NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core
Earnings for the quarter ended September 30, 2008 of $335.0 million or
$0.61 per average share available to common shareholders as compared
to Core Earnings of $102.5 million or $0.31 per average share
available to common shareholders for the quarter ended September 30,
2007, and Core Earnings of $305.2 million or $0.60 per average share
available to common shareholders for the quarter ended June 30, 2008.
"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 September 30, 2008 was $302.1 million
or $0.55 basic net income per average share available to common
shareholders, as compared to net income of $108.3 million or $0.33
basic net income per average share available to common shareholders
for the quarter ended September 30, 2007, and net income of $308.0
million or $0.60 basic net income per average share available to
common shareholders for the quarter ended June 30, 2008.
During the quarter ended September 30, 2008, the Company sold $4.8
billion of Investment Securities, resulting in a realized loss of $1.1
million. During the quarter ended September 30, 2007, the Company sold
$1.8 billion of Mortgage-Backed Securities, resulting in a realized
gain of $3.8 million. During the quarter ended June 30, 2008, the
Company sold $2.1 billion of Mortgage-Backed Securities, resulting in
a realized gain of $2.8 million.
Common dividends declared for the quarter ended September 30, 2008
were $0.55 per share, as compared to $0.26 per share for the quarter
ended September 30, 2007 and $0.55 per share for the quarter ended
June 30, 2008. The annualized dividend yield on the Company's common
stock for the quarter ended September 30, 2008, based on the September
30, 2008 closing price of $13.45, was 16.36%. On a Core Earnings
basis, the Company provided an annualized return on average equity of
18.55% for the quarter ended September 30, 2008, as compared to 11.44%
for the quarter ended September 30, 2007 and 17.88% for the quarter
ended June 30, 2008. On a GAAP basis, the Company provided an
annualized return on average equity of 16.73% for the quarter ended
September 30, 2008, as compared to 12.09% for the quarter ended
September 30, 2007, and 18.04% for the quarter ended June 30, 2008.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "The third
quarter of 2008 was a period of historic market and policy events that
challenged all companies and investors. While we expect these
conditions to continue for the foreseeable future, we have no crystal
ball about how it will play out. We do believe, however, that economic
growth will be weak, credit and market liquidity will be tight,
falling home prices and financial institution recapitalizations will
be a deflationary drag on global markets, and policymakers will be
vigilant. This may not be a pretty picture for our economy, but it is
fundamentally positive for our strategy. As always, our job is to
focus on delivering long-term value for our shareholders."
For the quarter ended September 30, 2008, the annualized yield on
average earning assets was 5.62% and the annualized cost of funds on
the average repurchase balance was 3.54%, which results in an interest
rate spread of 2.08%. This is a 141 basis point increase over the
0.67% annualized interest rate spread for the quarter ended September
30, 2007 and a 9 basis point increase over the 1.99% annualized
interest rate spread for the quarter ended June 30, 2008. For the
quarter ended September 30, 2007, the annualized yield on average
earning assets was 5.84% and the annualized cost of funds on the
average repurchase balance was 5.17%. For the quarter ended June 30,
2008, the annualized yield on average earning assets was 5.50% and the
annualized cost of funds on the average repurchase balance was 3.51%.
At September 30, 2008, the weighted average yield on assets was 5.27%
and the cost of funds, including the effect of interest rate swaps,
was 3.59%, which results in an interest rate spread of 1.68%. Leverage
at September 30, 2008 was 7.2:1, in comparison to 9.9:1 at September
30, 2007 and 7.1:1 at June 30, 2008.
Fixed-rate securities comprised 65% of the Company's portfolio at
September 30, 2008. The balance of the portfolio was comprised of 27%
adjustable-rate mortgages and 8% LIBOR floating-rate collateralized
mortgage obligations. At September 30, 2008, the Company had entered
into interest rate swaps on a notional amount of $18.4 billion, or 33%
of the portfolio. 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. As of September 30, 2008, all of
the Company's Investment Securities were FNMA, GNMA and FHLMC
mortgage-backed securities and Agency debentures, which carry an
actual or implied "AAA" rating.
"The coordinated global liquidity and monetary policy actions of
the past quarter should ultimately have a stabilizing impact on the
markets," said Wellington Denahan-Norris, Annaly's Vice Chairman,
Chief Investment Officer and Chief Operating Officer. "LIBOR is
starting to trend lower going into year-end, however we are prepared
for continued volatility in the near term. Mortgage spreads remain
wide as Treasuries have been outperforming Agencies. During the
quarter, we maintained our discipline as it relates to our portfolio
construction. After taking into account the effect of interest rate
swaps, at September 30, 2008 our portfolio of Investment Securities
was comprised of 32% fixed-rate, 27% adjustable-rate and 41%
floating-rate assets."
The following table summarizes portfolio information for the
Company:
September 30, September 30, June 30,
2008 2007 2008
------------------------------------
Leverage at period-end 7.2:1 9.9:1 7.1:1
Fixed-rate investment securities
as % of portfolio 65% 71% 69%
Adjustable-rate investment
securities as % of portfolio 27% 22% 23%
Floating-rate investment
securities as % of portfolio 8% 7% 8%
Notional amount of interest rate
swaps as % of portfolio 33% 33% 30%
Annualized yield on average
earning assets during the
quarter 5.62% 5.84% 5.50%
Annualized cost of funds on
average repurchase balance
during the quarter 3.54% 5.17% 3.51%
Annualized interest rate spread
during the quarter 2.08% 0.67% 1.99%
Weighted average yield on assets
at period-end 5.27% 5.74% 5.27%
Weighted average cost of funds at
period-end 3.59% 4.99% 3.40%
Interest rate spread at period-
end 1.68% 0.75% 1.87%
Weighted average receive rate on
interest rate swaps at period-
end 2.69% 5.59% 2.47%
Weighted average pay rate on
interest rate swaps at period-
end 4.70% 5.15% 4.78%
The Constant Prepayment Rate was 11% during the third quarter of
2008, as compared to 14% during the third quarter of 2007, and 16%
during the second quarter of 2008. The weighted average cost basis of
the Investment Securities was 101.0 at September 30, 2008. The net
amortization of premiums and accretion of discounts on Investment
Securities for the quarters ended September 30, 2008, September 30,
2007 and June 30, 2008 was $18.7 million, $16.9 million, and $26.6
million, respectively. The total net premium remaining unamortized at
September 30, 2008, September 30, 2007 and June 30, 2008 was $525.4
million, $229.7 million, and $500.7 million, respectively.
General and administrative expenses as a percentage of average
assets were 0.17%, 0.16% and 0.18% for the quarters ended September
30, 2008, September 30, 2007, and June 30, 2008, respectively. At
September 30, 2008, September 30, 2007, and June 30, 2008, the Company
had a common stock book value per share of $12.70, $11.36 and $13.03,
respectively.
At September 30, 2008, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.4 billion in
net assets and $10.5 billion in gross assets, as compared to $2.5
billion in net assets and $13.9 billion in gross assets at September
30, 2007 and $2.7 billion in net assets and $11.8 billion in gross
assets at June 30, 2008. For the quarter ended September 30, 2008,
FIDAC earned investment advisory and service fees, net of fees paid to
distributors, of $7.4 million, as compared to $4.4 million for the
quarter ended September 30, 2007 and $6.0 million for the quarter
ended June 30, 2008.
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 541,254,401 shares of common stock
outstanding.
The Company will hold the third quarter 2008 earnings conference
call on Thursday October 30, 2008 at 10:00 a.m. EST. The number to
call is 866-831-6224 for domestic calls and 617-213-8853 for
international calls and the pass code is 86696162. The replay number
is 888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 13478087. 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,
2007, 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)
September 30, June 30, March 31,
2008 2008 2008
(Unaudited) (Unaudited) (Unaudited)
----------------------------------------
ASSETS
Cash and cash equivalents $ 1,083,814 $ 1,462,737 $ 1,549,041
Reverse repurchase agreements 619,657 49,964 800,000
Mortgage-Backed Securities,
at fair value 54,840,928 58,017,305 56,115,025
Agency debentures, at fair
value 618,352 731,995 738,837
Available-for-sale equity
securities, at fair value 22,490 32,631 44,546
Trading securities, at fair
value 2,199 23,478 1,836
Receivable for Mortgage-
Backed Securities sold 2,446,342 824,308 174,413
Accrued interest and
dividends receivable 295,925 303,228 287,261
Receivable for advisory and
service fees 3,581 4,703 4,581
Intangible for customer
relationships 6,726 7,604 8,840
Goodwill 22,966 22,966 22,966
Other assets 2,602 3,216 4,347
----------------------------------------
Total assets $ 59,965,582 $61,484,135 $59,751,693
========================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $ 51,075,758 $51,839,663 $51,324,007
Payable for Investment
Securities purchased 839,235 1,405,109 828,235
Trading securities sold,
not yet purchased, at fair
value 30,903 48,718 37,268
Accrued interest payable 168,361 154,615 172,575
Dividends payable 296,254 296,201 224,823
Accounts payable and other
liabilities 26,385 36,625 20,123
Interest rate swaps, at
fair value 384,258 400,998 789,859
----------------------------------------
Total liabilities 52,821,154 54,181,929 53,396,890
----------------------------------------
Minority interest in equity
of consolidated affiliate - - -
----------------------------------------
6.00% Series B Cumulative
Convertible Preferred
Stock:
4,600,000 shares authorized,
4,496,525, 4,496,525,
4,597,550, 4,600,000, and
4,600,000 shares issued and
outstanding, respectively 108,957 108,957 111,405
----------------------------------------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred Stock:
7,412,500 authorized,
7,412,500 shares issued and
outstanding 177,088 177,088 177,088
Common stock: par value $.01
per share; 987,987,500
authorized 540,189,101,
538,546,666, 468,380,797,
401,822,703, and
330,509,203, issued and
outstanding, respectively 5,402 5,385 4,684
Additional paid-in capital 7,616,528 7,592,161 6,506,494
Accumulated other
comprehensive loss (661,498) (478,791) (335,814)
Accumulated deficit (102,049) (102,594) (109,054)
----------------------------------------
Total stockholders' equity 7,035,471 7,193,249 6,243,398
----------------------------------------
Total liabilities, minority
interest, Series B
Cumulative Convertible
Preferred Stock and
stockholders' equity $ 59,965,582 $61,484,135 $59,751,693
========================================
September 30,
December 31, 2007
2007 (1) (Unaudited)
---------------------------
ASSETS
Cash and cash equivalents $ 103,960 $ 90,028
Reverse repurchase agreements - -
Mortgage-Backed Securities, at fair value 52,879,528 44,641,352
Agency debentures, at fair value 253,915 249,281
Available-for-sale equity securities, at
fair value 64,754 -
Trading securities, at fair value 11,675 10,987
Receivable for Mortgage-Backed Securities
sold 276,737 516,140
Accrued interest and dividends receivable 271,996 235,787
Receivable for advisory and service fees 3,598 2,933
Intangible for customer relationships 9,842 10,178
Goodwill 22,966 22,966
Other assets 4,543 3,026
---------------------------
Total assets $53,903,514 $45,782,678
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $46,046,560 $40,140,113
Payable for Investment Securities
purchased 1,677,131 1,169,324
Trading securities sold, not yet
purchased, at fair value 32,835 26,823
Accrued interest payable 257,608 148,462
Dividends payable 136,618 85,932
Accounts payable and other liabilities 36,688 25,237
Interest rate swaps, at fair value 398,096 142,061
---------------------------
Total liabilities 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, 4,496,525,
4,496,525, 4,597,550, 4,600,000, and
4,600,000 shares issued and outstanding,
respectively 111,466 111,466
---------------------------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock: 7,412,500 authorized,
7,412,500 shares issued and outstanding 177,088 177,088
Common stock: par value $.01 per share;
987,987,500 authorized 540,189,101,
538,546,666, 468,380,797, 401,822,703,
and 330,509,203, issued and outstanding,
respectively 4,018 3,305
Additional paid-in capital 5,297,922 4,270,330
Accumulated other comprehensive loss (152,197) (385,960)
Accumulated deficit (121,893) (132,832)
---------------------------
Total stockholders' equity 5,204,938 3,931,931
---------------------------
Total liabilities, minority interest,
Series B Cumulative Convertible Preferred
Stock and stockholders' equity $53,903,514 $45,782,678
===========================
(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
September 30, June 30, March 31,
2008 2008 2008
---------------------------------------------
Interest income $ 810,659 $ 773,359 $ 791,128
Interest expense 458,250 442,251 537,606
---------------------------------------------
Net interest income 352,409 331,108 253,522
---------------------------------------------
Other (loss) income
Investment advisory
and service fees 7,663 6,406 6,598
(Loss) gain on sale of
Mortgage-Backed
Securities (1,066) 2,830 9,417
Gain on termination of
interest rate swaps - - -
Income from trading
securities 7,671 2,180 1,854
Dividend income from
available-for-sale
equity securities 580 580 941
Loss on other-than-
temporarily impaired
securities (31,834)(1) - -
---------------------------------------------
Total other (loss)
income (16,986) 11,996 18,810
---------------------------------------------
Expenses
Distribution fees 299 370 633
General and
administrative
expenses 25,455 27,215 23,995
---------------------------------------------
Total expenses 25,754 27,585 24,628
---------------------------------------------
Income before income
taxes and minority
interest 309,669 315,519 247,704
Income taxes 7,538 7,527 4,610
---------------------------------------------
Income before minority
interest 302,131 307,992 243,094
Minority interest - - 58
---------------------------------------------
Net income 302,131 307,992 243,036
Dividend on preferred
stock 5,335 5,334 5,373
---------------------------------------------
Net income available to
common shareholders $ 296,796 $ 302,658 $ 237,663
=============================================
Net income available per
share to common
shareholders:
Basic $ 0.55 $ 0.60 $ 0.54
=============================================
Diluted $ 0.54 $ 0.59 $ 0.53
=============================================
Weighted average number
of common shares
outstanding:
Basic 538,706,131 503,758,079 443,812,432
=============================================
Diluted 547,882,488 512,678,975 452,967,457
=============================================
Net income $ 302,131 $ 307,992 $ 243,036
---------------------------------------------
Other comprehensive
income (loss):
Unrealized (loss) gain
on available-for-sale
securities (200,513) (529,008) 217,563
Unrealized gain (loss)
on interest rate
swaps 16,740 388,861 (391,763)
Reclassification
adjustment for losses
(gains) included in
net income 1,066 (2,830) (9,417)
---------------------------------------------
Other comprehensive
(loss) income (182,707) (142,977) (183,617)
---------------------------------------------
Comprehensive income $ 119,424 $ 165,015 $ 59,419
---------------------------------------------
For the quarters ended
December 31, September 30,
2007 2007
----------------------------
Interest income $ 720,925 $ 628,696
Interest expense 558,435 519,118
----------------------------
Net interest income 162,490 109,578
----------------------------
Other (loss) income
Investment advisory and service fees 5,636 5,464
(Loss) gain on sale of Mortgage-Backed
Securities 1,829 3,795
Gain on termination of interest rate
swaps - 2,029
Income from trading securities 7,187 8,288
Dividend income from available-for-sale
equity securities 91 -
Loss on other-than-temporarily impaired
securities - -
----------------------------
Total other (loss) income 14,743 19,576
----------------------------
Expenses
Distribution fees 782 1,100
General and administrative expenses 20,174 17,334
----------------------------
Total expenses 20,956 18,434
----------------------------
Income before income taxes and minority
interest 156,277 110,720
Income taxes 3,100 2,327
----------------------------
Income before minority interest 153,177 108,393
Minority interest 245 106
----------------------------
Net income 152,932 108,287
Dividend on preferred stock 5,374 5,373
----------------------------
Net income available to common
shareholders $ 147,558 $ 102,914
============================
Net income available per share to common
shareholders:
Basic $ 0.38 $ 0.33
============================
Diluted $ 0.37 $ 0.32
============================
Weighted average number of common shares
outstanding:
Basic 389,410,812 315,969,814
============================
Diluted 398,247,632 324,614,534
============================
Net income $ 152,932 $ 108,287
----------------------------
Other comprehensive income (loss):
Unrealized (loss) gain on available-
for-sale securities 491,626 320,102
Unrealized gain (loss) on interest rate
swaps (256,034) (232,598)
Reclassification adjustment for losses
(gains) included in net income (1,829) (5,824)
----------------------------
Other comprehensive (loss) income 233,763 81,680
----------------------------
Comprehensive income $ 386,695 $ 189,967
----------------------------
(1) Although the Company has the intent and ability to retain its
investment in Chimera Investment Corporation, the Company
determined that it is appropriate to recognize an other-than-
temporary impairment charge of $31.8 million. Recognition of such
impairment charges will not reduce the taxable income of the
Company. The non-cash charge is the difference between the
purchase price for the shares and their market value at September
30, 2008.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands, except per share data)
For the nine months ended
September 30, 2008 September 30, 2007
-------------------------------------
Interest income $ 2,375,146 $ 1,634,522
Interest expense 1,438,107 1,368,030
-------------------------------------
Net interest income 937,039 266,492
-------------------------------------
Other income
Investment advisory and
service fees 20,667 16,392
Gain on sale of Mortgage-
Backed Securities 11,181 17,233
Gain on termination of
interest rate swaps - 2,096
Income from trading securities 11,705 11,960
Dividend income from
available-for-sale equity
securities 2,101 -
Loss on other-than-temporarily
impaired securities (31,834) (1,189)
-------------------------------------
Total other income 13,820 46,492
-------------------------------------
Expenses
Distribution fees 1,302 2,865
General and administrative
expenses 76,665 42,492
-------------------------------------
Total expenses 77,967 45,357
-------------------------------------
Income before income taxes and
minority interest 872,892 267,627
Income taxes 19,675 5,770
-------------------------------------
Income before minority interest 853,217 261,857
Minority interest 58 405
-------------------------------------
Net income 853,159 261,452
Dividend on preferred stock 16,042 16,119
-------------------------------------
Net income available to common
shareholders $ 837,117 $ 245,333
=====================================
Net income available per share
to common shareholders:
Basic $ 1.69 $ 0.92
=====================================
Diluted $ 1.67 $ 0.91
=====================================
Weighted average number of
common shares outstanding:
Basic 495,583,506 266,510,879
=====================================
Diluted 504,609,331 275,146,595
=====================================
Net income $ 853,159 $ 261,452
-------------------------------------
Other comprehensive loss:
Unrealized (loss) gain on
available-for-sale securities (511,958) (169,363)
Unrealized gain (loss) on
interest rate swaps 13,838 (122,345)
Reclassification adjustment
for gains included in net
income (11,181) (18,140)
-------------------------------------
Other comprehensive loss (509,301) (309,848)
-------------------------------------
Comprehensive income (loss) $ 343,858 ($48,396)
-------------------------------------
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations:
1- (888) 8Annaly
www.annaly.com