NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings
for the quarter ended March 31, 2010, of $350.8 million or $0.62 per
average share available to common shareholders as compared to Core
Earnings of $309.3 million or $0.56 per average share available to
common shareholders for the quarter ended March 31, 2009, and Core
Earnings of $439.3 million or $0.79 per average share available to
common shareholders for the quarter ended December 31, 2009. "Core
Earnings" represents a non-GAAP measure and is defined as net income
excluding impairment losses, loss on receivable from prime broker, gains
or losses on sales of securities and termination of interest rate swaps
and unrealized gains or losses on interest rate swaps. On a GAAP basis,
net income for the quarter ended March 31, 2010, was $281.1 million or
$0.50 per average share available to common shareholders, as compared to
net income of $349.9 million or $0.64 per average share related to
common shareholders for the quarter ended March 31, 2009, and net income
of $729.3 million or $1.31 per average share available to common
shareholders for the quarter ended December 31, 2009.
During the quarter ended March 31, 2010, the Company sold $1.6 billion
of Mortgage-Backed Securities, resulting in a realized gain of $47.0
million. During the quarter ended March 31, 2009, the Company sold
$835.7 million of Mortgage-Backed Securities, resulting in a realized
gain of $5.0 million. During the quarter ended December 31, 2009, the
Company sold $3.0 billion of Mortgage-Backed Securities, resulting in a
realized gain of $91.2 million.
Common dividends declared for the quarter ended March 31, 2010, were
$0.65 per share, as compared to $0.50 per share for the quarter ended
March 31, 2009, and $0.75 per share for the quarter ended December 31,
2009. The annualized dividend yield on the Company's common stock for
the quarter ended March 31, 2010, based on the March 31, 2010 closing
price of $17.18, was 15.13%. On a Core Earnings basis, the Company
provided an annualized return on average equity of 14.57% for the
quarter ended March 31, 2010, as compared to 15.96% for the quarter
ended March 31, 2009, and 18.51% for the quarter ended December 31,
2009. On a GAAP basis, the Company provided an annualized return on
average equity of 11.67% for the quarter ended March 31, 2010, as
compared to an annualized return on average equity of 18.06% for the
quarter ended March 31, 2009, and an annualized return on average equity
of 30.73% for the quarter ended December 31, 2009.
Michael A.J. Farrell, Chairman, Chief Executive Officer and President of
Annaly, commented on the Company's results. " The entire mortgage market
is digesting the buyout programs of Fannie Mae and Freddie Mac. Our
first quarter results reflect the elevated levels of prepayments in
Freddie Mac securities; we will likely see similar effects in the second
quarter in Fannie Mae securities. In addition, we are carefully
monitoring conditions following the completion of the Treasury
Department's and the Federal Reserve's Agency mortgage-backed securities
purchase programs. We expect to see both challenges and opportunities
during this period of heightened market activity, and I believe that our
conservatively managed portfolio is positioned to continue to perform."
For the quarter ended March 31, 2010, the annualized yield on average
interest-earning assets was 4.22% and the annualized cost of funds on
the average interest-bearing liabilities was 2.00%, which resulted in an
average interest rate spread of 2.22%. This is an 11 basis point
increase over the 2.11% annualized interest rate spread for the quarter
ended March 31, 2009, and a 57 basis point decrease from the 2.79%
average interest rate spread for the quarter ended December 31, 2009.
At March 31, 2010, the weighted average yield on interest-earning assets
was 3.78% and the weighted average cost of funds on interest-bearing
liabilities, including the effect of interest rate swaps, was 2.11%,
which resulted in an interest rate spread of 1.67%. Leverage at March
31, 2010, was 5.6:1 compared to 6.0:1 at March 31, 2009, and 5.7:1 at
December 31, 2009.
Fixed-rate securities comprised 77% of the Company's portfolio at March
31, 2010. The balance of the portfolio was comprised of 20%
adjustable-rate mortgages and 3% LIBOR floating-rate collateralized
mortgage obligations. At March 31, 2010, the Company had entered into
interest rate swaps with a notional amount of $22.8 billion, or 34% of
the portfolio. 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 receives 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 March 31, 2010, all of the Company's Investment
Securities were Fannie Mae, Freddie Mac and Ginnie Mae Mortgage-Backed
Securities and Agency debentures, which carry an actual or implied "AAA"
rating.
"Elevated levels of involuntary prepayments brought about by the
Agencies' programs of buying delinquent and defaulted loans out of
mortgage pools has the effect of increasing premium amortization or
discount accretion," said Wellington Denahan-Norris, Annaly's Vice
Chairman, Chief Investment Officer and Chief Operating Officer. "For us,
this effectively reduced the yield on assets in the quarter, leading to
reduced net interest rate spread. Our consistent adherence of basic
portfolio guidelines have positioned us to perform in a wide range of
environments. After taking into account the effect of interest rate
swaps, at March 31, 2010, our portfolio of Investment Securities was
comprised of 37% floating-rate, 20% adjustable-rate and 43% fixed-rate
assets."
The following table summarizes portfolio information for the Company:
March 31, March 31, December 31,
2010 2009 2009
Leverage at period-end 5.6:1 6.0:1 5.7:1
Fixed-rate investment securities as a 77% 66% 74%
percentage of portfolio
Adjustable-rate investment securities as a 20% 27% 21%
percentage of portfolio
Floating-rate investment securities as a 3% 7% 5%
percentage of portfolio
Notional amount of interest rate swaps as a 34% 31% 34%
percentage of portfolio
Annualized yield on average interest-earning 4.22% 5.23% 4.84%
assets during the quarter
Annualized cost of funds on average
interest-bearing liabilities during the 2.00% 3.12% 2.05%
quarter
Annualized interest rate spread during the 2.22% 2.11% 2.79%
quarter
Weighted average yield on interest-earning 3.78% 4.86% 4.51%
assets at period-end
Weighted average cost of funds on 2.11% 2.78% 2.11%
interest-bearing liabilities at period-end
Interest rate spread at period-end 1.67% 2.08% 2.40%
Weighted average receive rate on interest 0.24% 0.55% 0.25%
rate swaps at period-end
Weighted average pay rate on interest rate 3.66% 4.55% 3.85%
swaps at period-end
The Constant Prepayment Rate was 34% during the first quarter of 2010,
as compared to 16% during the first quarter of 2009, and 19% during the
fourth quarter of 2009. The weighted average cost basis of the Company's
Investment Securities was 101.9 at March 31, 2010. The net amortization
of premiums and accretion of discounts on Investment Securities for the
quarters ended March 31, 2010, March 31, 2009, and December 31, 2009,
was $164.0 million, $41.0 million, and $79.2 million, respectively. The
total net premium remaining unamortized at March 31, 2010, March 31,
2009, and December 31, 2009, was $1.3 billion, $668.3 million, and $1.2
billion, respectively.
General and administrative expenses as a percentage of average assets
were 0.23%, 0.20% and 0.21% for the quarters ended March 31, 2010, March
31, 2009, and December 31, 2009, respectively. At March 31, 2010, March
31, 2009, and December 31, 2009, the Company had a common stock book
value per share of $16.80, $14.67 and $16.95, respectively.
At March 31, 2010, Annaly's wholly-owned registered investment advisors
had under management approximately $11.6 billion in net assets and $20.3
billion in gross assets, as compared to $8.5 billion in net assets and
$16.3 billion in gross assets at March 31, 2009 and $11.5 billion in net
assets and $19.1 billion in gross assets at December 31, 2009. For the
quarter ended March 31, 2010, the investment advisors earned investment
advisory and service fees, net of fees paid to distributors, of $12.2
million, as compared to $7.3 million for the quarter ended March 31,
2009 and $14.4 million for the quarter ended December 31, 2009.
Annaly manages assets on behalf of institutional and individual
investors worldwide. The Company's principal business objective is to
generate net income for distribution to investors from its Investment
Securities and from dividends it receives from its subsidiaries. Annaly
is a Maryland corporation that has elected to be taxed as a real estate
investment trust ("REIT"), and currently has 559,671,124 shares of
common stock outstanding.
The Company will hold the first quarter 2010 earnings conference call on
Tuesday May 4, 2010 at 10:00 a.m. EST. The number to call is
800-901-5218 for domestic calls and 617-786-4511 for international calls
and the pass code is 28427730. The replay number is 888-286-8010 for
domestic calls and 617-801-6888 for international calls and the pass
code is 46872981. 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 Investor Relations, then select Receive E-Mail alerts and
complete the E-Mail notification form.
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, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
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 the 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,
changes in government regulations affecting our business, our ability to
maintain our qualification as a REIT for federal income tax purposes,
risks associated with the broker-dealer business of our subsidiary, and
risks associated with the investment advisory business of our
subsidiaries, including the removal by clients of assets they manage,
their regulatory requirements and competition in the investment advisory
business. 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 most recent Annual
Report on Form 10-K and any 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, September June 30, March 31,
December 31, 30,
2010 2009 2009
2009(1) 2009
(Unaudited) (Unaudited) (Unaudited)
(Unaudited)
ASSETS
Cash and cash $ 905,955 $ 1,504,568 $ 1,723,341 $ 1,352,798 $ 1,035,118
equivalents
Reverse
repurchase 255,580 328,757 226,264 170,916 452,480
agreements with
affiliate
Reverse
repurchase 276,586 425,000 100,000 - -
agreements
Mortgage-Backed
Securities, at 67,239,930 64,805,725 66,837,761 65,165,126 58,785,456
fair value
Agency
debentures, at 2,931,945 915,752 625,615 616,893 -
fair value
Investments 242,788 242,198 239,740 156,990 51,418
with affiliates
Securities 60,132 29,077 - - -
borrowed
Receivable for
Mortgage-Backed 359,636 732,134 - 412,214 33,009
Securities sold
Accrued
interest and 327,666 318,919 332,861 313,772 291,347
dividends
receivable
Receivable from 3,272 3,272 16,886 16,886 16,886
Prime Broker
Receivable for
advisory and 11,714 12,566 12,807 10,039 6,507
service fees
Intangible for
customer 10,191 10,491 10,791 11,091 11,399
relationships
Goodwill 27,917 27,917 27,917 27,917 27,917
Interest rate
swaps, at fair - 5,417 - 7,267 -
value
Other assets 65,850 14,397 8,695 5,346 5,717
Total assets $ 72,719,162 $ 69,376,190 $ 70,162,678 $ 68,267,255 $ 60,717,254
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase $ 53,784,480 $ 54,598,129 $ 55,842,840 $ 51,326,930 $ 48,951,178
agreements
Payable for
Investment 7,498,712 4,083,786 3,644,420 7,017,444 2,121,670
Securities
purchased
Convertible 600,000 - - - -
Senior Notes
Accrued
interest 88,346 89,460 97,693 102,662 112,457
payable
Dividends 363,785 414,851 381,411 326,612 272,170
payable
Securities 60,377 29,057 - - -
loaned
Accounts
payable and 70,290 10,005 37,991 40,115 23,970
other
liabilities
Interest rate
swaps, at fair 608,688 533,362 788,065 722,700 1,012,574
value
Total 63,074,678 59,758,650 60,792,420 59,536,463 52,494,019
liabilities
6.00% Series B
Cumulative
Convertible
Preferred
Stock:
4,600,000
shares
authorized,
2,603,969,
2,604,614,
2,604,814,
2,607,564 and
3,963,525
shares issued
and 63,098 63,114 63,114 63,118 63,185
outstanding,
respectively
Stockholders'
Equity:
7.875% Series A
Cumulative
Redeemable
Preferred
Stock:
7,412,500
authorized,
7,412,500
shares
issued and 177,088 177,088 177,088 177,088 177,088
outstanding
Common stock,
par value $.01
per share,
987,987,500
authorized,
559,668,624,
553,134,877,
552,778,531,
544,353,997,
and 544,339,785
issued
and
outstanding,
respectively
5,597 5,531 5,528 5,444 5,443
Additional 7,935,151 7,817,454 7,811,356 7,668,988 7,667,769
paid-in capital
Accumulated
other 1,887,852 1,891,317 1,959,994 1,362,134 1,121,551
comprehensive
income
Accumulated (424,302) (336,964) (646,822) (545,980) (811,801)
deficit
Total
stockholders' 9,581,386 9,554,426 9,307,144 8,667,674 8,160,050
equity
Total
liabilities,
Series B
Cumulative
Convertible $ 72,719,162 $ 69,376,190 $ 70,162,678 $ 68,267,255 $ 60,717,254
Preferred
Stock and
stockholders'
equity
(1) Derived from the audited consolidated financial statements at December 31, 2009.
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, June 30, March 31,
2010 2009 2009 2009 2009
Interest income:
Investments $ 653,935 $ 751,560 $ 744,523 $ 710,401 $ 716,015
Securities loaned 454 103 - - -
Total interest 654,389 751,663 744,523 710,401 716,015
income
Interest expense:
Repurchase 272,927 286,672 307,777 322,596 378,625
agreements
Securities 387 92 - - -
borrowed
Convertible notes 3,195 - - - -
Total interest 276,509 286,764 307,777 322,596 378,625
expense
Net interest 377,880 464,899 436,746 387,805 337,390
income
Other (loss)
income
Investment
advisory and 12,546 14,835 14,620 11,736 7,761
service fees
Gain on sale of
Mortgage-Backed 46,962 91,150 591 2,364 5,023
Securities
Dividend income 7,964 7,647 5,398 3,221 918
Loss on receivable
from Prime Broker - (13,613) - - -
(1)
Unrealized (loss)
gain on interest (116,732) 212,456 (128,687) 230,207 35,545
rate swaps
Total other (loss) (49,260) 312,475 (108,078) 247,528 49,247
income
Expenses
Distribution fees 360 418 478 432 428
General and
administrative 40,021 36,880 33,344 30,046 29,882
expenses
Total expenses 40,381 37,298 33,822 30,478 30,310
Income before
income from equity 288,239 740,076 294,846 604,855 356,327
method investment
and income taxes
Income (loss) from
equity method 140 (252) - - -
investment
Income taxes 7,314 10,489 9,657 7,801 6,434
Net income 281,065 729,335 285,189 597,054 349,893
Dividends on 4,625 4,625 4,625 4,625 4,626
preferred stock
Net income
available to $ 276,440 $ 724,710 $ 280,564 $ 592,429 $ 345,267
common
shareholders
Net income
available per
share to common
shareholders:
Basic $ 0.50 $ 1.31 $ 0.51 $ 1.09 $ 0.64
Diluted $ 0.49 $ 1.30 $ 0.51 $ 1.08 $ 0.63
Weighted average
number of common
shares
outstanding:
Basic 554,995,092 552,917,499 547,611,480 544,344,844 542,903,110
Diluted 575,859,564 559,336,066 553,376,285 550,099,709 548,551,328
Net income $ 281,065 $ 729,335 $ 285,189 $ 597,054 $ 349,893
Other
comprehensive
(loss) income:
Unrealized gain
(loss) on 7,416 (25,190) 542,396 176,013 820,178
available-for-sale
securities
Unrealized gain on
interest rate 36,081 47,663 56,055 66,934 54,166
swaps
Reclassification
adjustment for
gains included in (46,962) (91,150) (591) (2,364) (5,023)
net
income
Other
comprehensive (3,465) (68,677) 597,860 240,583 869,321
(loss) income
Comprehensive $ 277,600 $ 660,658 $ 883,049 $ 837,637 $ 1,219,214
income
(1) The Company invested $45,000,000 in an equity fund and has redeemed $56,000,000. Assets
of the fund still remain at the prime broker, Lehman Brothers International (Europe) (in
administration) ("LBIE"), which is in bankruptcy and the ultimate recovery of such amount
remains uncertain. The Company has entered into the Claims Resolution Agreement between
Lehman Brothers International (Europe) (in administration) and certain eligible offerees
effective December 29, 2009 with respect to these assets (the "CRA"). Given the great degree
of uncertainty as to the status of the Company's assets, other than specific assets that
remain directly in the control of LBIE that the Company has valued in accordance with the
CRA, the Company has valued the assets at an 80% discount.
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations
1- (888) 8Annaly
www.annaly.com