NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core
Earnings for the quarter ended June 30, 2008 of $305.2 million or
$0.60 per average share available to common shareholders as compared
to Core Earnings of $79.1 million or $0.28 per average share available
to common shareholders for the quarter ended June 30, 2007, and Core
Earnings of $233.6 million or $0.51 per average share available to
common shareholders for the quarter ended March 31, 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 June 30, 2008 was $308.0 million or
$0.60 basic net income per average share available to common
shareholders, as compared to net income of $85.7 million or $0.30
basic net income per average share available to common shareholders
for the quarter ended June 30, 2007, and net income of $243.0 million
or $0.54 basic net income per average share available to common
shareholders for the quarter ended March 31, 2008.
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. During the quarter ended June 30, 2007, the Company sold
$1.4 billion of Mortgage-Backed Securities, resulting in a realized
gain of $7.3 million. 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.
Common dividends declared for the quarter ended June 30, 2008 were
$0.55 per share, as compared to $0.24 per share for the quarter ended
June 30, 2007 and $0.48 per share for the quarter ended March 31,
2008. The annualized dividend yield on the Company's common stock for
the quarter ended June 30, 2008, based on the June 30, 2008 closing
price of $15.51, was 14.18%. On a Core Earnings basis, the Company
provided an annualized return on average equity of 17.88% for the
quarter ended June 30, 2008, as compared to 9.68% for the quarter
ended June 30, 2007 and 16.01% for the quarter ended March 31, 2008.
On a GAAP basis, the Company provided an annualized return on average
equity of 18.04% for the quarter ended June 30, 2008, as compared to
10.49% for the quarter ended June 30, 2007, and 16.66% for the quarter
ended March 31, 2008.
During the quarter ended June 30, 2008, the Company completed a
public offering of 69,000,000 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. "The historic
events of the first quarter of 2008 have given way to quieter but
still-volatile conditions in the second quarter. Policymakers continue
to have their hands full--managing not only a slowing economy but also
the uncertainty over inflation expectations and the risks of severe
financial market instability. Most recently, Congress passed
legislation to support the GSEs and the activities in which they
engage pursuant to their charters. The result has been a challenging
quarter across the spectrum of asset classes. Nevertheless, market
conditions for Annaly are fundamentally positive, with our cost of
financing remaining low, prepayment speeds remaining slow and mortgage
spreads remaining wide. I am pleased with our team's ability to
navigate our portfolio in this environment and to demonstrate the
long-term value of our investment strategy. I believe the capital
raise during the quarter positions us well to capitalize on market
opportunities going forward for the benefit of shareholders."
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%, which results in an interest
rate spread of 1.99%. This is a 139 basis point increase over the
0.60% annualized interest rate spread for the quarter ended June 30,
2007 and a 53 basis point increase over the 1.46% annualized interest
rate spread for the quarter ended March 31, 2008. For the quarter
ended June 30, 2007, the annualized yield on average earning assets
was 5.73% and the annualized cost of funds on the average repurchase
balance was 5.13%. 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%.
At June 30, 2008, the weighted average yield on assets was 5.27% and
the cost of funds, including the effect of interest rate swaps, was
3.40%, which results in an interest rate spread of 1.87%. Leverage at
June 30, 2008 was 7.1:1, in comparison to 11.2:1 at June 30, 2007 and
8.1:1 at March 31, 2008.
Fixed-rate securities comprised 69% of the Company's portfolio at
June 30, 2008. The balance of the portfolio was comprised of 23%
adjustable-rate mortgages and 8% LIBOR floating-rate collateralized
mortgage obligations. At June 30, 2008, the Company had entered into
interest rate swaps on a notional amount of $17.7 billion, or 30% 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 June 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 persistence of wide spreads in the mortgage market has
enabled Annaly to generate compelling returns even as we continue to
manage our portfolio conservatively at the low end of our historical
leverage levels," said Wellington Denahan-Norris, Annaly's Vice
Chairman, Chief Investment Officer and Chief Operating Officer. "We
believe that our prudent risk management and the consistent deployment
of our barbell strategy will position the company to perform through
this environment and for the long-term. After taking into account the
effect of interest rate swaps, at June 30, 2008 our portfolio of
Investment Securities was comprised of 39% fixed-rate, 23%
adjustable-rate and 38% floating-rate assets."
The following table summarizes portfolio information for the
Company:
June 30, June 30, March 31,
2008 2007 2008
---------------------------
Leverage at period-end 7.1:1 11.2:1 8.1:1
Fixed-rate investment securities as % of
portfolio 69% 76% 69%
Adjustable-rate investment securities as %
of portfolio 23% 19% 21%
Floating-rate investment securities as %
of portfolio 8% 5% 10%
Notional amount of interest rate swaps as
% of portfolio 30% 33% 30%
Annualized yield on average earning assets
during the quarter 5.50% 5.73% 5.64%
Annualized cost of funds on average
repurchase balance during the quarter 3.51% 5.13% 4.18%
Annualized interest rate spread during the
quarter 1.99% 0.60% 1.46%
Weighted average yield on assets at
period-end 5.27% 5.71% 5.36%
Weighted average cost of funds at period-
end 3.40% 5.10% 3.85%
Interest rate spread at period-end 1.87% 0.61% 1.51%
The Constant Prepayment Rate was 16% during the second quarter of
2008, as compared to 15% during the second quarter of 2007, and 15%
during the first quarter of 2008. The weighted average cost basis of
the Investment Securities was 100.9 at June 30, 2008. The net
amortization of premiums and accretion of discounts on Investment
Securities for the quarters ended June 30, 2008, June 30, 2007 and
March 31, 2008 was $26.6 million, $16.7 million, and $27.5 million,
respectively. The total net premium remaining unamortized at June 30,
2008, June 30, 2007 and March 31, 2008 was $500.7 million, $211.4
million, and $383.3 million, respectively.
General and administrative expenses as a percentage of average
assets were 0.18%, 0.12% and 0.17% for the quarter ended June 30,
2008, June 30, 2007, and March 31, 2008, respectively. At June 30,
2008, June 30, 2007, and March 31, 2008, the Company had a common
stock book value per share of $13.03, $10.52 and $12.95, respectively.
At June 30, 2008, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.7 billion in
net assets and $11.8 billion in gross assets, as compared to $2.6
billion in net assets and $15.7 billion in gross assets at June 30,
2007 and $3.2 billion in net assets and $12.7 billion in gross assets
at March 31, 2008. For the quarter ended June 30, 2008, FIDAC earned
investment advisory and service fees, net of fees paid to
distributors, of $6.0 million, as compared to $4.5 million for the
quarter ended June 30, 2007 and $6.0 million for the quarter ended
March 31, 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 538,549,916 shares of common stock
outstanding.
The Company will hold the second quarter 2008 earnings conference
call on Thursday July 31, 2008 at 10:00 a.m. EST. The number to call
is 866-770-7146 for domestic calls and 617-213-8068 for international
calls and the pass code is 42402257. The replay number is 888-286-8010
for domestic calls and 617-801-6888 for international calls and the
pass code is 98762217. 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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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)
June 30, March 31,
2008 2008
(Unaudited) (Unaudited)
------------------------
ASSETS
Cash and cash equivalents $1,462,737 $1,549,041
Reverse repurchase agreements 49,964 800,000
Mortgage-Backed Securities, at fair value 58,017,305 56,115,025
Agency debentures, at fair value 731,995 738,837
Available for sale equity securities, at fair
value 32,631 44,546
Trading securities, at fair value 23,478 1,836
Receivable for Mortgage-Backed Securities
sold 824,308 174,413
Accrued interest and dividends receivable 303,228 287,261
Receivable for advisory and service fees 4,703 4,581
Intangible for customer relationships 7,604 8,840
Goodwill 22,966 22,966
Interest rate swaps, at fair value - -
Other assets 3,216 4,347
------------------------
Total assets $61,484,135 $59,751,693
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $51,839,663 $51,324,007
Payable for Investment Securities purchased 1,405,109 828,235
Trading securities sold, not yet purchased,
at fair value 48,718 37,268
Accrued interest payable 154,615 172,575
Dividends payable 296,201 224,823
Accounts payable and other liabilities 36,625 20,123
Interest rate swaps, at fair value 400,998 789,859
------------------------
Total liabilities 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,
4,597,550,
4,600,000, 4,600,000, and 4,600,000 shares
issued and
outstanding, respectively 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
Common stock: par value $.01 per share;
987,987,500
authorized 538,546,666, 468,380,797,
401,822,703,
330,509,203, and 269,385,348 issued and
outstanding,
respectively 5,385 4,684
Additional paid-in capital 7,592,161 6,506,494
Accumulated other comprehensive loss (478,791) (335,814)
Accumulated deficit (102,594) (109,054)
------------------------
Total stockholders' equity 7,193,249 6,243,398
------------------------
Total liabilities, minority interest, Series
B Cumulative
Convertible Preferred Stock and stockholders'
equity $61,484,135 $59,751,693
========================
(1) Derived from the audited consolidated financial statements at
December 31, 2007.
September 30, June 30,
December 31, 2007 2007
2007 (1) (Unaudited) (Unaudited)
----------------------------------------
ASSETS
Cash and cash equivalents $103,960 $90,028 $91,781
Reverse repurchase agreements - - -
Mortgage-Backed Securities, at
fair value 52,879,528 44,641,352 38,603,002
Agency debentures, at fair
value 253,915 249,281 150,507
Available for sale equity
securities, at fair value 64,754 - -
Trading securities, at fair
value 11,675 10,987 12,131
Receivable for Mortgage-Backed
Securities sold 276,737 516,140 -
Accrued interest and dividends
receivable 271,996 235,787 197,060
Receivable for advisory and
service fees 3,598 2,933 2,954
Intangible for customer
relationships 9,842 10,178 10,513
Goodwill 22,966 22,966 22,966
Interest rate swaps, at fair
value - - 93,404
Other assets 4,543 3,026 3,146
----------------------------------------
Total assets $53,903,514 $45,782,678 $39,187,464
========================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $46,046,560 $40,140,113 $35,093,856
Payable for Investment
Securities purchased 1,677,131 1,169,324 744,027
Trading securities sold, not
yet purchased, at fair
value 32,835 26,823 37,734
Accrued interest payable 257,608 148,462 104,456
Dividends payable 136,618 85,932 64,652
Accounts payable and other
liabilities 36,688 25,237 14,520
Interest rate swaps, at fair
value 398,096 142,061 838
----------------------------------------
Total liabilities 48,585,536 41,737,952 36,060,083
----------------------------------------
Minority interest in equity of
consolidated affiliate 1,574 1,329 5,623
----------------------------------------
6.00% Series B Cumulative
Convertible Preferred Stock:
4,600,000 shares authorized,
4,496,525, 4,597,550,
4,600,000, 4,600,000, and
4,600,000 shares issued and
outstanding, respectively 111,466 111,466 111,466
----------------------------------------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred
Stock: 7,412,500 authorized,
7,412,500
shares issued and outstanding 177,088 177,088 177,088
Common stock: par value $.01
per share; 987,987,500
authorized 538,546,666,
468,380,797, 401,822,703,
330,509,203, and 269,385,348
issued and outstanding,
respectively 4,018 3,305 2,694
Additional paid-in capital 5,297,922 4,270,330 3,447,964
Accumulated other
comprehensive loss (152,197) (385,960) (467,640)
Accumulated deficit (121,893) (132,832) (149,814)
----------------------------------------
Total stockholders' equity 5,204,938 3,931,931 3,010,292
----------------------------------------
Total liabilities, minority
interest, Series B Cumulative
Convertible Preferred Stock
and stockholders' equity $53,903,514 $45,782,678 $39,187,464
========================================
(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 (LOSS)
(UNAUDITED)
(dollars in thousands, except per share data)
For the quarters ended
June 30, March 31,
2008 2008
------------------------
Interest income $773,359 $791,128
Interest expense 442,251 537,606
------------------------
Net interest income 331,108 253,522
------------------------
Other income
Investment advisory and service fees 6,406 6,598
Gain on sale of Mortgage-Backed Securities 2,830 9,417
Gain on termination of interest rate swaps - -
Income from trading securities 2,180 1,854
Dividend income from available-for-sale
equity securities 580 941
Loss on other-than-temporarily impaired
securities - -
------------------------
Total other income 11,996 18,810
------------------------
Expenses
Distribution fees 370 633
General and administrative expenses 27,215 23,995
------------------------
Total expenses 27,585 24,628
------------------------
Income before income taxes and minority
interest 315,519 247,704
Income taxes 7,527 4,610
------------------------
Income before minority interest 307,992 243,094
Minority interest - 58
------------------------
Net income 307,992 243,036
Dividend on preferred stock 5,334 5,373
------------------------
Net income available to common shareholders $302,658 $237,663
========================
Net income available per share to
common shareholders:
Basic $0.60 $0.54
========================
Diluted $0.59 $0.53
========================
Weighted average number of common shares
outstanding:
Basic 503,758,079 443,812,432
========================
Diluted 512,678,975 452,967,457
========================
Net income $307,992 $243,036
------------------------
Other comprehensive income (loss):
Unrealized (loss) gain on available-for-
sale securities (529,008) 217,563
Unrealized gain (loss) on interest rate
swaps 388,861 (391,763)
Reclassification adjustment for gains
included in net income (2,830) (9,417)
------------------------
Other comprehensive (loss) income (142,977) (183,617)
------------------------
Comprehensive income (loss) $165,015 $59,419
------------------------
For the quarters ended
December 31, September 30, June 30,
2007 2007 2007
----------------------------------------
Interest income $720,925 $628,696 $556,262
Interest expense 558,435 519,118 468,748
----------------------------------------
Net interest income 162,490 109,578 87,514
----------------------------------------
Other income
Investment advisory and
service fees 5,636 5,464 5,366
Gain on sale of Mortgage-
Backed Securities 1,829 3,795 7,293
Gain on termination of
interest rate swaps - 2,029 -
Income from trading
securities 7,187 8,288 243
Dividend income from
available-for-sale equity
securities 91 - -
Loss on other-than-
temporarily impaired
securities - - (698)
----------------------------------------
Total other income 14,743 19,576 12,204
----------------------------------------
Expenses
Distribution fees 782 1,100 861
General and administrative
expenses 20,174 17,334 12,272
----------------------------------------
Total expenses 20,956 18,434 13,133
----------------------------------------
Income before income taxes and
minority interest 156,277 110,720 86,585
Income taxes 3,100 2,327 839
----------------------------------------
Income before minority
interest 153,177 108,393 85,746
Minority interest 245 106 13
----------------------------------------
Net income 152,932 108,287 85,733
Dividend on preferred stock 5,374 5,373 5,373
----------------------------------------
Net income available to common
shareholders $147,558 $102,914 $80,360
========================================
Net income available per share
to
common shareholders:
Basic $0.38 $0.33 $0.30
========================================
Diluted $0.37 $0.32 $0.30
========================================
Weighted average number of
common shares outstanding:
Basic 389,410,812 315,969,814 264,990,422
========================================
Diluted 398,247,632 324,614,534 273,578,836
========================================
Net income $152,932 $108,287 $85,733
----------------------------------------
Other comprehensive income
(loss):
Unrealized (loss) gain on
available-for-sale
securities 491,626 320,102 (535,413)
Unrealized gain (loss) on
interest rate swaps (256,034) (232,598) 134,408
Reclassification adjustment
for gains included in net
income (1,829) (5,824) (6,595)
----------------------------------------
Other comprehensive (loss)
income 233,763 81,680 (407,600)
----------------------------------------
Comprehensive income (loss) $386,695 $189,967 ($321,867)
----------------------------------------
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands, except per share data)
For the six months ended
June 30, 2008 June 30, 2007
---------------------------
Interest income $1,564,487 $1,005,826
Interest expense 979,857 848,912
---------------------------
Net interest income 584,630 156,914
---------------------------
Other income
Investment advisory and service fees 13,004 10,928
Gain on sale of Mortgage-Backed
Securities 12,247 13,438
Gain on termination of interest rate
swaps - 67
Income from trading securities 4,034 3,672
Dividend income from available-for-sale
equity securities 1,521 -
Loss on other-than-temporarily impaired
securities - (1,189)
---------------------------
Total other income 30,806 26,916
---------------------------
Expenses
Distribution fees 1,003 1,765
General and administrative expenses 51,210 25,158
---------------------------
Total expenses 52,213 26,923
---------------------------
Income before income taxes and minority
interest 563,223 156,907
Income taxes 12,137 3,443
---------------------------
Income before minority interest 551,086 153,464
Minority interest 58 299
---------------------------
Net income 551,028 153,165
Dividend on preferred stock 10,707 10,746
---------------------------
Net income available to common
shareholders $540,321 $142,419
===========================
Net income available per share to
common shareholders:
Basic $1.14 $0.59
===========================
Diluted $1.13 $0.58
===========================
Weighted average number of common shares
outstanding:
Basic 473,785,256 241,371,530
===========================
Diluted 482,813,463 249,924,374
===========================
Net income $551,028 $153,165
---------------------------
Other comprehensive loss:
Unrealized (loss) gain on available-for-
sale securities (311,445) (489,465)
Unrealized (loss) gain on interest rate
swaps (2,902) 110,253
Reclassification adjustment for gains
included in net income (12,247) (12,316)
---------------------------
Other comprehensive loss (326,594) (391,528)
---------------------------
Comprehensive income (loss) $224,434 ($238,363)
---------------------------
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations, 1-(888)8Annaly
www.annaly.com