Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the
"Company") today announced its financial results for the quarter
ended March 31, 2022.
Financial Highlights
- GAAP net income of $1.37 per average common share for the
quarter
- Earnings available for distribution (“EAD”) of $0.28 per
average common share for the quarter; unchanged from the prior
quarter with dividend coverage of over 125%
- Economic return of (12.3%) for the first quarter
- Annualized GAAP return on average equity of 65.6% and
annualized EAD return on average equity of 14.0%
- Book value per common share of $6.77
- GAAP leverage of 5.3x, up from 4.7x in the prior quarter;
economic leverage of 6.4x, up from 5.7x in the prior quarter
- Declared quarterly common stock cash dividend of $0.22 per
share
Business Highlights
Investment and Strategy
- Total assets of $84.4 billion, including $76.1 billion in
highly liquid Agency portfolio(1)
- Due to meaningful spread widening and market volatility,
Annaly's Agency portfolio decreased 6% during the first quarter;
however, notional holdings were roughly unchanged and portfolio
activity focused on rotating upwards in coupon
- Hedge ratio increased from 95% to 109% as a result of a higher
notional hedge portfolio; hedge activity focused on active delta
hedging throughout the quarter and moving interest rate hedges
further out the curve given higher rate environment
- Annaly's Mortgage Servicing Rights ("MSR") platform grew assets
by 91% to $1.2 billion during the first quarter with MSR
representing 9% of dedicated equity capital(2)
- Annaly’s Residential Credit portfolio decreased 6% during the
quarter to $4.4 billion,(1) driven by residential whole loan
securitization activity as a result of strong production from the
whole loan correspondent channel
- During the quarter, the correspondent channel achieved over $1
billion in aggregated expanded credit loans since launching last
April
- Announced an agreement to sell Annaly's Middle Market Lending
portfolio for approximately $2.4 billion; portfolio sale enhances
Annaly's focus on all aspect of the housing finance market(3)
Financing and Capital
- $7.2 billion of unencumbered assets, including cash and
unencumbered Agency MBS of $4.0 billion
- Average GAAP cost of interest bearing liabilities increased 10
basis points to 0.48% and average economic cost of interest bearing
liabilities increased 14 basis points to 0.89%
- Annaly Residential Credit Group is now the second largest
non-bank issuer of Prime Jumbo and Expanded Credit MBS with six
securitizations totaling ~$2.5 billion in proceeds during the first
quarter(4)
- Annaly Residential Credit Group expanded credit facility
capacity by $250 million subsequent to quarter end
Corporate Responsibility & Governance
- Published disclosures outlining climate-related risks and
opportunities across our business in the short-, medium-and
long-term horizons taking into consideration the recommendations of
the Task Force on Climate-related Financial Disclosures
(“TCFD”)
- Amended bylaws to lower the threshold for shareholders to call
a special meeting
“The market environment during the first quarter of 2022 was one
of the most challenging for fixed-income in decades, characterized
by exceptional volatility with substantial spread widening and a
notable increase in benchmark rates,” remarked David Finkelstein,
Annaly’s Chief Executive Officer and President. “While our
portfolio continued to generate strong earnings, our book value was
not immune to the effects of Agency MBS underperformance resulting
from market turbulence. We remain disciplined given our expectation
for continued volatility, though we are encouraged by the
improvement in new investment returns provided by wider spreads,
greater certainty of mortgage cash flows in a lower prepayment
environment and additional clarity with respect to quantitative
tightening.
Further, the announced sale of our Middle Market Lending
portfolio subsequent to quarter end marks a significant strategic
achievement that is accretive to Annaly's stockholders. Combined
with the recent disposition of our Commercial Real Estate business
and the expansion of our MSR and Residential Credit businesses, the
transaction enables Annaly to deploy additional capital into our
core housing finance strategy and continue to build on synergies
between our Agency, MSR and Residential Credit portfolios.”
(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 exclude assets transferred or pledged to
securitization vehicles of $7.8 billion, include TBA purchase
contracts (market value) of $18.3 billion, CMBX derivatives (market
value) of $0.4 billion and $0.9 billion of retained securities that
are eliminated in consolidation and are shown net of participations
issued totaling $0.8 billion.
(2)
Includes limited partnership
interests in two MSR funds, one of which is reported in Other
Assets.
(3)
Annaly announced the sale of its
Middle Market Lending portfolio 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.
Subject to customary closing conditions, the transfer of the Middle
Market Lending portfolio is expected to be completed by end of the
second quarter of 2022. For more information, please see the 8-K
filing.
(4)
Issuer ranking data from Inside
Nonconforming Markets as of April 9, 2022.
Financial Performance
The following table summarizes certain key performance
indicators as of and for the quarters ended March 31, 2022,
December 31, 2021 and March 31, 2021:
March 31, 2022
December 31, 2021
March 31, 2021
Book value per common share
$
6.77
$
7.97
$
8.95
GAAP leverage at period-end (1)
5.3:1
4.7:1
4.6:1
GAAP net income (loss) per average common
share (2)
$
1.37
$
0.27
$
1.23
Annualized GAAP return (loss) on average
equity
65.62
%
12.44
%
49.87
%
Net interest margin (3)
3.20
%
1.97
%
3.39
%
Average yield on interest earning assets
(4)
3.61
%
2.31
%
3.76
%
Average GAAP cost of interest bearing
liabilities (5)
0.48
%
0.38
%
0.42
%
Net interest spread
3.13
%
1.93
%
3.34
%
Non-GAAP metrics *
Earnings available for distribution per
average common share (2)
$
0.28
$
0.28
$
0.29
Annualized EAD return on average
equity
14.01
%
13.10
%
12.53
%
Economic leverage at period-end (1)
6.4:1
5.7:1
6.1:1
Net interest margin (excluding PAA)
(3)
2.04
%
2.03
%
1.91
%
Average yield on interest earning assets
(excluding PAA) (4)
2.62
%
2.63
%
2.71
%
Average economic cost of interest bearing
liabilities (5)
0.89
%
0.75
%
0.87
%
Net interest spread (excluding PAA)
1.73
%
1.88
%
1.84
%
*
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, 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.
Commencing with the Company’s financial results for the quarter
ended June 30, 2021 and for subsequent reporting periods, the
Company has relabeled “Core Earnings (excluding PAA)” as “Earnings
Available for Distribution” (“EAD”). Earnings Available for
Distribution, which is a non-GAAP financial measure intended to
supplement the Company’s financial results computed in accordance
with U.S. generally accepted accounting principles (“GAAP”), has
replaced the Company’s prior presentation of Core Earnings
(excluding PAA). In addition, Core Earnings (excluding PAA) results
from prior reporting periods have been relabeled Earnings Available
for Distribution. In line with evolving industry practices, the
Company believes the term Earnings Available for Distribution more
accurately reflects the principal purpose of the measure than the
term Core Earnings (excluding PAA) and serves as a useful indicator
for investors in evaluating the Company’s performance and its
ability to pay dividends.
The definition of Earnings Available for Distribution is
identical to the definition of Core Earning (excluding PAA) from
prior reporting periods. As such, Earnings Available for
Distribution is defined as the sum of (a) economic net interest
income, (b) TBA dollar roll income and CMBX coupon income, (c) 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.
Earnings Available for Distribution should not be considered a
substitute for, or superior to, GAAP net income. Please refer to
the "Non-GAAP Financial Measures" section for a detailed discussion
of Earnings Available for Distribution.
In addition, beginning with the quarter ended June 30, 2021, the
Company began classifying certain portfolio activity- or
volume-related expenses (including but not limited to brokerage and
commission fees, due diligence costs and securitization expenses)
as Other income (loss) rather than Other general and administrative
expenses in the Consolidated Statements of Comprehensive Income
(Loss) to better reflect the nature of the items. As such, prior
periods have been conformed to the current presentation.
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; the sale of our middle market lending business; credit
risks related to our investments in credit risk transfer
securities, residential mortgage-backed securities and related
residential mortgage credit assets and corporate debt; risks
related to investments in 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
First Quarter 2022 Investor Presentation and the First 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 first quarter 2022 earnings conference
call on April 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/10164945/f20d8f5d22.
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 4986417. 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)
March 31, 2022
December 31, 2021 (1)
September 30, 2021
June 30, 2021
March 31, 2021
(unaudited)
(unaudited)
(unaudited)
(unaudited)
Assets
Cash and cash equivalents
$
955,840
$
1,342,090
$
1,046,300
$
1,380,456
$
1,122,793
Securities
60,727,637
63,655,674
65,622,352
69,032,335
71,849,437
Loans, net
3,617,818
4,242,043
3,580,521
3,563,008
2,603,343
Mortgage servicing rights
1,108,937
544,562
572,259
202,616
113,080
Interests in MSR
85,653
69,316
57,530
49,035
—
Assets transferred or pledged to
securitization vehicles
7,809,307
6,086,308
4,738,481
4,073,156
3,768,922
Assets of disposal group held for sale
—
194,138
238,042
3,302,001
4,400,723
Derivative assets
964,075
170,370
331,395
181,889
891,474
Receivable for unsettled trades
407,225
2,656
42,482
14,336
144,918
Principal and interest receivable
246,739
234,983
234,810
250,210
259,655
Goodwill and intangible assets, net
23,110
24,241
25,371
26,502
37,337
Other assets
238,793
197,683
172,890
300,761
177,907
Total assets
$
76,185,134
$
76,764,064
$
76,662,433
$
82,376,305
$
85,369,589
Liabilities and stockholders’
equity
Liabilities
Repurchase agreements
$
52,626,503
$
54,769,643
$
55,475,420
$
60,221,067
$
61,202,477
Other secured financing
914,255
903,255
729,555
909,655
922,605
Debt issued by securitization vehicles
6,711,953
5,155,633
3,935,410
3,315,087
3,044,725
Participations issued
775,432
1,049,066
641,006
315,810
180,527
Liabilities of disposal group held for
sale
—
154,956
159,508
2,362,690
3,319,414
Derivative liabilities
826,972
881,537
912,134
900,259
939,622
Payable for unsettled trades
1,992,568
147,908
571,540
154,405
1,070,080
Interest payable
80,870
91,176
109,586
173,721
100,949
Dividends payable
321,423
321,142
318,986
317,714
307,671
Other liabilities
456,388
94,423
91,421
66,721
213,924
Total liabilities
64,706,364
63,568,739
62,944,566
68,737,129
71,301,994
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)
14,610
14,597
14,499
14,442
13,985
Additional paid-in capital
20,321,952
20,313,832
20,228,366
20,178,692
19,754,826
Accumulated other comprehensive income
(loss)
(2,465,482
)
958,410
1,638,638
1,780,275
2,002,231
Accumulated deficit
(7,980,407
)
(9,653,582
)
(9,720,270
)
(9,892,863
)
(9,251,804
)
Total stockholders’ equity
11,427,242
13,169,826
13,697,802
13,617,115
14,055,807
Noncontrolling interests
51,528
25,499
20,065
22,061
11,788
Total equity
11,478,770
13,195,325
13,717,867
13,639,176
14,067,595
Total liabilities and equity
$
76,185,134
$
76,764,064
$
76,662,433
$
82,376,305
$
85,369,589
(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 1,461,012,252 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; 1,398,502,906 shares issued and outstanding at March
31, 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
March 31, 2022
December 31, 2021
September 30, 2021
June 30, 2021
March 31, 2021
Net interest income
Interest income
$
655,850
$
422,780
$
412,972
$
383,906
$
763,378
Interest expense
74,922
61,785
50,438
61,047
75,973
Net interest income
580,928
360,995
362,534
322,859
687,405
Net servicing income
Servicing and related income
34,715
31,322
17,948
10,519
9,229
Servicing and related expense
3,757
4,290
3,012
2,603
2,297
Net servicing income
30,958
27,032
14,936
7,916
6,932
Other income (loss)
Net gains (losses) on investments and
other
(159,804
)
(40,473
)
102,819
20,207
38,405
Net gains (losses) on derivatives
1,642,028
135,359
84,950
(581,962
)
1,169,383
Loan loss (provision) reversal
(608
)
(194
)
6,134
(494
)
139,620
Business divestiture-related gains
(losses)
(354
)
(16,514
)
(14,009
)
1,527
(249,563
)
Other, net
3,058
(415
)
1,285
(6,241
)
6,536
Total other income (loss)
1,484,320
77,763
181,179
(566,963
)
1,104,381
General and administrative
expenses
Compensation and management fee
33,002
27,061
27,859
32,013
31,518
Other general and administrative
expenses
12,762
13,640
16,023
21,513
16,387
Total general and administrative
expenses
45,764
40,701
43,882
53,526
47,905
Income (loss) before income
taxes
2,050,442
425,089
514,767
(289,714
)
1,750,813
Income taxes
26,548
6,629
(6,767
)
5,134
(321
)
Net income (loss)
2,023,894
418,460
521,534
(294,848
)
1,751,134
Net income (loss) attributable to
noncontrolling interests
1,639
2,979
2,290
794
321
Net income (loss) attributable to
Annaly
2,022,255
415,481
519,244
(295,642
)
1,750,813
Dividends on preferred stock
26,883
26,883
26,883
26,883
26,883
Net income (loss) available (related)
to common stockholders
$
1,995,372
$
388,598
$
492,361
$
(322,525
)
$
1,723,930
Net income (loss) per share available
(related) to common stockholders
Basic
$
1.37
$
0.27
$
0.34
$
(0.23
)
$
1.23
Diluted
$
1.36
$
0.27
$
0.34
$
(0.23
)
$
1.23
Weighted average number of common
shares outstanding
Basic
1,461,363,637
1,454,138,154
1,445,315,914
1,410,239,138
1,399,210,925
Diluted
1,462,451,965
1,455,411,503
1,446,357,867
1,410,239,138
1,400,000,727
Other comprehensive income
(loss)
Net income (loss)
$
2,023,894
$
418,460
$
521,534
$
(294,848
)
$
1,751,134
Unrealized gains (losses) on
available-for-sale securities
(3,568,679
)
(685,699
)
(113,451
)
(191,541
)
(1,428,927
)
Reclassification adjustment for net
(gains) losses included in net income (loss)
144,787
5,471
(28,186
)
(30,415
)
56,823
Other comprehensive income
(loss)
(3,423,892
)
(680,228
)
(141,637
)
(221,956
)
(1,372,104
)
Comprehensive income (loss)
(1,399,998
)
(261,768
)
379,897
(516,804
)
379,030
Comprehensive income (loss) attributable
to noncontrolling interests
1,639
2,979
2,290
794
321
Comprehensive income (loss)
attributable to Annaly
(1,401,637
)
(264,747
)
377,607
(517,598
)
378,709
Dividends on preferred stock
26,883
26,883
26,883
26,883
26,883
Comprehensive income (loss)
attributable to common stockholders
$
(1,428,520
)
$
(291,630
)
$
350,724
$
(544,481
)
$
351,826
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 March 31, 2022, December 31, 2021, and
March 31, 2021:
March 31, 2022
December 31, 2021
March 31, 2021
Portfolio related metrics
Fixed-rate Residential Securities as a
percentage of total Residential Securities
97
%
97
%
97
%
Adjustable-rate and floating-rate
Residential Securities as a percentage of total Residential
Securities
3
%
3
%
3
%
Weighted average experienced CPR for the
period
16.7
%
21.4
%
23.9
%
Weighted average projected long-term CPR
at period-end
9.5
%
12.7
%
11.8
%
Liabilities and hedging metrics
Weighted average days to maturity on
repurchase agreements outstanding at period-end
68
52
88
Hedge ratio (1)
109
%
95
%
75
%
Weighted average pay rate on interest rate
swaps at period-end (2)
0.70
%
0.59
%
0.80
%
Weighted average receive rate on interest
rate swaps at period-end (2)
0.50
%
0.08
%
0.34
%
Weighted average net rate on interest rate
swaps at period-end (2)
0.20
%
0.51
%
0.46
%
GAAP leverage at period-end (3)
5.3:1
4.7:1
4.6:1
GAAP capital ratio at period-end (4)
15.1
%
17.2
%
16.5
%
Performance related metrics
Book value per common share
$
6.77
$
7.97
$
8.95
GAAP net income (loss) per average common
share (5)
$
1.37
$
0.27
$
1.23
Annualized GAAP return (loss) on average
equity
65.62
%
12.44
%
49.87
%
Net interest margin (6)
3.20
%
1.97
%
3.39
%
Average yield on interest earning assets
(7)
3.61
%
2.31
%
3.76
%
Average GAAP cost of interest bearing
liabilities (8)
0.48
%
0.38
%
0.42
%
Net interest spread
3.13
%
1.93
%
3.34
%
Dividend declared per common share
$
0.22
$
0.22
$
0.22
Annualized dividend yield (9)
12.50
%
11.25
%
10.23
%
Non-GAAP metrics *
Earnings available for distribution per
average common share (5)
$
0.28
$
0.28
$
0.29
Annualized EAD return on average equity
(excluding PAA)
14.01
%
13.10
%
12.53
%
Economic leverage at period-end (3)
6.4:1
5.7:1
6.1:1
Economic capital ratio at period end
(4)
13.1
%
14.4
%
13.7
%
Net interest margin (excluding PAA)
(6)
2.04
%
2.03
%
1.91
%
Average yield on interest earning assets
(excluding PAA) (7)
2.62
%
2.63
%
2.71
%
Average economic cost of interest bearing
liabilities (8)
0.89
%
0.75
%
0.87
%
Net interest spread (excluding PAA)
1.73
%
1.88
%
1.84
%
*
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 $7.04, $7.82 and $8.60 at March 31, 2022,
December 31, 2021 and March 31, 2021, respectively.
The following table contains additional information on our
investment portfolio as of the dates presented:
For the quarters ended
March 31, 2022
December 31, 2021
March 31, 2021
Agency mortgage-backed securities
$
57,787,141
$
60,525,605
$
69,637,229
Residential credit risk transfer
securities
845,809
936,228
930,983
Non-agency mortgage-backed securities
1,737,333
1,663,336
1,277,104
Commercial mortgage-backed securities
357,354
530,505
4,121
Total securities
$
60,727,637
$
63,655,674
$
71,849,437
Residential mortgage loans
$
1,650,151
$
2,272,072
$
528,868
Residential mortgage loan warehouse
facility
—
980
—
Corporate debt
1,967,667
1,968,991
2,074,475
Total loans, net
$
3,617,818
$
4,242,043
$
2,603,343
Mortgage servicing rights
$
1,108,937
$
544,562
$
113,080
Interests in MSR
$
85,653
$
69,316
$
—
Agency mortgage-backed securities
transferred or pledged to securitization vehicles
$
544,991
$
589,873
$
598,118
Residential mortgage loans transferred or
pledged to securitization vehicles
7,264,316
5,496,435
3,170,804
Assets transferred or pledged to
securitization vehicles
$
7,809,307
$
6,086,308
$
3,768,922
Assets of disposal group held for
sale
$
—
$
194,138
$
4,400,723
Total investment portfolio
$
73,349,352
$
74,792,041
$
82,735,505
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
March 31, 2022
December 31, 2021
March 31, 2021
(dollars in thousands, except
per share data)
GAAP net income (loss)
$
2,023,894
$
418,460
$
1,751,134
Net income (loss) attributable to
noncontrolling interests
1,639
2,979
321
Net income (loss) attributable to
Annaly
2,022,255
415,481
1,750,813
Adjustments to exclude reported
realized and unrealized (gains) losses
Net (gains) losses on investments and
other
159,804
40,473
(38,405
)
Net (gains) losses on derivatives (1)
(1,704,569
)
(194,256
)
(1,249,130
)
Loan loss provision (reversal) (2)
812
1,931
(144,870
)
Business divestiture-related (gains)
losses
354
16,514
249,563
Other adjustments
Depreciation expense related to commercial
real estate and amortization of intangibles (3)
1,130
1,144
7,324
Non-EAD (income) loss allocated to equity
method investments (4)
(9,920
)
(2,345
)
(9,680
)
Transaction expenses and non-recurring
items (5)
3,350
1,533
695
Income tax effect of non-EAD income (loss)
items
27,091
8,380
4,334
TBA dollar roll income and CMBX coupon
income (6)
129,492
119,657
98,933
MSR amortization (7)
(19,652
)
(25,864
)
(15,488
)
Plus:
Premium amortization adjustment cost
(benefit)
(179,516
)
57,395
(214,570
)
Earnings available for distribution
*
430,631
440,043
439,519
Dividends on preferred stock
26,883
26,883
26,883
Earnings available for distribution
attributable to common stockholders *
$
403,748
$
413,160
$
412,636
GAAP net income (loss) per average
common share
$
1.37
$
0.27
$
1.23
Earnings available for distribution per
average common share *
$
0.28
$
0.28
$
0.29
Annualized GAAP return (loss) on
average equity
65.62
%
12.44
%
49.87
%
Annualized EAD return on average equity
*
14.01
%
13.10
%
12.53
%
*
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 ($62.5) million, ($58.9) million and ($79.7)
million for the quarters ended March 31, 2022, December 31, 2021
and March 31, 2021, respectively.
(2)
Includes $0.2 million, $1.7
million and ($5.3) million of loss provision (reversal) on the
Company’s unfunded loan commitments for the quarters ended March
31, 2022, December 31, 2021 and March 31, 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 March 31,
2022, December 31, 2021 and March 31, 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 $1.5 million for the quarters ended March 31, 2022, December
31, 2021 and March 31, 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 March 31, 2022,
December 31, 2021, and March 31, 2021:
For the quarters ended
March 31, 2022
December 31, 2021
March 31, 2021
(dollars in thousands)
Premium amortization expense
(accretion)
$
(25,353
)
$
219,172
$
(11,891
)
Less: PAA cost (benefit)
(179,516
)
57,395
(214,570
)
Premium amortization expense (excluding
PAA)
$
154,163
$
161,777
$
202,679
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
March 31, 2022
December 31, 2021
March 31, 2021
Economic leverage ratio
reconciliation
(dollars in thousands)
Repurchase agreements
$
52,626,503
$
54,769,643
$
61,202,477
Other secured financing
914,255
903,255
922,605
Debt issued by securitization vehicles
6,711,953
5,155,633
3,044,725
Participations issued
775,432
1,049,066
180,527
Debt included in liabilities of disposal
group held for sale
—
112,144
3,260,788
Total GAAP debt
$
61,028,143
$
61,989,741
$
68,611,122
Less Non-Recourse Debt:
Credit facilities (1)
$
(914,255
)
$
(903,255
)
$
(922,605
)
Debt issued by securitization vehicles
(6,711,953
)
(5,155,633
)
(3,044,725
)
Participations issued
(775,432
)
(1,049,066
)
(180,527
)
Non-recourse debt included in liabilities
of disposal group held for sale
—
(112,144
)
(2,968,620
)
Total recourse debt
$
52,626,503
$
54,769,643
$
61,494,645
Plus / (Less):
Cost basis of TBA and CMBX derivatives
$
19,006,949
$
20,690,768
$
23,538,792
Payable for unsettled trades
1,992,568
147,908
1,070,080
Receivable for unsettled trades
(407,225
)
(2,656
)
(144,918
)
Economic debt *
$
73,218,795
$
75,605,663
$
85,958,599
Total equity
$
11,478,770
$
13,195,325
$
14,067,595
Economic leverage ratio *
6.4:1
5.7:1
6.1:1
*
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
March 31, 2022
December 31, 2021
March 31, 2021
Economic capital ratio
reconciliation
(dollars in thousands)
Total GAAP assets
$
76,185,134
$
76,764,064
$
85,369,589
Less:
Gross unrealized gains on TBA derivatives
(1)
(24,757
)
(52,693
)
(17,404
)
Debt issued by securitization vehicles
(2)
(6,711,953
)
(5,155,633
)
(5,587,281
)
Plus:
Implied market value of TBA
derivatives
18,284,708
20,338,633
22,793,892
Total economic assets *
$
87,733,132
$
91,894,371
$
102,558,796
Total equity
$
11,478,770
$
13,195,325
$
14,067,595
Economic capital ratio (3)
13.1
%
14.4
%
13.7
%
*
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 March 31, 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
March 31, 2022
December 31, 2021
March 31, 2021
Interest income (excluding PAA)
reconciliation
(dollars in thousands)
GAAP interest income
$
655,850
$
422,780
$
763,378
Premium amortization adjustment
(179,516
)
57,395
(214,570
)
Interest income (excluding PAA)
*
$
476,334
$
480,175
$
548,808
Economic interest expense
reconciliation
GAAP interest expense
$
74,922
$
61,785
$
75,973
Add:
Net interest component of interest rate
swaps
62,541
58,897
79,747
Economic interest expense *
$
137,463
$
120,682
$
155,720
Economic net interest income (excluding
PAA) reconciliation
Interest income (excluding PAA) *
$
476,334
$
480,175
$
548,808
Less:
Economic interest expense *
137,463
120,682
155,720
Economic net interest income (excluding
PAA) *
$
338,871
$
359,493
$
393,088
* 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
March 31, 2022
December 31, 2021
March 31, 2021
Economic metrics (excluding
PAA)
(dollars in thousands)
Average interest earning assets
$
72,590,876
$
73,134,966
$
81,121,340
Interest income (excluding PAA) *
$
476,334
$
480,175
$
548,808
Average yield on interest earning assets
(excluding PAA) *
2.62
%
2.63
%
2.71
%
Average interest bearing liabilities
$
61,865,292
$
63,342,740
$
72,002,031
Economic interest expense *
$
137,463
$
120,682
$
155,720
Average economic cost of interest bearing
liabilities *
0.89
%
0.75
%
0.87
%
Economic net interest income (excluding
PAA) *
$
338,871
$
359,493
$
393,088
Net interest spread (excluding PAA) *
1.73
%
1.88
%
1.84
%
Interest income (excluding PAA) *
$
476,334
$
480,175
$
548,808
TBA dollar roll income and CMBX coupon
income
129,492
119,657
98,933
Economic interest expense *
(137,463
)
(120,682
)
(155,720
)
Subtotal
$
468,363
$
479,150
$
492,021
Average interest earnings assets
$
72,590,876
$
73,134,966
$
81,121,340
Average TBA contract and CMBX balances
19,229,537
21,159,120
21,865,969
Subtotal
$
91,820,413
$
94,294,086
$
102,987,309
Net interest margin (excluding PAA)
*
2.04
%
2.03
%
1.91
%
* Represents a non-GAAP financial
measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220426006327/en/
Annaly Capital Management, Inc. Investor Relations 1-888-8Annaly
www.annaly.com
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