities portfolio increasing to **$64.4 billion**, alongside significant investments in residential mortgage loans (**$2.5 billion**), mortgage servicing rights (**$2.8 billion**), and non-agency securities (**$1.7 billion**) Investment Portfolio Composition (in thousands) | Investment (in thousands) | June 30, 2024 | March 31, 2024 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Agency mortgage-backed securities | $64,390,905 | $63,542,230 | $67,764,264 | | Residential mortgage loans | $2,548,228 | $2,717,823 | $1,154,320 | | Mortgage servicing rights | $2,785,614 | $2,651,279 | $2,018,896 | | Total investment portfolio | $90,325,407 | $87,484,541 | $85,694,096 | [Non-GAAP Financial Measures](index=9&type=section&id=Non-GAAP%20Financial%20Measures) Annaly utilizes non-GAAP financial measures such as Earnings Available for Distribution (EAD), Economic Leverage, and Economic Net Interest Income to provide a clearer view of its operating performance and financial health [Earnings Available for Distribution (EAD)](index=11&type=section&id=Earnings%20available%20for%20distribution) Annaly uses Earnings Available for Distribution (EAD) to measure its operating performance and ability to pay dividends, adjusting GAAP net income by excluding unrealized gains/losses on investments and derivatives, and other non-cash or episodic items, with Q2 2024 EAD attributable to common stockholders at **$340.0 million**, or **$0.68** per share, an increase from **$320.9 million**, or **$0.64** per share, in Q1 2024 - EAD is a non-GAAP measure used by management to assess the company's progress in generating net income for distribution. It adjusts for items like unrealized gains/losses and the premium amortization adjustment (PAA)[29](index=29&type=chunk)[32](index=32&type=chunk) Earnings Available for Distribution Reconciliation (in thousands) | EAD Reconciliation (in thousands) | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | GAAP net income (loss) | $(8,833) | $465,174 | | Adjustments for (gains)/losses | $436,759 | $(52,875) | | Other adjustments | $(43,798) | $(54,337) | | **Earnings available for distribution** | **$377,139** | **$357,962** | | Dividends on preferred stock | $37,158 | $37,061 | | **EAD attributable to common stockholders** | **$339,981** | **$320,901** | | **EAD per average common share** | **$0.68** | **$0.64** | [Economic Leverage and Capital Ratios](index=13&type=section&id=Economic%20leverage%20and%20economic%20capital%20ratios) The company's economic leverage ratio, a non-GAAP measure that excludes non-recourse debt from securitizations, increased slightly to **5.8:1** from **5.6:1** in the prior quarter, providing insight into the company's recourse leverage, while the economic capital ratio, which adjusts total assets for derivatives and non-recourse debt, was **14.2%** at quarter-end - Economic leverage is calculated as recourse debt (including repos and TBAs) divided by total equity. It excludes non-recourse debt issued by securitization vehicles[42](index=42&type=chunk) Economic Leverage Ratio (in thousands) | Leverage Ratio | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Economic debt* (in thousands) | $65,778,149 | $64,404,856 | | Total equity (in thousands) | $11,262,904 | $11,496,113 | | **Economic leverage ratio*** | **5.8:1** | **5.6:1** | Economic Capital Ratio (in thousands) | Capital Ratio | June 30, 2024 | March 31, 2024 | | :--- | :--- | :--- | | Total economic assets* (in thousands) | $79,474,410 | $78,918,664 | | Total equity (in thousands) | $11,262,904 | $11,496,113 | | **Economic capital ratio*** | **14.2%** | **14.6%** | [Economic Net Interest Income and Related Metrics](index=15&type=section&id=Economic%20net%20interest%20income%20(excluding%20PAA)) Economic net interest income (excluding PAA), a key non-GAAP metric, rose to **$363.5 million** in Q2 2024 from **$320.7 million** in Q1, adjusting GAAP interest income for the PAA and GAAP interest expense for the net interest component of swaps, resulting in a widened net interest spread (excluding PAA) to **1.24%** from **1.09%** QoQ, reflecting improved core profitability - Economic interest expense includes GAAP interest expense plus the net interest component of interest rate swaps to reflect the total contractual cost of financing[47](index=47&type=chunk) Economic Net Interest Income Reconciliation (in thousands) | Economic Net Interest Income Reconciliation (in thousands) | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | Interest income (excluding PAA)* | $1,170,019 | $1,091,475 | | Economic interest expense* | $806,470 | $770,790 | | **Economic net interest income (excluding PAA)*** | **$363,549** | **$320,685** | Economic Metrics (excluding PAA) | Economic Metrics (excluding PAA) | Q2 2024 | Q1 2024 | | :--- | :--- | :--- | | Average yield on interest earning assets* | 5.14% | 4.87% | | Average economic cost of interest bearing liabilities* | 3.90% | 3.78% | | **Net interest spread*** | **1.24%** | **1.09%** | | **Net interest margin*** | **1.58%** | **1.43%** | [Other Information](index=4&type=section&id=Other%20Information) Additional information regarding Annaly's Q2 2024 results, including conference call details, is provided [Conference Call Information](index=4&type=section&id=Conference%20Call) Annaly will host its second quarter 2024 earnings conference call on **July 25, 2024**, at **9:00 a.m.** Eastern Time, with an audio webcast and replay available on the company's website - The Q2 2024 earnings conference call is scheduled for **July 25, 2024**, at **9:00 a.m.** Eastern Time[14](index=14&type=chunk) - A webcast and replay of the call will be available on the company's website, www.annaly.com[15](index=15&type=chunk)

Updates Since 2023 It's been over six months since I wrote about it in December of last year, so there are some things to recap first. Dividend History (Seeking Alpha) The first is, to its credit, NLY has not experienced any further cuts in its quarterly dividend. This tracks with when rate hikes finally halted. The halt occurred in late 2023, and while many investors (including fans of securities like NI.Y) were hoping rate cuts would begin early this year, they have since remained flat for the first half ...

Annaly Capital Management Inc. (NLY) is scheduled to report second-quarter 2024 results on Jul 24, after market close. The company's results are expected to reflect declines in earnings from the year-ago reported figure, while net interest income (NII) is expected to have increased. Annaly has an impressive earnings surprise history. Its earnings beat the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 3.04%. Let's see how things have shaped up prior to the second-quarter ...

What should investors make of a real estate investment trust (REIT) with a yield over 13%? That's the first hard question you'll face when it comes to Annaly Capital (NLY 2.46%), and it will likely be followed by an even harder one: Should you buy it? Most real estate investment trusts buy physical properties and then lease them to tenants, collecting the rents and using that cash flow to distribute dividends to investors. In fact, REITs were specifically created to allow retail investors to participate in ...

Further, the company is focused on diversifying its investment portfolio. The company seeks to stabilize and diversify its investment portfolio through investing in Agency MBS and residential credit. NLY's strong liquidity position enables it to reinvest in the franchise. In 2022, it sold its Middle Market Lending portfolio and exited its commercial real estate business. Through these exits, Annaly was able to enhance capabilities across its core housing finance strategy. Shares of Annaly have declined 2.7% ...

If you're an investor who doesn't already have access to billions in capital, you could probably learn a few things from the folks who do. Luckily, keeping tabs on the world's most successful investors isn't very hard to do. Let's look at their recent performance to find out if following the lead of billionaire fund managers makes sense for your portfolio. At recent prices, Annaly shares offer a mind-blowing 13.6% yield. The enormous yield is attracting funds run by billionaires. Citadel Advisors, which is ...

Olivier Le Moal Realty Income Corporation (O) is "The Monthly Dividend Company". It is a property REIT that invests in a diverse portfolio of properties using "triple-net" leases. Triple-net leases are a type of lease that makes the tenant responsible for paying most property-level costs. The structure is popular with tenants because they get lower rental rates and can exercise control over the property. For landlords, it removes the necessity of having local infrastructure or hiring local property manageme ...

Core Viewpoint - Annaly Capital's high dividend yield of 12.8% does not necessarily indicate a strong investment opportunity due to its volatile dividend history and the nature of its business model [1][4][12]. Group 1: Business Model - Annaly Capital operates as a mortgage REIT, which differs from traditional REITs that own physical properties; it primarily holds a portfolio of mortgage-backed securities [5][9]. - The value of Annaly's stock is closely tied to its mortgage bond portfolio, making it sensitive to market changes such as interest rates and property market dynamics [2][5]. Group 2: Dividend Performance - Annaly Capital has a history of volatile dividends, with a downward trend over the past decade, which is not suitable for investors seeking reliable passive income [6][11]. - The stock price of Annaly tends to fluctuate in line with its dividend changes, indicating that investors react strongly to dividend announcements [3][7]. Group 3: Investment Alternatives - Investors attracted to Annaly's high yield are encouraged to consider other income stocks with better dividend growth prospects, such as Realty Income, Vici Properties, and EPR Properties [13].