NEW YORK--(BUSINESS WIRE)--Oct. 26, 2005--Annaly Mortgage
Management, Inc.
(NYSE: NLY) today reported net income for the quarter
ended September 30, 2005 of $21.2 million, or $0.14 basic net income
per share available to common shareholders, as compared to $66.6
million or $0.53 basic net income per share available to common
shareholders for the quarter ended September 30, 2004 and $47.0
million, or $0.36 basic net income per share available to common
shareholders for the quarter ended June 30, 2005.
The Company was able to provide an annualized return on average
equity of 5.20% for the quarter ended September 30, 2005, as compared
to 16.59% for the quarter ended September 30, 2004 and 11.36% for the
quarter ended June 30, 2005. Common dividends declared for the quarter
ended September 30, 2005 were $0.13 per share, as compared to $0.50
per share for the quarter ended September 30, 2004 and $0.36 per share
for the quarter ended June 30, 2005. The annualized dividend yield on
common stock for the quarter, based on the September 30, 2005 closing
price of $12.95, was 4.02%.
"The third quarter was a continuation of the unfavorable market
conditions we have been highlighting in past conference calls and
earnings and dividend releases," said Michael A.J. Farrell, Chairman,
Chief Executive Officer and President of the Company. "These market
conditions adversely affect our results in two ways. First, our spread
is compressed as our cost of funds continues to rise relative to the
yield on our assets. Second, the transition to a flat curve with the
short end rising relative to the long end pressures asset prices and
enables prepayment speeds to stay relatively flat. Our shareholders
should understand that our results will continue to reflect these
conditions while they persist, and they may persist while the Federal
Reserve maintains its current course of monetary policy. We have
operated through Fed tightening cycles and rising rate environments
before, however, each environment presents its unique set of
challenges. We will continue to explore all available portfolio
management options to help strengthen our position to weather the
current environment until such time as the interest rate cycle moves
into its next stage."
For the quarter ended September 30, 2005, the annualized yield on
average earning assets was 3.75% and the annualized cost of funds on
the average repurchase balance was 3.51%, which equates to an interest
rate spread of 0.24%. This is a 132 basis point decrease over the
1.56% annualized interest rate spread for the quarter ended September
30, 2004 and a 36 basis point decrease over the 0.60% annualized
interest rate spread for the quarter ended June 30, 2005. For the
quarter ended September 30, 2004, the annualized yield on average
earning assets was 3.36% and the annualized cost of funds on the
average repurchase balance was 1.80%. For the quarter ended June 30,
2005, the annualized yield on average earning assets was 3.63% and the
annualized cost of funds on the average repurchase balance was 3.03%.
At September 30, 2005, the annualized yield on earning assets was
3.96% and the annualized cost of funds on the repurchase balance was
3.69%, which equates to an interest rate spread of 0.27%.
For the quarters ended September 30, 2005, September 30, 2004, and
June 30, 2005, the Company's gain on sale of Mortgage-Backed
Securities was $32,000, $1.4 million, and $11.4 million, respectively.
The Constant Prepayment Rate was 28% during the third quarter of
2005, as compared to 25% during the third quarter of 2004, and 27%
during the second quarter of 2005. The weighted average purchase price
of the Company's portfolio was 102.1 at September 30, 2005, 102.4 at
September 30, 2004 and 102.2 at June 30, 2005. The net amortization of
premiums and accretion of discounts on investment securities for the
quarters ended September 30, 2005, September 30, 2004, and June 30,
2005 was $43.7 million, $39.7 million, and $42.7 million,
respectively. The total net unamortized premium at September 30, 2005,
September 30, 2004, and June 30, 2005 was $376.0 million, $409.2
million, and $401.4 million, respectively. Leverage at September 30,
2005 was 10.9:1, in comparison to 9.4:1 at September 30, 2004 and
10.1:1at June 30, 2005.
"The landscape for our third quarter performance was dramatic bond
market volatility and fast prepayment activity," said Wellington
Denahan-Norris, Vice Chairman and Chief Investment Officer of Annaly.
"The challenge for Annaly has been that a substantial portion of our
portfolio was positioned in the period in and around the refinancing
boom of 2003, when Fed Funds stood at 1% and the 10-year Treasury
yield was at or below 4%. As a result, our legacy portfolio was
largely purchased at higher dollar prices and lower yields than are
generally available today. Going forward, the impact of generally
higher interest rates should flow through to our portfolio as we
reinvest into higher-yielding assets, and as amortization expense
declines further. Indeed, we observed that prepayment speeds declined
during the last month of the quarter as the recent back-up in
long-term rates has begun to work through the mortgage refinancing
pipeline."
General and administrative expenses as a percentage of average
assets were 0.13%, 0.14%, and 0.14% for the quarters ended September
30, 2005, September 30, 2004, and June 30, 2005, respectively. At
September 30, 2005, September 30, 2004, and June 30, 2005, the Company
had a common stock book value per share of $11.18, $12.84, and $12.43,
respectively. The Company classifies all investment securities as
"available for sale," thus requiring the Company to record the entire
portfolio at market value. Fixed rate securities comprised
approximately 34% of the Company's portfolio at September 30, 2005.
The balance of the portfolio was comprised of 61% adjustable rate
mortgages and 5% LIBOR floating rate collateralized mortgage
obligations. The Company has continued to avoid the introduction of
credit risk into its portfolio. As of September 30, 2005, 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.
At September 30, 2005, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.9 billion in
net assets and $26.8 billion in gross assets, as compared to $3.1
billion in net assets and $27.8 billion in gross assets at June 30,
2005 and $1.9 billion in net assets and $15.9 billion in gross assets
at December 31, 2004. For the quarter ended September 30, 2005, FIDAC
earned investment advisory and service fees, net of fees paid to
distributors, of $8.5 million, as compared to $7.5 million for the
quarter ended June 30, 2005. 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.
"The fee income we earn at FIDAC is an important diversification
of our revenue stream at Annaly that we intend to grow over time,"
said Mr. Farrell. "Our asset growth in 2005 reflects continued
investor demand for high credit quality, income-oriented investment
opportunities."
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 123,684,931 shares of common stock
outstanding.
The Company will hold the third quarter 2005 earnings conference
call on Thursday, October 27, 2005 at 10:00 a.m. EST. The number to
call is 1-800-299-9086 for domestic and 1-617-786-2903 for
international calls and the pass code is 93922351. The replay will be
available for 48 hours, and can be accessed by dialing 1-888-286-8010
for domestic calls and 1-617-801-6888 for international calls and the
pass code is 30091668. There will be a web cast of the call on
www.annaly.com which will be available for 48 hours. 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, FIDAC's clients' removal of
assets FIDAC manages, FIDAC's regulatory requirements, and competition
in the investment management 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 Annual Report on Form 10-K for the fiscal year ended December
31, 2004. 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.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
Sept. 30, June 30, March 31,
2005 2005 2005
(Unaudited) (Unaudited) (Unaudited)
------------ ----------- -----------
ASSETS
Cash and cash equivalents $ 1,684 $ 3,669 $ 2,417
Mortgage-Backed Securities, at
fair value 18,697,385 19,165,744 18,702,470
Agency Debentures, at fair value 258,616 391,092 388,593
Receivable for Mortgage-Backed
Securities sold 788 - -
Accrued interest receivable 83,806 87,960 80,172
Receivable for advisory and
service fees 4,579 4,334 2,883
Intangible for customer
relationships 15,367 15,552 15,613
Goodwill 23,122 23,122 23,122
Other assets 1,218 1,472 1,873
----------- ----------- -----------
Total assets $19,086,565 $19,692,945 $19,217,143
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $17,038,226 $17,251,594 $17,438,609
Payable for Mortgage-Backed
Securities purchased 429,502 659,325 75,165
Accrued interest payable 34,171 29,654 33,770
Dividends payable 16,079 44,120 54,575
Other liabilities 625 1,241 1,569
Accounts payable 8,602 6,523 4,079
----------- ----------- -----------
Total liabilities 17,527,205 17,992,457 17,607,767
----------- ----------- -----------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred Stock:
8,000,000 authorized,
7,412,500, 7,412,500,
7,412,500, 7,412,500, and
4,250,000 shares issued and
outstanding, respectively 177,088 177,088 177,077
Common stock: par value $.01 per
share; 500,000,000 authorized,
123,684,931, 122,554,831,
121,277,698, 121,263,000, and
121,235,702 shares issued and
outstanding, respectively 1,237 1,226 1,213
Additional paid-in capital 1,679,452 1,662,347 1,638,911
Accumulated other comprehensive
loss (304,555) (144,853) (213,280)
Retained earnings 6,138 4,680 5,455
----------- ----------- -----------
Total stockholders' equity 1,559,360 1,700,488 1,609,376
----------- ----------- -----------
Total liabilities and
stockholders' equity $19,086,565 $19,692,945 $19,217,143
=========== =========== ===========
Dec. 31, Sept. 30,
2004 2004
(Unaudited)
------------ -----------
ASSETS
Cash and cash equivalents $ 5,853 $ 6,772
Mortgage-Backed Securities, at fair value 19,038,386 17,571,593
Agency Debentures, at fair value 390,509 639,437
Receivable for Mortgage-Backed Securities sold 1,025 -
Accrued interest receivable 81,557 74,291
Receivable for advisory and service fees 2,359 1,637
Intangible for customer relationships 15,613 15,613
Goodwill 23,122 23,122
Other assets 1,875 1,371
----------- -----------
Total assets $19,560,299 $18,333,836
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $16,707,879 $15,579,196
Payable for Mortgage-Backed Securities
purchased 1,044,683 999,380
Accrued interest payable 35,721 24,483
Dividends payable 60,632 60,618
Other liabilities 2,819 4,061
Accounts payable 8,095 6,508
----------- -----------
Total liabilities 17,859,829 16,674,246
----------- -----------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock: 8,000,000 authorized,
7,412,500, 7,412,500, 7,412,500, 7,412,500,
and 4,250,000 shares issued and
outstanding, respectively 177,077 102,708
Common stock: par value $.01 per share;
500,000,000 authorized, 123,684,931,
122,554,831, 121,277,698, 121,263,000, and
121,235,702 shares issued and outstanding,
respectively 1,213 1,212
Additional paid-in capital 1,638,635 1,638,309
Accumulated other comprehensive loss (120,800) (91,987)
Retained earnings 4,345 9,348
----------- -----------
Total stockholders' equity 1,700,470 1,659,590
----------- -----------
Total liabilities and stockholders' equity $19,560,299 $18,333,836
=========== ===========
ANNALY MORTGAGE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the Quarters Ending
September 30, June 30, March 31,
2005 2005 2005
------------- ---------- -----------
Interest income $177,474 $171,595 $176,289
Interest expense 155,043 133,758 113,993
------------- ---------- -----------
Net interest income 22,431 37,837 62,296
------------- ---------- -----------
Other income
Investment advisory and service
fees 10,945 9,669 6,309
Gain on sale of Mortgage-Backed
Securities 32 11,435 580
------------- ---------- -----------
Total other income 10,977 21,104 6,889
------------- ---------- -----------
Expenses
Distribution fees 2,414 2,126 1,610
General and administrative
expenses 6,455 6,800 6,664
------------- ---------- -----------
Total expenses 8,869 8,926 8,274
------------- ---------- -----------
Income before income taxes 24,539 50,015 60,911
Income taxes 3,353 3,022 1,578
------------- ---------- -----------
Net income $21,186 46,993 59,333
Dividend on preferred stock 3,648 3,648 3,648
------------- ---------- -----------
Net income available to common
shareholders $17,538 $43,345 $55,685
============= ========== ===========
Net income per share available to
common shareholders:
Basic $0.14 $0.36 $0.46
============= ========== ===========
Diluted $0.14 $0.36 $0.46
============= ========== ===========
Weighted average number of shares
outstanding:
Basic 123,169,910 121,740,256 121,270,867
============= ========== ===========
Diluted 123,330,645 122,013,050 121,564,320
============= ========== ===========
Net income $21,186 $46,993 $59,333
------------- ---------- -----------
Comprehensive income (loss):
Unrealized gain (loss) on
available-for-sale securities (159,670) 79,862 (91,900)
Less: reclassification
adjustment for net gains
included in net income (32) (11,435) (580)
------------- ---------- -----------
Other comprehensive income
(loss) (159,702) 68,427 (92,480)
------------- ---------- -----------
Comprehensive income (loss) ($138,516) $115,420 ($33,147)
============= ========== ===========
For the Quarters Ending
December September
31, 30,
2004 2004
----------- ------------
Interest income $156,783 $138,970
Interest expense 93,992 70,173
----------- ------------
Net interest income 62,791 68,797
----------- ------------
Other income
Investment advisory and service fees 6,143 4,811
Gain on sale of Mortgage-Backed Securities 1,144 1,350
----------- ------------
Total other income 7,287 6,161
----------- ------------
Expenses
Distribution fees 1,538 1,024
General and administrative expenses 6,862 6,159
----------- ------------
Total expenses 8,400 7,183
----------- ------------
Income before income taxes 61,678 67,775
Income taxes 2,384 1,155
----------- ------------
Net income 59,294 66,620
Dividend on preferred stock 3,665 2,082
----------- ------------
Net income available to common shareholders $55,629 $64,538
=========== ============
Net income per share available to common
shareholders:
Basic $0.46 $0.53
=========== ============
Diluted $0.46 $0.53
=========== ============
Weighted average number of shares outstanding:
Basic 121,246,246 120,802,814
=========== ============
Diluted 121,514,941 120,994,191
=========== ============
Net income $59,294 $66,620
----------- ------------
Comprehensive income (loss):
Unrealized gain (loss) on available-for-sale
securities (27,669) 86,852
Less: reclassification adjustment for net
gains included in net income (1,144) (1,350)
----------- ------------
Other comprehensive income (loss) (28,813) 85,502
----------- ------------
Comprehensive income (loss) $30,481 $152,122
=========== ============
ANNALY MORTGAGE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the nine months
ended
September September
30, 30,
2005 2004
------------ -----------
Interest income $525,358 $375,545
Interest expense 402,794 176,124
------------ -----------
Net interest income 122,564 199,421
------------ -----------
Other income
Investment advisory and service fees 26,923 6,369
Gain on sale of Mortgage-Backed Securities 12,047 4,071
------------ -----------
Total other income 38,970 10,440
------------ -----------
Expenses
Distribution fees 6,151 1,322
General and administrative expenses 19,919 17,167
------------ -----------
Total expenses 26,070 18,489
------------ -----------
Income before income taxes 135,464 191,372
Income taxes 7,952 2,074
------------ -----------
Net income 127,512 189,298
Dividend on preferred stock 10,945 4,080
------------ -----------
Net income available to common shareholders $116,567 $185,218
============ ===========
Net income per share available to common
shareholders:
Basic $0.95 $1.58
============ ===========
Diluted $0.95 $1.58
============ ===========
Weighted average number of shares outstanding:
Basic 122,067,300 117,208,336
============ ===========
Diluted 122,265,351 117,439,248
============ ===========
Net income $127,512 $189,298
------------ -----------
Comprehensive income (loss):
Unrealized gain (loss) on available-for-sale
securities (171,709) (40,655)
Less: reclassification adjustment for net
gains included in net income (12,047) (4,071)
------------ -----------
Other comprehensive income (loss) (183,756) (44,726)
------------ -----------
Comprehensive income (loss) ($56,244) $144,572
============ ===========
CONTACT: Annaly Mortgage Management, Inc.
Investor Relations:
1-888-8Annaly
www.annaly.com
SOURCE: Annaly Mortgage Management, Inc.