Annaly's (NLY) Q1 Earnings Meet Estimates, NII Declines Y/Y
Zacks Investment Research | May 03, 2019 04:08AM ET
Annaly Capital Management, Inc. (NYSE:NLY) reported first-quarter 2019 core earnings, excluding premium amortization adjustment (PAA), of 29 cents per share, in line with the Zacks Consensus Estimate. However, the figure compares unfavorably with the year-ago tally of 30 cents.
Further, net interest income (NII) totaling $218.5 million, witnessed a steep decline from the year-ago tally of $512.1 million.
Reflecting negative sentiments, shares of the company were 2.5% down in yesterday’s trading hours.
Nonetheless, the company grew its portfolio by 12% primarily through the purchase of Agency mortgage-backed securities (MBS). It also originated or purchased more than $1 billion of credit assets during the reported quarter.
Quarter in Detail
In the first quarter, average yield on interest-earning assets (excluding PAA) was 3.45%, up from 2.99% recorded in the prior-year quarter.
Net interest spread (excluding PAA) of 1.30% for the first quarter up from 1.09% reported in the prior-year quarter. Net interest margin (excluding PAA) in the quarter came in at 1.51% compared with 1.52% witnessed in the March-end 2018 quarter.
The company’s investment at fair value of Agency MBS was around $103.1 million as of Mar 31, 2019, up from roughly $90.8 million as of Dec 31, 2018.
Further, Annaly’s book value per share came in at $9.67 as of Mar 31, 2019, compared with $10.53 as of Mar 31, 2018. Nonetheless, book value per share improved from $9.39 as of Dec 31, 2018. At the end of the first quarter, the company’s capital ratio was 12%, down from 12.1% reported at the end of the fourth quarter of 2018.
Leverage was 6:1:1 as of Mar 31, 2019, compared with 6:3:1 as of Dec 31, 2018. The company offered an annualized core return on average equity of 11.59% in the January-March quarter, up from the prior quarter’s 11.48%.
Our Take
During the first quarter, Annaly made significant securitization efforts within the residential credit and commercial real estate businesses. These efforts have improved the company’s liquidity while contributing to 75 basis points of incremental levered returns on its investments. Further, as of the March-end quarter, the company had unencumbered assets of $9 billion. Hence, with solid balance-sheet strength, the company is well positioned to expand its portfolio efficiently.
Annaly Capital Management Inc Price, Consensus and EPS Surprise
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