Document Information
Document Information | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Document information | |
Document type | 10-Q |
Amendment flag | false |
Document period end date | 2009-09-30 |
Entity Information
Entity Information (USD $) | |||
9 Months Ended
Sep. 30, 2009 | Nov. 04, 2009
| Jun. 30, 2008
| |
Entity Information [Line Items] | |||
Entity registrant name | ANNALY CAPITAL MANAGEMENT INC | ||
Entity central index key | 0001043219 | ||
Current fiscal year end date | --12-31 | ||
Entity well known seasoned issuer | Yes | ||
Entity voluntary filers | No | ||
Entity current reporting status | Yes | ||
Entity filer category | Large Accelerated Filer | ||
Entity public float | $8,306,036,131 | ||
Entity Listings [Line Items] | |||
Entity common stock shares outstanding | 552,778,531 |
Consolidated Statements of Fina
Consolidated Statements of Financial Condition (USD $) | |||||||||||||||||||
In Thousands | Sep. 30, 2009
| Dec. 31, 2008
| |||||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $1,723,341 | $909,353 | [1] | ||||||||||||||||
Reverse repurchase agreements with affiliates | 226,264 | 562,119 | [1] | ||||||||||||||||
Reverse repurchase agreements | 100,000 | 0 | [1] | ||||||||||||||||
Mortgage-Backed Securities, at fair value | 66,837,761 | 55,046,995 | [1] | ||||||||||||||||
Agency debentures, at fair value | 625,615 | 598,945 | [1] | ||||||||||||||||
Available for sale equity securities, at fair value | 171,834 | 52,795 | [1] | ||||||||||||||||
Investment in affiliate, equity method | 67,906 | 0 | [1] | ||||||||||||||||
Receivable for Mortage-Backed Securities sold | 0 | 75,546 | [1] | ||||||||||||||||
Accrued interest and dividends receivable | 332,861 | 282,532 | [1] | ||||||||||||||||
Receivable from Prime Broker | 16,886 | 16,886 | [1] | ||||||||||||||||
Receivable for advisory and service fees | 12,807 | 6,103 | [1] | ||||||||||||||||
Intangible for customer relationships, net | 10,791 | 12,380 | [1] | ||||||||||||||||
Goodwill | 27,917 | 27,917 | [1] | ||||||||||||||||
Other assets | 8,695 | 6,044 | [1] | ||||||||||||||||
Total assets | 70,162,678 | 57,597,615 | [1] | ||||||||||||||||
Liabilities: | |||||||||||||||||||
Repurchase agreements | 55,842,840 | 46,674,885 | [1] | ||||||||||||||||
Payable for Investment Securities purchased | 3,644,420 | 2,062,030 | [1] | ||||||||||||||||
Accrued interest payable | 97,693 | 199,985 | [1] | ||||||||||||||||
Dividends payable | 381,411 | 270,736 | [1] | ||||||||||||||||
Accounts payable and other liabilities | 37,991 | 8,380 | [1] | ||||||||||||||||
Interest rate swaps, at fair value | 788,065 | 1,102,285 | [1] | ||||||||||||||||
Total liabilities | 60,792,420 | 50,318,301 | [1] | ||||||||||||||||
Commitments and contingencies (Note 15) | 0 | 0 | [1] | ||||||||||||||||
Stockholders' Equity: | |||||||||||||||||||
Common stock: par value $.01 per share; 987,987,500 shares authorized, 552,778,531 and 541,475,366 issued and outstanding, respectively | 5,528 | 5,415 | [1] | ||||||||||||||||
Additional paid-in capital | 7,811,356 | 7,633,438 | [1] | ||||||||||||||||
Accumulated other comprehensive income | 1,959,994 | 252,230 | [1] | ||||||||||||||||
Accumulated deficit | (646,822) | (884,899) | [1] | ||||||||||||||||
Total stockholders' equity | 9,307,144 | 7,183,272 | [1] | ||||||||||||||||
Total liabilities, Series B Cumulative Convertible Preferred Stock and stockholders' equity | 70,162,678 | 57,597,615 | [1] | ||||||||||||||||
Series B Cumulative Convertible Redeemable Preferred Stock Member | |||||||||||||||||||
Liabilities: | |||||||||||||||||||
6.00% Series B Cumulative Convertible Preferred Stock: 4,600,000 shares authorized 2,604,614 and 3,963,525 shares issued and outstanding, respectively | 63,114 | 96,042 | [1] | ||||||||||||||||
Series A Cumulative Redeemable Preferred Stock Member | |||||||||||||||||||
Stockholders' Equity: | |||||||||||||||||||
7.875% Series A Cumulative Redeemable Preferred Stock: 7,412,500 shares authorized, issued and outstanding | $177,088 | $177,088 | [1] | ||||||||||||||||
[1]Derived from the audited consolidated statement of financial condition at December 31, 2008. |
1_Consolidated Statements of Fi
Consolidated Statements of Financial Condition Parentheticals (USD $) | |||||||||||||||||||
Sep. 30, 2009
| Dec. 31, 2008
| ||||||||||||||||||
Common stock: | |||||||||||||||||||
Common Stock, par value per share | 0.01 | 0.01 | [1] | ||||||||||||||||
Common Stock, shares authorized | 987,987,500 | 987,987,500 | [1] | ||||||||||||||||
Common Stock, shares issued | 552,778,531 | 541,475,366 | [1] | ||||||||||||||||
Common Stock, shares outstanding | 552,778,531 | 541,475,366 | [1] | ||||||||||||||||
Series B Cumulative Convertible Redeemable Preferred Stock Member | |||||||||||||||||||
Preferred Stock: | |||||||||||||||||||
Preferred Stock, shares authorized | 4,600,000 | 4,600,000 | [1] | ||||||||||||||||
Preferred Stock, shares issued | 2,604,614 | 3,963,525 | [1] | ||||||||||||||||
Preferred Stock, shares outstanding | 2,604,614 | 3,963,525 | [1] | ||||||||||||||||
Series A Cumulative Redeemable Preferred Stock Member | |||||||||||||||||||
Preferred Stock: | |||||||||||||||||||
Preferred Stock, shares authorized | 7,412,500 | 7,412,500 | [1] | ||||||||||||||||
Preferred Stock, shares issued | 7,412,500 | 7,412,500 | [1] | ||||||||||||||||
Preferred Stock, shares outstanding | 7,412,500 | 7,412,500 | [1] | ||||||||||||||||
[1]Derived from the audited consolidated statement of financial condition at December 31, 2008. |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income (Unaudited) (USD $) | ||||
In Thousands, except Share data | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 |
Interest income | $744,523 | $810,659 | $2,170,939 | $2,375,146 |
Interest expense | 307,777 | 458,250 | 1,008,998 | 1,438,107 |
Net interest income | 436,746 | 352,409 | 1,161,941 | 937,039 |
Other income: | ||||
Investment advisory and service fees | 14,620 | 7,663 | 34,117 | 20,667 |
Gain (loss) on sale of Investment Securities | 591 | (1,066) | 7,978 | 11,181 |
Income from trading securities | 0 | 7,671 | 0 | 11,705 |
Dividend income from available-for-sale equity Securities | 5,398 | 580 | 9,537 | 2,101 |
Unrealized (loss) gain on interest rate swaps | (128,687) | 0 | 137,065 | 0 |
Loss on other-than-temporarily impaired securities | 0 | (31,834) | 0 | (31,834) |
Total other (loss) income | (108,078) | (16,986) | 188,697 | 13,820 |
Expenses: | ||||
Distribution fees | 478 | 299 | 1,338 | 1,302 |
General and administrative expenses | 33,344 | 25,455 | 93,272 | 76,665 |
Total expenses | 33,822 | 25,754 | 94,610 | 77,967 |
Income before income taxes and noncontrolling interest | 294,846 | 309,669 | 1,256,028 | 872,892 |
Income taxes | 9,657 | 7,538 | 23,892 | 19,675 |
Net income | 285,189 | 302,131 | 1,232,136 | 853,217 |
Noncontrolling interest | 0 | 0 | 0 | 58 |
Net income attributable to controlling interest | 285,189 | 302,131 | 1,232,136 | 853,159 |
Dividends on preferred stock | 4,625 | 5,335 | 13,876 | 16,042 |
Net income available to common shareholders | 280,564 | 296,796 | 1,218,260 | 837,117 |
Net income available per share to common shareholders-basic | 0.51 | 0.55 | 2.24 | 1.69 |
Net income available per share to common shareholders-diluted | 0.51 | 0.54 | 2.22 | 1.67 |
Weighted average number of common shares outstanding-basic | 547,611,480 | 538,706,131 | 544,970,392 | 495,583,506 |
Weighted average number of common shares outstanding - diluted | 553,376,285 | 547,882,488 | 550,913,871 | 504,609,331 |
Net income attributable to controlling interest | 285,189 | 302,131 | 1,232,136 | 853,159 |
Other comprehensive income (loss): | ||||
Unrealized gain (loss) on available-for-sale securities | 542,396 | (200,513) | 1,538,587 | (511,958) |
Unrealized gain on interest rate swaps | 56,055 | 16,740 | 177,155 | 13,838 |
Reclassification adjustment for net gains (losses) included in net income | (591) | 1,066 | (7,978) | (11,181) |
Other comprehensive income (loss) | 597,860 | (182,707) | 1,707,764 | (509,301) |
Comprehensive income attributable to controlling interest | $883,049 | $119,424 | $2,939,900 | $343,858 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | Preferred Stock
| Additional Paid-In Capital
| Accumulated Other Comprehensive Income
| Accumulated Deficit
| Common Stock
| Total
| |||||||||||||
BALANCE, DECEMBER 31, 2008 at Dec. 31, 2008 | $177,088 | $7,633,438 | $252,230 | ($884,899) | $5,415 | $7,183,272 | [1] | ||||||||||||
Net income attributable to controlling interest | 1,232,136 | 1,232,136 | |||||||||||||||||
Other comprehensive income | 1,707,764 | 1,707,764 | |||||||||||||||||
Exercise of stock options and stock grants | 1,042 | 1 | 1,043 | ||||||||||||||||
Stock option expense and long-term compensation expense | 2,871 | 2,871 | |||||||||||||||||
Conversion of Series B Cumulative Convertible Preferred Stock | 32,900 | 28 | 32,928 | ||||||||||||||||
Net proceeds from direct purchase and dividend reinvestment | 141,105 | 84 | 141,189 | ||||||||||||||||
Preferred Series A dividends declared, $1.4766 per share | (10,945) | (10,945) | |||||||||||||||||
Preferred Series B dividends declared, $1.125 per share | (2,931) | (2,931) | |||||||||||||||||
Common dividends declared, $1.79 per share | (980,183) | (980,183) | |||||||||||||||||
BALANCE, SEPTEMBER 30, 2009 at Sep. 30, 2009 | 177,088 | 7,811,356 | 1,959,994 | (646,822) | 5,528 | 9,307,144 | |||||||||||||
BALANCE, DECEMBER 31, 2008 at Jun. 30, 2009 | 177,088 | ||||||||||||||||||
BALANCE, SEPTEMBER 30, 2009 at Sep. 30, 2009 | $177,088 | ||||||||||||||||||
[1]Derived from the audited consolidated statement of financial condition at December 31, 2008. |
2_Consolidated Statement of Sto
Consolidated Statement of Stockholders' Equity Parentheticals (Unaudited) (USD $) | |
1/1/2009 - 9/30/2009
| |
Preferred Stock Dividends Declared, Per Share [Abstract] | |
Preferred Series A dividends declared | 1.4766 |
Preferred Series B dividends declared | 1.125 |
Common Stock Dividends Declared, Per Share [Abstract] | |
Common dividends declared | 1.79 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | 3 Months Ended
Sep. 30, 2009 | 3 Months Ended
Sep. 30, 2008 | 9 Months Ended
Sep. 30, 2009 | 9 Months Ended
Sep. 30, 2008 | |||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income | $285,189 | $302,131 | $1,232,136 | $853,217 | |||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||
Net income attributable to noncontrolling interest | 0 | 0 | 0 | (58) | |||||||||||||||
Amortization of Mortgage-Backed Securities premiums and discounts, net | 75,072 | 18,709 | 174,502 | 72,836 | |||||||||||||||
Amortization of intangibles | 407 | 878 | 1,909 | 3,116 | |||||||||||||||
Amortization of trading securities premiums and discounts | 0 | 0 | 0 | (3) | |||||||||||||||
(Gain) loss on sale of Investment Securities | (591) | 1,066 | (7,978) | (11,181) | |||||||||||||||
Stock option and long-term compensation expense | 938 | 846 | 2,871 | 1,685 | |||||||||||||||
Unrealized gain (loss) on interest rate swaps | 128,687 | 0 | (137,065) | 0 | |||||||||||||||
Equity in Investment with affiliate | 11 | 0 | 11 | 0 | |||||||||||||||
Net realized gain on trading investments | 0 | (5,448) | 0 | (12,579) | |||||||||||||||
Unrealized (appreciation) depreciation on trading investments | 0 | (1,784) | 0 | 2,994 | |||||||||||||||
Loss on other-than-temporarily impaired securities | 0 | 31,834 | 0 | 31,834 | |||||||||||||||
(Increase) decrease in accrued interest and dividends receivable | (25,357) | 2,689 | (47,542) | (29,661) | |||||||||||||||
(Increase) decrease in other assets | (3,455) | 614 | (2,972) | 1,941 | |||||||||||||||
Purchase of trading securities | 0 | (1,033) | 0 | (13,049) | |||||||||||||||
Proceeds from sale of trading securities | 0 | 21,061 | 0 | 30,986 | |||||||||||||||
Purchase of trading securities sold, not yet purchased | 0 | (16,258) | 0 | (22,290) | |||||||||||||||
Proceeds from securities sold, not yet purchased | 0 | 6,927 | 0 | 21,483 | |||||||||||||||
Decrease (increase) in advisory and service fees receivable | (2,768) | 1,122 | (6,704) | 17 | |||||||||||||||
(Decrease) increase in interest payable | (4,968) | 13,746 | (102,291) | (89,247) | |||||||||||||||
Increase (decrease) in accrued expenses and other liabilities | (2,124) | (10,240) | 29,609 | (10,303) | |||||||||||||||
Proceeds from repurchase agreements from broker dealer | 172,113,103 | 0 | 199,146,573 | 0 | |||||||||||||||
Payments on repurchase agreements from broker dealer | (167,933,399) | 0 | (191,536,573) | 0 | |||||||||||||||
Proceeds from reverse repo from broker dealer | 1,402,637 | 0 | 1,992,414 | 0 | |||||||||||||||
Payment on reverse repo from broker dealer | (1,528,392) | 0 | (2,165,602) | 0 | |||||||||||||||
Net cash provided by operating activities | 4,504,990 | 366,860 | 8,573,298 | 831,738 | |||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of Mortgage-Backed Securities | (8,805,661) | (4,056,829) | (20,472,665) | (21,312,583) | |||||||||||||||
Proceeds from sale of Investment Securities | 605,911 | 3,160,959 | 1,635,844 | 8,819,213 | |||||||||||||||
Principal payments of Mortgage-Backed Securities | 4,016,331 | 1,761,680 | 10,031,023 | 7,091,400 | |||||||||||||||
Agency debentures called | 0 | 0 | 602,000 | (500,000) | |||||||||||||||
Purchase of agency debentures | 0 | 0 | (623,361) | 0 | |||||||||||||||
Proceeds from reverse repurchase agreements | 5,040,667 | 0 | 6,052,222 | 0 | |||||||||||||||
Payments on reverse repurchase agreements | (5,070,260) | (569,693) | (5,643,179) | (619,657) | |||||||||||||||
Purchase of available-for-sale equity securities from affiliate | 0 | 0 | (90,078) | 0 | |||||||||||||||
Purchase of equity securities | (67,917) | 0 | (67,917) | 0 | |||||||||||||||
Net cash used in investing activities | (4,280,929) | 296,117 | (8,576,111) | (6,521,627) | |||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Proceeds from repurchase agreements | 80,062,824 | 115,322,213 | 262,419,462 | 338,648,447 | |||||||||||||||
Principal payments on repurchase agreements | (79,726,618) | (116,086,118) | (260,861,509) | (333,619,249) | |||||||||||||||
Proceeds from exercise of stock options | 320 | 910 | 1,043 | 2,740 | |||||||||||||||
Proceeds from direct purchase and dividend reinvestment | 141,189 | 22,628 | 141,189 | 93,675 | |||||||||||||||
Net proceeds from follow-on offerings | 0 | 0 | 0 | 2,147,549 | |||||||||||||||
Net proceeds from ATM programs | 0 | 0 | 0 | 71,832 | |||||||||||||||
Noncontrolling interest | 0 | 0 | 0 | (1,573) | |||||||||||||||
Dividends paid | (331,233) | (301,533) | (883,384) | (673,678) | |||||||||||||||
Net cash provided by financing activities | 146,482 | (1,041,900) | 816,801 | 6,669,743 | |||||||||||||||
Net increase (decrease) in cash and cash equivalents | 370,543 | (378,923) | 813,988 | 979,854 | |||||||||||||||
Cash and cash equivalents, beginning of period | 1,352,798 | 1,462,737 | 909,353 | [1] | 103,960 | ||||||||||||||
Cash and cash equivalents, end of period | 1,723,341 | 1,083,814 | 1,723,341 | 1,083,814 | |||||||||||||||
Supplemental disclosure of cash flow information: | |||||||||||||||||||
Interest paid | 312,746 | 444,504 | 1,111,290 | 1,527,353 | |||||||||||||||
Taxes paid | 9,616 | 8,963 | 29,264 | 18,303 | |||||||||||||||
Noncash financing activities: | |||||||||||||||||||
Net change in unrealized gain (loss) on available-for-sale securities and interest rate swaps, net of reclassification adjustment | 597,860 | (182,707) | 1,707,764 | (509,301) | |||||||||||||||
Dividends declared, not yet paid | 381,411 | 296,254 | |||||||||||||||||
Noncash investing activities: | |||||||||||||||||||
Receivable for Investment Securities Sold | 0 | 2,446,342 | |||||||||||||||||
Payable for Investment Securities purchased | $3,644,420 | $839,235 | |||||||||||||||||
[1]Derived from the audited consolidated statement of financial condition at December 31, 2008. |
Organization and Significant Ac
Organization and Significant Accounting Policies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Organization and Significant Accounting Policies [Abstract] | |
Organization and Significant Accounting Policies [Text Block] | 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Annaly Capital Management, Inc. (Annaly or the Company) was incorporated in Maryland on November 25, 1996.The Company commenced its operations of purchasing and managing an investment portfolio of mortgage-backed securities on February 18, 1997, upon receipt of the net proceeds from the private placement of equity capital, and completed its initial public offering on October 14, 1997.The Company is a real estate investment trust (REIT) under the Internal Revenue Code of 1986, as amended.Fixed Income Discount Advisory Company (FIDAC) is a registered investment advisor and is a wholly owned taxable REIT subsidiary of the Company.During the third quarter of 2008, the Company formed RCap Securities, Inc. (RCap).RCap was granted membership in the Financial Industry Regulatory Authority (FINRA) on January 26, 2009, and operates as broker-dealer.RCap is a wholly owned taxable REIT subsidiary of the Company.On October 31, 2008, the Company acquired Merganser Capital Management, Inc. (Merganser).Merganser is a registered investment advisor and is a wholly owned taxable REIT subsidiary of the Company. A summary of the Companys significant accounting policies follows: Basis of Presentation - The accompanying unaudited consolidated financial statements have been prepared in conformity with the instructions to Form 10-Q and Article 10, Rule 10-01 of Regulation S-X for interim financial statements.Accordingly, they may not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (GAAP). The consolidated interim financial statements are unaudited; however, in the opinion of the Company's management, all adjustments, consisting only of normal recurring accruals, necessary for a fair statement of the financial positions, results of operations, and cash flows have been included. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008. The nature of the Company's business is such that the results of any interim period are not necessarily indicative of results for a full year. The consolidated financial statements include the accounts of the Company, FIDAC, Merganser, RCap and an affiliated investment fund (the Fund).The Fund is a wholly owned subsidiary of the Company whose assets are subject tothe administrationof Lehman Brothers International (Europe) (LBIE) under Englishbankruptcylaw. Cash and Cash Equivalents - Cash and cash equivalents include cash on hand and cash held in money market funds on an overnight basis. Reverse Repurchase Agreements - The Company may invest its daily available cash balances via reverse repurchase agreements to provide additional yield on its assets.These investments will typically be recorded as short term investments and will generally mature daily.Reverse repurchase agreements are recorded at cost and are collateralized by mortgage-backed securities pledged by the counterparty to the agreement.Reverse repurchase agreeme |
Mortgage-Backed Securities
Mortgage-Backed Securities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Mortgage-Backed Securities [Abstract] | |
Mortgage-Backed Securities [Text Block] | 2.MORTGAGE-BACKED SECURITIES The following tables present the Companys available-for-sale Mortgage-Backed Securities portfolio as of September 30, 2009 and December 31, 2008 which were carried at their fair value: September 30, 2009 Federal Home Loan Mortgage Corporation Federal National Mortgage Association Government National Mortgage Association Total Mortgage-Backed Securities (dollars in thousands) Mortgage-Backed Securities, gross $ 19,862,026 $ 42,822,517 $ 944,463 $ 63,629,006 Unamortized discount (21,414 ) (29,753 ) (29 ) (51,196 ) Unamortized premium 272,910 881,744 23,656 1,178,310 Amortized cost 20,113,522 43,674,508 968,090 64,756,120 Gross unrealized gains 737,486 1,356,794 29,386 2,123,666 Gross unrealized losses (15,688 ) (26,287 ) (50 ) (42,025 ) Estimated fair value $ 20,835,320 $ 45,005,015 $ 997,426 $ 66,837,761 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value (dollars in thousands) Adjustable rate $ 18,746,780 $ 589,585 $ (39,789 ) $ 19,296,576 Fixed rate 46,009,340 1,534,081 (2,236 ) 47,541,185 Total $ 64,756,120 $ 2,123,666 $ (42,025 ) $ 66,837,761 December 31, 2008 Federal Home Loan Mortgage Corporation Federal National Mortgage Association Government National Mortgage Association Total Mortgage-Backed Securities (dollars in thousands) Mortgage-Backed Securities, gross $ 19,898,430 $ 32,749,123 $ 1,259,118 $ 53,906,671 Unamortized discount (26,733 ) (36,647 ) (787 ) (64,167 ) Unamortized premium 212,354 381,433 25,694 619,481 Amortized cost 20,084,051 33,093,909 1,284,025 54,461,985 Gross unrealized gains 297,366 468,824 14,606 780,796 Gross unrealized losses (71,195 ) (123,443 ) (1,148 ) (195,786 ) Estimated fair value $ 20,310,222 $ 33,439,290 $ 1,297,483 $ 55,046,995 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value (dollars in thousands) Adjustable rate $ 19,509,017 $ 287,249 $ (178,599 ) $ 19,617,667 Fixed rate 34,952,968 493,547 (17,187 ) 35,429,328 Total $ 54,461,985 $ 780,796 $ (195,786 ) $ 55,046,995 Actual maturities of Mortgage-Backed Securities are generally shorter than stated contractual maturities because actual maturities of Mortgage-Backed Securities are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.The follow |
Agency Debentures
Agency Debentures | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Agency Debentures [Abstract] | |
Agency Debentures [TextBlock] | 3.AGENCY DEBENTURES At September 30, 2009, the Company owned agency debentures with a carrying value of $625.6 million, including an unrealized gain of $2.2 million.At December 31, 2008, the Company owned agency debentures with a carrying value of $598.9 million including an unrealized loss of $2.8 million. |
Available For Sale Equity Secur
Available For Sale Equity Securities | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Available For Sale Equity Securities [Abstract] | |
Available For Sale Equity Securities [Text Block] | 4.AVAILABLE FOR SALE EQUITY SECURITIES All of the available-for-sale equity securities are shares of Chimera and are reported at fair value.The Company owned approximately 45.0 million shares of Chimera at a fair value of approximately $171.8 million at September 30, 2009 and approximately 15.3 million shares of Chimera at fair value of approximately $52.8 million at December 31, 2008.At September 30, 2009 and December 31, 2008, the investment in Chimera had an unrealized gain of $33.0 million and $4.0 million, respectively.Chimera is externally managed by FIDAC pursuant to a management agreement. The quoted market value of the Companys investment in CreXus was $64.2 million at September 30, 2009. |
Investment in Affiliate, Equity
Investment in Affiliate, Equity Method | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Investment in Affiliate, Equity Method [Abstract] | |
Investment in Affiliate, Equity Method [Text Block] | 5.INVESTMENT IN AFFILIATE, EQUITY METHOD During the quarter ended September 30, 2009, the Company acquired 4,527,778 shares of CreXus Investment Corp. (CreXus) common stock at a price of $15.00 per share.The Company owns 25% of CreXus and accounts for its investment using the equity method.CreXus is externally managed by FIDAC pursuant to a management agreement. The quoted market value of the Company's investment in CreXus was $64.2 million at September 30, 2009. |
Reverse Repurchase Agreement
Reverse Repurchase Agreement | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Reverse Repurchase Agreement [Abstract] | |
Reverse Repurchase Agreement [Text Block] | 6.REVERSE REPURCHASE AGREEMENT At September 30, 2009, and December 31, 2008, the Company had lent $153.1 million and $562.1 million, respectively, to Chimera in a weekly reverse repurchase agreement.This amount is included in the principal amount which approximates fair value in the Companys Statement of Financial Condition.The interest rate at September 30, 2009 and December 31, 2008 was at the rate of 1.74% and 1.43%, respectively.The collateral for this loan is mortgage-backed securities with a fair value of $216.9 million and $680.8 million at September 30, 2009, and December 31, 2008, respectively. At September 30, 2009, RCap, in its ordinary course of business, financed though matched reverse repurchase agreements, at market rates, $73.2 million for a fund that is managed by FIDAC pursuant to a management agreement.At September 30, 2009, RCap had an outstanding reverse repurchase agreement with a non-affiliate of $100.0 million. |
Receivable From Prime Broker
Receivable From Prime Broker | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Receivable From Prime Broker [Abstract] | |
Receivable From Prime Broker [Text Block] | 7.RECEIVABLE FROM PRIME BROKER The net assets of the investment fund owned by the Company are subject toEnglishbankruptcylaw, whichgoverns the administrationof Lehman BrothersInternational(Europe) (LBIE), as well as the law of New York, which governs the contractual documents.Untilthe Companys contractual documentswith LBIE are terminated, the value of the assets and liabilities in its account with LBIE will continue to fluctuate based on market movements.The Company does not intend to terminate these contractual documents until LBIE's administrators have clarifiedthe consequences of doing so. The Company has notreceived notice from LBIE's administrators that LBIE has terminated the documents. LBIEsadministratorshave advised the Company thattheycan provide no additional information about the account at this time. As a result, the Company has recorded a receivable from LBIE based on the fair value of its account with LBIE as of September 15, 2008 of $16.9 million, which is the date of the last statement it received from LBIE on the accounts assets and liabilities. The Company can provide no assurance, however, that it will recover all or any portion of these assets following completion ofLBIE'sadministration(and any subsequent liquidation). Based on the information known at September 30, 2009, a loss was not determined to be probable.If additional information indicates otherwise and it is determined that the loss is probable, the estimated loss will be reflected in the statement of operations. |
Fair Value Measurements
Fair Value Measurements | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements [Text Block] | 8.FAIR VALUE MEASUREMENTS The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.The three levels are defined as follow: Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets and liabilities in active markets. Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 inputs to the valuation methodology are unobservable and significant to overall fair value. Available for sale equity securities are valued based on quoted prices (unadjusted) in an active market.Mortgage-Backed Securities and interest rate swaps are valued using quoted prices for similar assets and dealer quotes.The dealer will incorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including coupon, periodic and life caps, rate reset period and expected life of the security.Management ensures that current market conditions are represented.Management compares similar market transactions and comparisons to a pricing model.The Companys financial assets and liabilities carried at fair value on a recurring basis are valued as follows: Level 1 Level 2 Level 3 (dollars in thousands) Assets: Mortgage-Backed Securities - $ 66,837,761 - Agency debentures - 625,615 - Available for sale equity securities $ 171,834 - - Liabilities: Interest rate swaps - $ 788,065 - The classification of assets and liabilities by level remains unchanged at September 30, 2009, when compared to the previous quarter. |
Repurchase Agreements
Repurchase Agreements | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Repurchase Agreements [Abstract] | |
Repurchase Agreements [Text Block] | 9.REPURCHASE AGREEMENTS The Company had outstanding $55.8 billion and $46.7 billion of repurchase agreements with weighted average borrowing rates of 2.15% and 4.08%, after giving effect to the Companys interest rate swaps, and weighted average remaining maturities of 165 days and 238 days as of September 30, 2009 and December 31, 2008, respectively.Investment Securities pledged as collateral under these repurchase agreements and interest rate swaps had an estimated fair value of $60.1 billion at September 30, 2009 and $51.8 billion at December 31, 2008. At September 30, 2009 and December 31, 2008, the repurchase agreements had the following remaining maturities: September 30, 2009 December 31, 2008 (dollars in thousands) 1 day $ 6,010,000 $ - 2 to 29 days 34,990,475 32,025,186 30 to 59 days 6,312,213 5,205,352 60 to 89 days 372,280 209,673 90 to 119 days - 254,674 Over 120 days 8,157,872 8,980,000 Total $ 55,842,840 $ 46,674,885 The Company did not have an amount at risk greater than 10% of the equity of the Company with any counterparty as of September 30, 2009 or December 31, 2008. The Company has entered into long-term repurchase agreements which provide the counterparty with the right to call the balance prior to maturity date.These repurchase agreements totaled $7.7 billion and the fair value of the option to call was ($412.8 million) at September 30, 2009.These repurchase agreements totaled $8.1 billion and the fair value of the option to call was ($574.3 million) at December 31, 2008.Management has determined that the call option is not required to be bifurcated as it is deemed clearly and closely related to the debt instrument, therefore the fair value of the option is not recorded in the consolidated financial statements. The structured repurchase agreements are modeled and priced as pay fixed versus receive floating interest rate swaps whereby the fixed receiver has the option to cancel the swap after an initial lockout period. Therefore the structured repurchase agreements are priced as a combination of an interest rate swaps with an embedded call options. |
Interest Rate Swaps
Interest Rate Swaps | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Interest Rate Swaps [Abstract] | |
Interest Rate Swaps [Text Block] | 10.INTEREST RATE SWAPS In connection with the Companys interest rate risk management strategy, the Company hedges a portion of its interest rate risk by entering into derivative financial instrument contracts. As of September 30, 2009, such instruments are comprised of interest rate swaps, which in effect modify the cash flows on repurchase agreements. The use of interest rate swaps creates exposure to credit risk relating to potential losses that could be recognized if the counterparties to these instruments fail to perform their obligations under the contracts. In the event of a default by the counterparty, the Company could have difficulty obtaining its Mortgage-Backed Securities pledged as collateral for swaps.The Company does not anticipate any defaults by its counterparties. The Companys swaps are used to lock in the fixed rate related to a portion of its current and anticipated future 30-day term repurchase agreements. The location and fair value of derivative instruments reported in the Consolidated Statement of Financial Position as of September 30, 2009 are as follows: Location on Statement of Financial Condition Notional Amount (dollars in thousands) Net Estimated Fair Value/Carrying Value (dollars in thousands) September 30, 2009 Liabilities $ 20,641,750 $ 788,065 The effect of derivatives on the Statement of Operations and Comprehensive Income is as follows: Location on Statement of Operations and Comprehensive Income Interest Expense Unrealized Loss on Interest Rate Swaps (dollars in thousands) For the Quarter Ended September 30, 2009 $ 183,124 $ (128,687 ) The weighted average pay rate at September 30, 2009 was 3.98% and the weighted average receive rate was 0.28%. |
Preferred Stock And Common Stoc
Preferred Stock And Common Stock | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Preferred Stock And Common Stock [Abstract] | |
Preferred Stock And Common Stock [Text Block] | 11. PREFERRED STOCK AND COMMON STOCK (A)Common Stock Issuances During the quarter and nine months ended September 30, 2009, 33,450 and 97,712 options were exercised under the Long-Term Stock Incentive Plan, or Incentive Plan, for an aggregate exercise price of $320,000 and $1.0 million.During the nine months ended September 30, 2009, 7,550 shares of restricted stock were issued under the Incentive Plan.During the quarter and nine months ended September 30, 2009, 200 and 1.4 million shares of Series B Preferred Stock were converted into 438 and 2.8 million shares of common stock, respectively. During the quarter and nine months ended September 30, 2009, the Company raised $141.2 million by issuing 8.4 million shares, through the Direct Purchase and Dividend Reinvestment Program. During the quarter and nine months ended September 30, 2008, 102,625 and 289,842 options were exercised under the Incentive Plan for an aggregate exercise price of $910,000 and $2.7 million respectively. On May 13, 2008 the Company entered into an underwriting agreement pursuant to which it sold 69,000,000 shares of its common stock for net proceeds following underwriting expenses of approximately $1.1 billion. This transaction settled on May 19, 2008. On January 23, 2008 the Company entered into an underwriting agreement pursuant to which it sold 58,650,000 shares of its common stock for net proceeds following underwriting expenses of approximately $1.1 billion. This transaction settled on January 29, 2008. During the quarter and nine months ended September 30, 2008, the Company raised $22.6 million and $93.7 million by issuing 1.5 and 5.8 million shares, respectively, through the Direct Purchase and Dividend Reinvestment Program. During the quarter and nine months ended September 30, 2008, 102,625 and 289,842 options were exercised under the Incentive Plan for an aggregate exercise price of $910,000 and $2.7 million, respectively. On August 3, 2006, the Company entered into an ATM Equity Offering(sm) Sales Agreement with Merrill Lynch Co. and Merrill Lynch, Pierce, Fenner Smith Incorporated, relating to the sale of shares of the Companys common stock from time to time through Merrill Lynch. Sales of the shares, if any, are made by means of ordinary brokers' transaction on the New York Stock Exchange. During the quarter and nine month ended September 30, 2009, the Company did not issue shares pursuant to this program.During the year ended December 31, 2008, 588,000 shares of the Companys common stock were issued pursuant to this program, totaling $11.5 million in net proceeds. On August 3, 2006, the Company entered into an ATM Equity Sales Agreement with UBS Securities LLC, relating to the sale of shares of the Companys common stock from time to time through UBS Securities. Sales of the shares, if any, will be made by means of ordinary brokers' transaction on the New York Stock Exchange. During the quarter and nine months ended September 30, 2009, the Company did not issue shares pursuant to this program.During the year ended December 31, 2008, 3.8 million shares of the Companys common stock were issued pursuant to this program, tot |
Net Income Per Common Share
Net Income Per Common Share | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Net Income Per Common Share [Abstract] | |
Net Income Per Common Share [Text Block] | 12.NET INCOME PER COMMON SHARE The following table presents a reconciliation of the net income and shares used in calculating basic and diluted earnings per share for the quarters and nine months ended September 30, 2009 and 2008. For the Quarters Ended September 30, For the Nine Months Ended September 30, 2009 2008 2009 2008 Net income attributable to controlling interest $ 285,189 $ 302,131 $ 1,232,136 $ 853,159 Less: Preferred stock dividends 4,625 5,335 13,876 16,042 Net income available to common shareholders, prior to adjustment forSeries B dividends, if necessary $ 280,564 $ 296,796 $ 1,218,260 $ 837,117 Add: Preferred Series B dividends, if Series B shares are dilutive 977 1,686 2,930 5,097 Net income available to common shareholders, as adjusted $ 281,541 $ 298,482 $ 1,221,190 $ 842,214 Weighted average shares of common stock outstanding- basic 547,611 538,706 544,970 495,584 Add:Effect of dilutive stock options and Series B Cumulative Convertible Preferred Stock 5,765 9,176 5,944 9,025 Weighted average shares of common stock outstanding- diluted 553,376 547,882 550,914 504,609 Options to purchase 1.1 million and 4.5 million shares of common stock were outstanding and considered anti-dilutive as their exercise price exceeded the average stock price for the quarter and nine months ended September 30, 2009, respectively.Options to purchase 4.5 million and 1.8 million shares of common stock were outstanding and considered anti-dilutive as their exercise price exceeded the average stock price for the quarter and nine months ended September 30, 2008, respectively. |
Long-Term Stock Incentive Plan
Long-Term Stock Incentive Plan | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Long-Term Stock Incentive Plan [Abstract] | |
Long-Term Stock Incentive Plan [Text Block] | 13.LONG-TERM STOCK INCENTIVE PLAN The Company has adopted a long term stock incentive plan for executive officers, key employees and non-employee directors (the Incentive Plan).The Incentive Plan authorizes the Compensation Committee of the board of directors to grant awards, including non-qualified options as well as incentive stock options as defined under Section 422 of the Code.The Incentive Plan authorizes the granting of options or other awards for an aggregate of the greater of 500,000 shares or 9.5% of the diluted outstanding shares of the Companys common stock, up to a ceiling of 8,932,921 shares.Stock options are issued at the current market price on the date of grant, subject to an immediate or four year vesting in four equal installments with a contractual term of 5 or 10 years.The grant date fair value is calculated using the Black-Scholes option valuation model. For the Nine Months Ended September 30, 2009 September 30, 2008 Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Options outstanding at the beginning of period 5,180,164 $ 15.87 3,437,267 $ 15.23 Granted 2,537,000 13.26 2,043,700 16.02 Exercised (97,712 ) 10.67 (289,842 ) 9.45 Forfeited (10,000 ) 15.61 (2,550 ) 15.84 Expired (11,250 ) 17.32 (5,010 ) 20.70 Options outstanding at the end of period 7,598,202 $ 15.06 5,183,565 $ 15.86 Options exercisable at the end of period 2,196,377 $ 16.23 2,123,365 $ 16.35 The weighted average remaining contractual term was approximately 7.8 years for stock options outstanding and approximately 5.1 years for stock options exercisable as of September 30, 2009.As of September 30, 2009, there was approximately $14.4 million of total unrecognized compensation cost related to nonvested share-based compensation awards.That cost is expected to be recognized over a weighted average period of 3.2 years. The weighted average remaining contractual term was approximately 7.8 years for stock options outstanding and approximately 5.9 years for stock options exercisable as of September 30, 2008.As of September 30, 2008, there was approximately $10.1 million of total unrecognized compensation cost related to nonvested share-based compensation awards.That cost is expected to be recognized over a weighted average period of 3.8 years. During the nine months ended September 30, 2009, the Company granted 7,550 shares of restricted common stock to certain of its employees.As of September 30, 2009, 5,663 of these restricted shares were unvested and subject to forfeiture.During the year ended December 31, 2008, the Company granted 7,000 shares of restricted common stock to certain of its employees.As of September 30, 2009, 3,400 of these restricted shares were unvested and subject to forfeiture. |
Income Taxes
Income Taxes | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Income Taxes [Abstract] | |
Income Taxes [Text Block] | 14.INCOME TAXES As a REIT, the Company is not subject to federal income tax on earnings distributed to its shareholders. Most states recognize REIT status as well. The Company has decided to distribute the majority of its income and retain a portion of the permanent difference between book and taxable income arising from Section 162(m) of the Code pertaining to employee remuneration. During the quarter and nine months ended September 30, 2009, the Companys taxable REIT subsidiaries recorded $3.3 million and $5.4 million of income tax expense for income attributable to those subsidiaries, and the portion of earnings retained based on Code Section 162(m) limitations.During the quarter and nine months ended September 30, 2009, the Company recorded $6.4 million and $18.5 million of income tax expense for a portion of earnings retained based on Section 162(m) limitations. During the quarter and nine months ended September 30, 2008, FIDAC, a taxable REIT subsidiary, recorded $1.7 and $3.3 million, respectively, of income tax expense for income and for the portion of earnings retained based on Code Section 162(m) limitations.During the quarter and nine months ended September 30, 2008, the Company recorded $5.8 million and $16.4 million, respectively, of income tax expense for a portion of earnings retained based on Section 162(m) limitations. The Companys effective tax rate was 53% for the nine months ended September 30, 2009 and 2008, respectively using the Companys taxable income.These rates differed from the federal statutory rate as a result of state and local taxes and permanent difference pertaining to employee remuneration as discussed above.The amount is applied to the amount of estimated REIT taxable income retained (if any, and only up to 10% of ordinary income as all capital gain income is distributed) and to taxable income earned at the taxable subsidiaries.Thus, as a REIT, the Companys effective tax rate is significantly less as it is allowed to deduct dividend distributions. In general, common stock cash dividends declared by the Company will be considered ordinary income to stockholders for income tax purposes. From time to time, a portion of the Companys dividends may be characterized as capital gains or return of capital. During the quarter ended September 30, 2009, all of the income distributed in the form of dividends was characterized as ordinary income. |
Lease Commitments And Contingen
Lease Commitments And Contingencies | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Lease Commitments And Contingencies [Abstract] | |
Lease Commitments And Contingencies [Text Block] | 15.LEASE COMMITMENTS AND CONTINGENCIES The Company has a non-cancelable lease for office space, which commenced in May 2002 and was to expire in December 2009. The Company amended this lease to increase the amount of space it leases and extended it to December 2015.Merganser has a non-cancelable lease for office space, which commenced on May 2003 and expires in May 2014.The Companys aggregate future minimum lease payments total $10.7 million.The following table details the lease payments, net of sub-lease receipts. Year Ending December Lease Commitment Sublease Income Net Amount (dollars in thousands) 2009 (remaining) $ 584 $ 100 $ 484 2010 2,049 56 1,993 2011 2,120 - 2,120 2012 2,130 - 2,130 2013 2,170 - 2,170 Thereafter 1,677 - 1,677 $ 10,730 $ 156 $ 10,574 From time to time, the Company is involved in various claims and legal actions arising in the ordinary course of business.In the opinion of management, the ultimate disposition of these matters will not have a material effect on the Companys consolidated financial statements and therefore no accrual is required as of September 30, 2009 and December 31, 2008. Mergansers prior owners may receive additional consideration as an earn-out during 2012 if Merganser meets specific performance goals under the merger agreement.The Company cannot currently calculate how much consideration will be paid under the earn-out provisions because the payment amount will vary depending upon whether and the extent to which Merganser achieves specific performance goals.Any amounts paid under this provision will be recorded as additional goodwill. |
Interest Rate Risk
Interest Rate Risk | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Interest Rate Risk [Abstract] | |
Interest Rate Risk [Text Block] | 16.INTEREST RATE RISK The primary market risk to the Company is interest rate risk.Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the Companys control.Changes in the general level of interest rates can affect net interest income, which is the difference between the interest income earned on interest-earning assets and the interest expense incurred in connection with the interest-bearing liabilities, by affecting the spread between the interest-earning assets and interest-bearing liabilities.Changes in the level of interest rates also can affect the value of the Investment Securities and the Companys ability to realize gains from the sale of these assets.A decline in the value of the Investment Securities pledged as collateral for borrowings under repurchase agreements could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels.Liquidation of collateral at losses could have an adverse accounting impact, as discussed in Note 1. The Company seeks to manage the extent to which net income changes as a function of changes in interest rates by matching adjustable-rate assets with variable-rate borrowings.The Company may seek to mitigate the potential impact on net income of periodic and lifetime coupon adjustment restrictions in the portfolio of Investment Securities by entering into interest rate agreements such as interest rate caps and interest rate swaps. As of September 30, 2009, the Company had entered into interest rate swaps to pay a fixed rate and receive a floating rate of interest, with a total notional amount of $20.6 billion. Changes in interest rates may also have an effect on the rate of mortgage principal prepayments and, as a result, prepayments on Mortgage-Backed Securities.The Company will seek to mitigate the effect of changes in the mortgage principal repayment rate by balancing assets purchased at a premium with assets purchased at a discount.To date, the aggregate premium exceeds the aggregate discount on the Mortgage-Backed Securities.As a result, prepayments, which result in the expensing of unamortized premium, will reduce net income compared to what net income would be absent such prepayments. |
Related Party Transactions
Related Party Transactions | |
9 Months Ended
Sep. 30, 2009 USD / shares | |
Related Party Transactions [Abstract] | |
Related Party Transactions [Text Block] | 17.RELATED PARTY TRANSACTIONS During the quarter ended September 30, 2009, the Company acquired 4,527,778 shares of CreXus common stock at a price of $15.00 per share.The Company owns 25% of CreXus and accounts for its investment using the equity method.CreXus is externally managed by FIDAC pursuant to a management agreement. At September 30, 2009 and December 31, 2008, the Company had lent $153.1 million and $562.1 million, respectively, to Chimera pursuant to a reverse repurchase agreement.This amount is included at the principal amount which approximates fair value in the Companys Statement of Financial Condition.The agreement is callable by the Company on a weekly basis.The interest rate at September 30, 2009 and December 31, 2008 was at the market rate of 1.74% and 1.43%, respectively.The collateral for this loan is mortgage-backed securities with a fair value of $216.9 million and $680.8 million at September 30, 2009 and December 31, 2008, respectively. At September 30, 2009, the Company had $7.1 billion of repurchase agreements outstanding with RCap.The weighted average interest rate is 0.47% and the terms are one to two months.These agreements are collateralized by agency mortgage backed securities, with an estimated market value of $7.4 billion. At September 30, 2009, RCap, in its ordinary course of business, financed through matched repurchase agreements, at market rates, $73.2 million for a fund that is managed by FIDAC. |