NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core
Earnings for the quarter ended March 31, 2008 of $233.6 million or
$0.51 per average share available to common shareholders as compared
to Core Earnings of $61.7 million or $0.26 per average share available
to common shareholders for the quarter ended March 31, 2007, and Core
Earnings of $151.1 million or $0.37 per average share available to
common shareholders for the quarter ended December 31, 2007. "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 and termination of interest rate swaps. On a GAAP basis,
net income for the quarter ended March 31, 2008 was $243.0 million or
$0.54 basic net income per average share available to common
shareholders, as compared to net income of $67.4 million or $0.29
basic net income per average share available to common shareholders
for the quarter ended March 31, 2007, and net income of $152.9 million
or $0.38 basic net income per average share available to common
shareholders for the quarter ended December 31, 2007.
During the quarter ended March 31, 2008, the Company sold $4.1
billion of Mortgage-Backed Securities, resulting in a realized gain of
$9.4 million. During the quarter ended March 31, 2007, the Company
sold $1.2 billion of Mortgage-Backed Securities, resulting in a
realized gain of $6.1 million. In addition, the Company had a $67,000
gain on the termination of interest rate swaps with a notional value
of $300 million. During the quarter ended December 31, 2007, the
Company sold $549.4 million of Mortgage-Backed Securities, resulting
in a realized gain of $1.8 million.
Common dividends declared for the quarter ended March 31, 2008
were $0.48 per share, as compared to $0.20 per share for the quarter
ended March 31, 2007 and $0.34 per share for the quarter ended
December 31, 2007. The annualized dividend yield on the Company's
common stock for the quarter ended March 31, 2008, based on the March
31, 2008 closing price of $15.32, was 12.53%. On a Core Earnings
basis, the Company provided an annualized return on average equity of
16.01% for the quarter ended March 31, 2008, as compared to 8.13% for
the quarter ended March 31, 2007 and 12.92% for the quarter ended
December 31, 2007. On a GAAP basis, the Company provided an annualized
return on average equity of 16.66% for the quarter ended March 31,
2008, as compared to 8.88% for the quarter ended March 31, 2007, and
13.07% for the quarter ended December 31, 2007.
During the quarter ended March 31, 2008, the Company completed a
public offering of 58,650,000 shares of common stock. The estimated
net proceeds of the offering, including the exercise of the
underwriters' over-allotment option, were approximately $1.1 billion,
net of offering expenses.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "In the first
quarter of 2008, the deflating global credit bubble threatened
system-wide financial stability, raised anxiety levels in the
financing markets and reduced liquidity for many asset classes. To put
it simply, much of the credit markets were essentially frozen during
the second and third weeks of March, and the crisis prompted
unconventional and unprecedented actions by policymakers. We are
pleased that the combination of these policy initiatives, along with
the ongoing efforts to recapitalize financial institutions, has had a
calming effect, but we believe markets will continue to experience
periods of volatility for some time. In this environment, we expect
operating fundamentals to remain favorable for us, and will continue
to manage Annaly's portfolio conservatively and for the long-term
benefit of our shareholders."
For the quarter ended March 31, 2008, the annualized yield on
average earning assets was 5.64% and the annualized cost of funds on
the average repurchase balance was 4.18%, which results in an interest
rate spread of 1.46%. This is an 88 basis point increase over the
0.58% annualized interest rate spread for the quarter ended March 31,
2007 and a 58 basis point increase over the 0.88% annualized interest
rate spread for the quarter ended December 31, 2007. For the quarter
ended March 31, 2007, the annualized yield on average earning assets
was 5.68% and the annualized cost of funds on the average repurchase
balance was 5.10%. For the quarter ended December 31, 2007, the
annualized yield on average earning assets was 5.81% and the
annualized cost of funds on the average repurchase balance was 4.93%.
At March 31, 2008, the weighted average yield on assets was 5.36% and
the cost of funds, including the effect of interest rate swaps, was
3.85%, which results in an interest rate spread of 1.51%. Leverage at
March 31, 2008 was 8.1:1, in comparison to 9.8:1 at March 31, 2007 and
8.7:1 at December 31, 2007.
Fixed rate securities comprised 69% of the Company's portfolio at
March 31, 2008. The balance of the portfolio was comprised of 21%
adjustable rate mortgages and 10% LIBOR floating rate collateralized
mortgage obligations. At March 31, 2008, the Company had entered into
interest rate swaps with a notional amount of $17.0 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 is to lock in a spread relative to the cost of
financing. The Company has continued to avoid the introduction of
credit risk into its portfolio. As of March 31, 2008, 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.
"In spite of the volatility during the quarter, Agency
mortgage-backed securities performed relatively well," said Wellington
Denahan-Norris, Annaly's Vice Chairman, Chief Investment Officer and
Chief Operating Officer. "In our portfolio, after taking into account
the effect of interest rate swaps, at March 31, 2008 our portfolio of
short duration assets was comprised of 39% fixed-rate, 21%
adjustable-rate and 40% floating-rate assets. The spread widened
between the yield on our portfolio assets and the cost to finance them
as the Federal Reserve reduced short-term rates, and we managed our
financing operations at the low end of our leverage range. We will
likely remain at this leverage level for as long as the current
environment remains uncertain, as well as continue to prudently take
advantage of the attractive spreads available for new investments."
The following table summarizes portfolio information for the
Company:
March March December
31, 31, 31,
2008 2007 2007
--------------------
Leverage at period-end 8.1:1 9.8:1 8.7:1
Fixed-rate investment securities as % of
portfolio 69% 75% 71%
Adjustable-rate investment securities as % of
portfolio 21% 19% 21%
Floating-rate investment securities as % of
portfolio 10% 6% 8%
Notional amount of interest rate swaps as % of
portfolio 30% 34% 31%
Annualized yield on average earning assets during
the quarter 5.64% 5.68% 5.81%
Annualized cost of funds on average repurchase
balance during the quarter 4.18% 5.10% 4.93%
Annualized interest rate spread during the
quarter 1.46% 0.58% 0.88%
Weighted average yield on assets at period-end 5.36% 5.67% 5.75%
Weighted average cost of funds at period-end 3.85% 5.17% 4.76%
Interest rate spread at period-end 1.51% 0.50% 0.99%
The Constant Prepayment Rate was 15% during the first quarter of
2008, as compared to 17% during the first quarter of 2007, and 12%
during the fourth quarter of 2007. The weighted average cost basis of
the investment securities was 100.7 at March 31, 2008. The net
amortization of premiums and accretion of discounts on investment
securities for the quarters ended March 31, 2008, March 31, 2007 and
December 31, 2007 was $27.5 million, $15.4 million, and $16.2 million,
respectively. The total net premium remaining unamortized at March 31,
2008, March 31, 2007 and December 31, 2007 was $383.3 million, $195.6
million, and $328.4 million, respectively.
General and administrative expenses as a percentage of average
assets were 0.17%, 0.15% and 0.16% for the quarters ended March 31,
2008, March 31, 2007, and December 31, 2007, respectively. At March
31, 2008, March 31, 2007, and December 31, 2007, the Company had a
common stock book value per share of $12.95, $11.90 and $12.51,
respectively.
At March 31, 2008, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $3.2 billion in
net assets and $12.7 billion in gross assets, as compared to $2.5
billion in net assets and $16.1 billion in gross assets at March 31,
2007 and $3.1 billion in net assets and $15.4 billion in gross assets
at December 31, 2007. For the quarter ended March 31, 2008, FIDAC
earned investment advisory and service fees, net of fees paid to
distributors, of $6.0 million, as compared to $4.7 million for the
quarter ended March 31, 2007 and $4.9 million for the quarter ended
December 31, 2007.
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 468,380,797 shares of common stock
outstanding.
The Company will hold the first quarter 2008 earnings conference
call on Thursday May 1, 2008 at 10:00 a.m. EST. The number to call is
866-761-0748 for domestic calls and 617-614-2706 for international
calls and the pass code is 91995292. The replay number is 888-286-8010
for domestic calls and 617-801-6888 for international calls and the
pass code is 62070173. 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
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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 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)
March 31, December 31, September
2008 2007 (1) 30,
(Unaudited) 2007
(Unaudited)
------------ ------------ ------------
ASSETS
Cash and cash equivalents $ 1,549,041 $ 103,960 $ 90,028
Reverse repurchase agreements 800,000 - -
Mortgage-Backed Securities,
at fair value 56,115,025 52,879,528 44,641,352
Agency debentures, at fair
value 738,837 253,915 249,281
Available for sale equity
securities, at fair value 44,546 64,754 -
Trading securities, at fair
value 1,836 11,675 10,987
Receivable for Mortgage-
Backed Securities sold 174,413 276,737 516,140
Accrued interest and
dividends receivable 287,261 271,996 235,787
Receivable for advisory and
service fees 4,581 3,598 2,933
Intangible for customer
relationships 8,840 9,842 10,178
Goodwill 22,966 22,966 22,966
Interest rate swaps, at fair
value - - -
Other assets 4,347 4,543 3,026
------------ ------------ ------------
Total assets $59,751,693 $53,903,514 $45,782,678
============ ============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $51,324,007 $46,046,560 $40,140,113
Payable for Investment
Securities purchased 828,235 1,677,131 1,169,324
Trading securities sold,
not yet purchased, at fair
value 37,268 32,835 26,823
Accrued interest payable 172,575 257,608 148,462
Dividends payable 224,823 136,618 85,932
Accounts payable and other
liabilities 20,123 36,688 25,237
Interest rate swaps, at
fair value 789,859 398,096 142,061
------------ ------------ ------------
Total liabilities 53,396,890 48,585,536 41,737,952
------------ ------------ ------------
Minority interest in equity
of consolidated affiliate - 1,574 1,329
------------ ------------ ------------
6.00% Series B Cumulative
Convertible Preferred
Stock:
4,600,000 shares authorized,
4,597,550 and 4,600,000
shares issued and
outstanding, respectively 111,405 111,466 111,466
------------ ------------ ------------
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; 487,762,500
authorized, 468,380,797,
401,822,703, 330,509,203,
269,385,348, and 262,887,391
issued and outstanding,
respectively 4,684 4,018 3,305
Additional paid-in capital 6,506,494 5,297,922 4,270,330
Accumulated other
comprehensive loss (335,814) (152,197) (385,960)
Accumulated deficit (109,054) (121,893) (132,832)
------------ ------------ ------------
Total stockholders' equity 6,243,398 5,204,938 3,931,931
------------ ------------ ------------
Total liabilities, minority
interest, Series B
Cumulative
Convertible Preferred Stock
and stockholders' equity $59,751,693 $53,903,514 $45,782,678
============ ============ ============
June 30, March 31,
2007 2007
(Unaudited) (Unaudited)
------------- ------------
ASSETS
Cash and cash equivalents $ 91,781 $ 96,610
Reverse repurchase agreements - -
Mortgage-Backed Securities, at fair value 38,603,002 39,176,227
Agency debentures, at fair value 150,507 54,421
Available for sale equity securities, at
fair value - -
Trading securities, at fair value 12,131 7,872
Receivable for Mortgage-Backed Securities
sold - 28,643
Accrued interest and dividends receivable 197,060 179,816
Receivable for advisory and service fees 2,954 2,949
Intangible for customer relationships 10,513 10,849
Goodwill 22,966 22,966
Interest rate swaps, at fair value 93,404 1,028
Other assets 3,146 3,138
------------- ------------
Total assets $39,187,464 $39,584,519
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $35,093,856 $33,348,011
Payable for Investment Securities
purchased 744,027 2,590,429
Trading securities sold, not yet
purchased, at fair value 37,734 39,679
Accrued interest payable 104,456 79,362
Dividends payable 64,652 52,577
Accounts payable and other liabilities 14,520 7,942
Interest rate swaps, at fair value 838 42,871
------------- ------------
Total liabilities 36,060,083 36,160,871
------------- ------------
Minority interest in equity of consolidated
affiliate 5,623 5,610
------------- ------------
6.00% Series B Cumulative Convertible
Preferred Stock:
4,600,000 shares authorized, 4,597,550 and
4,600,000
shares issued and outstanding, respectively 111,466 111,466
------------- ------------
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;
487,762,500
authorized, 468,380,797, 401,822,703,
330,509,203,
269,385,348, and 262,887,391 issued and
outstanding,
respectively 2,694 2,629
Additional paid-in capital 3,447,964 3,352,417
Accumulated other comprehensive loss (467,640) (60,040)
Accumulated deficit (149,814) (165,522)
------------- ------------
Total stockholders' equity 3,010,292 3,306,572
------------- ------------
Total liabilities, minority interest,
Series B Cumulative
Convertible Preferred Stock and
stockholders' equity $39,187,464 $39,584,519
============= ============
(1) Derived from the audited consolidated financial statements at
December 31, 2007.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands, except per share data)
For the quarters ended
March 31, December 31, September 30,
2008 2007 2007
------------- ------------- -------------
Interest income $ 791,128 $ 720,925 $ 628,696
Interest expense 537,606 558,435 519,118
------------- ------------- -------------
Net interest income 253,522 162,490 109,578
------------- ------------- -------------
Other income
Investment advisory and
service fees 6,598 5,636 5,464
Gain on sale of
Mortgage-Backed
Securities 9,417 1,829 3,795
Gain on termination of
interest rate swaps - - 2,029
Income from trading
securities 1,854 7,187 8,288
Dividend income from
available-for-sale
equity securities 941 91 -
Loss on other-than-
temporarily impaired
securities - - -
------------- ------------- -------------
Total other income 18,810 14,743 19,576
------------- ------------- -------------
Expenses
Distribution fees 633 782 1,100
General and
administrative expenses 23,995 20,174 17,334
------------- ------------- -------------
Total expenses 24,628 20,956 18,434
------------- ------------- -------------
Income before income taxes
and minority interest 247,704 156,277 110,720
Income taxes 4,610 3,100 2,327
------------- ------------- -------------
Income before minority
interest 243,094 153,177 108,393
Minority interest 58 245 106
------------- ------------- -------------
Net income 243,036 152,932 108,287
Dividend on preferred
stock 5,373 5,374 5,373
------------- ------------- -------------
Net income available to
common shareholders $ 237,663 $ 147,558 $ 102,914
============= ============= =============
Net income available per
share to
common shareholders:
Basic $ 0.54 $ 0.38 $ 0.33
============= ============= =============
Diluted $ 0.53 $ 0.37 $ 0.32
============= ============= =============
Weighted average number of
common shares
outstanding:
Basic 443,812,432 389,410,812 315,969,814
============= ============= =============
Diluted 452,967,457 398,247,632 324,614,534
============= ============= =============
Net income $ 243,036 $ 152,932 $ 108,287
------------- ------------- -------------
Comprehensive income
(loss)
Unrealized gain (loss)
on available-for-sale
securities 217,563 491,626 320,102
Unrealized (loss) gain
on interest rate swaps (391,763) (256,034) (232,598)
Reclassification
adjustment for gains
included in net income (9,417) (1,829) (5,824)
------------- ------------- -------------
Other comprehensive
(loss) income (183,617) 233,763 81,680
------------- ------------- -------------
Comprehensive income
(loss) $ 59,419 $ 386,695 $ 189,967
------------- ------------- -------------
For the quarters ended
June 30, March 31,
2007 2007
-------------- -------------
Interest income $ 556,262 $ 449,564
Interest expense 468,748 380,164
-------------- -------------
Net interest income 87,514 69,400
-------------- -------------
Other income
Investment advisory and service fees 5,366 5,562
Gain on sale of Mortgage-Backed
Securities 7,293 6,145
Gain on termination of interest rate
swaps - 67
Income from trading securities 243 3,429
Dividend income from available-for-sale
equity securities - -
Loss on other-than-temporarily impaired
securities (698) (491)
-------------- -------------
Total other income 12,204 14,712
-------------- -------------
Expenses
Distribution fees 861 904
General and administrative expenses 12,272 12,886
-------------- -------------
Total expenses 13,133 13,790
-------------- -------------
Income before income taxes and minority
interest 86,585 70,322
Income taxes 839 2,604
-------------- -------------
Income before minority interest 85,746 67,718
Minority interest 13 286
-------------- -------------
Net income 85,733 67,432
Dividend on preferred stock 5,373 5,373
-------------- -------------
Net income available to common
shareholders $ 80,360 $ 62,059
============== =============
Net income available per share to
common shareholders:
Basic $ 0.30 $ 0.29
============== =============
Diluted $ 0.30 $ 0.28
============== =============
Weighted average number of common shares
outstanding:
Basic 264,990,422 217,490,205
============== =============
Diluted 273,578,836 225,928,127
============== =============
Net income $ 85,733 $ 67,432
-------------- -------------
Comprehensive income (loss)
Unrealized gain (loss) on available-
for-sale securities (535,413) 45,948
Unrealized (loss) gain on interest rate
swaps 134,408 (24,155)
Reclassification adjustment for gains
included in net income (6,595) (5,721)
-------------- -------------
Other comprehensive (loss) income (407,600) 16,072
-------------- -------------
Comprehensive income (loss) ($321,867) $ 83,504
-------------- -------------
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com