NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings
for the quarter ended December 31, 2009, of $439.3 million or $0.79 per
average share available to common shareholders as compared to Core
Earnings of $261.8 million or $0.47 per average share available to
common shareholders for the quarter ended December 31, 2008, and Core
Earnings of $413.3 million or $0.75 per average share available to
common shareholders for the quarter ended September 30, 2009. "Core
Earnings" represents a non-GAAP measure and is defined as net income
(loss) 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 December 31,
2009, was $729.3 million or $1.31 per average share available to common
shareholders, as compared to a net loss of $507.0 million or $0.95 per
average share related to common shareholders for the quarter ended
December 31, 2008, and net income of $285.2 million or $0.51 per average
share available to common shareholders for the quarter ended September
30, 2009.
Core Earnings for the year ended December 31, 2009 was $1.5 billion, or
$2.76 per average share available to common shareholders as compared to
Core Earnings of $1.1 billion, or $2.20 per average share available to
common shareholders for the year ended December 31, 2008. On a GAAP
basis, net income for the year ended December 31, 2009, was $2.0 billion
or $3.55 per average share available to common shareholders, as compared
to net income of $346.2 million or $0.64 per average share available to
common shareholders for the year ended December 31, 2008.
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. 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 September 30, 2009, the
Company sold $194.3 million of Mortgage-Backed Securities, resulting in
a realized gain of $591,000.
During the year ended December 31, 2009, the Company sold $4.6 billion
of Mortgage-Backed Securities, resulting in a realized gain of $99.1
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.
Common dividends declared for the quarter ended December 31, 2009, were
$0.75 per share, as compared to $0.50 per share for the quarter ended
December 31, 2008, and $0.69 per share for the quarter ended September
30, 2009. The annualized dividend yield on the Company's common stock
for the quarter ended December 31, 2009, based on the December 31, 2009
closing price of $17.35, was 17.29%. On a Core Earnings basis, the
Company provided an annualized return on average equity of 18.51% for
the quarter ended December 31, 2009, as compared to 14.52% for the
quarter ended December 31, 2008, and 18.27% for the quarter ended
September 30, 2009. On a GAAP basis, the Company provided an annualized
return on average equity of 30.73% for the quarter ended December 31,
2009, as compared to an annualized loss on average equity of 28.12% for
the quarter ended December 31, 2008, and an annualized return on average
equity of 12.60% for the quarter ended September 30, 2009.
Common dividends declared for the year ended December 31, 2009, were
$2.54 per share, as compared to $2.08 per share for the year ended
December 31, 2008. The annualized dividend yield on the Company's common
stock for the year ended December 31, 2009, based on the December 31,
2009 closing price of $17.35, was 14.64%. On a Core Earnings basis, the
Company provided a return on average equity of 17.66% for the year ended
December 31, 2009, as compared to 17.00% for the year ended December 31,
2008.
On a GAAP basis, the Company provided a return on average equity of
22.69% for the year ended December 31, 2009, as compared to a return on
average equity of 5.18% for the year ended December 31, 2008.
Michael A.J. Farrell, Chairman, Chief Executive Officer and President of
Annaly, commented on the Company's results. "The fundamentally favorable
operating environment for Annaly is reflected in our quarterly results.
While I believe that this environment will remain favorable, our team is
positioning the company to perform in a range of possible outcomes,
through conservatively managing our portfolio and by building our asset
management and broker-dealer businesses. As we begin another year of
operations in our history of delivering strong long-term returns, we
look forward to continuing to demonstrate the value of our efforts to
the marketplace."
For the quarter ended December 31, 2009, the annualized yield on average
earning assets was 4.84% and the annualized cost of funds on the average
repurchase balance was 2.05%, which resulted in an average interest rate
spread of 2.79%. This is a 108 basis point increase over the 1.71%
annualized interest rate spread for the quarter ended December 31, 2008,
and a 14 basis point increase over the 2.65% average interest rate
spread for the quarter ended September 30, 2009.
For the year ended December 31, 2009, the yield on average earning
assets was 4.99% and the cost of funds on the average repurchase balance
was 2.47%, which resulted in an average interest rate spread of 2.52%.
This is a 71 basis point increase over the 1.81% interest rate spread
for the year ended December 31, 2008.
At December 31, 2009, the weighted average yield on assets was 4.51% and
the weighted average cost of funds, including the effect of interest
rate swaps, was 2.11%, which resulted in an interest rate spread of
2.40%. Leverage at December 31, 2009, was 5.7:1 compared to 6.4:1 at
December 31, 2008, and 6.0:1 at September 30, 2009.
Fixed-rate securities comprised 74% of the Company's portfolio at
December 31, 2009. The balance of the portfolio was comprised of 21%
adjustable-rate mortgages and 5% LIBOR floating-rate collateralized
mortgage obligations. At December 31, 2009, the Company had entered into
interest rate swaps with a notional amount of $21.5 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 December 31, 2009, all of the Company's Investment
Securities were Fannie Mae, Freddie Mac and Ginnie Mae Mortgage-Backed
Securities, which carry an actual or implied "AAA" rating.
"Net interest spread remains strong in the portfolio, enabling us to
continue to deliver competitive results while maintaining a conservative
level of leverage," said Wellington Denahan-Norris, Annaly's Vice
Chairman, Chief Investment Officer and Chief Operating Officer. "We
continue to monitor the market effects of voluntary and involuntary
prepayments and the winding down of the Federal Reserve's Agency MBS
buying program, and believe that our prudent portfolio management not
only helps to protect our position in the event of volatility but also
will enable us to take advantage of attractive opportunities that may
arise. After taking into account the effect of interest rate swaps, at
December 31, 2009, our portfolio of Investment Securities was comprised
of 39% floating-rate, 21% adjustable-rate and 40% fixed-rate assets."
The following table summarizes portfolio information for the Company:
December 31, December 31, September 30,
2009 2008 2009
Leverage at period-end 5.7:1 6.4:1 6.0:1
Fixed-rate investment securities as a 74% 64% 71%
percentage of portfolio
Adjustable-rate investment securities 21% 28% 24%
as a percentage of portfolio
Floating-rate investment securities 5% 8% 5%
as a percentage of portfolio
Notional amount of interest rate 34% 32% 32%
swaps as a percentage of portfolio
Annualized yield on average earning 4.84% 5.50% 4.89%
assets during the quarter
Annualized cost of funds on average 2.05% 3.79% 2.24%
repurchase balance during the quarter
Annualized interest rate spread 2.79% 1.71% 2.65%
during the quarter
Weighted average yield on assets at 4.51% 5.03% 4.55%
period-end
Weighted average cost of funds at 2.11% 4.08% 2.15%
period-end
Interest rate spread at period-end 2.40% 0.95% 2.40%
Weighted average receive rate on 0.25% 1.18% 0.28%
interest rate swaps at period-end
Weighted average pay rate on interest 3.85% 4.66% 3.98%
rate swaps at period-end
The Constant Prepayment Rate was 19% during the fourth quarter of 2009,
as compared to 10% during the fourth quarter of 2008, and 21% during the
third quarter of 2009. The weighted average cost basis of the Company's
Investment Securities was 101.5 at December 31, 2009. The net
amortization of premiums and accretion of discounts on Investment
Securities for the quarters ended December 31, 2009, December 31, 2008,
and September 30, 2009, was $79.2 million, $26.8 million, and $75.1
million, respectively. The total net premium remaining unamortized at
December 31, 2009, December 31, 2008, and September 30, 2009, was $1.2
billion, $555.0 million, and $1.1 billion, respectively.
General and administrative expenses as a percentage of average assets
were 0.21%, 0.18% and 0.19% for the quarters ended December 31, 2009,
December 31, 2008, and September 30, 2009, respectively. At December 31,
2009, December 31, 2008, and September 30, 2009, the Company had a
common stock book value per share of $16.95, $12.94 and $16.52,
respectively.
At December 31, 2009, Annaly's wholly-owned registered investment
advisors had under management approximately $11.5 billion in net assets
and $19.1 billion in gross assets, as compared to $7.0 billion in net
assets and $15.3 billion in gross assets at December 31, 2008 and $11.3
billion in net assets and $22.6 billion in gross assets at September 30,
2009. For the quarter ended December 31, 2009, the investment advisors
earned investment advisory and service fees, net of fees paid to
distributors, of $14.4 million, as compared to $6.9 million for the
quarter ended December 31, 2008 and $14.1 million for the quarter ended
September 30, 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 553,155,945 shares of
common stock outstanding.
The Company will hold the fourth quarter 2009 earnings conference call
on Wednesday, February 3, 2010 at 9:00 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 55376438. The replay number is 888-286-8010 for
domestic calls and 617-801-6888 for international calls and the pass
code is 30876781. 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 E-Mail alerts, enter your e-mail
address where indicated and click the Submit 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,
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)
December 31, September June 30, March 31,
30, December 31,
2009 2009 2009
2009 2008(1)
(Unaudited) (Unaudited) (Unaudited)
(Unaudited)
ASSETS
Cash and cash $ 1,504,568 $ 1,723,341 $ 1,352,798 $ 1,035,118 $ 909,353
equivalents
Reverse
repurchase 328,757 226,264 170,916 452,480 562,119
agreements with
affiliate
Reverse
repurchase 425,000 100,000 - - -
agreements
Mortgage-Backed
Securities, at 64,805,725 66,837,761 65,165,126 58,785,456 55,046,995
fair value
Agency
debentures, at 915,752 625,615 616,893 - 598,945
fair value
Investments 242,198 239,740 156,990 51,418 52,795
with affiliates
Securities 29,077 - - - -
borrowed
Receivable for
Mortgage-Backed 732,134 - 412,214 33,009 75,546
Securities sold
Accrued
interest and 318,919 332,861 313,772 291,347 282,532
dividends
receivable
Receivable from 3,272 16,886 16,886 16,886 16,886
Prime Broker
Receivable for
advisory and 12,566 12,807 10,039 6,507 6,103
service fees
Intangible for
customer 10,491 10,791 11,091 11,399 12,380
relationships
Goodwill 27,917 27,917 27,917 27,917 27,917
Interest rate
swaps, at fair 5,417 - 7,267 - -
value
Other assets 14,397 8,695 5,346 5,717 6,044
Total assets $ 69,376,190 $ 70,162,678 $ 68,267,255 $ 60,717,254 $ 57,597,615
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase $ 54,598,129 $ 55,842,840 $ 51,326,930 $ 48,951,178 $ 46,674,885
agreements
Payable for
Investment 4,083,786 3,644,420 7,017,444 2,121,670 2,062,030
Securities
purchased
Accrued
interest 89,460 97,693 102,662 112,457 199,985
payable
Dividends 414,851 381,411 326,612 272,170 270,736
payable
Securities 29,057 - - - -
Loaned
Accounts
payable and 10,005 37,991 40,115 23,970 8,380
other
liabilities
Interest rate
swaps, at fair 533,362 788,065 722,700 1,012,574 1,102,285
value
Total 59,758,650 60,792,420 59,536,463 52,494,019 50,318,301
liabilities
6.00% Series B
Cumulative
Convertible
Preferred
Stock:
4,600,000
shares
authorized,
2,604,614, 63,114 63,114 63,118 63,185 96,042
2,604,614,
2,604,814,
2,607,564 and
3,963,525
shares issued
and
outstanding,
respectively
Stockholders'
Equity:
7.875% Series A
Cumulative
Redeemable
Preferred
Stock: 177,088 177,088 177,088 177,088 177,088
7,412,500
authorized,
7,412,500
shares issued
and outstanding
Common stock,
par value $.01
per share,
987,987,500
authorized,
553,134,877,
552,778,531, 5,531 5,528 5,444 5,443 5,415
544,353,997,
544,339,785,
and 541,475,366
issued and
outstanding,
respectively
Additional 7,817,454 7,811,356 7,668,988 7,667,769 7,633,438
paid-in capital
Accumulated
other 1,891,317 1,959,994 1,362,134 1,121,551 252,230
comprehensive
income
Accumulated (336,964) (646,822) (545,980) (811,801) (884,899)
deficit
Total
stockholders' 9,554,426 9,307,144 8,667,674 8,160,050 7,183,272
equity
Total
liabilities,
Series B
Cumulative
Convertible $ 69,376,190 $ 70,162,678 $ 68,267,255 $ 60,717,254 $ 57,597,615
Preferred Stock
and
stockholders'
equity
(1) Derived from the audited consolidated financial statements at December 31, 2008.
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
December September June 30, March 31, December
31, 30, 31,
2009 2009 2009 2009 2008
Interest income:
Investments $751,560 $744,523 $710,401 $716,015 $740,282
Securities loaned 103 - - - -
Total interest 751,663 744,523 710,401 716,015 740,282
income
Interest expense:
Repurchase 286,672 307,777 322,596 378,625 450,805
agreements
Securities 92 - - - -
borrowed
Total interest 286,764 307,777 322,596 378,625 450,805
expense
Net interest 464,899 436,746 387,805 337,390 289,477
income
Other income
(loss)
Investment
advisory and 14,835 14,620 11,736 7,761 7,224
service fees
Gain (loss)on sale
of Mortgage-Backed 91,150 591 2,364 5,023 (468)
Securities
Loss from trading - - - - (2,010)
securities
Dividend income
from 7,647 5,398 3,221 918 612
available-for-sale
equity securities
Loss on receivable
from Prime Broker (13,613) - - - -
(1)
Unrealized gain
(loss) on interest 212,456 (128,687) 230,207 35,545 (768,268)
rate swaps
Total other income 312,475 (108,078) 247,528 49,247 (762,910)
(loss)
Expenses
Distribution fees 418 478 432 428 287
General and
administrative 36,880 33,344 30,046 29,882 26,957
expenses
Total expenses 37,298 33,822 30,478 30,310 27,244
Income (loss)
before loss on
equity method 740,076 294,846 604,855 356,327 (500,677)
investment and
income taxes
Loss on equity 252 - - - -
method investment
Income taxes 10,489 9,657 7,801 6,434 6,302
Net income (loss) 729,335 285,189 597,054 349,893 (506,979)
Dividends on 4,625 4,625 4,625 4,626 5,135
preferred stock
Net income (loss)
available
(related) to $724,710 $280,564 $592,429 $345,267 ($512,114)
common
shareholders
Net income (loss)
available
(related) per
share to common
shareholders:
Basic $1.31 $0.51 $1.09 $0.64 ($0.95)
Diluted $1.30 $0.51 $1.08 $0.63 ($0.95)
Weighted average
number of common
shares
outstanding:
Basic 552,917,499 547,611,480 544,344,844 542,903,110 541,099,147
Diluted 559,336,066 553,376,285 550,099,709 548,551,328 541,099,147
Net income (loss) $729,335 $285,189 $597,054 $349,893 ($506,979)
Other
comprehensive
(loss) income:
Unrealized (loss)
gain on (25,190) 542,396 176,013 820,178 863,018
available-for-sale
securities
Unrealized gain on
interest rate 47,663 56,055 66,934 54,166 50,242
swaps
Reclassification
adjustment for
(gains) losses (91,150) (591) (2,364) (5,023) 468
included in net
income
Other
comprehensive (68,677) 597,860 240,583 869,321 913,728
(loss) income
Comprehensive $660,658 $883,049 $837,637 $1,219,214 $406,749
income
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
(1) 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.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
For the twelve months ended
December 31, 2009
December 31, 2008(1)
(Unaudited)
Interest income
Investments $2,922,499 $3,115,428
Securities loaned 103 -
Total interest income 2,922,602 3,115,428
Interest expense
Repurchase agreements 1,295,670 1,888,912
Securities borrowed 92 -
Total interest expense 1,295,762 1,888,912
Net interest income 1,626,840 1,226,516
Other income (loss):
Investment advisory and service fees 48,952 27,891
Gain on sale of Mortgage-Backed 99,128 10,713
Securities
Income from trading securities - 9,695
Dividend income from available-for-sale 17,184 2,713
equity securities
Loss on other-than-temporarily impaired - (31,834)
securities
Loss on receivable from Prime Broker (13,613) -
Unrealized gain (loss) on interest rate 349,521 (768,268)
swaps
Total other income (loss) 501,172 (749,090)
Expenses
Distribution fees 1,756 1,589
General and administrative expenses 130,152 103,622
Total expenses 131,908 105,211
Income before loss on equity method
investment, income taxes and 1,996,104 372,215
noncontrolling interest
Loss on equity method investment 252 -
Income taxes 34,381 25,977
Net income 1,961,471 346,238
Noncontrolling interest - 58
Net income attributable to controlling 1,961,471 346,180
interest
Dividends on preferred stock 18,501 21,177
Net income available to common $1,942,970 $325,003
shareholders
Net income available per share to
common shareholders:
Basic $3.55 $0.64
Diluted $3.52 $0.64
Weighted average number of common
shares outstanding:
Basic 546,973,036 507,024,596
Diluted 553,130,643 507,024,596
Net income attributable to controlling $1,961,471 $346,180
interest
Other comprehensive income:
Unrealized gain on available-for-sale 1,513,397 319,226
securities
Unrealized gain on interest rate swaps 224,818 64,080
Reclassification adjustment for gains (99,128) 21,121
(losses) included in net income
Other comprehensive income 1,639,087 404,427
Comprehensive income $3,600,558 $750,607
(1) Derived from the audited consolidated financial statements at December 31,
2008.
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations, 1-888-8Annaly
www.annaly.com