-
GAAP net income of $730.9 million, $0.70 per average common share
-
Core earnings of $0.29 per average common share, unchanged from prior
quarteri
-
Common stock book value per share of $11.83, up 3% from prior quarter
-
Economic leverage of 6.1:1, unchanged from prior quarter
-
Credit investment portfolio represents 22% of stockholders’ equity
-
Successfully integrated $1.5 billion acquisition of Hatteras Financial
Corp.
NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE:NLY) (the “Company” or “Annaly”)
today announced its financial results for the quarter ended September
30, 2016.
“Our diversified investment strategy has proven that we can provide
stable, durable earnings while protecting and opportunistically growing
our book value. We believe Annaly has a platform for predictable
results, as evidenced again in this most recent quarter,” commented
Kevin Keyes, Chief Executive Officer and President. “In this world of
low and negative yields, our broad menu of complementary investment
alternatives, coupled with a prudent and rigorous capital allocation
process, allow us to provide our shareholders with dependable and
attractive returns.”
“As we progress toward year end and 2017,” Mr. Keyes continued, “we
believe the investment landscape in our core Agency strategy will remain
favorable and our three credit businesses, which have reached efficient
scale, are uniquely positioned to take advantage of market
inefficiencies and dislocations resulting from the impact of regulation
and structural market changes.”
Financial Performance
The following table summarizes certain key performance indicators as of
and for the quarters ended September 30, 2016, June 30, 2016, and
September 30, 2015:
|
|
|
|
| For the quarters ended |
| | | | | September 30, 2016 |
|
| June 30, 2016 |
|
| September 30, 2015 |
|
Book value per common share
| | | | | $11.83 |
|
| $11.50 |
|
| $11.99 |
|
Economic leverage at period-end (1) | | | | |
6.1:1
| | |
6.1:1
| | |
5.8:1
|
|
GAAP net income (loss) per common share
| | | | | $0.70 | | |
($0.32)
| | |
($0.68)
|
|
Core earnings per common share* (2) | | | | | $0.29 | | | $0.29 | | | $0.30 |
|
Annualized return (loss) on average equity
| | | | |
23.55%
| | |
(9.60%)
| | |
(20.18%)
|
|
Annualized core return on average equity*
| | | | |
10.09%
| | |
9.73%
| | |
9.67%
|
|
Net interest margin
| | | | |
1.40%
| | |
1.15%
| | |
1.27%
|
|
Core net interest margin* (3) | | | | |
1.42%
| | |
1.54%
| | |
1.65%
|
|
Net interest spread
| | | | |
1.13%
| | |
0.80%
| | |
0.83%
|
|
Core net interest spread*
| | | | |
1.15%
| | |
1.27%
| | |
1.29%
|
|
Average yield on interest earning assets
| | | | |
2.70%
| | |
2.48%
| | |
2.48%
|
|
Core average yield on interest earning assets*
| | | | |
2.72%
| | |
2.95%
| | |
2.94%
|
| | | | | | | | | | |
|
|
*
|
|
Represents a non-GAAP financial measure. Please refer to the
‘Non-GAAP Financial Measures’ section for additional information.
|
|
(1)
| |
Computed as the sum of recourse debt, TBA derivative notional
outstanding and net forward purchases of investments divided by
total equity. Recourse debt consists of repurchase agreements, other
secured financing and Convertible Senior Notes. Securitized debt,
participation sold and mortgages payable are non-recourse to the
Company and are excluded from this measure.
|
|
(2)
| |
Core earnings 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
investments measured at fair value through earnings, net gains and
losses on trading assets, impairment losses, net income (loss)
attributable to noncontrolling interest, the premium amortization
adjustment resulting from the quarter-over-quarter change in
estimated long-term CPR, corporate acquisition related expenses and
certain other non-recurring gains or losses, and inclusive of dollar
roll income (a component of Net gains (losses) on trading assets)
and realized amortization of MSRs (a component of net unrealized
gains (losses) on investments measured at fair value through
earnings).
|
|
(3)
| |
Represents the sum of the Company’s annualized economic core net
interest income (exclusive of the premium amortization adjustment
(referred to herein as “PAA”) and inclusive of interest expense on
interest rate swaps used to hedge cost of funds) plus TBA dollar
roll income (less interest expense on swaps used to hedge dollar
roll transactions) divided by the sum of its average interest
earning assets plus average outstanding TBA derivative balances. PAA
excludes the component of premium amortization representing the
quarter-over-quarter change in estimated long-term constant
prepayment rates (“CPR”). Average interest earning assets reflects
the average amortized cost of our investments during the period.
|
| iRepresents a non-GAAP financial measure. Please refer to
the ‘Non-GAAP Financial Measures’ section for additional information.
|
GAAP Earnings
The Company reported GAAP net income for the quarter ended September 30,
2016 of $730.9 million, or $0.70 per average common share, compared to a
GAAP net loss of ($278.5) million, or ($0.32) per average common share,
for the quarter ended June 30, 2016, and a GAAP net loss of ($627.5)
million, or ($0.68) per average common share, for the quarter ended
September 30, 2015. The increase in GAAP net income (loss) for the
quarter ended September 30, 2016 compared to the quarters ended June 30,
2016 and September 30, 2015 is primarily due to favorable changes in
realized and unrealized gains (losses) on interest rate swaps, net gains
(losses) on trading assets and net unrealized gains on investments
measured at fair value through earnings, as well as incremental net
interest income earned on the assets acquired as part of the Company’s
acquisition of Hatteras Financial Corp. (“Hatteras”) and the resulting
bargain purchase gain, offset by transaction expenses, during the
quarter ended September 30, 2016.
Core Earnings
The Company periodically reviews its use of non-GAAP financial measures
to ensure only those measures relied upon by the Company’s management in
assessing the financial performance of the business are disclosed. This
review also considers regulatory interpretations and guidance. The
Company believes these non-GAAP financial measures are useful for
management, investors, analysts, and other interested parties in
evaluating the Company’s performance but should not be viewed in
isolation and are not a substitute for financial measurements computed
in accordance with GAAP. Please refer to the “Non-GAAP Financial
Measures” section for additional information including Non-GAAP
reconciliations to GAAP.
Core earnings for the quarter ended September 30, 2016 were $312.9
million, or $0.29 per average common share, compared to $282.2 million,
or $0.29 per average common share, for the quarter ended June 30, 2016,
and $300.7 million, or $0.30 per average common share, for the quarter
ended September 30, 2015. Core earnings increased for the quarter ended
September 30, 2016 compared to the quarter ended June 30, 2016 on higher
net interest income earned on the assets acquired as part of the
Hatteras acquisition and higher TBA dollar roll income, which were
offset by higher interest expense on repurchase agreements. Core
earnings per average share remained unchanged for the quarter ended
September 30, 2016 when compared to the quarter ended June 30, 2016 due
to the additional common shares issued in connection with the Hatteras
acquisition. Core earnings increased during the quarter ended September
30, 2016 compared to the quarter ended September 30, 2015 due to higher
net interest income earned on the assets acquired as part of the
Hatteras acquisition and higher interest income from the Company’s
commercial investment portfolio, partially offset by a reduction in TBA
dollar roll income and higher borrowing costs during the quarter ended
September 30, 2016.
Net Interest Margin, Net Interest Spread, and Book Value
Net interest margin for the quarters ended September 30, 2016, June 30,
2016, and September 30, 2015 was 1.40%, 1.15% and 1.27%, respectively.
Core net interest margin for the quarters ended September 30, 2016, June
30, 2016, and September 30, 2015 was 1.42%, 1.54% and 1.65%,
respectively. For the quarter ended September 30, 2016, the average
yield on interest earning assets was 2.70% and the average cost of
interest bearing liabilities, including interest expense on interest
rate swaps used to hedge cost of funds, was 1.57%, which resulted in a
net interest spread of 1.13%. The average yield on interest earning
assets for the quarter ended September 30, 2016 increased when compared
to the quarters ended June 30, 2016 and September 30, 2015 due to
differences in premium amortization expense on Residential Investment
Securities resulting from changes in long-term CPR estimates. The
decline in our average cost of interest bearing liabilities for the
quarter ended September 30, 2016 when compared to the quarters ended
June 30, 2016 and September 30, 2015 is primarily attributable to a
reduction in interest expense on swaps, partially offset by higher
balances on repurchase agreements during the quarter ended September 30,
2016.
For the quarter ended September 30, 2016, the core average yield on
interest earning assets was 2.72%, which resulted in a core net interest
spread of 1.15%. The core average yield on interest earning assets for
the quarter ended September 30, 2016 decreased when compared to the
quarters ended June 30, 2016 and September 30, 2015 primarily due to
lower weighted average coupons on Residential Investment Securities and
higher weighted average premium amortization expense, exclusive of the
PAA, on Residential Investment Securities during the quarter ended
September 30 2016.
At September 30, 2016, June 30, 2016, and September 30, 2015, the
Company had a common stock book value per share of $11.83, $11.50 and
$11.99, respectively.
Asset Portfolio
Residential Investment Securities
Residential Investment Securities, which are comprised of Agency
mortgage-backed securities, Agency debentures, credit risk transfer
securities and Non-Agency mortgage-backed securities, totaled $75.6
billion at September 30, 2016, compared to $66.6 billion at June 30,
2016 and $67.0 billion at September 30, 2015. The Company’s Residential
Investment Securities portfolio at September 30, 2016 was comprised of
81% fixed-rate assets with the remainder constituting adjustable or
floating-rate investments.
The total net premium balance on Residential Investment Securities at
September 30, 2016, June 30, 2016, and September 30, 2015, was $4.9
billion, $4.6 billion, and $4.8 billion, respectively. The weighted
average amortized cost basis of the Company’s non interest-only
Residential Investment Securities at September 30, 2016, June 30, 2016,
and September 30, 2015, was 104.9%, 105.0% and 105.3%, respectively. The
weighted average amortized cost basis of the Company’s interest-only
Residential Investment Securities at September 30, 2016, June 30, 2016,
and September 30, 2015, was 15.9%, 15.8%, and 16.1%, respectively. The
weighted average experienced CPR on our Agency mortgage-backed
securities for the quarters ended September 30, 2016, June 30, 2016, and
September 30, 2015, was 15.9%, 12.7% and 11.5%, respectively. The
weighted average projected long-term CPR on our Agency mortgage-backed
securities at September 30, 2016, June 30, 2016, and September 30, 2015,
was 14.4%, 13.0% and 9.2%, respectively. The net increase in long-term
CPRs is a result of the addition to the overall portfolio of ARM
securities from the Hatteras acquisition.
During the quarter ended September 30, 2016, the Company disposed of
$3.8 billion of Residential Investment Securities, resulting in a net
realized gain of $14.7 million. During the quarter ended June 30, 2016,
the Company disposed of $1.8 billion of Residential Investment
Securities, resulting in a net realized gain of $11.9 million. During
the quarter ended September 30, 2015, the Company disposed of $3.7
billion of Residential Investment Securities, resulting in a net
realized gain of $4.5 million.
Amortization
In accordance with GAAP, the Company amortizes or accretes premiums or
discounts into interest income for its Agency mortgage-backed
securities, excluding interest-only securities, considering estimates of
future principal prepayment in the calculation of the effective yield
because they are probable and the timing and amount of prepayments can
be reasonably estimated. The Company recalculates the effective yield as
differences between anticipated and actual prepayments occur. Using
third-party model and market information to project future cash flows
and expected remaining lives of securities, the effective interest rate
determined for each security is applied as if it had been in place from
the date of the security’s acquisition. The amortized cost of the
investment is then adjusted to the amount that would have existed had
the new effective yield been applied since the acquisition date. The
adjustment to amortized cost is offset with a charge or credit to
interest income. Changes in interest rates and other market factors will
impact prepayment speed projections and the amount of premium
amortization recognized in any given period. The Company’s GAAP metrics
include the unadjusted impact of amortization and accretion associated
with this method. The Company’s non-GAAP metrics exclude the effect of
the PAA, which quantifies the component of premium amortization
representing the cumulative effect of quarter-over-quarter changes in
estimated long-term CPR.
The following table illustrates the impact of quarter-over-quarter
adjustments to long-term CPR estimates on premium amortization expense
for the quarters ended September 30, 2016, June 30, 2016, and September
30, 2015:
|
|
|
| For the quarters ended |
| | | | September 30, 2016 |
|
|
| June 30, 2016 |
|
| September 30, 2015 |
| | | |
| |
|
| (dollars in thousands) |
|
| |
|
Premium amortization expense
| | | |
$
|
213,241
| | | |
$
|
265,475
| | |
$
|
255,123
|
|
Less: PAA cost (benefit)
| | | |
|
3,891
|
|
|
|
|
85,583
|
|
|
|
83,136
|
|
Premium amortization expense exclusive of PAA
| | | |
$
|
209,350
|
|
|
|
$
|
179,892
|
|
|
$
|
171,987
|
| | | | | | | | | | |
|
| | | | | | | | | | |
|
| | | | September 30, 2016 |
|
|
| June 30, 2016 |
|
| September 30, 2015 |
| | | |
| | | | (per common share) | | | |
|
Premium amortization expense
| | | |
$
|
0.21
| | | |
$
|
0.29
| | |
$
|
0.27
|
|
Less: PAA cost (benefit)
| | | |
|
--
| 1 |
|
|
|
0.10
|
|
|
|
0.09
|
|
Premium amortization expense exclusive of PAA
| | | |
$
|
0.21
|
|
|
|
$
|
0.19
|
|
|
$
|
0.18
|
|
(1)
|
|
Rounds to less than $0.01 per common share.
|
TBA Contracts
At September 30, 2016, the Company had outstanding $16.0 billion in
notional balances of TBA derivative positions. Realized and unrealized
gains (losses) on TBA derivatives are recorded in Net gains (losses) on
trading assets in the Company’s Consolidated Statements of Comprehensive
Income (Loss). The following table summarizes certain characteristics of
the Company’s TBA derivatives at September 30, 2016:
| TBA Purchase Contracts |
|
| Notional |
|
| Implied Cost Basis |
|
| Implied Market Value |
|
| Net Carrying Value |
|
|
|
|
|
| (dollars in thousands) |
|
| |
|
| |
|
Purchase contracts
| | |
$
|
15,950,000
| | |
$
|
16,671,196
| | |
$
|
16,730,009
| | |
$
|
58,813
|
| | | | | | | | | | | | | | | |
|
Commercial Investments Portfolio
The Company’s commercial investments portfolio consists of commercial
real estate debt and equity investments and corporate debt. Commercial
real estate debt, which is comprised of preferred equity, AAA-rated
commercial mortgage-backed securities, securitized loans of consolidated
variable interest entities (“VIEs”) and loans held for sale totaled $5.5
billion at September 30, 2016 compared to $5.7 billion at June 30, 2016.
Loans held for sale, net totaled $144.3 million at September 30, 2016,
compared to $164.2 million at June 30, 2016. Investments in commercial
real estate totaled $500.0 million at September 30, 2016, down slightly
from $504.6 million at June 30, 2016. Corporate debt investments totaled
$716.8 million as of September 30, 2016, up from $669.6 million at June
30, 2016. The weighted average levered return on commercial real estate
debt and preferred equity, including loans held for sale, as of
September 30, 2016, June 30, 2016, and September 30, 2015, was 8.26%,
8.25% and 7.36%, respectively. Excluding loans held for sale, the
weighted average levered return on commercial real estate debt and
preferred equity was 8.99%, 9.09% and 9.38% at September 30, 2016, June
30, 2016, and September 30, 2015, respectively. The weighted average
levered returns on investments in commercial real estate equity as of
September 30, 2016, June 30, 2016, and September 30, 2015, was 10.63%,
10.63% and 11.36%, respectively. The weighted average levered returns on
investments in corporate debt as of September 30, 2016, June 30, 2016
and September 30, 2015, was 8.12%, 7.53% and 7.38% respectively.ii
| iiJune 30, 2016 and September 30, 2015 represent
unlevered returns.
|
During the third quarter 2016, the Company provided additional funding
on pre-existing commercial real estate debt commitments totaling $15.2
million with a weighted average coupon of 8.4%. During the third quarter
2016, the Company received cash from its commercial real estate
investments of $167.9 million from loan sales (including loans held for
sale), partial pay-downs, prepayments and maturities with a weighted
average coupon of 4.23%.
At September 30, 2016, June 30, 2016, and September 30, 2015,
residential and commercial and corporate credit assets (including loans
held for sale) comprised 22%, 24% and 22% of stockholders’ equity,
respectively.
Capital and Funding
Leverage
At September 30, 2016, total stockholders’ equity was $13.3 billion.
Leverage at September 30, 2016, June 30, 2016, and September 30, 2015,
was 5.3:1, 5.3:1 and 4.8:1, respectively. For purposes of calculating
the Company’s leverage ratio, debt consists of repurchase agreements,
other secured financing, Convertible Senior Notes, securitized debt,
participation sold and mortgages payable. Securitized debt,
participation sold and mortgages payable are non-recourse to the
Company. Economic leverage, which excludes non-recourse debt and
includes other forms of financing such as TBA dollar roll transactions,
was 6.1:1 at September 30, 2016, compared to 6.1:1 at June 30, 2016, and
5.8:1 at September 30, 2015.
Capital Ratio and Return on Equity
At September 30, 2016, June 30, 2016, and September 30, 2015, the
Company’s capital ratio, which represents the ratio of stockholders’
equity to total assets (inclusive of total market value of TBA
derivatives and exclusive of consolidated VIEs associated with B Piece
commercial mortgage-backed securities), was 13.3%, 13.2%, and 14.0%,
respectively. On a GAAP basis, the Company produced an annualized return
(loss) on average equity for the quarters ended September 30, 2016, June
30, 2016, and September 30, 2015, of 23.55%, (9.60%) and (20.18%),
respectively. On a core earnings basis, the Company provided an
annualized return on average equity for the quarters ended September 30,
2016, June 30, 2016, and September 30, 2015, of 10.09%, 9.73%, and
9.67%, respectively.
Funding
At September 30, 2016, June 30, 2016, and September 30, 2015, the
Company had outstanding $61.8 billion, $53.9 billion, and $56.4 billion
of repurchase agreements, with weighted average remaining maturities of
128 days, 129 days, and 147 days, and with weighted average borrowing
rates of 1.71%, 1.81%, and 1.75%, after giving effect to the Company’s
interest rate swaps used to hedge cost of funds, respectively. The
weighted average rate on repurchase agreements during the quarters ended
September 30, 2016, June 30, 2016, and September 30, 2015, was 0.97%,
1.00%, and 0.73%, respectively. Included in these balances is a $350
million repurchase agreement credit facility for the Commercial Real
Estate business. As of September 30, 2016, outstanding borrowings under
the facility totaled $295.1 million with a weighted average borrowing
rate of 2.87%.
At September 30, 2016 and June 30, 2016, the Company had outstanding
$3.6 billion of advances from the Federal Home Loan Bank of Des Moines,
with weighted average remaining maturities of 1,552 days and 1,644 days,
respectively, and with weighted average borrowing rates of 0.65% and
0.60%, respectively.
The following table presents the principal balance and weighted average
rate of repurchase agreements and FHLB advances by maturity at September
30, 2016:
| Maturity |
|
| Principal Balance |
|
| Weighted Average Rate |
|
|
| (dollars in thousands) |
|
| |
|
Within 30 days
| | |
$
|
26,508,338
| | |
0.99%
|
|
30 to 59 days
| | | |
5,200,350
| | |
0.86%
|
|
60 to 89 days
| | | |
6,173,598
| | |
0.85%
|
|
90 to 119 days
| | | |
5,309,103
| | |
0.79%
|
|
Over 120 days(1) | | |
|
22,181,058
|
|
|
1.27%
|
|
Total
| | |
$
|
65,372,447
|
|
|
1.04%
|
|
|
| |
(1)
| | |
Approximately 16% of the total repurchase agreements and FHLB
advances have a remaining maturity over 1 year. The combined
weighted average days to maturity for repurchase agreements and
FHLB advances was 206 days.
|
The Company has access to a $300 million credit facility for the Middle
Market Lending business. As of September 30, 2016, outstanding
borrowings under the facility totaled $212.2 million with a weighted
average borrowing rate of 3.27%.
The following table presents the principal balance, weighted average
rate and weighted average days to maturity on outstanding debt at
September 30, 2016:
|
|
|
| |
|
| Weighted Average |
| | | | Principal Balance |
|
| Rate (3) |
|
| Days to Maturity (4) |
| | | |
| | | (dollars in thousands) |
|
| |
|
Repurchase agreements
| | | |
$
|
61,784,121
| | |
0.97%
| | |
128
|
|
Other secured financing (1) | | | | |
3,804,742
| | |
0.83%
| | |
1,560
|
|
Securitized debt of consolidated VIEs (2) | | | | |
3,695,502
| | |
1.29%
| | |
2,434
|
|
Participation sold (2) | | | | |
12,908
| | |
4.81%
| | |
213
|
|
Mortgages payable (2) | | | |
|
330,946
| | |
4.42%
| | |
2,881
|
|
Total indebtedness
| | | |
$
|
69,628,219
| | | | | | |
|
|
| |
(1)
| | |
Comprised of advances from the Federal Home Loan Bank of Des
Moines and other credit facilities.
|
(2)
| | |
Non-recourse to the Company.
|
(3)
| | |
Represents the quarterly average rate.
|
(4)
| | |
Determined based on estimated weighted-average lives of the
underlying debt instruments.
|
Hedge Portfolio
At September 30, 2016, the Company had outstanding interest rate swaps
with a net notional amount of $25.2 billion. 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
Company enters into interest rate swaps to mitigate the risk of rising
interest rates that affect the Company’s cost of funds or its TBA dollar
roll transactions. As of September 30, 2016, the swap portfolio had a
weighted average pay rate of 2.25%, a weighted average receive rate of
0.88% and a weighted average maturity of 6.89 years. There were no
forward starting swaps at September 30, 2016.
The following table summarizes certain characteristics of the Company’s
interest rate swaps at September 30, 2016:
| Maturity |
|
| Current Notional (1) |
|
| Weighted Average Pay Rate |
|
| Weighted Average Receive Rate |
|
| Weighted Average Years to Maturity |
|
|
| |
|
| (dollars in thousands) |
|
| |
|
| |
|
0 - 3 years
| | |
$
|
4,552,383
| | |
1.74%
| | |
0.76%
| | |
2.77
|
|
3 - 6 years
| | | |
9,675,000
| | |
1.92%
| | |
0.88%
| | |
4.14
|
|
6 - 10 years
| | | |
7,363,550
| | |
2.34%
| | |
0.98%
| | |
7.81
|
|
Greater than 10 years
| | |
|
3,634,400
|
|
|
3.70%
|
|
|
0.67%
|
|
|
18.62
|
|
Total / Weighted Average
|
|
|
$
|
25,225,333
|
|
|
2.25%
|
|
|
0.88%
|
|
|
6.89
|
(1)
|
|
|
There were no forward starting swaps.
|
At September 30, 2016, the Company had entered into interest rate
swaptions with a net notional amount of $0.8 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.
The following table summarizes certain characteristics of the Company’s
interest rate swaptions at September 30, 2016:
| Current Underlying Notional |
| Weighted Average Underlying Pay Rate |
| Weighted Average Underlying Receive Rate |
| Weighted Average Underlying Years to Maturity |
| Weighted Average Months to Expiration |
|
|
| |
| (dollars in thousands) |
| |
| |
|
Long
|
$
|
950,000
| | |
1.08%
| |
3M LIBOR
| |
2.24
| |
2.77
|
|
Short
|
$
|
(200,000
|
)
| |
3M LIBOR
| |
1.54%
| |
10.25
| |
2.77
|
| | | | | | | | | | |
|
The Company enters into U.S. Treasury and Eurodollar futures contracts
to hedge a portion of its interest rate risk. The following table
summarizes outstanding futures positions as of September 30, 2016:
|
|
| Notional - Long Positions |
|
| Notional - Short Positions |
|
| Weighted Average Years to Maturity |
| | | (dollars in thousands) |
|
| |
|
2-year swap equivalent Eurodollar contracts
| | |
$
|
-
|
|
|
$
|
(14,991,375)
| | |
2.00
|
U.S. Treasury futures - 5 year
| | |
|
-
|
|
|
|
(1,247,200)
|
|
|
4.42
|
|
Total
| | |
$
|
-
|
|
|
$
|
(16,238,575)
|
|
|
2.19
|
At September 30, 2016, June 30, 2016, and September 30, 2015, the
Company’s hedge ratio was 52%, 49% and 57%, respectively. Our hedge
ratio measures total notional balances of interest rate swaps, interest
rate swaptions and futures relative to repurchase agreements, other
secured financing and TBA notional outstanding.
Dividend Declarations
Common dividends declared for each of the quarters ended September 30,
2016, June 30, 2016, and September 30, 2015, were $0.30 per common
share. The annualized dividend yield on the Company’s common stock for
the quarter ended September 30, 2016, based on the September 30, 2016
closing price of $10.50, was 11.43%, compared to 10.84% for the quarter
ended June 30, 2016, and 12.16% for the quarter ended September 30, 2015.
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 September 30, 2016, June 30, 2016, and September 30, 2015:
|
|
| For the quarters ended |
| | | September 30, 2016 |
|
| June 30, 2016 |
|
| September 30, 2015 |
Portfolio Related Metrics: | | | |
|
| |
|
| |
|
Fixed-rate Residential Investment Securities as a percentage of
total Residential Investment Securities
| | |
81%
| | |
92%
| | |
93%
|
|
Adjustable-rate and floating-rate Residential Investment Securities
as a percentage of total Residential Investment Securities
| | |
19%
| | |
8%
| | |
7%
|
|
Weighted average experienced CPR for the period
| | |
15.9%
| | |
12.7%
| | |
11.5%
|
|
Weighted average projected long-term CPR at period end
| | |
14.4%
| | |
13.0%
| | |
9.2%
|
|
Weighted average levered return on commercial real estate debt and
preferred equity at period-end (1) | | |
8.26%
| | |
8.25%
| | |
7.36%
|
|
Weighted average levered return on investments in commercial real
estate equity at period-end
| | |
10.63%
|
|
|
10.63%
|
|
|
11.36%
|
| | | | | | | | |
|
Liabilities and Hedging Metrics: | | | | | | | | | |
|
Weighted average days to maturity on repurchase agreements
outstanding at period-end
| | |
128
| | |
129
| | |
147
|
|
Hedge ratio (2) | | |
52%
| | |
49%
| | |
57%
|
|
Weighted average pay rate on interest rate swaps at period-end
(3) | | |
2.25%
| | |
2.28%
| | |
2.26%
|
|
Weighted average receive rate on interest rate swaps at period-end
(3) | | |
0.88%
| | |
0.74%
| | |
0.42%
|
|
Weighted average net rate on interest rate swaps at period-end
(3) | | |
1.37%
| | |
1.54%
| | |
1.84%
|
|
Leverage at period-end (4) | | |
5.3:1
| | |
5.3:1
| | |
4.8:1
|
|
Economic leverage at period-end (5) | | |
6.1:1
| | |
6.1:1
| | |
5.8:1
|
|
Capital ratio at period-end
| | |
13.3%
|
|
|
13.2%
|
|
|
14.0%
|
| | | | | | | | |
|
Performance Related Metrics: | | | | | | | | | |
|
Book value per common share
| | | $11.83 | | | $11.50 | | | $11.99 |
|
GAAP net income (loss) per common share
| | | $0.70 | | |
($0.32)
| | |
($0.68)
|
|
Core earnings per common share*
| | | $0.29 | | | $0.29 | | | $0.30 |
|
Annualized return (loss) on average equity
| | |
23.55%
| | |
(9.60%)
| | |
(20.18%)
|
|
Annualized core return on average equity*
| | |
10.09%
| | |
9.73%
| | |
9.67%
|
|
Net interest margin
| | |
1.40%
| | |
1.15%
| | |
1.27%
|
|
Core net interest margin*
| | |
1.42%
| | |
1.54%
| | |
1.65%
|
|
Average yield on interest earning assets (6) | | |
2.70%
| | |
2.48%
| | |
2.48%
|
|
Core average yield on interest earning assets *(6) | | |
2.72%
| | |
2.95%
| | |
2.94%
|
|
Average cost of interest bearing liabilities (7) | | |
1.57%
| | |
1.68%
| | |
1.65%
|
|
Net interest spread
| | |
1.13%
| | |
0.80%
| | |
0.83%
|
|
Core net interest spread*
| | |
1.15%
|
|
|
1.27%
|
|
|
1.29%
|
|
*
|
|
Represents a non-GAAP financial measure. Please refer to the
‘Non-GAAP Financial Measures’ section for additional information.
|
(1)
| |
Includes loans held for sale. Excluding loans held for sale, the
weighted average levered return on commercial real estate debt and
preferred equity was 8.99%, 9.09% and 9.38% at September 30, 2016,
June 30, 2016, and September 30, 2015, respectively.
|
(2)
| |
Measures total notional balances of interest rate swaps, interest
rate swaptions and futures relative to repurchase agreements, other
secured financing and TBA notional outstanding.
|
(3)
| |
Excludes forward starting swaps.
|
(4)
| |
Debt consists of repurchase agreements, other secured financing,
Convertible Senior Notes, securitized debt, participation sold and
mortgages payable. Securitized debt, participation sold and
mortgages payable are non-recourse to the Company.
|
(5)
| |
Computed as the sum of recourse debt, TBA derivative notional
outstanding and net forward purchases of investments divided by
total equity.
|
(6)
| |
Average interest earning assets reflects the average amortized cost
of our investments during the period.
|
(7)
| |
Includes interest expense on interest rate swaps used to hedge cost
of funds.
|
Other Information
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 our
commercial business; our ability to grow our residential mortgage credit
business; credit risks related to our investments in credit risk
transfer securities, residential mortgage-backed securities and related
residential mortgage credit assets, commercial real estate assets and
corporate debt; risks related to investments in mortgage servicing
rights and ownership of a servicer; any potential business disruption
following the acquisition of Hatteras; our ability to consummate any
contemplated investment opportunities; changes in government regulations
affecting our business; our ability to maintain our qualification as a
REIT; and our ability to maintain our exemption from registration under
the Investment Company Act of 1940, as amended. 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, except as required by law.
Annaly’s principal business objectives are to generate net income for
distribution to its shareholders from its investments and capital
preservation. 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 supplemental investor presentation and a
financial summary for the benefit of its shareholders. Both the Third
Quarter 2016 Investor Presentation and the Third Quarter 2016 Financial
Summary can be found at the Company’s website (www.annaly.com)
in the Investors section under Investor Presentations.
Conference Call
The Company will hold the third quarter 2016 earnings conference call on
November 3, 2016 at 10:00 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 2832295. 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
10095019. If you would like to be added to the e-mail distribution list,
please visit www.annaly.com,
click on Investors, then select Email Alerts and complete the email
notification form.
| ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION |
| (dollars in thousands, except per share data) |
|
|
| |
| |
| |
| |
| |
| | | For the quarters ended |
| | | September 30, | | June 30, | | March 31, | | December 31, | | September 30, |
| | | 2016 | | 2016 | | 2016 | | 20151 | | 2015 |
| | | (Unaudited) |
| (Unaudited) |
| (Unaudited) |
|
|
| (Unaudited) |
| ASSETS | | | | | | | | | | | |
| | | | | | | | | | |
|
|
Cash and cash equivalents
| | |
$
|
2,382,188
| | |
$
|
2,735,250
| | |
$
|
2,416,136
| | |
$
|
1,769,258
| | |
$
|
2,237,423
| |
|
Investments, at fair value:
| | | | | | | | | | | |
|
Agency mortgage-backed securities
| | | |
73,476,105
| | | |
64,862,992
| | | |
65,439,824
| | | |
65,718,224
| | | |
65,806,640
| |
|
Agency debentures
| | | |
-
| | | |
-
| | | |
157,035
| | | |
152,038
| | | |
413,115
| |
|
Credit risk transfer securities
| | | |
669,295
| | | |
520,321
| | | |
501,167
| | | |
456,510
| | | |
330,727
| |
|
Non-Agency mortgage-backed securities
| | | |
1,460,261
| | | |
1,197,549
| | | |
1,157,507
| | | |
906,722
| | | |
490,037
| |
|
Residential mortgage loans (2) | | | |
310,148
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| |
|
Mortgage servicing rights
| | | |
492,169
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| |
|
Commercial real estate debt investments (3) | | | |
4,319,077
| | | |
4,361,972
| | | |
4,401,725
| | | |
2,911,828
| | | |
2,881,659
| |
|
Commercial real estate debt and preferred equity, held for
investment (4) | | | |
1,070,197
| | | |
1,137,971
| | | |
1,177,468
| | | |
1,348,817
| | | |
1,316,595
| |
|
Commercial loans held for sale, net
| | | |
144,275
| | | |
164,175
| | | |
278,600
| | | |
278,600
| | | |
476,550
| |
|
Investments in commercial real estate
| | | |
500,027
| | | |
504,605
| | | |
527,786
| | | |
535,946
| | | |
301,447
| |
|
Corporate debt
| | | |
716,831
| | | |
669,612
| | | |
639,481
| | | |
488,508
| | | |
424,974
| |
|
Interest rate swaps, at fair value
| | | |
113,253
| | | |
146,285
| | | |
93,312
| | | |
19,642
| | | |
39,295
| |
|
Other derivatives, at fair value
| | | |
87,921
| | | |
137,490
| | | |
77,449
| | | |
22,066
| | | |
87,516
| |
|
Receivable for investments sold
| | | |
493,839
| | | |
697,943
| | | |
2,220
| | | |
121,625
| | | |
127,571
| |
|
Accrued interest and dividends receivable
| | | |
260,583
| | | |
227,225
| | | |
232,180
| | | |
231,336
| | | |
228,169
| |
|
Receivable for investment advisory income
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| | | |
3,992
| |
|
Other assets
| | | |
301,419
| | | |
237,959
| | | |
234,407
| | | |
119,422
| | | |
67,738
| |
|
Goodwill
| | | |
71,815
| | | |
71,815
| | | |
71,815
| | | |
71,815
| | | |
71,815
| |
|
Intangible assets, net
| | |
|
39,903
|
|
|
|
43,306
|
|
|
|
35,853
|
|
|
|
38,536
|
|
|
|
33,424
|
|
|
Total assets
| | |
$
|
86,909,306
|
|
|
$
|
77,716,470
|
|
|
$
|
77,443,965
|
|
|
$
|
75,190,893
|
|
|
$
|
75,338,687
|
|
| | | | | | | | | | |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
| | | | | | | | | | |
|
|
Liabilities:
| | | | | | | | | | | |
|
Repurchase agreements
| | |
$
|
61,784,121
| | |
$
|
53,868,385
| | |
$
|
54,448,141
| | |
$
|
56,230,860
| | |
$
|
56,449,364
| |
|
Other secured financing
| | | |
3,804,742
| | | |
3,588,326
| | | |
3,588,326
| | | |
1,845,048
| | | |
359,970
| |
|
Securitized debt of consolidated VIEs (5) | | | |
3,712,821
| | | |
3,748,289
| | | |
3,802,682
| | | |
2,540,711
| | | |
2,553,398
| |
|
Participation sold
| | | |
12,976
| | | |
13,079
| | | |
13,182
| | | |
13,286
| | | |
13,389
| |
|
Mortgages payable
| | | |
327,632
| | | |
327,643
| | | |
334,765
| | | |
334,707
| | | |
166,697
| |
|
Interest rate swaps, at fair value
| | | |
2,919,492
| | | |
3,208,986
| | | |
2,782,961
| | | |
1,677,571
| | | |
2,160,350
| |
|
Other derivatives, at fair value
| | | |
73,445
| | | |
154,017
| | | |
69,171
| | | |
49,963
| | | |
113,626
| |
|
Dividends payable
| | | |
269,111
| | | |
277,479
| | | |
277,456
| | | |
280,779
| | | |
284,348
| |
|
Payable for investments purchased
| | | |
454,237
| | | |
746,090
| | | |
250,612
| | | |
107,115
| | | |
744,378
| |
|
Accrued interest payable
| | | |
173,320
| | | |
159,435
| | | |
163,983
| | | |
151,843
| | | |
145,554
| |
|
Accounts payable and other liabilities
| | |
|
115,606
|
|
|
|
62,868
|
|
|
|
54,679
|
|
|
|
53,088
|
|
|
|
63,280
|
|
|
Total liabilities
| | |
|
73,647,503
|
|
|
|
66,154,597
|
|
|
|
65,785,958
|
|
|
|
63,284,971
|
|
|
|
63,054,354
|
|
| | | | | | | | | | |
|
|
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
| |
|
7.625% Series E Cumulative Redeemable Preferred Stock:
11,500,000 authorized, issued and outstanding
| | | |
287,500
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| |
Common stock, par value $0.01 per share, 1,945,437,500,
1,956,937,500,
1,956,937,500, 1,956,937,500 and 1,956,937,500
authorized, 1,018,857,866,
924,929,607, 924,853,133,
935,929,561 and 947,826,176 issued and
outstanding,
respectively
| | | |
10,189
| | | |
9,249
| | | |
9,249
| | | |
9,359
| | | |
9,478
| |
|
Additional paid-in capital
| | | |
15,578,677
| | | |
14,575,426
| | | |
14,573,760
| | | |
14,675,768
| | | |
14,789,320
| |
|
Accumulated other comprehensive income (loss)
| | | |
1,119,677
| | | |
1,117,046
| | | |
640,366
| | | |
(377,596
|
)
| | |
262,855
| |
|
Accumulated deficit
| | |
|
(4,655,440
|
)
|
|
|
(5,061,565
|
)
|
|
|
(4,487,982
|
)
|
|
|
(3,324,616
|
)
|
|
|
(3,695,884
|
)
|
|
Total stockholders’ equity
| | | |
13,253,662
| | | |
11,553,215
| | | |
11,648,452
| | | |
11,895,974
| | | |
12,278,828
| |
|
Noncontrolling interest
| | |
|
8,141
|
|
|
|
8,658
|
|
|
|
9,555
|
|
|
|
9,948
|
|
|
|
5,505
|
|
|
Total equity
| | |
|
13,261,803
|
|
|
|
11,561,873
|
|
|
|
11,658,007
|
|
|
|
11,905,922
|
|
|
|
12,284,333
|
|
|
Total liabilities and equity
| | |
$
|
86,909,306
|
|
|
$
|
77,716,470
|
|
|
$
|
77,443,965
|
|
|
$
|
75,190,893
|
|
|
$
|
75,338,687
|
|
|
(1)
|
|
|
Derived from the audited consolidated financial statements at
December 31, 2015.
|
|
(2)
| | |
Includes securitized mortgage loans of a consolidated VIE carried
at fair value of $176.7 million at September 30, 2016.
|
|
(3)
| | |
Includes senior securitized commercial mortgage loans of
consolidated VIEs with a carrying value of $4.0 billion, $4.0
billion, $4.0 billion, $2.6 billion and $2.6 billion at September
30, 2016, June 30, 2016, March 31, 2016, December 31, 2015 and
September 30, 2015, respectively.
|
|
(4)
| | |
Includes senior securitized commercial mortgage loans of
consolidated VIE with a carrying value of $128.9 million, $187.2
million, $211.9 million, $262.7 million and $314.9 million at
September 30, 2016, June 30, 2016, March 31, 2016, December 31, 2015
and September 30, 2015, respectively.
|
|
(5)
| | |
Includes securitized debt of consolidated VIEs carried at fair value
of $3.7 billion, $3.7 billion, $3.7 billion, $2.4 billion and $2.4
billion at September 30, 2016, June 30, 2016, March 31, 2016,
December 31, 2015 and September 30, 2015, 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 |
| | | September 30, | | June 30, | | March 31, | | December 31, | | September 30, |
| | | 2016 |
|
| 2016 |
|
| 2016 |
|
| 2015 |
|
| 2015 |
|
|
Interest income
| | |
$
|
558,668
| | |
$
|
457,118
| | |
$
|
388,143
| | |
$
|
576,580
| | |
$
|
450,726
| |
|
Interest expense
| | |
|
174,154
|
|
|
|
152,755
|
|
|
|
147,447
|
|
|
|
118,807
|
|
|
|
110,297
|
|
|
Net interest income
| | |
|
384,514
|
|
|
|
304,363
|
|
|
|
240,696
|
|
|
|
457,773
|
|
|
|
340,429
|
|
|
Realized and unrealized gains (losses):
| | | | | | | | | | | |
|
Realized gains (losses) on interest rate swaps(1) | | | |
(124,572
|
)
| | |
(130,762
|
)
| | |
(147,475
|
)
| | |
(159,487
|
)
| | |
(162,304
|
)
|
|
Realized gains (losses) on termination of interest rate swaps
| | | |
1,337
| | | |
(60,064
|
)
| | |
-
| | | |
-
| | | |
-
| |
|
Unrealized gains (losses) on interest rate swaps
| | |
|
256,462
|
|
|
|
(373,220
|
)
|
|
|
(1,031,720
|
)
|
|
|
463,126
|
|
|
|
(822,585
|
)
|
|
Subtotal
| | |
|
133,227
|
|
|
|
(564,046
|
)
|
|
|
(1,179,195
|
)
|
|
|
303,639
|
|
|
|
(984,889
|
)
|
|
Net gains (losses) on disposal of investments
| | | |
14,447
| | | |
12,535
| | | |
(1,675
|
)
| | |
(7,259
|
)
| | |
(7,943
|
)
|
|
Net gains (losses) on trading assets
| | | |
162,981
| | | |
81,880
| | | |
125,189
| | | |
42,584
| | | |
108,175
| |
|
Net unrealized gains (losses) on investments measured at fair value
through earnings
| | | |
29,675
| | | |
(54,154
|
)
| | |
128
| | | |
(62,703
|
)
| | |
(24,501
|
)
|
|
Bargain purchase gain
| | |
|
72,576
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Subtotal
| | |
|
279,679
|
|
|
|
40,261
|
|
|
|
123,642
|
|
|
|
(27,378
|
)
|
|
|
75,731
|
|
|
Total realized and unrealized gains (losses)
| | |
|
412,906
|
|
|
|
(523,785
|
)
|
|
|
(1,055,553
|
)
|
|
|
276,261
|
|
|
|
(909,158
|
)
|
|
Other income (loss):
| | | | | | | | | | | |
|
Investment advisory income
| | | |
-
| | | |
-
| | | |
-
| | | |
-
| | | |
3,780
| |
|
Other income (loss)
| | |
|
29,271
|
|
|
|
(9,930
|
)
|
|
|
(6,115
|
)
|
|
|
(10,447
|
)
|
|
|
(13,455
|
)
|
|
Total other income (loss)
| | |
|
29,271
|
|
|
|
(9,930
|
)
|
|
|
(6,115
|
)
|
|
|
(10,447
|
)
|
|
|
(9,675
|
)
|
|
General and administrative expenses:
| | | | | | | | | | | |
|
Compensation and management fee
| | | |
38,709
| | | |
36,048
| | | |
36,997
| | | |
37,193
| | | |
37,450
| |
|
Other general and administrative expenses
| | |
|
59,028
|
|
|
|
13,173
|
|
|
|
10,948
|
|
|
|
10,643
|
|
|
|
12,007
|
|
|
Total general and administrative expenses
| | |
|
97,737
|
|
|
|
49,221
|
|
|
|
47,945
|
|
|
|
47,836
|
|
|
|
49,457
|
|
|
Income (loss) before income taxes
| | | |
728,954
| | | |
(278,573
|
)
| | |
(868,917
|
)
| | |
675,751
| | | |
(627,861
|
)
|
|
Income taxes
| | |
|
(1,926
|
)
|
|
|
(76
|
)
|
|
|
(837
|
)
|
|
|
6,085
|
|
|
|
(370
|
)
|
|
Net income (loss)
| | | |
730,880
| | | |
(278,497
|
)
| | |
(868,080
|
)
| | |
669,666
| | | |
(627,491
|
)
|
|
Net income (loss) attributable to noncontrolling interest
| | |
|
(336
|
)
|
|
|
(385
|
)
|
|
|
(162
|
)
|
|
|
(373
|
)
|
|
|
(197
|
)
|
|
Net income (loss) attributable to Annaly
| | | |
731,216
| | | |
(278,112
|
)
| | |
(867,918
|
)
| | |
670,039
| | | |
(627,294
|
)
|
|
Dividends on preferred stock
| | |
|
22,803
|
|
|
|
17,992
|
|
|
|
17,992
|
|
|
|
17,992
|
|
|
|
17,992
|
|
|
Net income (loss) available (related) to common stockholders
| | |
$
|
708,413
|
|
|
$
|
(296,104
|
)
|
|
$
|
(885,910
|
)
|
|
$
|
652,047
|
|
|
$
|
(645,286
|
)
|
|
Net income (loss) per share available (related) to common
stockholders:
| | | | | |
|
Basic
| | |
$
|
0.70
|
|
|
$
|
(0.32
|
)
|
|
$
|
(0.96
|
)
|
|
$
|
0.69
|
|
|
$
|
(0.68
|
)
|
|
Diluted
| | |
$
|
0.70
|
|
|
$
|
(0.32
|
)
|
|
$
|
(0.96
|
)
|
|
$
|
0.69
|
|
|
$
|
(0.68
|
)
|
|
Weighted average number of common shares outstanding:
| | | | | | | | | |
|
Basic
| | |
|
1,007,607,893
|
|
|
|
924,887,316
|
|
|
|
926,813,588
|
|
|
|
945,072,058
|
|
|
|
947,795,500
|
|
|
Diluted
| | |
|
1,007,963,406
|
|
|
|
924,887,316
|
|
|
|
926,813,588
|
|
|
|
945,326,098
|
|
|
|
947,795,500
|
|
|
Net income (loss)
| | |
$
|
730,880
|
|
|
$
|
(278,497
|
)
|
|
$
|
(868,080
|
)
|
|
$
|
669,666
|
|
|
$
|
(627,491
|
)
|
|
Other comprehensive income (loss):
| | | | | | | | | | | |
|
Unrealized gains (losses) on available-for-sale securities
| | | |
18,237
| | | |
483,930
| | | |
1,017,707
| | | |
(648,106
|
)
| | |
609,725
| |
|
Reclassification adjustment for net (gains) losses included in net
income (loss)
| | |
|
(15,606
|
)
|
|
|
(7,250
|
)
|
|
|
255
|
|
|
|
7,655
|
|
|
|
8,095
|
|
|
Other comprehensive income (loss)
| | |
|
2,631
|
|
|
|
476,680
|
|
|
|
1,017,962
|
|
|
|
(640,451
|
)
|
|
|
617,820
|
|
|
Comprehensive income (loss)
| | | |
733,511
| | | |
198,183
| | | |
149,882
| | | |
29,215
| | | |
(9,671
|
)
|
|
Comprehensive income (loss) attributable to noncontrolling interest
| | |
|
(336
|
)
|
|
|
(385
|
)
|
|
|
(162
|
)
|
|
|
(373
|
)
|
|
|
(197
|
)
|
|
Comprehensive income (loss) attributable to Annaly
| | |
$
|
733,847
|
|
|
$
|
198,568
|
|
|
$
|
150,044
|
|
|
$
|
29,588
|
|
|
$
|
(9,474
|
)
|
|
(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.
|
|
|
| |
|
| |
| ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
| (UNAUDITED) |
| (dollars in thousands, except per share data) |
| | | | | |
|
| | | For the nine months ended |
| | | September 30, | | | September 30, |
| | | 2016 |
|
| 2015 |
|
Net interest income:
| | | | | | |
|
Interest income
| | |
$
|
1,403,929
| | | |
$
|
1,594,117
| |
|
Interest expense
| | |
|
474,356
|
|
|
|
|
352,789
|
|
|
Net interest income
| | |
|
929,573
|
|
|
|
|
1,241,328
|
|
|
Realized and unrealized gains (losses):
| | | | | | |
|
Realized gains (losses) on interest rate swaps(1) | | | |
(402,809
|
)
| | | |
(465,008
|
)
|
|
Realized gains (losses) on termination of interest rate swaps
| | | |
(58,727
|
)
| | | |
(226,462
|
)
|
|
Unrealized gains (losses) on interest rate swaps
| | |
|
(1,148,478
|
)
|
|
|
|
(587,995
|
)
|
|
Subtotal
| | |
|
(1,610,014
|
)
|
|
|
|
(1,279,465
|
)
|
|
Net gains (losses) on disposal of investments
| | | |
25,307
| | | | |
58,246
| |
|
Net gains (losses) on trading assets
| | | |
370,050
| | | | |
(12,961
|
)
|
|
Net unrealized gains (losses) on investments measured at fair value
through earnings
| | | |
(24,351
|
)
| | | |
(40,466
|
)
|
|
Bargain purchase gain
| | | |
72,576
| | | | |
-
| |
|
Impairment of goodwill
| | |
|
-
|
|
|
|
|
(22,966
|
)
|
|
Subtotal
| | |
|
443,582
|
|
|
|
|
(18,147
|
)
|
|
Total realized and unrealized gains (losses)
| | |
|
(1,166,432
|
)
|
|
|
|
(1,297,612
|
)
|
|
Other income (loss):
| | | | | | |
|
Investment advisory income
| | | |
-
| | | | |
24,848
| |
|
Dividend income from affiliate
| | | |
-
| | | | |
8,636
| |
|
Other income (loss)
| | |
|
13,226
|
|
|
|
|
(36,754
|
)
|
|
Total other income (loss)
| | |
|
13,226
|
|
|
|
|
(3,270
|
)
|
|
General and administrative expenses:
| | | | | | |
|
Compensation and management fee
| | | |
111,754
| | | | |
113,093
| |
|
Other general and administrative expenses
| | |
|
83,149
|
|
|
|
|
39,311
|
|
|
Total general and administrative expenses
| | |
|
194,903
|
|
|
|
|
152,404
|
|
|
Income (loss) before income taxes
| | | |
(418,536
|
)
| | | |
(211,958
|
)
|
|
Income taxes
| | |
|
(2,839
|
)
|
|
|
|
(8,039
|
)
|
|
Net income (loss)
| | | |
(415,697
|
)
| | | |
(203,919
|
)
|
|
Net income (loss) attributable to noncontrolling interest
| | |
|
(883
|
)
|
|
|
|
(436
|
)
|
|
Net income (loss) attributable to Annaly
| | | |
(414,814
|
)
| | | |
(203,483
|
)
|
|
Dividends on preferred stock
| | |
|
58,787
|
|
|
|
|
53,976
|
|
|
Net income (loss) available (related) to common stockholders
| | |
$
|
(473,601
|
)
|
|
|
$
|
(257,459
|
)
|
|
Net income (loss) per share available (related) to common
stockholders:
| | | | | | |
|
Basic
| | |
$
|
(0.50
|
)
|
|
|
$
|
(0.27
|
)
|
|
Diluted
| | |
$
|
(0.50
|
)
|
|
|
$
|
(0.27
|
)
|
|
Weighted average number of common shares outstanding:
| | | | | | |
|
Basic
| | |
|
953,301,855
|
|
|
|
|
947,732,735
|
|
|
Diluted
| | |
|
953,301,855
|
|
|
|
|
947,732,735
|
|
|
Net income (loss)
| | |
$
|
(415,697
|
)
|
|
|
$
|
(203,919
|
)
|
|
Other comprehensive income (loss):
| | | | | | |
|
Unrealized gains (losses) on available-for-sale securities
| | | |
1,519,874
| | | | |
116,154
| |
|
Reclassification adjustment for net (gains) losses included in net
income (loss)
| | |
|
(22,601
|
)
|
|
|
|
(58,182
|
)
|
|
Other comprehensive income (loss)
| | |
|
1,497,273
|
|
|
|
|
57,972
|
|
|
Comprehensive income (loss)
| | | |
1,081,576
| | | | |
(145,947
|
)
|
|
Comprehensive income (loss) attributable to noncontrolling interest
| | |
|
(883
|
)
|
|
|
|
(436
|
)
|
|
Comprehensive income (loss) attributable to Annaly
| | |
$
|
1,082,459
|
|
|
|
$
|
(145,511
|
)
|
|
(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.
|
Non-GAAP Financial Measures
To supplement its consolidated financial statements, which are prepared
and presented in accordance with U.S. generally accepted accounting
principles (“GAAP”), the Company provides the following non-GAAP
financial measures. These measures should not be considered a substitute
for, or superior to, financial measures computed in accordance with GAAP.
|
|
-
Core earnings
-
Core earnings per common share;
-
Annualized core return on average equity;
-
Core interest income;
-
Economic interest expense;
| -
Economic core net interest income;
-
Core average yield on interest earning assets;
-
Core net interest margin; and
-
Core net interest spread
|
These non-GAAP measures provide additional detail to enhance investor
understanding of the Company’s period-over-period operating performance
and business trends, as well as for assessing the Company’s performance
versus that of industry peers.
Additional information pertaining to the Company’s use of these non-GAAP
financial measures, including discussion of how each such measure is
useful to investors, and reconciliations to their most directly
comparable GAAP results are provided below.
Core earnings, core earnings per common share and annualized core
return on average equity
One of the Company’s principal business objectives is to generate net
income by earning a net interest spread on its investment portfolio,
which is a function of the Company’s interest income from its investment
portfolio less financing, hedging and operating costs. Core earnings,
which is comprised of interest income plus TBA dollar roll income,iii
less financing and hedging costsiv and general and
administrative expenses, is used by management to measure its progress
in achieving this objective. Accordingly, core earnings, includes MSR
amortization and excludes gains and losses on disposals of investments
and termination of interest rate swaps, unrealized gains and losses on
interest rate swaps and investments measured at fair value through
earnings, net gains and losses on trading assets, impairment losses, net
income (loss) attributable to noncontrolling interest, the premium
amortization adjustment and certain non-recurring gains and losses. The
Company believes these measures provide management and investors with
additional details regarding the Company’s underlying operating results
and investment portfolio trends by (i) making adjustments to account for
the disparate reporting of changes in fair value where certain
instruments are reflected in GAAP net income (loss) while others are
reflected in other comprehensive income (loss), and (ii) by excluding
certain unrealized, non-cash or episodic components of GAAP net income
(loss) in order to provide additional transparency into the operating
performance of the Company’s portfolio. Annualized core return on
average equity, which is calculated by dividing core earnings over
average stockholders’ equity, provides investors with additional detail
on the core earnings generated by the Company’s invested equity capital.
The following table presents a reconciliation of GAAP financial results
to non-GAAP core earnings for the periods presented.
|
|
| For the quarters ended |
| | | September 30, 2016 |
| June 30, 2016 |
| September 30, 2015 |
| | |
|
| (dollars in thousands) |
| |
|
GAAP net income (loss)
| | |
$
|
730,880
| |
$
|
(278,497)
| |
$
|
(627,491)
|
|
Less:
| | | | | | | |
|
Realized (gains) losses on termination of interest rate swaps
| | | |
(1,337)
| | |
60,064
| | |
-
|
|
Unrealized (gains) losses on interest rate swaps
| | | |
(256,462)
| | |
373,220
| | |
822,585
|
|
Net (gains) losses on disposal of investments
| | | |
(14,447)
| | |
(12,535)
| | |
7,943
|
|
Net (gains) losses on trading assets
| | | |
(162,981)
| | |
(81,880)
| | |
(108,175)
|
Net unrealized (gains) losses on investments measured at fair
value through
earnings
| | | |
(29,675)
| | |
54,154
| | |
24,501
|
|
Bargain purchase gain
| | | |
(72,576)
| | |
-
| | |
-
|
|
Corporate acquisition related expenses (1) | | | |
46,724
| | |
2,163
| | |
-
|
|
Net (income) loss attributable to noncontrolling interest
| | | |
336
| | |
385
| | |
197
|
|
Premium amortization adjustment cost (benefit)
| | | |
3,891
| | |
85,583
| | |
83,136
|
|
Plus:
| | | | | | | |
|
TBA dollar roll income (2) | | | |
90,174
| | |
79,519
| | |
98,041
|
|
MSR amortization (3) | | |
|
(21,634)
|
|
|
-
|
|
|
-
|
|
Core earnings*
| | |
$
|
312,893
|
|
$
|
282,176
|
|
$
|
300,737
|
|
GAAP net income (loss) per average common share
| | |
$
|
0.70
|
|
$
|
(0.32)
|
|
$
|
(0.68)
|
|
Core earnings per average common share*
| | |
$
|
0.29
|
|
$
|
0.29
|
|
$
|
0.30
|
*
|
|
|
Represents a non-GAAP financial measure.
|
|
(1)
| | |
Represents non-recurring transaction costs incurred in connection
with the Company’s acquisition of Hatteras.
|
(2)
| | |
Represents a component of Net gains (losses) on trading assets.
|
(3)
| | |
Represents the portion of changes in fair value that is
attributable to the realization of estimated cash flows on the
Company’s MSR portfolio and is reported as a component of Net
unrealized gains (losses) on investments measured at fair value.
|
| iiiTBA dollar roll transactions are accounted for as
derivatives, with gains and losses reflected as a component of Net
gains (losses) on trading assets in the Company’s Consolidated
Statements of Comprehensive Income (Loss). TBA dollar roll income
represents the economic equivalent of interest income on the
underlying security less the implied cost of financing.
|
| ivThe interest component of hedging costs are reported as
realized gains (losses) on interest rate swaps in the Company’s
Consolidated Statements of Comprehensive Income (Loss).
|
Core interest income, economic interest expense and economic core
net interest income
Core interest income represents interest income excluding the effect of
the premium amortization adjustment (“PAA”), and serves as the basis for
deriving core average yield on interest bearing assets, core net
interest spread and core net interest margin, which are discussed below.
The Company believes this measure provides management and investors with
additional detail to enhance their understanding of the Company’s
operating results and trends by excluding the component of premium
amortization expense representing the cumulative effect of
quarter-over-quarter changes in estimated long-term prepayment speeds
related to the Company’s Agency mortgage-backed securities (other than
interest-only securities), which can obscure underlying trends in the
performance of the portfolio.
Economic interest expense is comprised of interest expense, as computed
in accordance with GAAP, plus interest expense on interest rate swaps
used to hedge the cost of funds, which is a component of Realized gains
(losses) on interest rate swaps in the Company’s Consolidated Statements
of Comprehensive Income (Loss). The Company uses interest rate swaps to
manage its exposure to changing interest rates on its repurchase
agreements by economically hedging cash flows associated with these
borrowings. Accordingly, adding the contractual interest payments on
interest rate swaps to interest expense, as computed in accordance with
GAAP, reflects the total contractual interest expense and thus, provides
investors with additional information about the cost of our financing
strategy.
Similarly, economic core net interest income, as computed below,
provides investors with additional information to enhance their
understanding of the net economics of our primary business operations.
|
|
| For the quarters ended |
| | | September 30, 2016 |
| June 30, 2016 |
| September 30, 2015 |
Core Interest Income Reconciliation | | |
|
| (dollars in thousands) |
| |
|
GAAP interest income
| | |
$
|
558,668
| |
$
|
457,118
| |
$
|
450,726
|
|
Premium amortization adjustment
| | |
|
3,891
|
|
|
85,583
|
|
|
83,136
|
|
Core interest income*
| | |
$
|
562,559
|
|
$
|
542,701
|
|
$
|
533,862
|
| | | | | | |
|
Economic Interest Expense
Reconciliation | | | | | | | |
|
GAAP interest expense
| | |
$
|
174,154
| |
$
|
152,755
| |
$
|
110,297
|
|
Add:
| | | | | | | |
|
Interest expense on interest rate swaps used to hedge cost of funds
| | |
|
103,100
|
|
|
108,301
|
|
|
137,744
|
|
Economic interest expense*
| | |
$
|
277,254
|
|
$
|
261,056
|
|
$
|
248,041
|
| | | | | | |
|
Economic Core Net Interest Income
Reconciliation | | | | | | | |
|
Core interest income*
| | |
$
|
562,559
| |
$
|
542,701
| |
$
|
533,862
|
|
Less:
| | | | | | | |
|
Economic interest expense*
| | |
|
277,254
|
|
|
261,056
|
|
|
248,041
|
|
Economic core net interest income*
| | |
$
|
285,305
|
|
$
|
281,645
|
|
$
|
285,821
|
* Represents a non-GAAP financial measure.
Core average yield on interest earnings assets, core net interest
margin and core net interest spread
Core net interest spread, which is the difference between the core
average yield on interest earning assets and the average cost of
interest bearing liabilities, and core net interest margin, which is
calculated by dividing the economic core net interest income by average
interest earning assets, provide management with additional measures of
the Company’s profitability that management relies upon in monitoring
the performance of the business.
Disclosure of these measures, which are presented below, provides
investors with additional detail regarding how management evaluates the
Company’s performance.
|
|
| For the quarters ended |
| | | September 30, 2016 |
| June 30, 2016 |
| September 30, 2015 |
Economic Core Metrics | | |
|
| (dollars in thousands) |
| |
|
Core interest income*
| | |
$
|
562,559
| |
$
|
542,701
| |
$
|
533,862
|
|
Average interest earning assets
| | |
$
|
82,695,270
| |
$
|
73,587,753
| |
$
|
72,633,314
|
|
Core average yield on interest earning assets*
| | |
|
2.72%
|
|
|
2.95%
|
|
|
2.94%
|
|
Economic interest expense*
| | |
$
|
277,254
| |
$
|
261,056
| |
$
|
248,041
|
|
Average interest bearing liabilities
| | |
$
|
70,809,712
| |
$
|
62,049,474
| |
$
|
59,984,298
|
|
Average cost of interest bearing liabilities
| | |
|
1.57%
|
|
|
1.68%
|
|
|
1.65%
|
|
Core net interest spread*
| | |
|
1.15%
|
|
|
1.27%
|
|
|
1.29%
|
|
Core net interest margin*
| | |
|
1.42%
|
|
|
1.54%
|
|
|
1.65%
|
* Represents a non-GAAP financial measure.
View source version on businesswire.com: http://www.businesswire.com/news/home/20161102006292/en/
Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com
Source: Annaly Capital Management, Inc.