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Annaly (NLY) Q3 Earnings Top Estimate, Book Value & NII Fall

Annaly's (NLY) third-quarter results reflect low financing costs, which increase net interest spread. A decline in the average yield on interest-earning assets and book value erosion ail.

This story originally appeared on Zacks

Annaly Capital Management, Inc. NLY reported third-quarter 2021 earnings available for distribution (EAD) per share of 28 cents that surpassed the Zacks Consensus Estimate of 26 cents. The figure, however, compared unfavorably with the year-ago quarter’s 32 cents.

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The net interest income (NII) was $362.5 million, lagging the Zacks Consensus Estimate of $410.2 million. The figure declined 19% year over year.

With continued low financing costs, Annaly witnessed a rise in net interest spread. However, the company registered a year-over-year decline in book value per share (BVPS) and the average yield on interest-earning assets.

In the third quarter of 2021, the company closed the previously announced sale of substantially all of the assets that comprise the commercial real estate business for $2.33 billion. The remaining assets are expected to be legally transferred by the end of fourth-quarter 2021.

Inside the Headlines

At the third-quarter end, the company had $94.2 billion of total assets, with 92% of assets invested in the Agency portfolio. At the end of the quarter, unencumbered assets stood at $9.8 billion.

In the reported quarter, the average yield on interest-earning assets (excluding premium amortization adjustment or PAA) was 2.63%, down from the prior-year quarter’s 2.86%.Average GAAP costs of interest-bearing liabilities were 0.32%, declining from 0.60%.

Net interest spread (excluding PAA) of 1.97% for the third quarter rose from 1.93% in the prior-year quarter. The net interest margin (excluding PAA) in the reported quarter was 2.04% compared with 2.05% witnessed in third-quarter 2020.

Annaly’s BVPS was $8.39 as of Sep 30, 2021, sequentially up from $8.37. However, BVPS compared unfavorably with $8.70 as of Sep 30, 2020. At the end of the reported quarter, the company’s economic capital ratio was 14.2%, rising from 13.6% in the prior-year quarter.

For the September-end quarter, the weighted average actual constant prepayment rate was 23.1%, sequentially down from 26.4%.

Economic leverage was 5.8X as of Sep 30, 2021, flat sequentially and down from 6.2X in the prior-year quarter. The company generated an annualized EAD return on average equity (excluding PAA) of 12.81% in the third quarter, down from the prior quarter’s 13.05%.

Annaly currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Annaly Capital Management Inc Price, Consensus and EPS Surprise


Annaly Capital Management Inc Price, Consensus and EPS Surprise

Annaly Capital Management Inc price-consensus-eps-surprise-chart | Annaly Capital Management Inc Quote

Performance and Earnings Dates of Other mREITs

AGNC Investment Corp. AGNC reported a third-quarter 2021 net spread and dollar roll income per common share (excluding estimated "catch-up" premium amortization costs) of 75 cents per share, beating the Zacks Consensus Estimate of 63 cents. However, the reported figure declined from the third-quarter 2020 number of 81 cents.

We now look forward to the earnings releases of other mortgage REITs like Arbor Realty Trust, Inc. ABR and Chimera Investment Corporation CIM, which are scheduled to release their results on Oct 29 and Nov 3, respectively.

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