Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the
"Company") today announced its financial results for the quarter
ended June 30, 2022.
Financial Highlights
- GAAP net income of $0.55 per average common share for the
quarter
- Earnings available for distribution (“EAD”) of $0.30 per
average common share for the quarter; up $0.02 from the prior
quarter with dividend coverage of over 135%
- Economic return (loss) of (9.6%) for the second quarter
- Annualized GAAP return on average equity of 30.6% and
annualized EAD return on average equity of 17.5%
- Book value per common share of $5.90
- GAAP leverage of 5.4x, up from 5.3x in the prior quarter;
economic leverage of 6.6x, up from 6.4x in the prior quarter
- Declared quarterly common stock cash dividend of $0.22 per
share
Business Highlights
Investment and Strategy
- Total assets of $82.3 billion, including $74.9 billion in
highly liquid Agency portfolio(1)
- Annaly's Agency portfolio decreased modestly during the
quarter, while capital allocation was roughly unchanged at 71%
- Reduced exposure to lower coupons (2.0% - 3.0%) through TBA and
specified pool sales and rotated into higher coupons (3.5% - 5.0%)
primarily through TBA purchases
- Annaly's Mortgage Servicing Rights ("MSR") platform grew assets
by 41% to $1.7 billion(2) during the second quarter with MSR
representing 15% of dedicated equity capital, up from 9% in the
prior quarter
- Annaly’s Residential Credit portfolio increased 10% during the
quarter to $4.8 billion(1), driven by opportunistic CRT and NPL/RPL
purchases within its securities portfolio
- Closed previously announced sale of Annaly's Middle Market
Lending portfolio(3)
Financing and Capital
- $6.3 billion of unencumbered assets, including cash and
unencumbered Agency MBS of $4.5 billion
- Average GAAP cost of interest bearing liabilities increased 64
basis points to 1.12% and average economic cost of interest bearing
liabilities increased 22 basis points to 1.11%
- Annaly's Residential Credit Group closed five whole loan
securitizations totaling $2.0 billion during the second quarter and
is the largest non-bank issuer of Prime Jumbo and Expanded Credit
MBS(4)
- Annaly's Residential Credit Group added $500 million of credit
facility capacity during the second quarter
- Annaly's Mortgage Servicing Rights platform closed a $500
million credit facility subsequent to quarter end(5)
- Raised nearly $1 billion of accretive common equity in the
first half of 2022, including $742 million through a common stock
follow-on offering in May(6)
Corporate Responsibility & Governance
- Published third Corporate Responsibility Report, demonstrating
Annaly’s continued progress on its ESG goals and initiatives
- Included in the FTSE4Good Index for the fourth consecutive
year, recognizing our strong ESG practices
“The operating environment remained challenging during the
second quarter as persistent spread widening and rate volatility
roiled financial markets while intensifying concerns about global
economic growth contributed to risk-off sentiment,” remarked David
Finkelstein, Annaly’s Chief Executive Officer and President. “These
pressures weighed on our book value, though our portfolio again
generated earnings that exceeded our dividend. Despite these
challenges, we remain constructive on the outlook for Agency MBS
given historically attractive new investment returns and increased
clarity from the Federal Reserve on the path forward for interest
rate hikes and quantitative tightening.
“Additionally, we were pleased to close the sale of our Middle
Market Lending business during the quarter, which completes our
transition to a dedicated housing finance REIT. Our Residential
Credit and Mortgage Servicing Rights businesses continue to grow
market share and make progress towards long-term strategic
objectives, which ultimately should enhance the durability and
quality of our returns.”
(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. Total
assets include commercial real estate related assets, including
CMBX derivatives (market value) of $0.4 billion, which are excluded
from capital allocation calculations. Agency assets exclude assets
transferred or pledged to securitization vehicles of $0.5 billion
and include TBA purchase contracts (market value) of $19.3 billion
and $30 million of retained securities that are eliminated in
consolidation. Residential Credit assets exclude assets transferred
or pledged to securitization vehicles of $8.4 billion, include $1.0
billion of retained securities that are eliminated in consolidation
and are shown net of participations issued totaling $0.7 billion.
MSR assets include limited partnership interests in two MSR funds,
one of which is reported in Other Assets, and unsettled commitments
of $190 million.
(2)
Includes limited partnership interests in
two MSR funds, one of which is reported in Other Assets, and
unsettled commitments of $190 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.
(3)
Annaly announced the sale of its Middle
Market Lending portfolio for approximately $2.4 billion on April
25, 2022. The transaction represents substantially all of the
Middle Market Lending assets held on balance sheet as well as
assets managed for third parties. The majority of these assets were
legally transferred during the second quarter of 2022 and the
remaining assets are expected to be transferred by the third
quarter of 2022. For more information, please see the 8-K
filing.
(4)
Issuer ranking data from Inside
Nonconforming Markets as of June 30, 2022. Reflects 1H'22 data.
(5)
Represents a $250 million committed credit
facility and a $250 million accordion for total capacity of $500
million.
(6)
These amounts include ~$220 million raised
through the Company’s at-the-market sales program for its common
stock net of sales agent commissions and other offering expenses.
The May 2022 common equity offering excludes any applicable
underwriting discounts and other estimated offering expenses and
includes the underwriters’ full exercise of their overallotment
option to purchase additional shares of stock.
Financial Performance
The following table summarizes certain key performance
indicators as of and for the quarters ended June 30, 2022, March
31, 2022 and June 30, 2021:
June 30, 2022
March 31, 2022
June 30, 2021
Book value per common share
$
5.90
$
6.77
$
8.37
GAAP leverage at period-end (1)
5.4:1
5.3:1
4.7:1
GAAP net income (loss) per average common
share (2)
$
0.55
$
1.37
$
(0.23
)
Annualized GAAP return (loss) on average
equity
30.60
%
65.62
%
(8.51
%)
Net interest margin (3)
2.64
%
3.20
%
1.66
%
Average yield on interest earning assets
(4)
3.58
%
3.61
%
1.97
%
Average GAAP cost of interest bearing
liabilities (5)
1.12
%
0.48
%
0.35
%
Net interest spread
2.46
%
3.13
%
1.62
%
Non-GAAP metrics *
Earnings available for distribution per
average common share (2)
$
0.30
$
0.28
$
0.30
Annualized EAD return on average
equity
17.49
%
14.01
%
13.05
%
Economic leverage at period-end (1)
6.6:1
6.4:1
5.8:1
Net interest margin (excluding PAA)
(3)
2.20
%
2.04
%
2.09
%
Average yield on interest earning assets
(excluding PAA) (4)
2.87
%
2.62
%
2.76
%
Average economic cost of interest bearing
liabilities (5)
1.11
%
0.89
%
0.83
%
Net interest spread (excluding PAA)
1.76
%
1.73
%
1.93
%
*
Represents a non-GAAP financial measure.
Please refer to the "Non-GAAP Financial Measures" section for
additional information.
(1)
GAAP leverage is computed as the sum of
repurchase agreements, other secured financing, debt issued by
securitization vehicles, participations issued and mortgages
payable 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 and other secured financing (excluding
certain non-recourse credit facilities). Certain credit facilities
(included within other secured financing), debt issued by
securitization vehicles, participations issued, and mortgages
payable are non-recourse to the Company and are excluded from
economic leverage.
(2)
Net of dividends on preferred stock.
(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.
Updates to Financial Disclosures
Beginning with the quarter ended March 31, 2022, in light of the
continued growth of its mortgage servicing rights portfolio, the
Company enhanced its financial disclosures by separately reporting
servicing income and servicing expense in its Consolidated
Statements of Comprehensive Income (Loss). Servicing income and
servicing expense were previously included within Other income
(loss). As a result of this change, prior periods have been
adjusted to conform to the current presentation.
In addition, beginning with the quarter ended March 31, 2022,
the Company consolidated certain line items in its Consolidated
Statements of Comprehensive Income (Loss) in an effort to
streamline and simplify its financial presentation. Amounts
previously reported under Net interest component of interest rate
swaps, Realized gains (losses) on termination or maturity of
interest rate swaps, Unrealized gains (losses) on interest rate
swaps and Net gains (losses) on other derivatives are combined into
a single line item titled Net gains (losses) on derivatives.
Similarly, amounts previously reported under Net gains (losses) on
disposal of investments and other and Net unrealized gains (losses)
on instruments measured at fair value through earnings are combined
into a single line item titled Net gains (losses) on investments
and other. As a result of these changes, prior periods have been
adjusted to conform to the current presentation.
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. Actual results could differ
materially from those set forth in forward-looking statements due
to a variety of factors, including, but not limited to, risks and
uncertainties related to the COVID-19 pandemic, including as
related to adverse economic conditions on real estate-related
assets and financing conditions; changes in interest rates; changes
in the yield curve; changes in prepayment rates; the availability
of mortgage-backed securities and other securities for purchase;
the availability of financing and, if available, the terms of any
financing; changes in the market value of our assets; changes in
business conditions and the general economy; operational risks or
risk management failures by us or critical third parties, including
cybersecurity incidents; our ability to grow our residential credit
business; credit risks related to our investments in credit risk
transfer securities, residential mortgage-backed securities, and
related residential mortgage credit assets; risks related to
investments in mortgage servicing rights; our ability to consummate
any contemplated investment opportunities; changes in government
regulations or policy affecting our business; our ability to
maintain our qualification as a REIT for U.S. federal income tax
purposes; and our ability to maintain our exemption from
registration under the Investment Company Act. For a discussion of
the risks and uncertainties which could cause actual results to
differ from those contained in the forward-looking statements, see
"Risk Factors" in our most recent Annual Report on Form 10-K and
any subsequent Quarterly Reports on Form 10-Q. The Company does not
undertake, and specifically disclaims any obligation, to publicly
release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated
or unanticipated events or circumstances after the date of such
statements, except as required by law.
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.
Annaly routinely posts important information for investors on
the Company’s website, www.annaly.com. Annaly intends to use this
webpage as a means of disclosing material, non-public information,
for complying with the Company’s disclosure obligations under
Regulation FD and to post and update investor presentations and
similar materials on a regular basis. Annaly encourages investors,
analysts, the media and others interested in Annaly to monitor the
Company’s website, in addition to following Annaly’s press
releases, SEC filings, public conference calls, presentations,
webcasts and other information it posts from time to time on its
website. To sign-up for email-notifications, please visit the
"Investors" section of our website, www.annaly.com, then click on
"Investor Resources" and select "Email Alerts" to complete the
email notification form. The information contained on, or that may
be accessed through, the Company’s webpage is not incorporated by
reference into, and is not a part of, this document.
The Company prepares a supplemental investor presentation and a
financial summary for the benefit of its shareholders. Both the
Second Quarter 2022 Investor Presentation and the Second Quarter
2022 Financial Summary 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 second quarter 2022 earnings
conference call on July 28, 2022 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/10168431/f37809757b. 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 8286631. 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)
June 30, 2022
March 31, 2022
December 31, 2021 (1)
September 30,
2021
June 30, 2021
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Assets
Cash and cash equivalents
$
853,932
$
955,840
$
1,342,090
$
1,046,300
$
1,380,456
Securities
59,042,734
60,727,637
63,655,674
65,622,352
69,032,335
Loans, net
1,487,133
3,617,818
4,242,043
3,580,521
3,563,008
Mortgage servicing rights
1,421,420
1,108,937
544,562
572,259
202,616
Interests in MSR
83,622
85,653
69,316
57,530
49,035
Assets transferred or pledged to
securitization vehicles
8,877,247
7,809,307
6,086,308
4,738,481
4,073,156
Assets of disposal group held for sale
97,414
—
194,138
238,042
3,302,001
Derivative assets
748,432
964,075
170,370
331,395
181,889
Receivable for unsettled trades
434,227
407,225
2,656
42,482
14,336
Principal and interest receivable
300,028
246,739
234,983
234,810
250,210
Goodwill and intangible assets, net
18,195
23,110
24,241
25,371
26,502
Other assets
272,865
238,793
197,683
172,890
300,761
Total assets
$
73,637,249
$
76,185,134
$
76,764,064
$
76,662,433
$
82,376,305
Liabilities and stockholders’
equity
Liabilities
Repurchase agreements
$
51,364,097
$
52,626,503
$
54,769,643
$
55,475,420
$
60,221,067
Other secured financing
—
914,255
903,255
729,555
909,655
Debt issued by securitization vehicles
7,502,483
6,711,953
5,155,633
3,935,410
3,315,087
Participations issued
696,944
775,432
1,049,066
641,006
315,810
Liabilities of disposal group held for
sale
3,608
—
154,956
159,508
2,362,690
Derivative liabilities
379,708
826,972
881,537
912,134
900,259
Payable for unsettled trades
1,995,960
1,992,568
147,908
571,540
154,405
Interest payable
91,962
80,870
91,176
109,586
173,721
Dividends payable
354,027
321,423
321,142
318,986
317,714
Other liabilities
158,560
456,388
94,423
91,421
66,721
Total liabilities
62,547,349
64,706,364
63,568,739
62,944,566
68,737,129
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)
16,092
14,610
14,597
14,499
14,442
Additional paid-in capital
21,281,077
20,321,952
20,313,832
20,228,366
20,178,692
Accumulated other comprehensive income
(loss)
(4,310,926
)
(2,465,482
)
958,410
1,638,638
1,780,275
Accumulated deficit
(7,496,061
)
(7,980,407
)
(9,653,582
)
(9,720,270
)
(9,892,863
)
Total stockholders’ equity
11,026,751
11,427,242
13,169,826
13,697,802
13,617,115
Noncontrolling interests
63,149
51,528
25,499
20,065
22,061
Total equity
11,089,900
11,478,770
13,195,325
13,717,867
13,639,176
Total liabilities and equity
$
73,637,249
$
76,185,134
$
76,764,064
$
76,662,433
$
82,376,305
(1)
Derived from the audited consolidated
financial statements at December 31, 2021.
(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 2,936,500,000 shares authorized.
Includes 1,609,215,497 shares issued and outstanding at June 30,
2022; 1,461,012,252 shares issued and outstanding at March 31,
2022; 1,459,736,258 shares issued and outstanding at December 31,
2021; 1,449,935,017 shares issued and outstanding at September 30,
2021; 1,444,156,029 shares issued and outstanding at June 30,
2021.
ANNALY CAPITAL MANAGEMENT,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except
per share data)
(Unaudited)
For the quarters ended
June 30, 2022
March 31, 2022
December 31,
2021
September 30,
2021
June 30, 2021
Net interest income
Interest income
$
645,615
$
655,850
$
422,780
$
412,972
$
383,906
Interest expense
170,475
74,922
61,785
50,438
61,047
Net interest income
475,140
580,928
360,995
362,534
322,859
Net servicing income
Servicing and related income
55,685
34,715
31,322
17,948
10,519
Servicing and related expense
5,949
3,757
4,290
3,012
2,603
Net servicing income
49,736
30,958
27,032
14,936
7,916
Other income (loss)
Net gains (losses) on investments and
other
(615,216
)
(159,804
)
(40,473
)
102,819
20,207
Net gains (losses) on derivatives
1,015,643
1,642,028
135,359
84,950
(581,962
)
Loan loss (provision) reversal
26,913
(608
)
(194
)
6,134
(494
)
Business divestiture-related gains
(losses)
(23,955
)
(354
)
(16,514
)
(14,009
)
1,527
Other, net
(5,486
)
3,058
(415
)
1,285
(6,241
)
Total other income (loss)
397,899
1,484,320
77,763
181,179
(566,963
)
General and administrative
expenses
Compensation expense
22,243
33,002
27,061
27,859
32,013
Other general and administrative
expenses
13,795
12,762
13,640
16,023
21,513
Total general and administrative
expenses
36,038
45,764
40,701
43,882
53,526
Income (loss) before income
taxes
886,737
2,050,442
425,089
514,767
(289,714
)
Income taxes
23,420
26,548
6,629
(6,767
)
5,134
Net income (loss)
863,317
2,023,894
418,460
521,534
(294,848
)
Net income (loss) attributable to
noncontrolling interests
(3,379
)
1,639
2,979
2,290
794
Net income (loss) attributable to
Annaly
866,696
2,022,255
415,481
519,244
(295,642
)
Dividends on preferred stock
26,883
26,883
26,883
26,883
26,883
Net income (loss) available (related)
to common stockholders
$
839,813
$
1,995,372
$
388,598
$
492,361
$
(322,525
)
Net income (loss) per share available
(related) to common stockholders
Basic
$
0.55
$
1.37
$
0.27
$
0.34
$
(0.23
)
Diluted
$
0.55
$
1.36
$
0.27
$
0.34
$
(0.23
)
Weighted average number of common
shares outstanding
Basic
1,522,436,766
1,461,363,637
1,454,138,154
1,445,315,914
1,410,239,138
Diluted
1,523,595,000
1,462,451,965
1,455,411,503
1,446,357,867
1,410,239,138
Other comprehensive income
(loss)
Net income (loss)
$
863,317
$
2,023,894
$
418,460
$
521,534
$
(294,848
)
Unrealized gains (losses) on
available-for-sale securities
(2,503,250
)
(3,568,679
)
(685,699
)
(113,451
)
(191,541
)
Reclassification adjustment for net
(gains) losses included in net income (loss)
657,806
144,787
5,471
(28,186
)
(30,415
)
Other comprehensive income
(loss)
(1,845,444
)
(3,423,892
)
(680,228
)
(141,637
)
(221,956
)
Comprehensive income (loss)
(982,127
)
(1,399,998
)
(261,768
)
379,897
(516,804
)
Comprehensive income (loss) attributable
to noncontrolling interests
(3,379
)
1,639
2,979
2,290
794
Comprehensive income (loss)
attributable to Annaly
(978,748
)
(1,401,637
)
(264,747
)
377,607
(517,598
)
Dividends on preferred stock
26,883
26,883
26,883
26,883
26,883
Comprehensive income (loss)
attributable to common stockholders
$
(1,005,631
)
$
(1,428,520
)
$
(291,630
)
$
350,724
$
(544,481
)
ANNALY CAPITAL MANAGEMENT,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except
per share data)
For the six months
ended
June 30, 2022
June 30, 2021
(unaudited)
(unaudited)
Net interest income
Interest income
$
1,301,465
$
1,147,284
Interest expense
245,397
137,020
Net interest income
1,056,068
1,010,264
Net servicing income
Servicing and related income
90,400
19,748
Servicing and related expense
9,706
4,900
Net servicing income
80,694
14,848
Other income (loss)
Net gains (losses) on investments and
other
(775,020
)
58,612
Net gains (losses) on derivatives
2,657,671
587,421
Loan loss (provision) reversal
26,305
139,126
Business divestiture-related gains
(losses)
(24,309
)
(248,036
)
Other, net
(2,428
)
295
Total other income (loss)
1,882,219
537,418
General and administrative
expenses
Compensation expense
55,245
63,531
Other general and administrative
expenses
26,557
37,900
Total general and administrative
expenses
81,802
101,431
Income (loss) before income
taxes
2,937,179
1,461,099
Income taxes
49,968
4,813
Net income (loss)
2,887,211
1,456,286
Net income (loss) attributable to
noncontrolling interests
(1,740
)
1,115
Net income (loss) attributable to
Annaly
2,888,951
1,455,171
Dividends on preferred stock
53,766
53,766
Net income (loss) available (related)
to common stockholders
$
2,835,185
$
1,401,405
Net income (loss) per share available
(related) to common stockholders
Basic
$
1.90
$
1.00
Diluted
$
1.90
$
1.00
Weighted average number of common
shares outstanding
Basic
1,492,068,912
1,404,755,496
Diluted
1,493,254,890
1,405,764,272
Other comprehensive income
(loss)
Net income (loss)
$
2,887,211
$
1,456,286
Unrealized gains (losses) on
available-for-sale securities
(6,071,929
)
(1,620,468
)
Reclassification adjustment for net
(gains) losses included in net income (loss)
802,593
26,408
Other comprehensive income
(loss)
(5,269,336
)
(1,594,060
)
Comprehensive income (loss)
(2,382,125
)
(137,774
)
Comprehensive income (loss) attributable
to noncontrolling interests
(1,740
)
1,115
Comprehensive income (loss)
attributable to Annaly
(2,380,385
)
(138,889
)
Dividends on preferred stock
53,766
53,766
Comprehensive income (loss)
attributable to common stockholders
$
(2,434,151
)
$
(192,655
)
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 June 30, 2022, March 31, 2022, and June
30, 2021:
June 30, 2022
March 31, 2022
June 30, 2021
Portfolio related metrics
Fixed-rate Residential Securities as a
percentage of total Residential Securities
97
%
97
%
98
%
Adjustable-rate and floating-rate
Residential Securities as a percentage of total Residential
Securities
3
%
3
%
2
%
Weighted average experienced CPR for the
period
14.9
%
16.7
%
26.4
%
Weighted average projected long-term CPR
at period-end
7.7
%
9.5
%
12.9
%
Liabilities and hedging metrics
Weighted average days to maturity on
repurchase agreements outstanding at period-end
47
68
88
Hedge ratio (1)
107
%
109
%
75
%
Weighted average pay rate on interest rate
swaps at period-end (2)
1.16
%
0.70
%
0.81
%
Weighted average receive rate on interest
rate swaps at period-end (2)
1.65
%
0.50
%
0.34
%
Weighted average net rate on interest rate
swaps at period-end (2)
(0.49
%)
0.20
%
0.47
%
GAAP leverage at period-end (3)
5.4:1
5.3:1
4.7:1
GAAP capital ratio at period-end (4)
15.1
%
15.1
%
16.6
%
Performance related metrics
Book value per common share
$
5.90
$
6.77
$
8.37
GAAP net income (loss) per average common
share (5)
$
0.55
$
1.37
$
(0.23
)
Annualized GAAP return (loss) on average
equity
30.60
%
65.62
%
(8.51
%)
Net interest margin (6)
2.64
%
3.20
%
1.66
%
Average yield on interest earning assets
(7)
3.58
%
3.61
%
1.97
%
Average GAAP cost of interest bearing
liabilities (8)
1.12
%
0.48
%
0.35
%
Net interest spread
2.46
%
3.13
%
1.62
%
Dividend declared per common share
$
0.22
$
0.22
$
0.22
Annualized dividend yield (9)
14.89
%
12.50
%
9.91
%
Non-GAAP metrics *
Earnings available for distribution per
average common share (5)
$
0.30
$
0.28
$
0.30
Annualized EAD return on average equity
(excluding PAA)
17.49
%
14.01
%
13.05
%
Economic leverage at period-end (3)
6.6:1
6.4:1
5.8:1
Economic capital ratio at period end
(4)
13.0
%
13.1
%
14.3
%
Net interest margin (excluding PAA)
(6)
2.20
%
2.04
%
2.09
%
Average yield on interest earning assets
(excluding PAA) (7)
2.87
%
2.62
%
2.76
%
Average economic cost of interest bearing
liabilities (8)
1.11
%
0.89
%
0.83
%
Net interest spread (excluding PAA)
1.76
%
1.73
%
1.93
%
*
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) and futures relative to repurchase agreements, other
secured financing and cost basis of TBA derivatives outstanding;
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 mortgages
payable 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 and other secured financing (excluding
certain non-recourse credit facilities). Certain credit facilities
(included within other secured financing), debt issued by
securitization vehicles, participations issued, and mortgages
payable 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)
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 TBA contract and CMBX
balances.
(7)
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).
(8)
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.
(9)
Based on the closing price of the
Company’s common stock of $5.91, $7.04 and $8.88 at June 30, 2022,
March 31, 2022 and June 30, 2021, respectively.
The following table contains additional information on our
investment portfolio as of the dates presented:
For the quarters ended
June 30, 2022
March 31, 2022
June 30, 2021
Agency mortgage-backed securities
$
55,593,336
$
57,787,141
$
66,468,519
Residential credit risk transfer
securities
965,714
845,809
827,328
Non-agency mortgage-backed securities
2,026,658
1,737,333
1,582,323
Commercial mortgage-backed securities
457,026
357,354
154,165
Total securities
$
59,042,734
$
60,727,637
$
69,032,335
Residential mortgage loans
$
1,486,811
$
1,650,151
$
1,029,929
Residential mortgage loan warehouse
facility
322
—
—
Corporate debt
—
1,967,667
2,066,709
Corporate debt, held for sale
—
—
466,370
Total loans, net
$
1,487,133
$
3,617,818
$
3,563,008
Mortgage servicing rights
$
1,421,420
$
1,108,937
$
202,616
Interests in MSR
$
83,622
$
85,653
$
49,035
Agency mortgage-backed securities
transferred or pledged to securitization vehicles
$
458,268
$
544,991
$
605,163
Residential mortgage loans transferred or
pledged to securitization vehicles
8,418,979
7,264,316
3,467,993
Assets transferred or pledged to
securitization vehicles
$
8,877,247
$
7,809,307
$
4,073,156
Assets of disposal group held for
sale
$
97,414
$
—
$
3,302,001
Total investment portfolio
$
71,009,570
$
73,349,352
$
80,222,151
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 depreciation expense related to commercial
real estate and amortization of intangibles, non-EAD income
allocated to equity method investments and other non-EAD components
of other income (loss)), (e) general and administrative expenses
(excluding transaction expenses and non-recurring items), and (f)
income taxes (excluding the income tax effect of non-EAD income
(loss) items) and excludes (g) the premium amortization adjustment
("PAA") representing the cumulative impact on prior periods, but
not the current period, of quarter-over-quarter changes in
estimated long-term prepayment speeds related to the Company’s
Agency mortgage-backed securities 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
June 30, 2022
March 31, 2022
June 30, 2021
(dollars in thousands, except
per share data)
GAAP net income (loss)
$
863,317
$
2,023,894
$
(294,848
)
Net income (loss) attributable to
noncontrolling interests
(3,379
)
1,639
794
Net income (loss) attributable to
Annaly
866,696
2,022,255
(295,642
)
Adjustments to exclude reported
realized and unrealized (gains) losses
Net (gains) losses on investments and
other
615,216
159,804
(20,207
)
Net (gains) losses on derivatives (1)
(1,014,651
)
(1,704,569
)
498,875
Loan loss provision (reversal) (2)
(29,380
)
812
1,078
Business divestiture-related (gains)
losses
23,955
354
(1,527
)
Other adjustments
Depreciation expense related to commercial
real estate and amortization of intangibles (3)
1,302
1,130
5,635
Non-EAD (income) loss allocated to equity
method investments (4)
(3,270
)
(9,920
)
3,141
Transaction expenses and non-recurring
items (5)
1,751
3,350
1,150
Income tax effect of non-EAD income (loss)
items
28,841
27,091
7,147
TBA dollar roll income and CMBX coupon
income (6)
161,673
129,492
111,592
MSR amortization (7)
(33,810
)
(19,652
)
(13,491
)
Plus:
Premium amortization adjustment cost
(benefit)
(127,521
)
(179,516
)
153,607
Earnings available for distribution
*
490,802
430,631
451,358
Dividends on preferred stock
26,883
26,883
26,883
Earnings available for distribution
attributable to common stockholders *
$
463,919
$
403,748
$
424,475
GAAP net income (loss) per average
common share
$
0.55
$
1.37
$
(0.23
)
Earnings available for distribution per
average common share *
$
0.30
$
0.28
$
0.30
Annualized GAAP return (loss) on
average equity
30.60
%
65.62
%
(8.51
%)
Annualized EAD return on average equity
*
17.49
%
14.01
%
13.05
%
*
Represents a non-GAAP financial
measure.
(1)
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 $1.0 million, ($62.5) million and ($83.1) million for the
quarters ended June 30, 2022, March 31, 2022 and June 30, 2021,
respectively.
(2)
Includes ($2.5) million, $0.2 million and
$0.6 million of loss provision (reversal) on the Company’s unfunded
loan commitments for the quarters ended June 30, 2022, March 31,
2022 and June 30, 2021, respectively, which is reported in Other,
net in the Company’s Consolidated Statements of Comprehensive
Income (Loss).
(3)
Includes depreciation and amortization
expense related to equity method investments.
(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)
The quarters ended June 30, 2022, March
31, 2022 and June 30, 2021 include 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
derivatives. CMBX coupon income totaled $1.1 million, $1.1 million
and $1.4 million for the quarters ended June 30, 2022, March 31,
2022 and June 30, 2021, 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 June 30, 2022,
March 31, 2022, and June 30, 2021:
For the quarters ended
June 30, 2022
March 31, 2022
June 30, 2021
(dollars in thousands)
Premium amortization expense
(accretion)
$
(4,869
)
$
(25,353
)
$
320,108
Less: PAA cost (benefit)
(127,521
)
(179,516
)
153,607
Premium amortization expense (excluding
PAA)
$
122,652
$
154,163
$
166,501
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, mortgages payable 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 (excluding certain non-recourse credit
facilities). Certain credit facilities (included within other
secured financing), debt issued by securitization vehicles,
participations issued, and mortgages payable 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
June 30, 2022
March 31, 2022
June 30, 2021
Economic leverage ratio
reconciliation
(dollars in thousands)
Repurchase agreements
$
51,364,097
$
52,626,503
$
60,221,067
Other secured financing
—
914,255
909,655
Debt issued by securitization vehicles
7,502,483
6,711,953
3,315,087
Participations issued
696,944
775,432
315,810
Debt included in liabilities of disposal
group held for sale
—
—
2,306,633
Total GAAP debt
$
59,563,524
$
61,028,143
$
67,068,252
Less Non-Recourse Debt:
Credit facilities (1)
$
—
$
(914,255
)
$
(909,655
)
Debt issued by securitization vehicles
(7,502,483
)
(6,711,953
)
(3,315,087
)
Participations issued
(696,944
)
(775,432
)
(315,810
)
Non-recourse debt included in liabilities
of disposal group held for sale
—
—
(2,035,982
)
Total recourse debt
$
51,364,097
$
52,626,503
$
60,491,718
Plus / (Less):
Cost basis of TBA and CMBX derivatives
$
19,723,326
$
19,006,949
$
18,107,549
Payable for unsettled trades
1,995,960
1,992,568
154,405
Receivable for unsettled trades
(434,227
)
(407,225
)
(14,336
)
Economic debt *
$
72,649,156
$
73,218,795
$
78,739,336
Total equity
$
11,089,900
$
11,478,770
$
13,639,176
Economic leverage ratio *
6.6:1
6.4:1
5.8:1
* Represents a non-GAAP financial
measure.
(1) Included in Other secured financing in
the Company’s Consolidated Statements of Financial Condition.
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
June 30, 2022
March 31, 2022
June 30, 2021
Economic capital ratio
reconciliation
(dollars in thousands)
Total GAAP assets
$
73,637,249
$
76,185,134
$
82,376,305
Less:
Gross unrealized gains on TBA derivatives
(1)
(60,661
)
(24,757
)
(31,943
)
Debt issued by securitization vehicles
(2)
(7,502,483
)
(6,711,953
)
(4,925,196
)
Plus:
Implied market value of TBA
derivatives
19,282,979
18,284,708
17,691,150
Total economic assets *
$
85,357,084
$
87,733,132
$
95,110,316
Total equity
$
11,089,900
$
11,478,770
$
13,639,176
Economic capital ratio (3) *
13.0
%
13.1
%
14.3
%
*
Represents a non-GAAP financial
measure.
(1)
Included in Derivative assets in the
Company’s Consolidated Statements of Financial Condition.
(2)
Includes debt issued by securitization
vehicles reported in Liabilities of disposal group held for sale in
the Company's Consolidated Statements of Financial Condition.
(3)
Economic capital ratio is computed as
total equity divided by total economic assets.
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). The Company did not enter into any MAC interest rate swaps
during the quarter ended June 30, 2022.
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
June 30, 2022
March 31, 2022
June 30, 2021
Interest income (excluding PAA)
reconciliation
(dollars in thousands)
GAAP interest income
$
645,615
$
655,850
$
383,906
Premium amortization adjustment
(127,521
)
(179,516
)
153,607
Interest income (excluding PAA)
*
$
518,094
$
476,334
$
537,513
Economic interest expense
reconciliation
GAAP interest expense
$
170,475
$
74,922
$
61,047
Add:
Net interest component of interest rate
swaps
(992
)
62,541
83,087
Economic interest expense *
$
169,483
$
137,463
$
144,134
Economic net interest income (excluding
PAA) reconciliation
Interest income (excluding PAA) *
$
518,094
$
476,334
$
537,513
Less:
Economic interest expense *
169,483
137,463
144,134
Economic net interest income (excluding
PAA) *
$
348,611
$
338,871
$
393,379
* 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
June 30, 2022
March 31, 2022
June 30, 2021
Economic metrics (excluding
PAA)
(dollars in thousands)
Average interest earning assets
$
72,123,055
$
72,590,876
$
77,916,766
Interest income (excluding PAA) *
$
518,094
$
476,334
$
537,513
Average yield on interest earning assets
(excluding PAA) *
2.87
%
2.62
%
2.76
%
Average interest bearing liabilities
$
60,446,528
$
61,865,292
$
68,469,413
Economic interest expense *
$
169,483
$
137,463
$
144,134
Average economic cost of interest bearing
liabilities *
1.11
%
0.89
%
0.83
%
Economic net interest income (excluding
PAA) *
$
348,611
$
338,871
$
393,379
Net interest spread (excluding PAA) *
1.76
%
1.73
%
1.93
%
Interest income (excluding PAA) *
$
518,094
$
476,334
$
537,513
TBA dollar roll income and CMBX coupon
income
161,673
129,492
111,592
Economic interest expense *
(169,483
)
(137,463
)
(144,134
)
Subtotal
$
510,284
$
468,363
$
504,971
Average interest earnings assets
$
72,123,055
$
72,590,876
$
77,916,766
Average TBA contract and CMBX balances
20,566,553
19,229,537
18,761,062
Subtotal
$
92,689,608
$
91,820,413
$
96,677,828
Net interest margin (excluding PAA)
*
2.20
%
2.04
%
2.09
%
* Represents a non-GAAP financial
measure.
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version on businesswire.com: https://www.businesswire.com/news/home/20220726006156/en/
Annaly Capital Management, Inc. Investor Relations 1-888-8Annaly
www.annaly.com
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