NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core
Earnings for the quarter ended December 31, 2006 of $51.7 million or
$0.23 per average share available to common shareholders, as compared
to Core Earnings of $12.0 million or $0.06 per average share available
to common shareholders for the quarter ended December 31, 2005 and
Core Earnings of $34.9 million or $0.16 per average share available to
common shareholders for the quarter ended September 30, 2006. The
Company reported Core Earnings for the year ended December 31, 2006 of
$141.8 million or $0.73 per average share available to common
shareholders, as compared to Core Earnings of $127.1 million or $0.92
per average share available to common shareholders for the year ended
December 31, 2005. "Core Earnings" represents a non-GAAP measure and
is defined as net income (loss) excluding impairment losses and gains
or losses on sales of securities. On a GAAP basis, the net income for
the quarter ended December 31, 2006 was $53.3 million or $0.23 basic
net income per average share available to common shareholders, as
compared to a net loss of $136.7 million or $1.14 basic net loss per
average share available to common shareholders for the quarter ended
December 31, 2005 and net income of $42.9 million or $0.21 basic net
income per average share available to common shareholders for the
quarter ended September 30, 2006. On a GAAP basis, the net income for
the year ended December 31, 2006 was $93.8 million or $0.44 basic net
income per average share available to common shareholders, as compared
to a net loss of $9.2 million or $0.19 basic net loss per average
share available to common shareholders for the year ended December 31,
2005.
During the year ended December 31, 2006, the Company sold $3.2
billion of Mortgage-Backed Securities, resulting in a realized loss of
$3.9 million. In addition, the Company had a $10.7 million realized
gain on the termination of interest rate swaps with a notional value
of $1.2 billion. During the year ended December 31, 2005, the Company
sold $3.0 billion of Mortgage-Backed Securities, resulting in a
realized loss of $53.2 million.
Common dividends declared for the quarter ended December 31, 2006
were $0.19 per share, as compared to $0.10 per share for the quarter
ended December 31, 2005 and $0.14 per share for the quarter ended
September 30, 2006. The annualized dividend yield on common stock for
the quarter ended December 31, 2006, based on the December 31, 2006
closing price of $13.91, was 5.46%. On a Core Earnings basis, the
Company provided an annualized return on average equity of 7.89% for
the quarter ended December 31, 2006, as compared to 3.04% for the
quarter ended December 31, 2005 and 6.29% for the quarter ended
September 30, 2006. On a GAAP basis, the Company provided an
annualized return on average equity of 8.13% for the quarter ended
December 31, 2006, as compared to (35.71%) for the quarter ended
December 31, 2005, and 7.72% for the quarter ended September 30, 2006.
On a GAAP basis, the Company provided an annualized return on average
equity of 4.68% for the year ended December 31, 2006, as compared to
(0.57%) for the year ended December 31, 2005.
During the year ended December 31, 2006, the Company completed an
offering of cumulative convertible preferred stock totaling
approximately $111.5 million in net proceeds, before offering
expenses. The Company also completed two secondary offerings of common
stock. The net proceeds from these offerings were approximately $914.0
million, before offering expenses.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "The
transparency of the Annaly business model is such that our fourth
quarter results are a fair reflection of the market facts: During the
quarter short- and long-term rates were relatively range-bound, thus
keeping our cost of funds steady and stabilizing our asset values. We
also benefited from the accretion related to capital deployed after
our capital-raises. While the Federal Reserve has remained on hold
since June 29, 2006, recent economic data have not been sufficient to
drive a policy move in one direction or another. However, we believe
that signs of continuing weakness in housing and housing-related
industries, deterioration in credit performance among mortgage
borrowers, and the easing of inflationary pressures will be important
signposts for the Fed. That said, we continue to position our
portfolio of assets to perform in a range of interest rate outcomes,
including a continuation of the current environment."
For the quarter ended December 31, 2006, the annualized yield on
average earning assets was 5.64% and the annualized cost of funds on
the average repurchase balance was 5.15%, which equates to an interest
rate spread of 0.49%. This is a 40 basis point increase over the 0.09%
annualized interest rate spread for the quarter ended December 31,
2005 and a 17 basis point increase over the 0.32% annualized interest
rate spread for the quarter ended September 30, 2006. For the quarter
ended December 31, 2005, the annualized yield on average earning
assets was 4.10% and the annualized cost of funds on the average
repurchase balance was 4.01%. For the quarter ended September 30,
2006, the annualized yield on average earning assets was 5.44% and the
annualized cost of funds on the average repurchase balance was 5.12%.
At December 31, 2006, the weighted average yield on assets was 5.63%
and the cost of funds was 5.14%, which equates to an interest rate
spread of 0.49%. Leverage at December 31, 2006 was 10.4:1, in
comparison to 9.0:1 at December 31, 2005 and 9.6:1 at September 30,
2006.
Fixed rate securities comprised 72% of the Company's portfolio at
December 31, 2006. The balance of the portfolio was comprised of 20%
adjustable rate mortgages and 8% LIBOR floating rate collateralized
mortgage obligations. At December 31, 2006, the Company had entered
into interest rate swaps with a notional amount of $9.3 billion. The
Company's swaps are designated as cash flow hedges against the
benchmark interest rate risk associated with the Company's borrowings.
The purpose of the swaps is to mitigate the risk of rising interest
rates that affect the Company's cost of funds. Since the Company will
be receiving a floating rate on the notional amount of the swaps, the
effect of the swaps will be to enhance the earnings potential of a
portion of the fixed rate assets in the portfolio in a rising rate
environment. The Company has continued to avoid the introduction of
credit risk into its portfolio. As of December 31, 2006, substantially
all of the assets in the Company's portfolio were FNMA, GNMA and FHLMC
mortgage-backed securities and agency debentures, which carry an
actual or implied "AAA" rating.
"Although we continue to operate in range-bound markets, we have
taken every opportunity to improve our portfolio," said Wellington
Denahan-Norris, Annaly's Vice Chairman, Chief Investment Officer and
Chief Operating Officer. "Due to the rebalancing of the portfolio
which continued early in the year, the capital raises in April and
August and the subsequent deployment of proceeds, our weighted average
dollar price is lower, our portfolio yields are higher, our yield
exposure to faster prepayment rates is lower and our floating rate
exposure is increased. Giving effect to the swaps, at December 31,
2006, our portfolio of short duration assets was effectively comprised
of 41% fixed-rate, 20% adjustable-rate and 39% floating-rate exposure,
which is consistent with the portfolio composition in our barbell
strategy."
The following table summarizes portfolio information for the
Company:
December 31, December 31, September 30,
2006 2005 2006
Leverage at period-end 10.4:1 9.0:1 9.6:1
Fixed-rate investment
securities as % of portfolio 72% 39% 71%
Adjustable-rate investment
securities as % of portfolio 20% 55% 20%
Floating-rate investment
securities as % of portfolio 8% 6% 9%
Notional amount of interest
rate swaps as % of investment
securities 31% 3% 32%
Annualized yield on average
earning assets during the
quarter 5.64% 4.10% 5.44%
Annualized cost of funds on
avg. repurchase balance
during the quarter 5.15% 4.01% 5.12%
Weighted average yield on
assets at period-end 5.63% 4.68% 5.58%
Weighted average cost of funds
at period-end 5.14% 4.16% 5.12%
The Constant Prepayment Rate was 15% during the fourth quarter of
2006, as compared to 28% during the fourth quarter of 2005, and 16%
during the third quarter of 2006. The weighted average cost basis was
100.5 at December 31, 2006. The net amortization of premiums and
accretion of discounts on investment securities for the quarters ended
December 31, 2006, December 31, 2005 and September 30, 2006 was $15.0
million, $31.8 million, and $14.9 million, respectively. The total net
premium remaining unamortized at December 31, 2006, December 31, 2005
and September 30, 2006 was $140.7 million, $220.6 million, and $139.7
million, respectively.
General and administrative expenses as a percentage of average
assets were 0.16%, 0.14%, and 0.18% for the quarters ended December
31, 2006, December 31, 2005, and September 30, 2006, respectively. At
December 31, 2006, December 31, 2005, and September 30, 2006 the
Company had a common stock book value per share of $11.52, $10.73 and
$11.26, respectively.
At December 31, 2006, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.6 billion in
net assets and $15.1 billion in gross assets, as compared to $2.3
billion in net assets and $18.7 billion in gross assets at December
31, 2005 and $2.6 billion in net assets and $14.6 billion in gross
assets at September 30, 2006. For the quarter ended December 31, 2006,
FIDAC earned investment advisory and service fees, net of fees paid to
distributors, of $4.4 million, as compared to $6.9 million for the
quarter ended December 31, 2005 and $4.3 million for the quarter ended
September 30, 2006. FIDAC, organized as a taxable REIT subsidiary of
Annaly, generally receives net investment advisory fees of
approximately 10 to 20 basis points of the gross assets it manages,
assists in managing or supervises.
"Our asset management business has stabilized," said Mr. Farrell.
"We continue to focus our energies on opportunities for our asset
management subsidiary in order to grow assets under management and fee
income."
Annaly manages assets on behalf of institutional and individual
investors worldwide through Annaly and through the funds managed by
its wholly-owned registered investment advisor, FIDAC. The Company's
principal business objective is to generate net income for
distribution to investors from the spread between the interest income
on its mortgage-backed securities and the cost of borrowing to finance
their acquisition and from dividends Annaly receives from FIDAC, which
earns investment advisory fee income. The Company, a Maryland
corporation that has elected to be taxed as a real estate investment
trust ("REIT"), currently has 205,345,591 shares of common stock
outstanding.
The Company will hold the fourth quarter 2006 earnings conference
call on February 7, 2007 at 10:00 a.m. EST. The number to call is
1-800-573-4842 for domestic calls and 617-224-4327 for international
calls and the pass code is 57827669. The replay number is
1-888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 66924330. The replay is available for 48
hours after the earnings call. There will be a web cast of the call on
www.annaly.com. If you would like to be added to the e-mail
distribution list, please visit www.annaly.com, click on E-Mail
alerts, enter your e-mail address where indicated and click the
Subscribe button.
This news release and our public documents to which we refer
contain or incorporate by reference certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward-looking
statements which are based on various assumptions (some of which are
beyond our control) may be identified by reference to a future period
or periods or by the use of forward-looking terminology, such as
"may," "will," "believe," "expect," "anticipate," "continue," or
similar terms or variations on those terms or the negative of those
terms. Actual results could differ materially from those set forth in
forward-looking statements due to a variety of factors, including, but
not limited to, changes in interest rates, changes in yield curve,
changes in prepayment rates, the availability of mortgage-backed
securities for purchase, the availability of financing and, if
available, the terms of any financing, changes in the market value of
our assets, changes in business conditions and the general economy,
and risks associated with the investment advisory business of FIDAC,
including the removal by FIDAC's clients of assets FIDAC manages,
FIDAC's regulatory requirements, and competition in the investment
advisory business, changes in government regulations affecting our
business, and our ability to maintain our qualification as a REIT for
federal income tax purposes. For a discussion of the risks and
uncertainties which could cause actual results to differ from those
contained in the forward-looking statements, see "Risk Factors" in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2005
and all subsequent Quarterly Reports on Form 10-Q. We do not
undertake, and specifically disclaim any obligation, to publicly
release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such
statements.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
December 31, September June 30,
2006 30, 2006 2006
(Unaudited) (Unaudited) (Unaudited)
--------------------------------------
ASSETS
Cash and cash equivalents $ 91,782 $ 66,844 $ 53,849
Mortgage-Backed Securities, at
fair value 30,167,509 28,348,027 23,474,006
Agency debentures, at fair
value 49,500 - -
Trading securities, at fair
value 18,365 23,409
Receivable for Mortgage-Backed
Securities sold 200,535 5,325 -
Accrued interest receivable 146,089 130,348 110,647
Receivable for advisory and
service fees 3,178 3,124 3,114
Intangible for customer
relationships 11,184 11,662 12,206
Goodwill 22,966 22,966 22,966
Interest rate swaps, at fair
value 2,558 - 105,435
Other assets 2,314 2,679 1,567
--------------------------------------
Total assets $30,715,980 $28,614,384 $23,783,790
======================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $27,514,020 $24,901,420 $21,256,703
Payable for Investment
Securities purchased 338,172 942,871 607,789
Trading securities sold, not
yet purchased, at fair value 41,948 29,740 -
Accrued interest payable 83,998 66,547 42,100
Dividends payable 39,016 30,403 21,322
Other liabilities - - -
Accounts payable and other
liabilities 18,816 13,367 6,979
Interest rate swaps, at fair
value 20,179 30,333 -
--------------------------------------
Total liabilities 28,056,149 26,014,681 21,934,893
--------------------------------------
Minority interest in equity of
consolidated affiliate 5,324 5,028 5,000
--------------------------------------
6.00% Series B Cumulative
Convertible Preferred Stock:
4,600,000 shares authorized,
issued and outstanding at
December 31, 2006, September
30, 2006 and June 30, 2006 111,466 111,466 111,471
--------------------------------------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred Stock:
7,637,500 authorized,
7,412,500 shares issued and
outstanding 177,088 177,088 177,088
Common stock: par value $.01
per share; 500,000,000
authorized, 205,345,591,
204,845,591, 164,015,156,
123,701,656 and 123,684,931,
outstanding, respectively 2,053 2,048 1,640
Additional paid-in capital 2,615,016 2,607,995 2,131,358
Accumulated other
comprehensive loss (76,112) (119,973) (384,912)
Accumulated deficit (175,004) (183,949) (192,748)
--------------------------------------
Total stockholders' equity 2,543,041 2,483,209 1,732,426
--------------------------------------
Total liabilities, minority
interest, Series B Cumulative
Convertible Preferred Stock
and stockholders' equity $30,715,980 $28,614,384 $23,783,790
======================================
March 31, December 31,
2006 2005 (1)
(Unaudited)
-------------------------
ASSETS
Cash and cash equivalents $ 2,403 $ 4,808
Mortgage-Backed Securities, at fair value 16,176,348 15,929,864
Agency debentures, at fair value - -
Trading securities, at fair value
Receivable for Mortgage-Backed Securities
sold 139,491 13,449
Accrued interest receivable 75,092 71,340
Receivable for advisory and service fees 3,805 3,497
Intangible for customer relationships 13,851 15,183
Goodwill 22,966 23,122
Interest rate swaps, at fair value 36,470 -
Other assets 2,281 2,159
-------------------------
Total assets $16,472,707 $16,063,422
=========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $14,629,883 $13,576,301
Payable for Investment Securities purchased 354,312 933,051
Trading securities sold, not yet purchased,
at fair value - -
Accrued interest payable 37,738 27,994
Dividends payable 13,607 12,368
Other liabilities - 305
Accounts payable and other liabilities 3,238 8,837
Interest rate swaps, at fair value - 543
-------------------------
Total liabilities 15,038,778 14,559,399
-------------------------
Minority interest in equity of consolidated
affiliate - -
-------------------------
6.00% Series B Cumulative Convertible
Preferred Stock: 4,600,000 shares
authorized, issued and outstanding at
December 31, 2006, September 30, 2006 and
June 30, 2006 - -
-------------------------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock: 7,637,500 authorized,
7,412,500 shares issued and outstanding 177,088 177,088
Common stock: par value $.01 per share;
500,000,000 authorized, 205,345,591,
204,845,591, 164,015,156, 123,701,656 and
123,684,931, outstanding, respectively 1,237 1,237
Additional paid-in capital 1,679,904 1,679,452
Accumulated other comprehensive loss (249,459) (207,117)
Accumulated deficit (174,841) (146,637)
-------------------------
Total stockholders' equity 1,433,929 1,504,023
-------------------------
Total liabilities, minority interest, Series
B Cumulative Convertible Preferred Stock and
stockholders' equity $16,472,707 $16,063,422
=========================
(1) Derived from the audited consolidated financial statements at
December 31, 2005.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the Quarters ending
December 31, September 30, June 30,
2006 2006 2006
------------------------------------------
Interest income $ 407,092 $ 339,737 $ 280,171
Interest expense 349,302 295,726 242,473
------------------------------------------
Net interest income 57,790 44,011 37,698
------------------------------------------
Other income (loss)
Investment advisory and
service fees 5,178 4,966 5,210
Gain (loss) on sale of
Mortgage-Backed
Securities 4,829 (446) (1,239)
Gain on termination of
interest rate swaps 2,260 8,414 -
Income from trading
securities 3,382 612 -
------------------------------------------
Total other income (loss) 15,649 13,546 3,971
------------------------------------------
Expenses
Distribution fees 795 724 755
General and administrative
expenses 12,219 11,682 8,985
------------------------------------------
Total expenses 13,014 12,406 9,740
------------------------------------------
Impairment of intangible
for customer relationships - - 1,345
------------------------------------------
Loss on other-than-
temporarily impaired
securities 5,504 - 20,114
------------------------------------------
Income (loss) before income
taxes and minority
interest 54,921 45,151 10,470
Income taxes 1,288 2,273 1,892
------------------------------------------
Net income (loss) before
minority interest 53,633 42,878 8,578
Minority interest 296 28 -
------------------------------------------
------------------------------------------
Net income (loss) 53,337 42,850 8,578
------------------------------------------
------------------------------------------
Dividend on preferred stock 5,373 5,373 5,163
------------------------------------------
Net income available (loss
related) to common
shareholders $ 47,964 $ 37,477 $ 3,415
==========================================
Net income (loss) per share
available (related) to
common shareholders:
Basic $ 0.23 $ 0.21 $ 0.02
==========================================
Diluted $ 0.23 $ 0.20 $ 0.02
==========================================
Weighted average number of
shares outstanding:
Basic 205,092,330 181,767,106 158,632,865
==========================================
Diluted 213,455,555 189,952,159 158,703,614
==========================================
Net income (loss) $ 53,335 $ 42,850 $ 8,578
------------------------------------------
Comprehensive income (loss)
Unrealized gain (loss) on
available-for-sale
securities 35,979 400,261 (225,771)
Unrealized (loss) gain on
interest rate swaps 14,971 (127,354) 68,965
Reclassification
adjustment for net
(gains) losses included
in net income or loss (7,089) (7,968) 21,353
------------------------------------------
Other comprehensive
income (loss) 43,861 264,939 (135,453)
------------------------------------------
Comprehensive income (loss) $ 97,196 $ 307,789 ($126,875)
==========================================
For the Quarters ending
March 31, December 31,
2006 2005
----------------------------
Interest income $ 194,882 $ 179,688
Interest expense 167,512 165,766
----------------------------
Net interest income 27,370 13,922
----------------------------
Other income (loss)
Investment advisory and service fees 6,997 8,702
Gain (loss) on sale of Mortgage-Backed
Securities (7,006) (65,285)
Gain on termination of interest rate
swaps - -
Income from trading securities - -
----------------------------
Total other income (loss) (9) (56,583)
----------------------------
Expenses
Distribution fees 1,170 1,850
General and administrative expenses 7,177 6,359
----------------------------
Total expenses 8,347 8,209
----------------------------
Impairment of intangible for customer
relationships 1,148 -
----------------------------
Loss on other-than-temporarily impaired
securities 26,730 83,098
----------------------------
Income (loss) before income taxes and
minority interest (8,864) (133,968)
Income taxes 2,085 2,791
----------------------------
Net income (loss) before minority interest (10,949) (136,759)
Minority interest - -
----------------------------
----------------------------
Net income (loss) (10,949) (136,759)
----------------------------
----------------------------
Dividend on preferred stock 3,648 3,649
----------------------------
Net income available (loss related) to
common shareholders ($14,597) ($140,408)
============================
Net income (loss) per share available
(related) to common shareholders:
Basic ($0.12) ($1.14)
============================
Diluted ($0.12) ($1.14)
============================
Weighted average number of shares
outstanding:
Basic 123,693,851 123,684,931
============================
Diluted 123,693,851 123,684,931
============================
Net income (loss) ($10,949) ($136,759)
----------------------------
Comprehensive income (loss)
Unrealized gain (loss) on available-for-
sale securities (113,091) (50,402)
Unrealized (loss) gain on interest rate
swaps 37,013 (543)
Reclassification adjustment for net
(gains) losses included in net income or
loss 33,736 148,383
----------------------------
Other comprehensive income (loss) (42,342) 97,438
----------------------------
Comprehensive income (loss) ($53,291) ($39,321)
============================
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands)
For the twelve months ended
December 31, December 31,
2006 2005 (1)
(Unaudited)
---------------------------
Interest income $ 1,221,882 $ 705,046
Interest expense 1,055,013 568,560
---------------------------
Net interest income 166,869 136,486
---------------------------
Other income (loss)
Investment advisory and service fees 22,351 35,625
(Loss) gain on sale of Mortgage-Backed
Securities (3,862) (53,238)
Gain on termination of interest rate
swaps 10,674 -
Income from trading securities 3,994 -
---------------------------
Total other income (loss) 33,157 (17,613)
---------------------------
Expenses
Distribution fees 3,444 8,000
General and administrative expenses 40,063 26,278
---------------------------
Total expenses 43,507 34,278
---------------------------
Impairment of intangible for customer
relationships 2,493 -
---------------------------
Loss on other-than-temporarily impaired
securities 52,348 83,098
---------------------------
Income before income taxes and minority
interest 101,678 1,497
Income taxes 7,538 10,744
---------------------------
Net income (loss) before minority interest 94,140 (9,247)
Minority interest 324 -
Net income (loss) 93,816 (9,247)
Dividend on preferred stock 19,557 14,593
---------------------------
Net income available (loss related) to
common shareholders 74,259 ($23,840)
===========================
Net income per share available (loss
related) to common shareholders:
Basic $ 0.44 ($0.19)
===========================
Diluted $ 0.44 ($0.19)
===========================
Weighted average number of shares
outstanding:
Basic 167,666,631 122,475,032
===========================
Diluted 167,746,387 122,475,032
===========================
Net income (loss) $ 93,816 ($9,247)
---------------------------
Comprehensive income (loss):
Unrealized gain (loss) on available-for-
sale securities 91,873 (222,110)
Unrealized loss on interest rate swap (6,404) (543)
Reclassification adjustment for net
losses included in net income 45,536 136,336
---------------------------
Other comprehensive income (loss) 131,005 (86,317)
---------------------------
Comprehensive income (loss) $ 224,821 ($95,564)
===========================
(1) Derived from the audited consolidated financial statements at
December 31, 2005
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com