Annaly Capital Management Inc (NLY) Reports Q3 2023 Earnings
GAAP net loss of ($1.21) per average common share for the quarter
Earnings available for distribution ("EAD") of $0.66 per average common share for the quarter
Economic loss of (8.8%) for the third quarter
Book value per common share of $18.25
GAAP leverage of 7.1x, up from 6.1x in the prior quarter; economic leverage of 6.4x, up from 5.8x in the prior quarter
Annaly Capital Management Inc (NYSE:NLY) announced its financial results for the third quarter ended September 30, 2023, on October 25, 2023. The company reported a GAAP net loss of ($1.21) per average common share for the quarter. Despite the challenging period for fixed income markets, Annaly maintained a conservative hedge position and actively managed its portfolio duration.
Financial Performance
Annaly's total portfolio stood at $76.2 billion, including $68.5 billion in a highly liquid Agency portfolio. The company's Agency portfolio decreased modestly by 4%, with portfolio activity focused on further gravitation up in coupon. The Residential Credit portfolio increased 6% to $5.3 billion, driven by strong performance from the residential whole loan correspondent channel. The Mortgage Servicing Rights ("MSR") portfolio grew 4% quarter-over-quarter to $2.3 billion in assets.
Financing and Capital
The company had $4.7 billion of unencumbered assets, including cash and unencumbered Agency MBS of $2.8 billion. The average GAAP cost of interest-bearing liabilities increased 27 basis points to 5.27%, and the average economic cost of interest-bearing liabilities increased 51 basis points to 3.28% quarter-over-quarter.
Corporate Responsibility & Governance
Annaly expanded its Board of Directors with the election of two new Independent Directors, Manon Laroche and Scott Wede. The board is currently comprised of twelve members, ten of whom are independent and seven of whom identify as women and/or racially/ethnically diverse.
CEO Commentary
The third quarter of 2023 marked a challenging period for fixed income markets driven by a rapid rise in global yields. Agency MBS spreads widened amidst ongoing supply, MBS runoff from Federal Reserve and bank portfolios as well as elevated volatility," commented David Finkelstein, Annalys Chief Executive Officer and Chief Investment Officer. "Annaly entered the quarter with lower leverage and substantial liquidity, which, along with our dynamic hedging, enabled us to remain nimble. Despite our active portfolio management, higher rates and spreads weighed on our book value and economic return for the quarter."
Outlook
While risks to the operating environment persist, Annaly expects to benefit from attractive investment returns across its three businesses and a supportive financing environment. The company's Residential Credit business continues to grow, bolstered by strong performance from its whole loan correspondent channel, and its MSR portfolio is strengthened by stable cash flows and rising yields supporting valuations.
Explore the complete 8-K earnings release (here) from Annaly Capital Management Inc for further details.
This article first appeared on GuruFocus.
