NEW YORK—(BUSINESS WIRE)—November 1, 2017—Annaly Capital Management, Inc. (NYSE: NLY) (the “Company” or “Annaly”) today announced its financial results for the quarter ended September 30, 2017.

·	GAAP net income was $367.3 million, $0.31 per average common share

·	Core earnings (excluding PAA) were $353.5 million, $0.30 per average common share

·	GAAP return on average equity was 10.98% and core return on average equity (excluding PAA) was 10.57%

·	Book value per common share of $11.42, up from $11.19 at June 30, 2017

·	Economic leverage increased to 6.9x, as compared to 6.4x at June 30, 2017

·	Declared common stock dividend of $0.30 per share for the 16th consecutive fiscal quarter

·	Annualized year-to-date economic return of 13.9%

·	Raised $2.4 billion of equity capital in three separate offerings in July and October

·	Equity issuances largely deployed towards Agency assets and select credit assets. Credit businesses comprise 23% of allocated capital at quarter end

·	Redeemed 7.875% Series A Cumulative Redeemable Preferred Stock, resulting in 30 basis point reduction of economic cost of preferred capital

·	Completed sale of Pingora Holdings L.P. while maintaining ownership interests in mortgage servicing rights

·	Board of Directors appointed Chief Executive Officer and President Kevin Keyes as Chairman, effective January 1, 2018

·	Expanding Board of Directors with addition of two new independent directors, Katie Beirne Fallon and Vicki Brinson Williams, effective January 1, 2018

·	Established an investment partnership with Capital Impact Partners, a prominent community development financial institution

“Our third quarter financial performance again highlights the benefits of our large, diversified platform as we achieved growth in book value and generated stable earnings,” commented Kevin Keyes, Chief Executive Officer and President.  “Our conservative and balanced investment strategies were further endorsed by the market as we successfully raised over $2.4 billion of new equity capital since the beginning of the quarter.  Annaly remains uniquely positioned in an equity market where conservatively-valued, yield manufacturing businesses are increasingly difficult to find.”

The following table summarizes certain key performance indicators as of and for the quarters ended September 30, 2017, June 30, 2017, and September 30, 2016:

 

		September 30, 2017				June 30, 2017				September 30, 2016
Book value per common share		$	11.42			$	11.19			$	11.83
Economic leverage at period-end (1)		6.9:1				6.4:1				6.1:1
GAAP net income (loss) per average common share (2)		$	0.31			$	(0.01	)		$	0.70
Annualized GAAP return (loss) on average equity			10.98	%			0.46	%			23.55	%
Net interest margin (3)			1.33	%			1.23	%			1.40	%
Average yield on interest earning assets (4)			2.79	%			2.58	%			2.70	%
Average cost of interest bearing liabilities (5)			1.82	%			1.74	%			1.57	%
Net interest spread			0.97	%			0.84	%			1.13	%
Core Earnings Metrics:
Core earnings (excluding PAA) per average common share *(2)(6)		$	0.30			$	0.30			$	0.29
Core earnings per average common share *(2)(6)		$	0.26			$	0.23			$	0.29
PAA cost (benefit) per average common share		$	0.04			$	0.07			$	0.00
Annualized core return on average equity (excluding PAA) *			10.57	%			10.54	%			10.09	%
Net interest margin (excluding PAA) *(3)			1.47	%			1.53	%			1.42	%
Average yield on interest earning assets (excluding PAA) *(4)			2.97	%			2.93	%			2.72	%
Net interest spread (excluding PAA) *			1.15	%			1.19	%			1.15	%

 

	*	Represents a non-GAAP financial measure. Please refer to the ‘Non-GAAP Financial Measures’ section for additional information.
	(1)	Computed as the sum of recourse debt, to-be-announced (“TBA”) derivative notional outstanding and net forward purchases of investments divided by total equity. Recourse debt consists of repurchase agreements and other secured financing. Securitized debt, participation sold and mortgages payable are non-recourse to the Company and are excluded from this measure.
	(2)	Net of dividends on preferred stock, including cumulative and undeclared dividends on the Company’s Series F Preferred stock of $8.3 million for the quarter ended September 30, 2017.
	(3)	Represents the sum of the Company’s annualized economic net interest income (inclusive of interest expense on interest rate swaps used to hedge cost of funds) plus TBA dollar roll income (less interest expense on swaps used to hedge TBA dollar roll transactions) divided by the sum of its average interest earning assets plus average outstanding TBA derivative balances.
	(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)	Includes interest expense on interest rate swaps used to hedge cost of funds.
	(6)	Core earnings is defined as net income (loss) excluding gains or losses on disposals of investments and termination of interest rate swaps, unrealized gains or losses on interest rate swaps and investments measured at fair value through earnings, net gains and losses on trading assets, impairment losses, net income (loss) attributable to noncontrolling interest, corporate acquisition related expenses and certain other non-recurring gains or losses, and inclusive of TBA dollar roll income (a component of Net gains (losses) on trading assets) and realized amortization of MSRs (a component of net unrealized gains (losses) on investments measured at fair value through earnings). Core earnings (excluding PAA) excludes 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.

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, 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; our ability to grow our commercial real estate business; our ability to grow our residential mortgage credit business; our ability to grow 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, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights; our ability to consummate any contemplated investment opportunities; changes in government regulations and 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 of 1940, as amended. 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. We do not undertake, and specifically disclaim 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 that invests in and finances residential and commercial assets. Annaly’s principal business objective is to generate net income for distribution to its stockholders through capital preservation, prudent selection of investments, and continuous management of its portfolio. Annaly has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Annaly is externally managed by Annaly Management Company LLC. Additional information on the Company can be found at www.annaly.com.

The Company prepares a supplemental investor presentation and a financial summary for the benefit of its shareholders. Both the Third Quarter 2017 Investor Presentation and the Third Quarter 2017 Financial Summary can be found at the Company’s website (www.annaly.com) in the Investors section under Investor Presentations.

The Company will hold the third quarter 2017 earnings conference call on November 2, 2017 at 10:00 a.m. Eastern Time. The number to call is 888-317-6003 for domestic calls and 412-317-6061 for international calls. The conference passcode is 8343484. There will also be an audio webcast of the call on www.annaly.com. The 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 10113329. 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.

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share data)
		September 30,				June 30,				March 31,				December 31,				September 30,
		2017				2017				2017				2016(1)				2016
		(Unaudited)				(Unaudited)				(Unaudited)								(Unaudited)
ASSETS
Cash and cash equivalents (2)		$	867,840			$	700,692			$	819,421			$	1,539,746			$	2,382,188
Investments, at fair value:
Agency mortgage-backed securities			85,889,131				73,963,998				72,708,490				75,589,873				73,476,105
Credit risk transfer securities			582,938				605,826				686,943				724,722				669,295
Non-Agency mortgage-backed securities			1,227,235				1,234,053				1,409,093				1,401,307				1,460,261
Residential mortgage loans (3)			895,919				779,685				682,416				342,289				310,148
Mortgage servicing rights			570,218				605,653				632,166				652,216				492,169
Commercial real estate debt investments (4)			3,869,110				3,972,560				4,102,613				4,321,739				4,319,077
Commercial real estate debt and preferred equity, held for investment (5)			981,748				928,181				985,091				970,505				1,070,197
Commercial loans held for sale, net			-				-				-				114,425				144,275
Investments in commercial real estate			470,928				474,510				462,760				474,567				500,027
Corporate debt			856,110				773,957				841,265				773,274				716,831
Interest rate swaps, at fair value (2)			12,250				10,472				19,195				68,194				113,253
Other derivatives, at fair value			266,249				154,004				196,935				171,266				87,921
Receivable for investments sold			340,033				9,784				354,126				51,461				493,839
Accrued interest and dividends receivable			293,207				263,217				266,887				270,400				260,583
Other assets			353,708				399,456				388,224				333,063				301,419
Goodwill			71,815				71,815				71,815				71,815				71,815
Intangible assets, net			25,742				28,715				31,517				34,184				39,903
Total assets		$	97,574,181			$	84,976,578			$	84,658,957			$	87,905,046			$	86,909,306
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements		$	69,430,268			$	62,497,400			$	62,719,087			$	65,215,810			$	61,784,121
Other secured financing			3,713,256				3,785,543				3,876,150				3,884,708				3,804,742
Securitized debt of consolidated VIEs (6)			3,357,929				3,438,675				3,477,059				3,655,802				3,712,821
Participation sold			-				-				12,760				12,869				12,976
Mortgages payable			311,886				311,810				311,707				311,636				327,632
Interest rate swaps, at fair value (2)			606,960				614,589				572,419				1,443,765				2,919,492
Other derivatives, at fair value			75,529				99,380				52,496				86,437				73,445
Dividends payable			326,425				305,709				305,691				305,674				269,111
Payable for investments purchased			5,243,868				1,043,379				340,383				65,041				454,237
Accrued interest payable			231,611				185,720				182,478				163,013				173,320
Accounts payable and other liabilities			121,231				84,948				161,378				184,319				115,606
Total liabilities			83,418,963				72,367,153				72,011,608				75,329,074				73,647,503
Stockholders’ Equity:
7.875% Series A Cumulative Redeemable Preferred Stock: 7,412,500 authorized, 0, 7,412,500, 7,412,500, 7,412,500, and 7,412,500 issued and outstanding, respectively			-				177,088				177,088				177,088				177,088
7.625% Series C Cumulative Redeemable Preferred Stock 12,650,000 authorized, 12,000,000 issued and outstanding			290,514				290,514				290,514				290,514				290,514
7.50% Series D Cumulative Redeemable Preferred Stock: 18,400,000 authorized, issued and outstanding			445,457				445,457				445,457				445,457				445,457
7.625% Series E Cumulative Redeemable Preferred Stock: 11,500,000 authorized, issued and outstanding			287,500				287,500				287,500				287,500				287,500
6.95% Series F Cumulative Redeemable Preferred Stock: 32,200,000 authorized, 28,800,000 issued and outstanding			696,910				-				-				-				-
Common stock, par value $0.01 per share, 1,917,837,500, 1,945,437,500, 1,945,437,500, 1,945,437,500, and 1,945,437,500 authorized, 1,088,083,794, 1,019,027,880, 1,018,971,441, 1,018,913,249, and 1,018,857,866 issued and outstanding, respectively			10,881				10,190				10,190				10,189				10,189
Additional paid-in capital			16,377,805				15,581,760				15,580,038				15,579,342				15,578,677
Accumulated other comprehensive income (loss)			(640,149	)			(850,767	)			(1,126,091	)			(1,085,893	)			1,119,677
Accumulated deficit			(3,320,160	)			(3,339,228	)			(3,024,670	)			(3,136,017	)			(4,655,440	)
Total stockholders’ equity			14,148,758				12,602,514				12,640,026				12,568,180				13,253,662
Noncontrolling interest			6,460				6,911				7,323				7,792				8,141
Total equity			14,155,218				12,609,425				12,647,349				12,575,972				13,261,803
Total liabilities and equity		$	97,574,181			$	84,976,578			$	84,658,957			$	87,905,046			$	86,909,306

 

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