NEW YORK--(BUSINESS WIRE)--Oct. 21, 2003--Annaly Mortgage
Management, Inc. (NYSE: NLY) today reported earnings for the quarter
ended September 30, 2003 of $28,479,000 or $0.30 per average share
outstanding, as compared to $56,668,000 or $0.68 per average share
outstanding for the quarter ended September 30, 2002.
The Company was able to provide an annualized return on average
equity of 9.88% for the quarter ended September 30, 2003, as compared
to 20.79% for the quarter ended June 30, 2003, and 21.24% for the
quarter ended September 30, 2002. Dividends declared for the quarter
ended September 30, 2003 were $0.28 per share, compared to $0.60 for
the quarter ended June 30, 2003 and $0.68 per share for the quarter
ended September 30, 2002. The annualized dividend yield for the
quarter, based on the September 30, 2003 closing price of $16.42, was
6.82%.
"Our third quarter results reflect the transition from a period of
very low interest rates and very high prepayment speeds to a period of
higher rates and slower speeds," said Michael A.J. Farrell, Chairman,
Chief Executive Officer and President of Annaly. "As we have
reiterated time and again in 2002 and 2003, our job as managers during
this time has been to protect capital and remain defensive until the
fundamentals of the mortgage market improved. The good news is that
amortization expense--which has exceeded interest expense through the
first 9 months of the year--is now subsiding. Looking ahead to the
fourth quarter and beyond, we expect that the substantial reduction in
prepayment speeds and premium amortization will serve to enhance
earnings."
For the quarter ended September 30, 2003, the yield on average
earning assets was 2.13% and the cost of funds on the average
repurchase balance was 1.44%, which equates to an interest rate spread
of 0.69%. This is a 56 basis point decrease over the 1.25% interest
rate spread for the quarter ended June 30, 2003, when the yield on
average earning assets was 2.93% and the cost of funds on the average
repurchase balance was 1.68%, and a 128 basis point decrease over the
1.97% interest rate spread for the quarter ended September 30, 2002,
when the yield on average earning assets was 4.10% and the cost of
funds on the average repurchase balance was 2.13%.
The Constant Prepayment Rate increased to 48% during the third
quarter of 2003, as compared to 44% in the second quarter of 2003 and
34% for the quarter ended September 30, 2002. The homeowners'
prepayment option makes the average term, yield and performance of a
mortgage-backed security uncertain because of the uncertainty in
timing the return of principal. In general, prepayments decrease the
total yield on a bond purchased at a premium, because over the life of
the bond that premium has to be amortized. The faster prepayments, the
shorter the life of the security, which results in the increased
amortization. The total amount of amortization for the quarters ended
September 30, 2003, June 30, 2003, and September 30, 2002 were
$72,047,000, $57,615,000, and $28,229,000, respectively. The weighted
average purchase price of the portfolio was 102.6 at September 30,
2003, 102.5 at June 30, 2003, and 102.3 at September 30, 2002.
"While the bond market has shown remarkable price volatility
during the quarter, its dominant feature has been the historically
fast prepayment speeds due to refinancing activity," said Wellington
Denahan, Vice Chairman and Chief Investment Officer. "Because of the
two to three month lag between mortgage applications and their related
cash flows, during the third quarter we recognized the amortization
expense related to the second quarter peak in the MBA Refi Index.
Since the peak on May 30, the MBA Refi Index has fallen approximately
75%. Accordingly, we expect to see our amortization expense fall
beginning in the fourth quarter."
For the quarter ended September 30, 2003, the Company's gain on
sale of assets was $9.7 million as compared to $20.2 million in the
quarter ended June 30, 2003 and $4.7 million for the quarter ended
September 30, 2002. Leverage at September 30, 2003 was 9.8:1, in
comparison to 10.5:1 at June 30, 2003 and 9.0:1 at September 30, 2002.
General and administration expenses, as a percent of average
assets was 0.12% for the quarters ended September 30, 2003, June 30,
2003 and September 30, 2002, respectively. In addition, the Company's
Dividend Efficiency Ratio, calculated as general and administrative
expenses divided by dividends paid, was 15.3%, 7.4% and 5.7% for the
quarters ended September 30, 2003, June 30, 2003, and September 30,
2002, respectively. "In our simple, low G&A business model," said Mr.
Farrell, "the increase in net interest income that comes about from
reductions in premium amortization essentially drops to the bottom
line."
At September 30, 2003, June 30, 2003, and September 30, 2002,
respectively, the Company had a book value of $11.94, $12.35 and
$12.84. The Company classifies all investment securities as "available
for sale;" therefore requiring the Company to record the entire
portfolio at market value. Fixed rate securities comprised
approximately 31% of the Company's portfolio at September 30, 2003.
The balance of the portfolio was comprised of 50% adjustable rate
mortgages and 19% LIBOR floating rate collateralized mortgage
obligations. The Company has continued to avoid the introduction of
credit risk into its portfolio. As of September 30, 2003, all of the
assets in the Company's portfolio were FNMA, GNMA, FHLMC
mortgage-backed securities, and agency debentures, which carry an
actual or implied "AAA" rating.
The Company is a Maryland corporation which owns and manages a
portfolio of mortgage-backed securities. The Company's principal
business objective is to generate net income for distribution to
stockholders from the spread between the interest income on its
mortgage-backed securities and the cost of borrowing to finance their
acquisition. The Company has elected to be taxed as a real estate
investment trust ("REIT") and currently has 95,984,229 shares of
common stock outstanding.
The Company will hold the 3rd quarter 2003 earnings conference
call on Wednesday, October 22, 2003 at 10:00 a.m. EST. The number to
call is 1-800-838-4403. The re-play number is 1-800-428-6051 and the
pass code is 310828. 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. 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, 2002. 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 MORTGAGE MANAGEMENT, INC.
STATEMENTS OF FINANCIAL CONDITION
(dollars in the thousands)
SEPT. 30, 2003 JUNE 30, 2003 MARCH 31, 2003
(Unaudited) (Unaudited) (Unaudited)
----------------------------------------------
ASSETS
Cash and cash equivalents $3,381 $304 $945
Mortgage-Backed Securities,
at fair value 11,628,271 12,887,495 11,674,910
Agency Debentures,
at fair value 976,814 1,375,980 643,160
Receivable for Mortgage-Backed
Securities sold 177,304 387,218 304,766
Accrued interest receivable 53,955 58,026 50,087
Other assets 1,233 1,104 873
----------------------------------------------
Total assets $12,840,958 $14,710,127 $12,674,741
==============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $11,201,897 $12,162,333 $10,192,049
Payable for Mortgage-Backed
Securities purchased 445,148 1,306,238 1,335,427
Accrued interest payable 13,868 16,788 15,915
Dividends payable 26,876 56,420 50,789
Other liabilities 4,294 4,708 2,816
Accounts payable 3,147 2,202 1,033
----------------------------------------------
Total liabilities 11,695,230 13,548,689 11,598,029
----------------------------------------------
Stockholders' Equity:
Common stock: par value $.01 per
share; 500,000,000 authorized,
95,964,915, 94,030,753,
84,647,484, 84,569,206, and
84,507,065 shares issued and
outstanding, respectively 960 940 846
Additional paid-in
capital 1,192,819 1,157,092 1,004,370
Accumulated other
comprehensive income
(loss) (51,870) 1,190 71,000
Retained earnings 3,819 2,216 496
----------------------------------------------
Total stockholders' equity 1,145,728 1,161,438 1,076,712
----------------------------------------------
Total liabilities and
stockholders' equity $12,840,958 $14,710,127 $12,674,741
==============================================
DEC. 31, 2002 SEPT. 30, 2002
(Unaudited)
------------------------------
ASSETS
Cash and cash equivalents $726 $2,002
Mortgage-Backed Securities, at fair
value 11,551,857 11,489,538
Agency Debentures, at fair value - -
Receivable for Mortgage-Backed
Securities sold 55,954 77,232
Accrued interest receivable 49,707 49,950
Other assets 840 1,260
------------------------------
Total assets $11,659,084 $11,619,982
==============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $10,163,174 $9,809,968
Payable for Mortgage-Backed
Securities purchased 338,691 634,598
Accrued interest payable 14,935 28,035
Dividends payable 57,499 57,465
Other liabilities 2,812 2,592
Accounts payable 1,907 2,319
------------------------------
Total liabilities 10,579,018 10,534,977
------------------------------
Stockholders' Equity:
Common stock: par value $.01 per
share; 500,000,000 authorized,
95,964,915, 94,030,753,
84,647,484, 84,569,206, and
84,507,065 shares issued and
outstanding, respectively 846 845
Additional paid-in capital 1,003,200 1,002,197
Accumulated other comprehensive
income (loss) 75,511 74,382
Retained earnings 509 7,581
------------------------------
Total stockholders' equity 1,080,066 1,085,005
------------------------------
Total liabilities and stockholders'
equity $11,659,084 $11,619,982
==============================
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars in thousands
(For the Quarters Ended)
September 30, June 30, March 31,
2003 2003 2003
---------------------------------------------------
INTEREST INCOME $66,855 $93,892 $87,500
INTEREST EXPENSE 43,922 51,770 44,048
---------------------------------------------------
NET INTEREST INCOME 22,933 42,122 43,452
GAIN ON SALE OF MORTGAGE-BACKED
SECURITIES 9,656 20,231 11,020
GENERAL AND ADMINISTRATIVE
EXPENSES 4,110 4,201 3,697
---------------------------------------------------
NET INCOME 28,479 58,152 50,775
---------------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain (loss) on
available-for-sale
securities (43,405) (49,579) 6,509
Less: reclassification
adjustment for net gains
included in net income (9,656) (20,231) (11,020)
---------------------------------------------------
Other comprehensive
income (loss) (53,061) (69,810) (4,511)
---------------------------------------------------
COMPREHENSIVE INCOME (LOSS) $(24,582) $(11,658) $46,264
===================================================
NET INCOME PER SHARE:
Basic $0.30 $0.62 $0.60
===================================================
Diluted $0.30 $0.62 $0.60
===================================================
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING:
Basic 94,685,685 93,384,128 84,606,786
===================================================
Diluted 95,500,486 93,588,024 84,837,390
===================================================
(For the Quarters Ended)
December September
31, 30,
2002 2002
----------------------
INTEREST INCOME $92,641 $109,201
INTEREST EXPENSE 49,874 54,012
----------------------
NET INTEREST INCOME 42,767 55,189
GAIN ON SALE OF MORTGAGE-BACKED SECURITIES
11,563 4,747
GENERAL AND ADMINISTRATIVE EXPENSES 3,904 3,268
----------------------
NET INCOME 50,426 56,668
----------------------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain (loss) on available-for-sale
securities 12,692 11,846
Less: reclassification adjustment for net
gains included in net income (11,563) (4,747)
----------------------
Other comprehensive income (loss) 1,129 7,099
----------------------
COMPREHENSIVE INCOME (LOSS) $51,555 $63,767
======================
NET INCOME PER SHARE:
Basic $0.60 $0.68
======================
Diluted $0.60 $0.68
======================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 84,525,171 83,668,422
======================
Diluted 84,766,747 83,939,870
======================
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars in thousands)
For the nine months For the nine months
ended September 30, ended September 30,
2003 2002
------------------------------------------
INTEREST INCOME $248,247 $311,524
INTEREST EXPENSE 139,740 141,884
------------------------------------------
NET INTEREST INCOME 108,507 169,640
GAIN ON SALE OF MORTGAGE-BACKED
SECURITIES 40,907 9,500
GENERAL AND ADMINISTRATIVE EXPENSES 12,008 10,059
------------------------------------------
NET INCOME 137,406 169,081
------------------------------------------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain (loss) on
available-for-sale securities (86,474) 45,713
Less: reclassification adjustment
for net gains included in
net income (40,907) (9,500)
------------------------------------------
Other comprehensive income (loss) (127,381) 36,213
------------------------------------------
COMPREHENSIVE INCOME (LOSS) $10,025 $205,294
=========================================
NET INCOME PER SHARE:
Basic $1.51 $2.08
=========================================
Diluted $1.50 $2.07
=========================================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 90,929,196 81,206,156
=================================
Diluted 91,750,472 81,490,436
=================================
CONTACT: Annaly Mortgage Management, Inc.
Investor Relations:
Kathryn Fagan, 212-696-0100
1- (888) 8Annaly
www.annaly.com
SOURCE: Annaly Mortgage Management, Inc.