-
GAAP net loss of $658.3 million, $0.71 loss per common share
-
Core earnings of $298.9 million, $0.30 earnings per common share
-
Common stock book value of $13.10, up from $12.87 at prior quarter end
-
Capital ratio of 15.1% and leverage of 5.4:1
-
Net interest margin of 1.56%
NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE:NLY) today announced its financial
results for the quarter and year ended December 31, 2014.
Financial Performance
GAAP net loss for the quarter ended December 31, 2014 was $658.3
million, or $0.71 loss per average common share, compared to GAAP net
income of $354.9 million, or $0.36 per average common share, for the
quarter ended September 30, 2014, and GAAP net income of $1.0 billion,
or $1.07 per average common share, for the quarter ended December 31,
2013. The decrease in net income for the quarter ended December 31, 2014
compared to the quarters ended September 30, 2014 and December 31, 2013
was primarily attributable to mark-to-market losses on our interest rate
swaps. Core earnings for the quarter ended December 31, 2014 was $298.9
million, or $0.30 per average common share, compared to $308.6 million,
or $0.31 per average common share, for the quarter ended September 30,
2014, and $350.1 million, or $0.35 per average common share, for the
quarter ended December 31, 2013. "Core earnings" represents a non-GAAP
measure and is defined as net income (loss) excluding gains or losses on
disposals of investments and termination of interest rate swaps,
unrealized gains or losses on interest rate swaps and Agency
interest-only mortgage-backed securities, net gains and losses on
trading assets, impairment losses, net income (loss) attributable to
noncontrolling interest, and certain other non-recurring gains or losses.
GAAP net loss for the year ended December 31, 2014 was $842.3 million,
or $0.96 loss per average common share and GAAP net income for the year
ended December 31, 2013 was $3.7 billion, or $3.86 per average common
share. Core earnings for the years ended December 31, 2014 and 2013,
respectively, were $1.1 billion or $1.14 per average common share and
$1.2 billion, or $1.21 per average common share.
Net interest margin for the quarters ended December 31, 2014, September
30, 2014 and December 31, 2013 was 1.56%, 1.61% and 1.78%, respectively.
Net interest margin represents the Company’s annualized economic net
interest income, inclusive of interest expense on interest rate swaps,
divided by its average interest-earning assets. For the quarter ended
December 31, 2014, the average yield on interest earning assets was
2.98% and the average cost of interest bearing liabilities, including
interest expense on interest rate swaps, was 1.69%, which resulted in a
net interest spread of 1.29%. Our average yield on interest earning
assets was relatively unchanged for the quarter ended December 31, 2014
when compared to the quarter ended September 30, 2014. Our average yield
on interest earning assets decreased for the quarter ended December 31,
2014 when compared to the quarter ended December 31, 2013 due to higher
amortization expense in the current quarter resulting from faster
prepayment speeds. Our average cost of interest bearing liabilities
increased for the quarter ended December 31, 2014 when compared to the
quarter ended September 30, 2014 due to higher interest expense on
interest rate swaps. Our average cost of interest bearing liabilities
decreased for the quarter ended December 31, 2014 when compared to the
quarter ended December 31, 2013 due to lower interest rate swap and
swaption notional balances as a percentage of repurchase agreements.
Wellington J. Denahan, Chairman and Chief Executive Officer of Annaly,
commented on the Company’s results. “We fully expect the Federal Reserve
to adjust policy accommodation sometime this year and the markets to
endure higher levels of volatility. We look forward to the opportunities
that will accompany that adjustment and remain comfortable in our
continued ability to deliver attractive relative returns.”
Kevin Keyes, President of Annaly, added “In addition to our size,
liquidity and industry-low leverage, our diversified Agency and
Commercial strategies help to insulate the Company from heightened
volatility while providing complimentary and more durable earnings over
time.”
Asset Portfolio
Investment Securities, which are comprised of Agency mortgage-backed
securities and Agency debentures, were $82.9 billion at December 31,
2014, compared to $82.8 billion at September 30, 2014 and $73.4 billion
at December 31, 2013. As of December 31, 2014, substantially all of the
Company’s Investment Securities were Fannie Mae, Freddie Mac and Ginnie
Mae mortgage-backed securities and debentures. Fixed-rate Agency
mortgage-backed securities and debentures comprised 95% of the Company’s
Investment Securities portfolio at December 31, 2014 and adjustable-rate
Agency mortgage-backed securities and debentures comprised the remainder
of the Company’s Investment Securities portfolio. During the quarter
ended December 31, 2014, the Company disposed of $7.3 billion of
Investment Securities, resulting in a realized gain of $3.2 million.
During the quarter ended September 30, 2014, the Company disposed of
$4.2 billion of Investment Securities, resulting in a realized gain of
$4.7 million. During the quarter ended December 31, 2013, the Company
disposed of $11.9 billion of Investment Securities, resulting in a
realized gain of $49.6 million.
During the year ended December 31, 2014, the Company disposed of $22.5
billion of Investment Securities, resulting in a realized gain of $94.5
million. During the year ended December 31, 2013, the Company disposed
of $56.8 billion of Investment Securities, resulting in a realized gain
of $424.1 million.
The weighted average experienced constant prepayment rate for the
quarters ended December 31, 2014, September 30, 2014, and December 31,
2013, was 8%, 9% and 7%, respectively. The net amortization of premiums
and accretion of discounts on Investment Securities for the quarters
ended December 31, 2014, September 30, 2014, and December 31, 2013, was
$198.0 million, $197.7 million, and $30.7 million, respectively. The
total net premium balance on Investment Securities at December 31, 2014,
September 30, 2014, and December 31, 2013, was $5.3 billion, $5.5
billion, and $4.6 billion, respectively. The weighted average amortized
cost basis of the Company’s non-interest-only Investment Securities at
December 31, 2014, September 30, 2014, and December 31, 2013, was
105.3%, 105.4%, and 105.0%, respectively. The weighted average amortized
cost basis of the Company’s interest-only Investment Securities at
December 31, 2014, September 30, 2014, and December 31, 2013, was 15.4%,
15.2%, and 14.1%, respectively.
Commercial real estate debt and preferred equity, including securitized
loans, totaled $1.5 billion and investments in commercial real estate
totaled $210.0 million at December 31, 2014. Commercial real estate debt
and preferred equity, including securitized loans, totaled $1.6 billion
and investments in commercial real estate totaled $73.8 million at
September 30, 2014. The commercial investment portfolio, net of
financing, represented 11% of stockholders’ equity at December 31, 2014
and September 30, 2014. The weighted average yield on commercial real
estate debt and preferred equity as of December 31, 2014, September 30,
2014, and December 31, 2013, was 9.00%, 9.23% and 9.17%, respectively.
The weighted average levered equity yield on investments in commercial
real estate, excluding real estate held-for-sale, as of December 31,
2014, September 30, 2014, and December 31, 2013, was 13.95%, 11.46% and
10.80%, respectively.
Capital and Funding
At December 31, 2014, total stockholders’ equity was $13.3 billion.
Leverage at December 31, 2014, September 30, 2014, and December 31,
2013, was 5.4:1, 5.4:1 and 5.0:1, respectively. Leverage includes
repurchase agreements, Convertible Senior Notes, securitized debt, loan
participation and mortgages payable. Securitized debt, loan
participation and mortgages payable are non-recourse to the Company. At
December 31, 2014, September 30, 2014, and December 31, 2013, the
Company’s capital ratio, which represents the ratio of stockholders’
equity to total assets, was 15.1%, 15.0%, and 15.1%, respectively. At
December 31, 2014, September 30, 2014, and December 31, 2013, the
Company’s net capital ratio was 15.1%, 15.0%, and 15.9%, respectively.
The Company’s net capital ratio takes into account the net balances of
its reverse repurchase agreements and repurchase agreements, U.S
Treasury securities and U.S Treasury securities sold, not yet purchased,
and securities borrowed and securities loaned, as applicable. On a GAAP
basis, the Company produced an annualized return (loss) on average
equity for the quarters ended December 31, 2014, September 30, 2014, and
December 31, 2013 of (19.91%), 10.69%, and 32.46%, respectively. On a
Core earnings basis, the Company provided an annualized return on
average equity for the quarters ended December 31, 2014, September 30,
2014, and December 31, 2013, of 9.04%, 9.30%, and 11.05%, respectively.
At December 31, 2014, September 30, 2014, and December 31, 2013 the
Company had outstanding $71.4 billion, $69.6 billion, and $61.8 billion
of repurchase agreements, respectively, with weighted average remaining
maturities of 141 days, 159 days, and 204 days, respectively, and with
weighted average borrowing rates of 1.62%, 1.61%, and 2.33%,
respectively, after giving effect to the Company’s interest rate swaps.
At December 31, 2014, September 30, 2014, and December 31, 2013, the
Company had a common stock book value per share of $13.10, $12.87 and
$12.13, respectively.
The following table presents the principal balance and weighted average
rate of repurchase agreements by maturity at December 31, 2014:
|
| |
| | |
| Maturity |
| Principal Balance |
| Weighted Average Rate | |
| (dollars in thousands) | |
|
Within 30 days
| |
$
|
28,354,167
| |
0.35
|
%
| |
|
30 to 59 days
| | |
17,336,469
| |
0.43
|
%
| |
|
60 to 89 days
| | |
4,040,677
| |
0.38
|
%
| |
|
90 to 119 days
| | |
2,945,495
| |
0.50
|
%
| |
|
Over 120 days(1) | |
|
18,685,118
|
|
1.24
|
%
| |
|
Total
| |
$
|
71,361,926
|
|
0.61
|
%
| |
(1) Approximately 15% of the total repurchase agreements have a
remaining maturity over 1 year.
Hedge Portfolio
At December 31, 2014, the Company had outstanding interest rate swaps
with a net notional amount of $31.5 billion and interest rate swaptions
with a net notional amount of $1.8 billion, representing 47% of the
Company’s repurchase agreements. Interest rate swaps and swaptions
represented 48% of the Company’s repurchase agreements at September 30,
2014 and 92% of the Company’s repurchase agreements at December 31,
2013. Changes in the unrealized gains or losses on the interest rate
swaps are reflected in the Company’s Consolidated Statements of
Comprehensive Income (Loss). The purpose of the interest rate swaps is
to mitigate the risk of rising interest rates that affect the Company’s
cost of funds. Since the Company pays a fixed rate and receives a
floating rate on the notional amount of the swaps, the intended effect
of the swaps is to lock in a cost of financing. As of December 31, 2014,
the swap portfolio, excluding forward starting swaps, had a weighted
average pay rate of 2.49%, a weighted average receive rate of 0.22% and
weighted average maturity of 8.38 years.
At December 31, 2014, the Company had outstanding interest rate
swaptions with a net notional amount of $1.8 billion. Changes in the
unrealized gains or losses on the interest rate swaptions are reflected
in the Company’s Consolidated Statements of Comprehensive Income (Loss).
The interest rate swaptions provide the Company with the option to enter
into an interest rate swap agreement for a specified notional amount,
duration, and pay and receive rates. As of December 31, 2014, the long
swaption portfolio had a weighted average pay rate of 2.88% and weighted
average expiration of 3.59 months. As of December 31, 2014, there were
no short swaption positions.
The following table summarizes certain characteristics of the Company’s
interest rate swaps at December 31, 2014:
|
| |
| |
| |
| | |
| | | | Weighted | | Weighted | | Weighted | |
| Maturity | | | | Average | | Average Receive | | Average Years | |
|
|
| Current Notional (1) |
| Pay Rate (2)(3) |
| Rate (2) |
| to Maturity (2) | |
| (dollars in thousands) | | | | | | | |
| |
|
0 - 3 years
| |
$
|
2,502,505
| |
1.63
|
%
| |
0.17
|
%
| |
2.64
| |
|
3 - 6 years
| | |
11,138,000
| |
2.06
|
%
| |
0.22
|
%
| |
5.18
| |
|
6 - 10 years
| | |
13,069,200
| |
2.67
|
%
| |
0.23
|
%
| |
8.57
| |
|
Greater than 10 years
| |
|
4,751,800
|
|
3.58
|
%
|
|
0.20
|
%
|
|
19.53
| |
|
Total / Weighted Average
| |
$
|
31,461,505
|
|
2.49
|
%
|
|
0.22
|
%
|
|
8.38
| |
| | | | | | | | | | | |
|
|
(1)
|
|
|
Notional amount includes $0.5 billion in forward starting pay fixed
swaps.
|
|
(2)
| | |
Excludes forward starting swaps.
|
|
(3)
| | |
Weighted average fixed rate on forward starting pay fixed swaps was
3.25%.
|
The following table summarizes certain characteristics of the Company’s
interest rate swaptions at December 31, 2014:
|
| |
| Weighted Average |
| Weighted Average |
| Weighted Average |
| | |
| | Current Underlying | | Underlying Pay | | Underlying Receive | | Underlying Years to | | Weighted Average Months | |
| | Notional |
| Rate |
| Rate |
| Maturity |
| to Expiration | |
| | (dollars in thousands) | |
|
Long
| |
$
|
1,750,000
| |
2.88%
| |
3M LIBOR
| |
9.17
| |
3.59
| |
|
Short
| |
$
|
-
| |
-
| | |
-
| |
-
| |
-
| |
Key Metrics
The following table presents key metrics of the Company’s portfolio,
liabilities and hedging positions, and performance as of and for the
quarters ended December 31, 2014, September 30, 2014, and December 31,
2013:
|
| |
| |
| | |
| | | | | | |
|
| | December 31, 2014 |
| September 30, 2014 |
| December 31, 2013 | |
Portfolio Related Metrics: | | | | | | | |
|
Fixed-rate Agency mortgage-backed securities and debentures as a
percentage of Investment Securities
| |
95%
| |
95%
| |
91%
| |
|
Adjustable-rate Agency mortgage-backed securities and debentures as
a percentage of Investment Securities
| |
5%
| |
5%
| |
9%
| |
|
Weighted average yield on commercial real estate debt and preferred
equity at period-end
| |
9.00%
| |
9.23%
| |
9.17%
| |
|
Weighted average net equity yield on investments in commercial real
estate at period-end (1) | |
13.95%
|
|
11.46%
|
|
10.80%
| |
| | | | | | |
|
Liabilities and Hedging Metrics: | | | | | | | |
|
Weighted average days to maturity on repurchase agreements
outstanding at period-end
| |
141
| |
159
| |
204
| |
|
Notional amount of interest rate swaps and swaptions as a percentage
of repurchase agreements
| |
47%
| |
48%
| |
92%
| |
|
Weighted average pay rate on interest rate swaps at period-end
(2) | |
2.49%
| |
2.48%
| |
2.14%
| |
|
Weighted average receive rate on interest rate swaps at period-end
(2) | |
0.22%
| |
0.21%
| |
0.20%
| |
|
Weighted average net rate on interest rate swaps at period-end
(2) | |
2.27%
| |
2.27%
| |
1.94%
| |
|
Leverage at period-end (3) | |
5.4:1
| |
5.4:1
| |
5.0:1
| |
|
Capital ratio at period end
| |
15.1%
| |
15.0%
| |
15.1%
| |
|
Net capital ratio at period end
| |
15.1%
|
|
15.0%
|
|
15.9%
| |
| | | | | | |
|
Performance Related Metrics: | | | | | | | |
|
Net interest margin (4) | |
1.56%
| |
1.61%
| |
1.78%
| |
|
Average yield on interest earning assets (5) | |
2.98%
| |
2.99%
| |
3.50%
| |
|
Average cost of interest bearing liabilities (6) | |
1.69%
| |
1.64%
| |
2.07%
| |
|
Net interest spread
| |
1.29%
| |
1.35%
| |
1.43%
| |
|
Annualized return (loss) on average equity
| |
(19.91%)
| |
10.69%
| |
32.46%
| |
|
Annualized Core return on average equity
| |
9.04%
| |
9.30%
| |
11.05%
| |
|
Common dividend declared during the quarter
| | $0.30 | | $0.30 | | $0.30 | |
|
Book value per common share
| | $13.10 |
| $12.87 |
| $12.13 | |
| | | | | | |
|
|
(1)
|
|
|
Excludes real estate held-for-sale.
|
|
(2)
| | |
Excludes forward starting swaps.
|
|
(3)
| | |
Includes repurchase agreements, Convertible Senior Notes,
securitized debt, loan participation and mortgages payable.
Securitized debt, loan participation and mortgages payable are
non-recourse to the Company.
|
|
(4)
| | |
Represents the Company’s annualized economic net interest income,
inclusive of interest expense on interest rate swaps, divided by its
average interest-earning assets.
|
|
(5)
| | |
Average interest earning assets reflects the average amortized cost
of our investments during the period.
|
|
(6)
| | |
Includes interest expense on interest rate swaps.
|
The following table presents a reconciliation between GAAP net income
and Core earnings for the quarters ended December 31, 2014, September
30, 2014, and December 31, 2013:
|
| |
| |
| | |
| | | | | | |
|
| | For the quarters ended | |
| | December 31, 2014 |
| September 30, 2014 |
| December 31, 2013 | |
| | (dollars in thousands) | |
|
GAAP net income (loss)
| |
$
|
(658,272
|
)
| |
$
|
354,856
| | |
$
|
1,028,749
| | |
|
Adjustments:
| | | | | | | |
|
Realized (gains) losses on termination of interest rate swaps
| | |
-
| | | |
-
| | | |
13,177
| | |
|
Unrealized (gains) losses on interest rate swaps
| | |
873,468
| | | |
(98,593
|
)
| | |
(561,101
|
)
| |
|
Net (gains) losses on disposal of investments
| | |
(3,420
|
)
| | |
(4,693
|
)
| | |
(28,602
|
)
| |
|
Net (gains) losses on trading assets
| | |
57,454
| | | |
(4,676
|
)
| | |
(41,936
|
)
| |
|
Net unrealized (gains) losses on interest-only Agency
mortgage-backed securities
| | |
29,520
| | | |
37,944
| | | |
(60,181
|
)
| |
|
Other non-recurring loss (1) | | |
-
| | | |
23,783
| | | |
-
| | |
|
GAAP net income attributable to noncontrolling interest
| |
|
196
|
|
|
|
-
|
|
|
|
-
|
| |
|
Core earnings
| |
$
|
298,946
|
|
|
$
|
308,621
|
|
|
$
|
350,106
|
| |
| | | | | | |
|
|
GAAP net income (loss) per average common share
| |
$
|
(0.71
|
)
|
|
$
|
0.36
|
|
|
$
|
1.07
|
| |
|
Core earnings per average common share
| |
$
|
0.30
|
|
|
$
|
0.31
|
|
|
$
|
0.35
|
| |
|
(1)
|
|
|
Represents a one-time payment made by FIDAC to Chimera Investment
Corp. (Chimera) during the quarter ended September 30, 2014 to
resolve issues raised in derivative demand letters sent to Chimera’s
board of directors. This amount is a component of Other income
(loss) in the Company’s Consolidated Statements of Comprehensive
Income (Loss).
|
The following table presents a reconciliation between GAAP net income
and Core earnings for the years ended December 31, 2014 and 2013:
|
| |
| | |
| | | | |
|
| | For the years ended | |
| | December 31, 2014 |
| December 31, 2013 | |
| | (dollars in thousands) | |
|
GAAP net income (loss)
| |
$
|
(842,279
|
)
| |
$
|
3,729,698
| | |
|
Adjustments:
| | | | | |
|
Realized (gains) losses on termination of interest rate swaps
| | |
779,333
| | | |
101,862
| | |
|
Unrealized (gains) losses on interest rate swaps
| | |
948,755
| | | |
(2,002,200
|
)
| |
|
Net (gains) losses on disposal of investments
| | |
(93,716
|
)
| | |
(403,045
|
)
| |
|
Net (gains) losses on trading assets
| | |
245,495
| | | |
(1,509
|
)
| |
|
Net unrealized (gains) losses on interest-only Agency
mortgage-backed securities
| | |
86,172
| | | |
(244,730
|
)
| |
|
Impairment of goodwill
| | |
-
| | | |
23,987
| | |
|
Loss on previously held equity interest in CreXus
| | |
-
| | | |
18,896
| | |
|
Other non-recurring expense (1) | | |
23,783
| | | |
-
| | |
|
GAAP net income attributable to noncontrolling interest
| |
|
196
|
|
|
|
-
|
| |
|
Core earnings
| |
$
|
1,147,739
|
|
|
$
|
1,222,959
|
| |
| | | | |
|
|
GAAP net income per average common share
| |
$
|
(0.96
|
)
|
|
$
|
3.86
|
| |
|
Core earnings per average common share
| |
$
|
1.14
|
|
|
$
|
1.21
|
| |
|
(1)
|
|
|
Represents a one-time payment made by FIDAC to Chimera Investment
Corp. (Chimera) to resolve issues raised in derivative demand
letters sent to Chimera’s board of directors. This amount is a
component of Other income (loss) in the Company’s Consolidated
Statements of Comprehensive Income (Loss).
|
The following table presents the components of the Company’s interest
income and interest expense for the quarters ended December 31, 2014,
September 30, 2014, and December 31, 2013:
|
| |
| |
| | |
| | For the quarters ended | |
| | December 31, | | September 30, | | December 31, | |
| | 2014 |
| 2014 |
| 2013 | |
| | (dollars in thousands) | |
| | | | | | |
|
| Interest income: | | | | | | | |
|
Investment Securities
| |
$
|
606,746
| |
$
|
606,331
| |
$
|
721,670
| |
|
Commercial investment portfolio(1) | | |
40,913
| | |
38,113
| | |
37,702
| |
|
U.S. Treasury securities
| | |
-
| | |
-
| | |
8,125
| |
|
Securities loaned
| | |
-
| | |
-
| | |
2,087
| |
|
Reverse repurchase agreements
| | |
429
| | |
135
| | |
1,587
| |
|
Other
| |
|
56
|
|
|
61
|
|
|
78
| |
|
Total interest income
| |
|
648,144
|
|
|
644,640
|
|
|
771,249
| |
| Interest expense: | | | | | | | |
|
Repurchase agreements
| | |
107,540
| | |
102,750
| | |
111,038
| |
|
Convertible Senior Notes
| | |
25,701
| | |
22,376
| | |
17,788
| |
|
U.S. Treasury securities sold, not yet purchased
| | |
-
| | |
-
| | |
6,684
| |
|
Securities borrowed
| | |
-
| | |
-
| | |
1,718
| |
|
Securitized debt of consolidated VIE
| | |
1,106
| | |
1,780
| | |
-
| |
|
Participation sold
| |
|
165
|
|
|
163
|
|
|
165
| |
|
Total interest expense
| |
|
134,512
|
|
|
127,069
|
|
|
137,393
| |
| Net interest income | |
$
|
513,632
|
|
$
|
517,571
|
|
$
|
633,856
| |
(1) Consists of commercial real estate debt and preferred equity and
corporate debt.
Dividend Declarations
Common dividends declared for the quarters ended December 31, 2014,
September 30, 2014, and December 31, 2013 were $0.30, $0.30, and $0.30
per common share, respectively. The annualized dividend yield on the
Company’s common stock for the quarter ended December 31, 2014, based on
the December 31, 2014 closing price of $10.81, was 11.10%, compared to
11.24% for the quarter ended September 30, 2014, and 12.04% for the
quarter ended December 31, 2013.
Other Information
Annaly’s principal business objective is to generate net income for
distribution to its shareholders from its investments. Annaly is a
Maryland corporation that has elected to be taxed as a real estate
investment trust (“REIT”). Annaly is managed and advised by Annaly
Management Company LLC.
The Company prepares a supplement to provide additional quarterly
information for the benefit of its shareholders. The supplement can be
found at the Company’s website in the Investor Relations section under
“Quarterly Supplemental Information”.
Conference Call
The Company will hold the fourth quarter 2014 earnings conference call
on February 25, 2015 at 9:00 a.m. Eastern Time. The number to call is
888-317-6003 for domestic calls and 412-317-6061 for international
calls. The conference passcode is 1590772. There will also be an audio
webcast of the call on www.annaly.com.
The replay of the call is available for one week following the
conference call. The replay number is 877-344-7529 for domestic calls
and 412-317-0088 for international calls and the conference passcode is
10060573. If you would like to be added to the e-mail distribution list,
please visit www.annaly.com,
click on Investor Relations, then select Email Alerts and complete the
email notification form.
This news release and our public documents to which we refer contain or
incorporate by reference certain forward-looking statements which are
based on various assumptions (some of which are beyond our control) and
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 and other securities for
purchase; the availability of financing and, if available, the terms of
any financings; changes in the market value of our assets; changes in
business conditions and the general economy; our ability to grow the
commercial mortgage business; credit risks related to our investments in
commercial real estate assets and corporate debt; our ability to
consummate any contemplated investment opportunities; changes in
government regulations affecting our business; our ability to maintain
our qualification as a REIT for federal income tax purposes; our ability
to maintain our exemption from registration under the Investment Company
Act of 1940, as amended; risks associated with the businesses of our
subsidiaries, including the investment advisory business of a
wholly-owned subsidiary and the broker-dealer business of a wholly-owned
subsidiary. 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, except per share data) | |
| | | | | | | | | | |
|
| | December 31, | | September 30, | | June 30, | | March 31, | | December 31, | |
| | 2014 | | 2014 | | 2014 | | 2014 | | 2013(1) | |
| | (Unaudited) | | (Unaudited) | | (Unaudited) | | (Unaudited) | |
| |
| ASSETS | | | | | | | | | | | |
| | | | | | | | | | |
|
|
Cash and cash equivalents
| |
$
|
1,741,244
| | |
$
|
1,178,621
| | |
$
|
1,320,666
| | |
$
|
924,197
| | |
$
|
552,436
| | |
|
Reverse repurchase agreements
| | |
100,000
| | | |
-
| | | |
-
| | | |
444,375
| | | |
100,000
| | |
|
Securities borrowed
| | |
-
| | | |
-
| | | |
-
| | | |
513,500
| | | |
2,582,893
| | |
|
Investments, at fair value:
| | | | | | | | | | | |
|
U.S. Treasury securities
| | |
-
| | | |
-
| | | |
-
| | | |
-
| | | |
1,117,915
| | |
|
Agency mortgage-backed securities
| | |
81,565,256
| | | |
81,462,387
| | | |
81,055,337
| | | |
75,350,388
| | | |
70,388,949
| | |
|
Agency debentures
| | |
1,368,350
| | | |
1,334,181
| | | |
1,348,727
| | | |
2,408,259
| | | |
2,969,885
| | |
|
Investment in affiliates
| | |
143,045
| | | |
136,748
| | | |
143,495
| | | |
137,647
| | | |
139,447
| | |
|
Commercial real estate debt and preferred equity (2) | | |
1,518,165
| | | |
1,554,958
| | | |
1,586,169
| | | |
1,640,206
| | | |
1,583,969
| | |
|
Investments in commercial real estate
| | |
210,032
| | | |
73,827
| | | |
74,355
| | | |
40,313
| | | |
60,132
| | |
|
Corporate debt, held for investment
| | |
166,464
| | | |
144,451
| | | |
151,344
| | | |
145,394
| | | |
117,687
| | |
|
Receivable for investments sold
| | |
1,010,094
| | | |
855,161
| | | |
856,983
| | | |
19,116
| | | |
1,193,730
| | |
|
Accrued interest and dividends receivable
| | |
278,489
| | | |
287,231
| | | |
283,423
| | | |
276,007
| | | |
273,079
| | |
|
Receivable for investment advisory income
| | |
10,402
| | | |
8,369
| | | |
6,380
| | | |
6,498
| | | |
6,839
| | |
|
Goodwill
| | |
94,781
| | | |
94,781
| | | |
94,781
| | | |
94,781
| | | |
94,781
| | |
|
Interest rate swaps, at fair value
| | |
75,225
| | | |
198,066
| | | |
170,604
| | | |
340,890
| | | |
559,044
| | |
|
Other derivatives, at fair value
| | |
5,499
| | | |
19,407
| | | |
7,938
| | | |
40,105
| | | |
146,725
| | |
|
Other assets
| |
|
68,321
|
| |
|
39,798
|
| |
|
50,743
|
| |
|
33,101
|
| |
|
34,949
|
| |
|
Total assets
| |
$
|
88,355,367
|
| |
$
|
87,387,986
|
| |
$
|
87,150,945
|
| |
$
|
82,414,777
|
| |
$
|
81,922,460
|
| |
| | | | | | | | | | |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | | | |
| | | | | | | | | | |
|
|
Liabilities:
| | | | | | | | | | | |
|
U.S. Treasury securities sold, not yet purchased, at fair value
| |
$
|
-
| | |
$
|
-
| | |
$
|
-
| | |
$
|
-
| | |
$
|
1,918,394
| | |
|
Repurchase agreements
| | |
71,361,926
| | | |
69,610,722
| | | |
70,372,218
| | | |
64,543,949
| | | |
61,781,001
| | |
|
Securities loaned
| | |
-
| | | |
7
| | | |
7
| | | |
513,510
| | | |
2,527,668
| | |
|
Payable for investments purchased
| | |
264,984
| | | |
2,153,789
| | | |
781,227
| | | |
1,898,507
| | | |
764,131
| | |
|
Convertible Senior Notes
| | |
845,295
| | | |
836,625
| | | |
831,167
| | | |
827,486
| | | |
825,262
| | |
|
Securitized debt of consolidated VIE
| | |
260,700
| | | |
260,700
| | | |
260,700
| | | |
260,700
| | | |
-
| | |
|
Mortgages payable
| | |
146,553
| | | |
42,635
| | | |
30,316
| | | |
19,317
| | | |
19,332
| | |
|
Participation sold
| | |
13,693
| | | |
13,768
| | | |
13,866
| | | |
13,963
| | | |
14,065
| | |
|
Accrued interest payable
| | |
180,501
| | | |
180,345
| | | |
157,782
| | | |
170,644
| | | |
160,921
| | |
|
Dividends payable
| | |
284,293
| | | |
284,278
| | | |
284,261
| | | |
284,247
| | | |
284,230
| | |
|
Interest rate swaps, at fair value
| | |
1,608,286
| | | |
857,658
| | | |
928,789
| | | |
1,272,616
| | | |
1,141,828
| | |
|
Other derivatives, at fair value
| | |
8,027
| | | |
-
| | | |
6,533
| | | |
6,045
| | | |
55,518
| | |
|
Accounts payable and other liabilities
| |
|
47,328
|
| |
|
36,511
|
| |
|
35,160
|
| |
|
39,081
|
| |
|
25,055
|
| |
|
Total liabilities
| |
|
75,021,586
|
| |
|
74,277,038
|
| |
|
73,702,026
|
| |
|
69,850,065
|
| |
|
69,517,405
|
| |
|
Stockholders’ Equity:
| | | | | | | | | | | |
7.875% Series A Cumulative Redeemable Preferred Stock: 7,412,500
authorized, issued and outstanding
| | |
177,088
| | | |
177,088
| | | |
177,088
| | | |
177,088
| | | |
177,088
| | |
7.625% Series C Cumulative Redeemable Preferred Stock 12,650,000
authorized, 12,000,000 issued and outstanding
| | |
290,514
| | | |
290,514
| | | |
290,514
| | | |
290,514
| | | |
290,514
| | |
7.50% Series D Cumulative Redeemable Preferred Stock: 18,400,000
authorized, issued and outstanding
| | |
445,457
| | | |
445,457
| | | |
445,457
| | | |
445,457
| | | |
445,457
| | |
Common stock, par value $0.01 per share, 1,956,937,500 authorized,
947,643,079, 947,540,823, 947,488,945, 947,432,862 and 947,304,761
issued and outstanding, respectively
| | |
9,476
| | | |
9,476
| | | |
9,475
| | | |
9,475
| | | |
9,474
| | |
|
Additional paid-in capital
| | |
14,786,509
| | | |
14,781,308
| | | |
14,776,302
| | | |
14,770,553
| | | |
14,765,761
| | |
|
Accumulated other comprehensive income (loss)
| | |
204,883
| | | |
(967,820
|
)
| | |
(572,256
|
)
| | |
(2,088,479
|
)
| | |
(2,748,933
|
)
| |
|
Accumulated deficit
| |
|
(2,585,436
|
)
| |
|
(1,625,075
|
)
| |
|
(1,677,661
|
)
| |
|
(1,039,896
|
)
| |
|
(534,306
|
)
| |
|
Total stockholders’ equity
| | |
13,328,491
| | | |
13,110,948
| | | |
13,448,919
| | | |
12,564,712
| | | |
12,405,055
| | |
|
Noncontrolling interest
| |
|
5,290
|
| |
|
-
|
| |
|
-
|
| |
|
-
|
| |
|
-
|
| |
|
Total equity
| |
|
13,333,781
|
| |
|
13,110,948
|
| |
|
13,448,919
|
| |
|
12,564,712
|
| |
|
12,405,055
|
| |
|
Total liabilities and equity
| |
$
|
88,355,367
|
| |
$
|
87,387,986
|
| |
$
|
87,150,945
|
| |
$
|
82,414,777
|
| |
$
|
81,922,460
|
| |
(1) Derived from the audited consolidated financial statements at
December 31, 2013.
(2) Includes senior securitized mortgages of consolidated VIE with a
carrying value of $398.6 million, $398.4 million, $398.3 million, $398.1
million and $0, respectively.
|
| |
| |
| |
| |
| | |
| ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES | |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | |
| (UNAUDITED) | |
| (dollars in thousands, except per share data) | |
| | | | | | | | | | |
|
| | For the quarters ended | |
| | December 31, | | September 30, | | June 30, | | March 31, | | December 31, | |
| | 2014 |
| 2014 |
| 2014 |
| 2014 |
| 2013 | |
| Net interest income: | | | | | | | | | | | |
|
Interest income
| |
$
|
648,144
| | |
$
|
644,640
| | |
$
|
683,962
| | |
$
|
655,901
| | |
$
|
771,249
| | |
|
Interest expense
| |
|
134,512
|
|
|
|
127,069
|
|
|
|
126,107
|
|
|
|
124,971
|
|
|
|
137,393
|
| |
| Net interest income | |
|
513,632
|
|
|
|
517,571
|
|
|
|
557,855
|
|
|
|
530,930
|
|
|
|
633,856
|
| |
| | | | | | | | | | |
|
| Other income (loss): | | | | | | | | | | | |
|
Realized gains (losses) on interest rate swaps(1) | | |
(174,908
|
)
| | |
(169,083
|
)
| | |
(220,934
|
)
| | |
(260,435
|
)
| | |
(242,182
|
)
| |
|
Realized gains (losses) on termination of interest rate swaps
| | |
-
| | | |
-
| | | |
(772,491
|
)
| | |
(6,842
|
)
| | |
(13,177
|
)
| |
|
Unrealized gains (losses) on interest rate swaps
| |
|
(873,468
|
)
|
|
|
98,593
|
|
|
|
175,062
|
|
|
|
(348,942
|
)
|
|
|
561,101
|
| |
| Subtotal | |
|
(1,048,376
|
)
|
|
|
(70,490
|
)
|
|
|
(818,363
|
)
|
|
|
(616,219
|
)
|
|
|
305,742
|
| |
|
Investment advisory income
| | |
10,858
| | | |
8,253
| | | |
6,109
| | | |
6,123
| | | |
8,490
| | |
|
Net gains (losses) on disposal of investments
| | |
3,420
| | | |
4,693
| | | |
5,893
| | | |
79,710
| | | |
28,602
| | |
|
Dividend income from affiliates
| | |
4,048
| | | |
4,048
| | | |
4,048
| | | |
13,045
| | | |
4,048
| | |
|
Net gains (losses) on trading assets
| | |
(57,454
|
)
| | |
4,676
| | | |
(46,489
|
)
| | |
(146,228
|
)
| | |
41,936
| | |
|
Net unrealized gains (losses) on interest-only Agency
mortgage-backed securities
| | |
(29,520
|
)
| | |
(37,944
|
)
| | |
2,085
| | | |
(20,793
|
)
| | |
60,181
| | |
|
Other income (loss)
| |
|
3,365
|
|
|
|
(22,249
|
)
|
|
|
4,687
|
|
|
|
1,460
|
|
|
|
3,945
|
| |
| Subtotal | |
|
(65,283
|
)
|
|
|
(38,523
|
)
|
|
|
(23,667
|
)
|
|
|
(66,683
|
)
|
|
|
147,202
|
| |
| Total other income (loss) | |
|
(1,113,659
|
)
|
|
|
(109,013
|
)
|
|
|
(842,030
|
)
|
|
|
(682,902
|
)
|
|
|
452,944
|
| |
| General and administrative expenses: | | | | | | | | | | | |
|
Compensation and management fee
| | |
38,734
| | | |
39,028
| | | |
39,277
| | | |
38,521
| | | |
43,385
| | |
|
Other general and administrative expenses
| |
|
19,720
|
|
|
|
12,289
|
|
|
|
12,912
|
|
|
|
8,857
|
|
|
|
12,909
|
| |
| Total general and administrative expenses | |
|
58,454
|
|
|
|
51,317
|
|
|
|
52,189
|
|
|
|
47,378
|
|
|
|
56,294
|
| |
| Income (loss) before income taxes | | |
(658,481
|
)
| | |
357,241
| | | |
(336,364
|
)
| | |
(199,350
|
)
| | |
1,030,506
| | |
| Income taxes | |
|
(209
|
)
|
|
|
2,385
|
|
|
|
(852
|
)
|
|
|
4,001
|
|
|
|
1,757
|
| |
| Net income (loss) | | |
(658,272
|
)
| | |
354,856
| | | |
(335,512
|
)
| | |
(203,351
|
)
| | |
1,028,749
| | |
| Net income (loss) attributable to noncontrolling interest | |
|
(196
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
| |
| Net income (loss) attributable to Annaly | | |
(658,076
|
)
| | |
354,856
| | | |
(335,512
|
)
| | |
(203,351
|
)
| | |
1,028,749
| | |
| Dividends on preferred stock | |
|
17,992
|
|
|
|
17,992
|
|
|
|
17,992
|
|
|
|
17,992
|
|
|
|
17,992
|
| |
| Net income (loss) available (related) to common stockholders | |
$
|
(676,068
|
)
|
|
$
|
336,864
|
|
|
$
|
(353,504
|
)
|
|
$
|
(221,343
|
)
|
|
$
|
1,010,757
|
| |
| Net income (loss) per share available (related) to common
stockholders: | | | | | | | | | | | |
|
Basic
| |
$
|
(0.71
|
)
|
|
$
|
0.36
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
1.07
|
| |
|
Diluted
| |
$
|
(0.71
|
)
|
|
$
|
0.35
|
|
|
$
|
(0.37
|
)
|
|
$
|
(0.23
|
)
|
|
$
|
1.03
|
| |
| Weighted average number of common shares outstanding: | | | | | | | | | | | |
|
Basic
| |
|
947,615,793
|
|
|
|
947,565,432
|
|
|
|
947,515,127
|
|
|
|
947,458,813
|
|
|
|
947,386,060
|
| |
|
Diluted
| |
|
947,615,793
|
|
|
|
987,315,527
|
|
|
|
947,515,127
|
|
|
|
947,458,813
|
|
|
|
995,625,622
|
| |
| Net income (loss) | |
$
|
(658,272
|
)
| |
$
|
354,856
|
| |
$
|
(335,512
|
)
| |
$
|
(203,351
|
)
| |
$
|
1,028,749
|
| |
| Other comprehensive income (loss): | | | | | | | | | | | |
|
Unrealized gains (losses) on available-for-sale securities
| | |
1,175,864
| | | |
(390,871
|
)
| | |
1,522,126
| | | |
741,172
| | | |
(1,244,500
|
)
| |
|
Reclassification adjustment for net (gains) losses included in net
income (loss)
| |
|
(3,161
|
)
| |
|
(4,693
|
)
| |
|
(5,903
|
)
| |
|
(80,718
|
)
| |
|
(49,643
|
)
| |
|
Other comprehensive income (loss)
| |
|
1,172,703
|
| |
|
(395,564
|
)
| |
|
1,516,223
|
| |
|
660,454
|
| |
|
(1,294,143
|
)
| |
|
Comprehensive income (loss)
| | |
514,431
| | | |
(40,708
|
)
| | |
1,180,711
| | | |
457,103
| | | |
(265,394
|
)
| |
|
Comprehensive income (loss) attributable to noncontrolling interest
| |
|
(196
|
)
| |
|
-
|
| |
|
-
|
| |
|
-
|
| |
|
-
|
| |
| Comprehensive income (loss) attributable to Annaly | |
$
|
514,627
|
| |
$
|
(40,708
|
)
| |
$
|
1,180,711
|
| |
$
|
457,103
|
| |
$
|
(265,394
|
)
| |
|
(1)
|
|
|
Interest expense related to the Company’s interest rate swaps is
recorded in Realized gains (losses) on interest rate swaps on the
Consolidated Statements of Comprehensive Income (Loss)
|
|
| |
| | |
| | | | |
|
| | | | |
|
| ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| (dollars in thousands, except per share data) |
| (Unaudited) |
| | | | |
|
| | For the years ended | |
| | December 31, | | December 31, | |
| | 2014 | | 2013(2) | |
| | (Unaudited) | |
| |
| Net interest income: | | | | | |
|
Interest income
| |
$
|
2,632,647
| | |
$
|
2,918,562
| | |
|
Interest expense
| |
|
512,659
|
|
|
|
624,714
|
| |
| Net interest income | |
|
2,119,988
|
|
|
|
2,293,848
|
| |
| Other income (loss): | | | | | |
|
Realized gains (losses) on interest rate swaps(1) | | |
(825,360
|
)
| | |
(908,294
|
)
| |
|
Realized gains (losses) on termination of interest rate swaps
| | |
(779,333
|
)
| | |
(101,862
|
)
| |
|
Unrealized gains (losses) on interest rate swaps
| |
|
(948,755
|
)
|
|
|
2,002,200
|
| |
| Subtotal | |
|
(2,553,448
|
)
|
|
|
992,044
|
| |
|
Investment advisory income
| | |
31,343
| | | |
43,643
| | |
|
Net gains (losses) on disposal of investments
| | |
93,716
| | | |
403,045
| | |
|
Dividend income from affiliates
| | |
25,189
| | | |
18,575
| | |
|
Net gains (losses) on trading assets
| | |
(245,495
|
)
| | |
1,509
| | |
|
Net unrealized gains (losses) on interest-only Agency
mortgage-backed securities
| | |
(86,172
|
)
| | |
244,730
| | |
|
Impairment of goodwill
| | |
-
| | | |
(23,987
|
)
| |
|
Loss on previously held equity interest in CreXus
| | |
-
| | | |
(18,896
|
)
| |
|
Other income (loss)
| |
|
(12,737
|
)
|
|
|
15,481
|
| |
| Subtotal | |
|
(194,156
|
)
|
|
|
684,100
|
| |
| Total other income (loss) | |
|
(2,747,604
|
)
|
|
|
1,676,144
|
| |
| General and administrative expenses: | | | | | |
|
Compensation and management fee
| | |
155,560
| | | |
167,366
| | |
|
Other general and administrative expenses
| |
|
53,778
|
|
|
|
64,715
|
| |
| Total general and administrative expenses | |
|
209,338
|
|
|
|
232,081
|
| |
| Income (loss) before income taxes | | |
(836,954
|
)
| | |
3,737,911
| | |
| Income taxes | |
|
5,325
|
|
|
|
8,213
|
| |
| Net income (loss) | | |
(842,279
|
)
| | |
3,729,698
| | |
| Net income (loss) attributable to noncontrolling interest | |
|
(196
|
)
|
|
|
-
|
| |
| Net income (loss) attributable to Annaly | |
|
(842,083
|
)
|
|
|
3,729,698
|
| |
| Dividends on preferred stock | |
|
71,968
|
|
|
|
71,968
|
| |
| Net income (loss) available (related) to common stockholders | |
$
|
(914,051
|
)
|
|
$
|
3,657,730
|
| |
| Net income (loss) per share available (related) to common
stockholders: | | | | | |
|
Basic
| |
$
|
(0.96
|
)
|
|
$
|
3.86
|
| |
|
Diluted
| |
$
|
(0.96
|
)
|
|
$
|
3.74
|
| |
| Weighted average number of common shares outstanding: | | | | | |
|
Basic
| |
|
947,539,294
|
|
|
|
947,337,915
|
| |
|
Diluted
| |
|
947,539,294
|
|
|
|
995,557,026
|
| |
| Net income (loss) | |
$
|
(842,279
|
)
|
|
$
|
3,729,698
|
| |
| Other comprehensive income (loss): | | | | | |
|
Unrealized gains (losses) on available-for-sale securities
| | |
3,048,291
| | | |
(5,378,089
|
)
| |
|
Reclassification adjustment for net (gains) losses included in net
income (loss)
| |
|
(94,475
|
)
|
|
|
(424,086
|
)
| |
|
Other comprehensive income (loss)
| |
|
2,953,816
|
|
|
|
(5,802,175
|
)
| |
|
Comprehensive income (loss)
| | |
2,111,537
| | | |
(2,072,477
|
)
| |
|
Comprehensive income (loss) attributable to noncontrolling interest
| |
|
(196
|
)
|
|
|
-
|
| |
| Comprehensive income (loss) attributable to Annaly | |
$
|
2,111,733
|
|
|
$
|
(2,072,477
|
)
| |
|
(1)
|
|
|
Interest expense related to the Company’s interest rate swaps is
recorded in Realized gains (losses) on interest rate swaps on the
Consolidated Statements of Comprehensive Income (Loss).
|
|
(2)
| | |
Derived from the audited consolidated financial statements at
December 31, 2013.
|
Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com
Source: Annaly Capital Management, Inc.