NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings
for the quarter ended December 31, 2008 of $261.8 million or $0.47 per
average share available to common shareholders as compared to Core
Earnings of $151.1 million or $0.37 per average share available to
common shareholders for the quarter ended December 31, 2007, and Core
Earnings of $335.0 million or $0.61 per average share available to
common shareholders for the quarter ended September 30, 2008. The
Company reported Core Earnings for the year ended December 31, 2008 of
$1.1 billion or $2.20 per average share available to common shareholders
as compared to Core Earnings of $394.4 million or $1.25 per average
share available to common shareholders for the year ended December 31,
2007. "Core Earnings" represents a non-GAAP measure and is defined as
net income (loss) excluding impairment losses, gains or losses on sales
of securities and termination of interest rate swaps and unrealized gain
or loss on interest rate swaps
As previously announced, beginning in the fourth quarter of 2008 the
Company will no longer apply hedge accounting to its interest rate swaps
under Statement of Financial Accounting Standards No. 133 "Accounting
for Derivative Instruments and Hedging Activities". As a result,
unrealized gains and losses on interest rate swaps will be reported in
earnings for GAAP net income. In the quarter ended December 31, 2008,
the Company recorded an unrealized loss on interest rate swaps of $768.3
million. The Company continues to designate its interest rate swaps as
hedges for tax purposes and any unrealized gains or losses should not
affect its distributable net income. On a GAAP basis, net loss for the
quarter ended December 31, 2008 was $507.0 million or $0.95 basic net
loss per average share related to common shareholders, as compared to
net income of $152.9 million or $0.38 basic net income per average share
available to common shareholders for the quarter ended December 31,
2007, and net income of $302.1 million or $0.55 basic net income per
average share available to common shareholders for the quarter ended
September 30, 2008. On a GAAP basis, the net income for the year ended
December 31, 2008 was $346.2 million or $0.64 basic net income per
average share available to common shareholders, as compared to net
income of $414.4 million or $1.32 basic net income per average share
available to common shareholders for the year ended December 31, 2007.
During the quarter ended December 31, 2008, the Company sold $4.3
billion of Mortgage-Backed Securities, resulting in a realized loss of
$468,000. During the quarter ended December 31, 2007, the Company sold
$549.4 million of Mortgage-Backed Securities, resulting in a realized
gain of $1.8 million. During the quarter ended September 30, 2008, the
Company sold $4.8 billion of Mortgage-Backed Securities, resulting in a
realized loss of $1.1 million. During the year ended December 31, 2008,
the Company sold $15.1 billion of Mortgage-Backed Securities, resulting
in a realized gain of $10.7 million. During the year ended December 31,
2007, the Company sold $4.9 billion of Mortgage-Backed Securities,
resulting in a realized gain of $19.1 million. In addition, for the year
ended December 31, 2007, the Company had a $2.1 million gain on the
termination of interest rate swaps with a notional amount of $900.0
million.
Common dividends declared for the quarter ended December 31, 2008 were
$0.50 per share, as compared to $0.34 per share for the quarter ended
December 31, 2007 and $0.55 per share for the quarter ended September
30, 2008. The annualized dividend yield on the Company's common stock
for the quarter ended December 31, 2008, based on the December 31, 2008
closing price of $15.87, was 12.60%. Common dividends declared for the
year ended December 31, 2008 were $2.08 per share, as compared to $1.04
per share for the year ended December 31, 2007. On a Core Earnings
basis, the Company provided an annualized return on average equity of
14.52% for the quarter ended December 31, 2008, as compared to 12.92%
for the quarter ended December 31, 2007 and 18.55% for the quarter ended
September 30, 2008. On a GAAP basis, the Company provided an annualized
loss on average equity of 28.12% for the quarter ended December 31,
2008, as compared to an annualized return on average equity of 13.07%
for the quarter ended December 31, 2007, and 16.73% for the quarter
ended September 30, 2008. On a Core Earnings basis, the Company provided
a return on average equity of 17.00% for the year ended December 31,
2008, as compared to 10.63% for the year ended December 31, 2007. On a
GAAP basis, the Company provided a return on average equity of 5.18% for
the year ended December 31, 2008, as compared to 11.17% for the year
ended December 31, 2007.
Michael A.J. Farrell, Chairman, Chief Executive Officer and President of
Annaly, commented on the Company's results. "On behalf of our
shareholders, I want to thank my colleagues and staff for the tremendous
job guiding our Company through 2008, a year that will go down in
history as one of the most tumultuous and game-changing periods in the
global financial markets. Looking ahead, while 2009 will likely see more
uncertainty and volatility, we believe the continued conservative
management of our portfolio will position us to take advantage of
opportunities that arise in this environment."
For the quarter ended December 31, 2008, the annualized yield on average
earning assets was 5.50% and the annualized cost of funds on the average
repurchase balance was 3.79%, which results in an interest rate spread
of 1.71%. This is an 83 basis point increase over the 0.88% annualized
interest rate spread for the quarter ended December 31, 2007 and a 37
basis point decrease over the 2.08% annualized interest rate spread for
the quarter ended September 30, 2008. For the quarter ended December 31,
2007, the annualized yield on average earning assets was 5.81% and the
annualized cost of funds on the average repurchase balance was 4.93%.
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%. At December 31, 2008, the weighted
average yield on assets was 5.03% and the cost of funds, including the
effect of interest rate swaps, was 4.08%, which results in an interest
rate spread of 0.95%. Leverage at December 31, 2008 was 6.4:1, in
comparison to 8.7:1 at December 31, 2007 and 7.2:1 at September 30, 2008.
Fixed-rate securities comprised 64% of the Company's portfolio at
December 31, 2008. The balance of the portfolio was comprised of 28%
adjustable-rate mortgages and 8% LIBOR floating-rate collateralized
mortgage obligations. At December 31, 2008, the Company had entered into
interest rate swaps with a notional amount of $17.6 billion, or 32% 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 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 December 31, 2008, all of the Company's
Investment Securities were FNMA, FHLMC and GNMA mortgage-backed
securities and Agency debentures, which carry an actual or implied "AAA"
rating.
"Our team remains focused on managing the risks to which we are exposed
in our strategy, evaluating the opportunities in our market and
assessing the possible outcomes of evolving policy decisions," said
Wellington Denahan-Norris, Annaly's Vice Chairman, Chief Investment
Officer and Chief Operating Officer. "We believe our prudent use of
leverage and the balanced composition of our portfolio of Agency assets
puts us in good position to perform during this period. After taking
into account the effect of interest rate swaps, at December 31, 2008 our
portfolio of Investment Securities was comprised of 32% fixed-rate, 28%
adjustable-rate and 40% floating-rate assets."
The following table summarizes portfolio information for the Company:
December 31, December 31, September 30,
2008 2007 2008
Leverage at period-end 6.4:1 8.7:1 7.2:1
Fixed-rate investment securities as % 64% 71% 65%
of portfolio
Adjustable-rate investment securities 28% 21% 27%
as % of portfolio
Floating-rate investment securities 8% 8% 8%
as % of portfolio
Notional amount of interest rate 32% 31% 33%
swaps as % of portfolio
Annualized yield on average earning 5.50% 5.81% 5.62%
assets during the quarter
Annualized cost of funds on average 3.79% 4.93% 3.54%
repurchase balance during the quarter
Annualized interest rate spread 1.71% 0.88% 2.08%
during the quarter
Weighted average yield on assets at 5.03% 5.75% 5.27%
period-end
Weighted average cost of funds at 4.08% 4.76% 3.59%
period-end
Interest rate spread at period-end 0.95% 0.99% 1.68%
Weighted average receive rate on 1.18% 5.06% 2.69%
interest rate swaps at period-end
Weighted average pay rate on interest 4.66% 5.03% 4.70%
rate swaps at period-end
The Constant Prepayment Rate was 10% during the fourth quarter of 2008,
as compared to 12% during the fourth quarter of 2007, and 11% during the
third quarter of 2008. The weighted average cost basis of the Company's
Investment Securities was 101.1 at December 31, 2008. The net
amortization of premiums and accretion of discounts on Investment
Securities for the quarters ended December 31, 2008, December 31, 2007
and September 30, 2008 was $26.8 million, $16.2 million, and $18.7
million, respectively. The total net premium remaining unamortized at
December 31, 2008, December 31, 2007 and September 30, 2008 was $555.0
million, $328.4 million, and $525.4 million, respectively.
General and administrative expenses as a percentage of average assets
were 0.18%, 0.16% and 0.17% for the quarters ended December 31, 2008,
December 31, 2007, and September 30, 2008, respectively. At December 31,
2008, December 31, 2007, and September 30, 2008, the Company had a
common stock book value per share of $12.94, $12.51 and $12.70,
respectively.
During the quarter, Annaly completed the previously announced
transaction to acquire Merganser Capital Management LP. Merganser is a
Boston-based institutional fixed income manager which, at December 31,
2008, had $4.6 billion in assets under management. Subsequent to quarter
end, Annaly's newly-formed subsidiary which will operate as a
broker-dealer was granted membership in the Financial Industry
Regulatory Authority (FINRA).
At December 31, 2008, Annaly's wholly-owned registered investment
advisors had under management approximately $7.0 billion in net assets
and $15.3 billion in gross assets, as compared to $3.1 billion in net
assets and $15.4 billion in gross assets at December 31, 2007 and $2.4
billion in net assets and $10.5 billion in gross assets at September 30,
2008. For the quarter ended December 31, 2008, the investment advisors
earned investment advisory and service fees, net of fees paid to
distributors, of $6.9 million, as compared to $4.9 million for the
quarter ended December 31, 2007 and $7.4 million for the quarter ended
September 30, 2008.
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 its subsidiaries. Annaly is a Maryland corporation
that has elected to be taxed as a real estate investment trust ("REIT"),
and currently has 544,280,475 shares of common stock outstanding.
The Company will hold the fourth quarter 2008 earnings conference call
on February 5, 2009 at 10:00 a.m. EST. The number to call is
800-638-5439 for domestic calls and 617-614-3945 for international calls
and the pass code is 72730916. The replay number is 888-286-8010 for
domestic calls and 617-801-6888 for international calls and the pass
code is 30806332. 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, 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,
risk 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)
December 31, September 30, June 30, March 31, December 31,
2008 2008 2008 2008 2007(1)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
ASSETS
Cash and cash $ 909,353 $ 1,083,814 $ 1,462,737 $ 1,549,041 $ 103,960
equivalents
Reverse repurchase 562,119 619,657 49,964 800,000 -
agreements
Mortgage-Backed
Securities, at 55,046,995 54,840,928 58,017,305 56,115,025 52,879,528
fair value
Agency debentures, 598,945 618,352 731,995 738,837 253,915
at fair value
Available-for-sale
equity securities, 52,795 22,490 32,631 44,546 64,754
at fair value
Trading
securities, at - 2,199 23,478 1,836 11,675
fair value
Receivable for
Mortgage-Backed 75,546 2,446,342 824,308 174,413 276,737
Securities sold
Accrued interest
and dividends 282,532 295,925 303,228 287,261 271,996
receivable
Receivable from
prime broker on 16,886 - - - -
equity investment
(2)
Receivable for
advisory and 6,103 3,581 4,703 4,581 3,598
service fees
Intangible for
customer 12,380 6,726 7,604 8,840 9,842
relationships
Goodwill 27,917 22,966 22,966 22,966 22,966
Other assets 6,044 2,602 3,216 4,347 4,543
Total assets $ 57,597,615 $ 59,965,582 $ 61,484,135 $ 59,751,693 $ 53,903,514
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase $ 46,674,885 $ 51,075,758 $ 51,839,663 $ 51,324,007 $ 46,046,560
agreements
Payable for
Investment 2,062,030 839,235 1,405,109 828,235 1,677,131
Securities
purchased
Trading securities
sold, not yet - 30,903 48,718 37,268 32,835
purchased, at fair
value
Accrued interest 199,985 168,361 154,615 172,575 257,608
payable
Dividends payable 270,736 296,254 296,201 224,823 136,618
Accounts payable
and other 8,380 26,385 36,625 20,123 36,688
liabilities
Interest rate
swaps, at fair 1,102,285 384,258 400,998 789,859 398,096
value
Total liabilities 50,318,301 52,821,154 54,181,929 53,396,890 48,585,536
Minority interest
in equity of - - - - 1,574
consolidated
affiliate
6.00% Series B
Cumulative
Convertible
Preferred Stock:
4,600,000 shares
authorized,
3,963,525,
4,496,525, 96,042 108,957 108,957 111,405 111,466
4,496,525,
4,597,550 and
4,600,000, shares
issued and
outstanding,
respectively
Stockholders'
Equity:
7.875% Series A
Cumulative
Redeemable
Preferred
Stock: 7,412,500 177,088 177,088 177,088 177,088 177,088
authorized,
7,412,500
shares issued and
outstanding
Common stock, par
value $.01 per
share, 987,987,500
authorized,
541,475,366,
540,189,101,
538,546,666, 5,415 5,402 5,385 4,684 4,018
468,380,797 and
401,822,703,
issued and
outstanding,
respectively
Additional paid-in 7,633,438 7,616,528 7,592,161 6,506,494 5,297,922
capital
Accumulated other
comprehensive 252,230 (661,498 ) (478,791 ) (335,814 ) (152,197 )
income (loss)
Accumulated (884,899 ) (102,049 ) (102,594 ) (109,054 ) (121,893 )
deficit
Total
stockholders' 7,183,272 7,035,471 7,193,249 6,243,398 5,204,938
equity
Total liabilities,
minority interest,
Series B
Cumulative
$ 57,597,615 $ 59,965,582 $ 61,484,135 $ 59,751,693 $ 53,903,514
Convertible
Preferred Stock
and stockholders'
equity
(1) Derived from the audited consolidated financial statements at December 31,
2007.
The Company invested $45,000,000 in an equity fund and has redeemed
$56,000,000. Net unrealized gains in the fund valued at September 15, 2008
(2) still remain at the prime broker, Lehman Brothers International (Europe),
which is in bankruptcy and the ultimate recovery of such amount remains
uncertain.
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
December 31, September 30, June 30, March 31, December 31,
2008 2008 2008 2008 2007
Interest income $ 740,282 $810,659 $ 773,359 $ 791,128 $ 720,925
Interest expense 450,805 458,250 442,251 537,606 558,435
Net interest income 289,477 352,409 331,108 253,522 162,490
Other (loss) income
Investment advisory 7,224 7,663 6,406 6,598 5,636
and service fees
(Loss)gain on sale of
Mortgage-Backed (468 ) (1,066 ) 2,830 9,417 1,829
Securities
(Loss)income from (2,010 ) 7,671 2,180 1,854 7,187
trading securities
Dividend income from
available-for-sale 612 580 580 941 91
equity securities
Loss on
other-than-temporarily - (31,834 ) - - -
impaired securities(1)
Unrealized loss on (768,268 ) - - - -
interest rate swaps(2)
Total other (loss) (762,910 ) (16,986 ) 11,996 18,810 14,743
income
Expenses
Distribution fees 287 299 370 633 782
General and
administrative 26,957 25,455 27,215 23,995 20,174
expenses
Total expenses 27,244 25,754 27,585 24,628 20,956
(Loss) income before
income taxes and (500,677 ) 309,669 315,519 247,704 156,277
minority interest
Income taxes 6,302 7,538 7,527 4,610 3,100
(Loss) income before (506,979 ) 302,131 307,992 243,094 153,177
minority interest
Minority interest - - - 58 245
Net (loss) income (506,979 ) 302,131 307,992 243,036 152,932
Dividend on preferred 5,135 5,335 5,334 5,373 5,374
stock
Net (loss) income
(related) available to ($512,114 ) $296,796 $ 302,658 $ 237,663 $ 147,558
common
shareholders
Net (loss) income
(related) available
per share to common
shareholders:
Basic ($0.95 ) $0.55 $ 0.60 $ 0.54 $ 0.38
Diluted ($0.95 ) $0.54 $ 0.59 $ 0.53 $ 0.37
Weighted average
number of common
shares outstanding:
Basic 541,099,147 538,706,131 503,758,079 443,812,432 389,410,812
Diluted 541,099,147 547,882,488 512,678,975 452,967,457 398,247,632
Net (loss) income ($506,979 ) $302,131 $ 307,992 $ 243,036 $ 152,932
Other comprehensive
income (loss):
Unrealized gain (loss)
on available-for-sale 863,018 (232,347 ) (529,008 ) 217,563 491,626
securities
Unrealized gain (loss) 50,242 16,740 388,861 (391,763 ) (256,034 )
on interest rate swaps
Reclassification
adjustment for losses 468 32,900 (2,830 ) (9,417 ) (1,829 )
(gains) included in
net income
Other comprehensive 913,728 (182,707 ) (142,977 ) (183,617 ) 233,763
income (loss)
Comprehensive income $ 406,749 $119,424 $ 165,015 $ 59,419 $ 386,695
Although the Company has the intent and ability to retain its investment in
Chimera Investment Corporation, the Company determined that it is
(1) 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 fair value at September 30, 2008.
Beginning in the fourth quarter of 2008, the Company no longer applies
(2) hedge accounting to its interest rate swaps under SFAS 133. As a result,
changes in unrealized gains and losses in interest rate swaps will be
reported in the income statement for GAAP purposes.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands, except per share data)
For the twelve months ended
December 31, 2008 December 31, 2007(1)
Interest income $ 3,115,428 $ 2,355,447
Interest expense 1,888,912 1,926,465
Net interest income 1,226,516 428,982
Other (loss) income
Investment advisory and service fees 27,891 22,028
Gain on sale of Mortgage-Backed 10,713 19,062
Securities
Gain on termination of interest rate - 2,096
swaps
Income from trading securities 9,695 19,147
Dividend income from available-for-sale 2,713 91
equity securities
Loss on other-than-temporarily impaired (31,834 ) (1,189 )
securities
Unrealized loss on interest rate swaps (768,268 ) -
Total other (loss) income (749,090 ) 61,235
Expenses
Distribution fees 1,589 3,647
General and administrative expenses 103,622 62,666
Total expenses 105,211 66,313
Income before income taxes and minority 372,215 423,904
interest
Income taxes 25,977 8,870
Income before minority interest 346,238 415,034
Minority interest 58 650
Net income 346,180 414,384
Dividend on preferred stock 21,177 21,493
Net income available to common $ 325,003 $ 392,891
shareholders
Net income available per share to
common shareholders:
Basic $ 0.64 $ 1.32
Diluted $ 0.64 $ 1.31
Weighted average number of common
shares outstanding:
Basic 507,024,596 297,488,394
Diluted 507,024,596 306,263,766
Net income $ 346,180 $ 414,384
Other comprehensive income (loss):
Unrealized gain on available-for-sale 319,226 322,264
securities
Unrealized gain (loss) on interest rate 64,080 (378,380 )
swaps
Reclassification adjustment for gains 21,121 (19,969 )
included in net income
Other comprehensive income (loss) 404,427 (76,085 )
Comprehensive income $ 750,607 $ 338,299
(1) Derived from the audited consolidated financial statements at December 31,
2007.
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations:
1- (888) 8Annaly
www.annaly.com