Annaly Capital Management (NLY) Q3 2024 earnings summary

Executive summary

• Delivered a 4.9% economic return for Q3 2024 and 10.5% year-to-date, with EAD per share of $0.66 exceeding the dividend and robust portfolio earnings power.

• Book value per common share increased to $19.54, up from $19.25 in the prior quarter and $18.25 a year ago.

• Raised $1.2 billion in accretive common equity since the start of Q3, supporting growth across all business lines.

• Maintained disciplined leverage, with economic leverage down to 5.7x and GAAP leverage at 6.9x.

• Announced a new sub-servicing partnership with Rocket Mortgage to enhance MSR servicing capabilities.

Financial highlights

• GAAP net income for Q3 2024 was $82.4 million ($0.05 per share), compared to a net loss in Q2; EAD per share was $0.66.

• Book value per share rose to $19.54, with a quarterly dividend of $0.65 per share and a dividend yield of 13.0%.

• Net interest margin (excluding PAA) was 1.52%, and net interest spread (excluding PAA) was 1.32%.

• Average yield on interest earning assets (excluding PAA) was 5.25%; average economic cost of interest bearing liabilities was 3.93%.

• Operating expense to equity ratio decreased to 1.48% for Q3.

Outlook and guidance

• Management is optimistic about the improving operating environment, with the Fed’s rate cutting cycle underway and a constructive macro outlook for fixed income.

• Agency, Residential Credit, and MSR strategies are expected to benefit from improved market dynamics and robust demand.

• Modest earnings and NIM increase expected in Q4; dividend considered safe with potential for further growth depending on market and Fed direction.

• Agency MBS remains the preferred allocation, but all business lines are expected to grow as opportunities arise.

• Management expects continued interest rate volatility due to elections and geopolitical risks, but maintains a favorable outlook for Agency MBS.