Annaly Capital Management (NYSE:NLY), as expected, posted a drop in its earnings for distribution for a fifth straight quarter as higher interest rates and spreads weighed on the mortgage REIT’s economic return.
Q3 EPS for distribution of $0.66, trailing the $0.68 consensus, dropped from $0.72 in the previous quarter and $1.06 in the year-ago period.
Economic return of -8.8% vs. 2.9% in Q2. Economic leverage of 6.4x rose from 5.8x in the prior quarter.
Book value per common share of $18.25 at Sept. 30, 2023, fell from $20.73 at June 30.
“Annaly (NLY) entered the quarter with lower leverage and substantial liquidity, which, along with our dynamic hedging, enabled us to remain nimble,” said CEO and Chief Investment Officer David Finkelstein. “Despite our active portfolio management, higher rates and spreads weighed on our book value and economic return for the quarter.”
Annaly (NLY) stock rose 1.5% in Wednesday after-hours trading.
Total assets of $89.6B vs. $89.3B at June 30, 2023. Securities fell to $69.9B at Sept. 30 from $71.2B at the end of Q2, while net loans increased to $1.79B from $1.15B. Mortgage servicing rights stood at $2.23B vs. $2.02B at Q2-end.
Total portfolio of $76.2B includes $68.5B in highly liquid agency portfolio. Annaly’s (NLY) agency portfolio decreased by 4%, with portfolio activity focused on further gravitation up in coupon.
Q3 net interest income of -$45.3M vs. -$32.0M in Q2 and $19.5M in Q3 2022; net interest margin, excluding PAA, of 1.48% vs. 1.66% in Q2 and 1.98% in Q3 2022.
Q3 net interest spread, excluding PAA, was 1.18% vs. 1.45% in the prior quarter and 1.70% a year ago.
Net servicing income of $88.0M rose from $74.8M in Q2 and $76.4M in Q3 2022.
Average economic cost of interest-bearing liabilities was 3.28% at Sept. 30 vs. 2.77% at June 30 and 1.54% at Sept. 30, 2022.
Total general and administrative expenses were $39.9M, down from $42.9M the previous quarter and $40.8M a year ago.
Conference call on Oct. 26 at 9:00 AM ET.
Earlier, Annaly Capital Management (NLY) non-GAAP EPS of $0.66 misses by $0.02