Document Information
Document Information | |
3 Months Ended
Mar. 31, 2010 | |
Document information | |
Document type | 10-Q |
Amendment flag | false |
Document period end date | 2010-03-31 |
Document fiscal year focus | 2,010 |
Document fiscal period focus | Q1 |
Entity Information
Entity Information (USD $) | |||
3 Months Ended
Mar. 31, 2010 | May. 06, 2010
| Jun. 30, 2009
| |
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 | $8,193,939,370 | ||
Entity Listings [Line Items] | |||
Entity common stock shares outstanding | 559,686,133 |
Consolidated Statements of Fina
Consolidated Statements of Financial Condition (USD $) | |||||||||||||||||||
In Thousands | Mar. 31, 2010
| Dec. 31, 2009
| |||||||||||||||||
ASSETS | |||||||||||||||||||
Cash and cash equivalents | $905,955 | $1,504,568 | [1] | ||||||||||||||||
Reverse repurchase agreements with affiliate | 255,580 | 328,757 | [1] | ||||||||||||||||
Reverse repurchase agreements | 276,586 | 425,000 | [1] | ||||||||||||||||
Mortgage-Backed Securities, at fair value | 67,239,930 | 64,805,725 | [1] | ||||||||||||||||
Agency debentures, at fair value | 2,931,945 | 915,752 | [1] | ||||||||||||||||
Investment with affiliates | 242,788 | 242,198 | [1] | ||||||||||||||||
Securities borrowed | 60,132 | 29,077 | [1] | ||||||||||||||||
Receivable for Mortgage-Backed Securities sold | 359,636 | 732,134 | [1] | ||||||||||||||||
Accrued interest and dividends receivable | 327,666 | 318,919 | [1] | ||||||||||||||||
Receivable from Prime Broker | 3,272 | 3,272 | [1] | ||||||||||||||||
Receivable for advisory and service fees | 11,714 | 12,566 | [1] | ||||||||||||||||
Intangible for customer relationships, net | 10,191 | 10,491 | [1] | ||||||||||||||||
Goodwill | 27,917 | 27,917 | [1] | ||||||||||||||||
Interest rate swaps, at fair value | 5,417 | [1] | |||||||||||||||||
Other assets | 65,850 | 14,397 | [1] | ||||||||||||||||
Total assets | 72,719,162 | 69,376,190 | [1] | ||||||||||||||||
Liabilities: | |||||||||||||||||||
Repurchase agreements | 53,784,480 | 54,598,129 | [1] | ||||||||||||||||
Payable for Investment Securities Purchased | 7,498,712 | 4,083,786 | [1] | ||||||||||||||||
Convertible Senior Notes | 600,000 | ||||||||||||||||||
Accrued interest payable | 88,346 | 89,460 | [1] | ||||||||||||||||
Dividends payable | 363,785 | 414,851 | [1] | ||||||||||||||||
Securities loaned | 60,377 | 29,057 | [1] | ||||||||||||||||
Accounts payable and other liabilities | 70,290 | 10,005 | [1] | ||||||||||||||||
Interest rate swaps, at fair value | 608,688 | 533,362 | [1] | ||||||||||||||||
Total liabilities | 63,074,678 | 59,758,650 | [1] | ||||||||||||||||
Commitments and contingencies | |||||||||||||||||||
Stockholders' Equity: | |||||||||||||||||||
Common stock, par value $.01 per share, 987,987,500 authorized, 559,668,624 and 553,134,877 shares issued and outstanding, respectively | 5,597 | 5,531 | [1] | ||||||||||||||||
Additional paid-in capital | 7,935,151 | 7,817,454 | [1] | ||||||||||||||||
Accumulated other comprehensive income | 1,887,852 | 1,891,317 | [1] | ||||||||||||||||
Accumulated deficit | (424,302) | (336,964) | [1] | ||||||||||||||||
Total stockholders' equity | 9,581,386 | 9,554,426 | [1] | ||||||||||||||||
Total liabilities, Series B Cumulative Convertible Preferred Stock and stockholders' equity | 72,719,162 | 69,376,190 | [1] | ||||||||||||||||
Series B Cumulative Convertible Redeemable Preferred Stock [Member] | |||||||||||||||||||
Liabilities: | |||||||||||||||||||
6.00% Series B Cumulative Convertible Preferred Stock: 4,600,000 shares authorized 2,603,969 and 2,604,614 shares issued and outstanding, respectively | 63,098 | 63,114 | [1] | ||||||||||||||||
Series A Cumulative Redeemable Preferred Stock [Member] | |||||||||||||||||||
Stockholders' Equity: | |||||||||||||||||||
7.875% Series A Cumulative Redeemable Preferred Stock: 7,412,500 authorized, 7,412,500 shares issued and outstanding respectively | $177,088 | $177,088 | [1] | ||||||||||||||||
[1]Derived from the audited consolidated financial statements at December 31, 2009. |
1_Consolidated Statements of Fi
Consolidated Statements of Financial Condition (Parenthetical) (USD $) | |||||||||||||||||||
Mar. 31, 2010
| Dec. 31, 2009
| ||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||
Common Stock, par value | 0.01 | 0.01 | [1] | ||||||||||||||||
Common Stock, shares authorized | 987,987,500 | 987,987,500 | [1] | ||||||||||||||||
Common Stock, shares issued | 559,668,624 | 553,134,877 | [1] | ||||||||||||||||
Common Stock, shares outstanding | 559,668,624 | 553,134,877 | [1] | ||||||||||||||||
Series B Cumulative Convertible Redeemable Preferred Stock [Member] | |||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||
Preferred Stock, shares authorized | 4,600,000 | 4,600,000 | [1] | ||||||||||||||||
Preferred Stock, shares issued | 2,603,969 | 2,604,614 | [1] | ||||||||||||||||
Preferred Stock, shares outstanding | 2,603,969 | 2,604,614 | [1] | ||||||||||||||||
Series A Cumulative Redeemable Preferred Stock [Member] | |||||||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||||||||||
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 financial statements at December 31, 2009. |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Income (Unaudited) (USD $) | ||
In Thousands, except Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Interest Income | ||
Investments | $653,935 | $716,015 |
Securities loaned | 454 | |
Total interest income | 654,389 | 716,015 |
Interest expense | ||
Repurchase agreements | 272,927 | 378,625 |
Convertible Senior Notes | 3,195 | |
Securities borrowed | 387 | |
Total interest expense | 276,509 | 378,625 |
Net interest income | 377,880 | 337,390 |
Other (loss) income: | ||
Investment advisory and service fees | 12,546 | 7,761 |
Gain on sale of Investment Securities | 46,962 | 5,023 |
Dividend income | 7,964 | 918 |
Unrealized gain (loss) on interest rate swaps | (116,732) | 35,545 |
Total other (loss) income | (49,260) | 49,247 |
Expenses: | ||
Distribution fees | 360 | 428 |
General and administrative expenses | 40,021 | 29,882 |
Total expenses | 40,381 | 30,310 |
Income before income from equity method investments and income taxes | 288,239 | 356,327 |
Income from equity method investment | 140 | |
Income taxes | 7,314 | 6,434 |
Net income | 281,065 | 349,893 |
Dividends on preferred stock | 4,625 | 4,626 |
Net income available to common shareholders | 276,440 | 345,267 |
Net income available per share to common shareholders: | ||
Basic | 0.5 | 0.64 |
Diluted | 0.49 | 0.63 |
Weighted average number of common shares outstanding: | ||
Basic | 554,995,092 | 542,903,110 |
Diluted | 575,859,564 | 548,551,328 |
Net income | 281,065 | 349,893 |
Other comprehensive (loss) income: | ||
Unrealized gain on available-for-sale securities | 7,416 | 820,178 |
Unrealized gain on interest rate swaps | 36,081 | 54,166 |
Reclassification adjustment for net (gains) loss included in net income | (46,962) | (5,023) |
Other comprehensive (loss) income | (3,465) | 869,321 |
Comprehensive income | $277,600 | $1,219,214 |
Consolidated Statement of Stock
Consolidated Statement of Stockholders' Equity (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | Preferred Stock [Member]
| Common Stock Par Value [Member]
| Additional Paid-In Capital [Member]
| Accumulated Other Comprehensive Income [Member]
| Accumulated Deficit [Member]
| Total
| |||||||||||||
BALANCE at Dec. 31, 2009 | $177,088 | $5,531 | $7,817,454 | $1,891,317 | ($336,964) | $9,554,426 | [1] | ||||||||||||
Net income | 281,065 | 281,065 | |||||||||||||||||
Other comprehensive loss | (3,465) | (3,465) | |||||||||||||||||
Comprehensive income | 277,600 | ||||||||||||||||||
Exercise of stock options | 1 | 1,057 | 1,058 | ||||||||||||||||
Stock option expense and long-term compensation expense | 1,171 | 1,171 | |||||||||||||||||
Conversion of Series B cumulative preferred stock | 16 | 16 | |||||||||||||||||
Net proceeds from direct purchase and dividend reinvestment | 65 | 115,453 | 115,518 | ||||||||||||||||
Preferred Series A dividends declared $0.4925 per share | (3,648) | (3,648) | |||||||||||||||||
Preferred Series B dividends declared $0.375 per share | (977) | (977) | |||||||||||||||||
Common dividends declared, $0.65 per share | (363,778) | (363,778) | |||||||||||||||||
BALANCE at Mar. 31, 2010 | $177,088 | $5,597 | $7,935,151 | $1,887,852 | ($424,302) | $9,581,386 | |||||||||||||
[1]Derived from the audited consolidated financial statements at December 31, 2009. |
2_Consolidated Statement of Sto
Consolidated Statement of Stockholders' Equity (Unaudited) (Parenthetical) (USD $) | |
3 Months Ended
Mar. 31, 2010 | |
Common dividends declared | 0.65 |
Series B Cumulative Convertible Redeemable Preferred Stock [Member] | |
Preferred Series dividends declared | 0.375 |
Series A Cumulative Redeemable Preferred Stock [Member] | |
Preferred Series dividends declared | 0.4925 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) (USD $) | |||||||||||||||||||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | |||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income | $281,065 | $349,893 | |||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||
Amortization of Mortgage Backed Securities premiums and discounts, net | 164,007 | 41,014 | |||||||||||||||||
Amortization of intangibles | 407 | 1,088 | |||||||||||||||||
Deferred expense amortization | 450 | ||||||||||||||||||
Gain on sale of Investment Securities | (46,962) | (5,023) | |||||||||||||||||
Stock option and long-term compensation expense | 1,171 | 879 | |||||||||||||||||
Unrealized loss (gain) on interest rate swaps | 116,732 | (35,545) | |||||||||||||||||
Gain on investment with affiliate, equity method | (140) | ||||||||||||||||||
Decrease (increase) in accrued interest and dividend receivable | 1,746 | (8,525) | |||||||||||||||||
(Increase) decrease in other assets | (33,915) | 220 | |||||||||||||||||
Proceeds from repurchase agreements from Broker Dealer | 250,140,649 | 1,086,026 | |||||||||||||||||
Payments on repurchase agreements from Broker Dealer | (248,827,060) | (200,000) | |||||||||||||||||
Proceeds from reverse repo from Broker Dealer | 2,727,269 | ||||||||||||||||||
Payments on reverse repo from Broker Dealer | (2,764,682) | ||||||||||||||||||
Proceeds from securities borrowed | 476,309 | ||||||||||||||||||
Payments on securities borrowed | (507,364) | ||||||||||||||||||
Proceeds from securities loaned | 559,552 | ||||||||||||||||||
Payments on securities loaned | (528,232) | ||||||||||||||||||
Decrease (increase) in advisory and service fees receivable | 851 | (404) | |||||||||||||||||
Decrease in interest payable | (1,115) | (87,528) | |||||||||||||||||
Increase in accounts payable and other liabilities | 60,286 | 15,590 | |||||||||||||||||
Net cash provided by operating activities | 1,821,024 | 1,157,685 | |||||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Purchase of Mortgage-Backed Securities | (6,980,855) | (6,244,648) | |||||||||||||||||
Proceeds from sale of Mortgage-Backed Securities | 1,974,280 | 882,754 | |||||||||||||||||
Principal payments of Mortgage-Backed Securities | 6,190,795 | 2,502,807 | |||||||||||||||||
Agency debentures called | 602,000 | ||||||||||||||||||
Purchase of agency debentures | (2,014,728) | ||||||||||||||||||
Payments on reverse repurchase agreements | (4,032,426) | ||||||||||||||||||
Proceeds from reverse repurchase agreements | 4,291,430 | 109,639 | |||||||||||||||||
Net cash used in investing activities | (571,504) | (2,147,448) | |||||||||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Proceeds from repurchase agreements | 57,522,092 | 89,786,336 | |||||||||||||||||
Principal payments on repurchase agreements | (59,649,330) | (88,396,069) | |||||||||||||||||
Issuance of convertible notes | 582,000 | ||||||||||||||||||
Proceeds from exercise of stock options | 1,058 | 623 | |||||||||||||||||
Proceeds from direct purchase and dividend reinvestment | 115,518 | ||||||||||||||||||
Dividends paid | (419,471) | (275,362) | |||||||||||||||||
Net cash (used) provided by financing activities | (1,848,133) | 1,115,528 | |||||||||||||||||
Net (decrease) increase in cash and cash equivalents | (598,613) | 125,765 | |||||||||||||||||
Cash and cash equivalents, beginning of period | 1,504,568 | [1] | 909,353 | ||||||||||||||||
Cash and cash equivalents, end of period | 905,955 | 1,035,118 | |||||||||||||||||
Supplemental disclosure of cash flow information: | |||||||||||||||||||
Interest paid | 277,624 | 466,153 | |||||||||||||||||
Taxes paid | 5,232 | 8,357 | |||||||||||||||||
Noncash investing activities: | |||||||||||||||||||
Receivable for Investment Securities Sold | 359,636 | 33,009 | |||||||||||||||||
Payable for Investment Securities Purchased | 7,498,712 | 2,121,670 | |||||||||||||||||
Net change in unrealized (loss) gain on available-for-sale securities and interest rate swaps, net of reclassification adjustment | (3,465) | 869,321 | |||||||||||||||||
Noncash financing activities: | |||||||||||||||||||
Dividends declared, not yet paid | $363,785 | $272,170 | |||||||||||||||||
[1]Derived from the audited consolidated financial statements at December 31, 2009. |
Organization and Significant Ac
Organization and Significant Accounting Policies | |
3 Months Ended
Mar. 31, 2010 | |
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, 2009. 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, and RCap.All intercompany balances and transactions have been eliminated. 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 agreements entered into by RCap are part of the subsidiarys daily matched book trading activity.These reverse repurchase agreements are recorded on trade dat |
Mortgage-Backed Securities
Mortgage-Backed Securities | |
3 Months Ended
Mar. 31, 2010 | |
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 ofMarch 31, 2010 and December 31, 2009 which were carried at their fair value: March 31, 2010 Federal Home Loan Mortgage Corporation Federal National Mortgage Association Government National Mortgage Association Total Mortgage- Backed Securities (dollars in thousands) Mortgage-Backed Securities, gross $ 19,023,298 $ 44,340,657 $ 646,035 $ 64,009,990 Unamortized discount (15,516 ) (26,121 ) - (41,637 ) Unamortized premium 328,404 999,187 17,705 1,345,296 Amortized cost 19,336,186 45,313,723 663,740 65,313,649 Gross unrealized gains 666,106 1,280,444 21,892 1,968,442 Gross unrealized losses (13,504 ) (28,209 ) (448 ) (42,161 ) Estimated fair value $ 19,988,788 $ 46,565,958 $ 685,184 $ 67,239,930 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value Adjustable rate $ 15,505,157 $ 459,564 $ (15,302 ) $ 15,949,419 Fixed rate 49,808,492 1,508,878 (26,859 ) 51,290,511 Total $ 65,313,649 $ 1,968,442 $ (42,161 ) $ 67,239,930 December 31, 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 $ 18,973,616 $ 41,836,554 $ 779,109 $ 61,589,279 Unamortized discount (20,210 ) (28,167 ) - (48,377 ) Unamortized premium 301,700 974,861 20,382 1,296,943 Amortized cost 19,255,106 42,783,248 799,491 62,837,845 Gross unrealized gains 717,749 1,318,066 21,944 2,057,759 Gross unrealized losses (27,368 ) (61,739 ) (772 ) (89,879 ) Estimated fair value $ 19,945,487 $ 44,039,575 $ 820,663 $ 64,805,725 Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Estimated Fair Value (dollars in thousands) Adjustable rate $ 16,345,988 $ 513,820 $ (68,488 ) $ 16,791,320 Fixed rate 46,491,857 1,543,939 (21,391 ) 48,014,405 Total $ 62, 837,845 $ 2,057,759 $ (89,879 ) $ 64,805,725 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 prepay |
Agency Debentures
Agency Debentures | |
3 Months Ended
Mar. 31, 2010 | |
Agency Debentures [Abstract] | |
Agency Debentures [Text Block] | 3. AGENCY DEBENTURES At March 31, 2010, the Company owned agency debentures with a carrying value of $2.9 billion, including an unrealized loss of $1.4 million.At December 31, 2009, the Company owned agency debentures with a carrying value of $915.8 million including an unrealized loss of $3.0 million. |
Available For Sale Equity Secur
Available For Sale Equity Securities | |
3 Months Ended
Mar. 31, 2010 | |
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 $175.0 million at March 31, 2010 and approximately 45.0 million shares of Chimera at fair value of approximately $174.5 million at December 31, 2009.At March 31, 2010 and December 31, 2009, the investment in Chimera had an unrealized gain of $36.1 million and $35.7 million, respectively.Chimera is externally managed by FIDAC pursuant to a management agreement. |
Investment in Affiliate, Equity
Investment in Affiliate, Equity Method | |
3 Months Ended
Mar. 31, 2010 | |
Investment in Affiliate, Equity Method [Abstract] | |
Investment in Affiliate, Equity Method [Text Block] | 5. INVESTMENT IN AFFILIATE, EQUITY METHOD During the quarter ended March 31, 2010, the Company acquired 4,527,778 shares of CreXus Investment common stock at a price of $15.00 per share.The Company owns approximately 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 fair value of the Companys investment in CreXus was $63.2 million at December 31, 2009. |
Reverse Repurchase Agreement
Reverse Repurchase Agreement | |
3 Months Ended
Mar. 31, 2010 | |
Reverse Repurchase Agreement [Abstract] | |
Reverse Repurchase Agreement [Text Block] | 6. REVERSE REPURCHASE AGREEMENTS At March 31, 2010, the Company did not have any amounts outstanding under its reverse repurchase agreement with Chimera.AtDecember 31, 2009, the Company had lent $259.0 million to Chimera in a reverse repurchase agreement which is callable weekly.This amount is included in the principal amount which approximates fair value in the Companys Statements of Financial Condition.The interest rate at December 31, 2009 was at the rate of 1.72%.The collateral for this loan is mortgage-backed securities with a fair value of $314.3 million at December 31, 2009. At March 31, 2010, RCap, in its ordinary course of business, financed though matched reverse repurchase agreements, at market rates, $108.2 million for a fund that is managed by FIDAC pursuant to a management agreement and $147.4 million to Chimera.At March 31, 2010, RCap had an outstanding reverse repurchase agreement with a non-affiliate of $276.6 million. The Company reports cash flows on reverse repurchase agreements as investment activities in the Statements of Cash Flows.RCap reports cash flows on reverse repurchase agreements as operating activities in the Statements of Cash Flows. |
Receivable From Prime Broker
Receivable From Prime Broker | |
3 Months Ended
Mar. 31, 2010 | |
Receivable From Prime Broker [Abstract] | |
Receivable From Prime Broker [Text Block] | 7. RECEIVABLE FROM PRIME BROKER The net assets of the Fund owned by the Company are subject toEnglishbankruptcylaw, whichgoverns the administrationof Lehman Brothers International (Europe) (in administration) (LBIE), as well as the law of New York, which governs the contractual documents.The Company invested approximately $45.0 million in the fund and has redeemed approximately $56.0 million.The current assets of the Fund still remain at LBIE and affiliates of LBIE and the ultimate recovery of such amount remains uncertain.The Company has entered into the Claims Resolution Agreement (the CRA) between LBIE and certain eligible offerees effective December 29, 2009 with respect to these assets. Certain of the Companys assets subject to the CRA are held directly at LBIE and the Company has valued such assets in accordance with the valuation date set forth in the CRA and the pricing information provided to the Company by LBIE.The valuation date with respect to these assets as set forth in the CRA is September 19, 2008. Certain of the Companys assets subject to the CRA are not held directly at LBIE and are believed to be held at affiliates of LBIE.Given the great degree of uncertainty as to the status of the Companys assets that are not directly held by LBIE and are believed to be held at affiliates of LBIE, the Company has valued such assets at an 80% discount, or $3.3 million.The value of the net assets that are not directly held by LBIE and are believed to be held at affiliates of LBIE is determined on the basis of the best information available to us from time to time, legal and professional advice obtained for the purpose of determining the rights, and on the basis of a number of assumptions which we believe to be reasonable. The Company can provide no assurance, however, that it will recover all or any portion of any of the net assets of the investment fund following completion ofLBIEsadministration(and any subsequent liquidation). |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
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 follows: 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 Investment Securities characteristics are as follows: Weighted Average Coupon on Fixed Rate Securities Weighted Average Coupon on Adjustable Rate Securities Weighted Average Yield Weighted Average Lifetime Cap on Adjustable Rate Securities Weighted Average Term to Next Adjustment on Adjustable Rate Securities At March 31, 2010 5.50% 4.55% 2.92% 10.09% 32 months At December 31, 2009 5.78% 4.55% 4.51% 10.09% 33 months The Companys financial assets and liabilities carried at fair value on a recurring basis are valued as follows: Level 1 Level 2 Level 3 At March 31, 2010 (dollars in thousands) Assets: Mortgage-Backed Securities $ - $ 67,239,930 - Agency debentures - 2,931,945 - Available for sale equity securities 174,983 - - Liabilities: Interest rate swaps - 608,688 - At December 31, 2009 Assets: Mortgage-Backed Securities $ - $ 64,805,725 - Agency debentures - 915,752 - Available for sale equity securities 174,533 - - Interest rate swaps 5,417 Liabilities: Interest rate swaps - 533,362 - The classification of assets and liabilities by level remains unchanged at March 31, 2010, when compared to the previous quarter. |
Repurchase Agreements
Repurchase Agreements | |
3 Months Ended
Mar. 31, 2010 | |
Repurchase Agreements [Abstract] | |
Repurchase Agreements [Text Block] | 9.REPURCHASE AGREEMENTS The Company had outstanding $53.8 billion and $59.6 billion of repurchase agreements with weighted average borrowing rates of 2.09% and 2.11%, after giving effect to the Companys interest rate swaps, and weighted average remaining maturities of 166 days and 170 days as of March 31, 2010 and December 31, 2009, respectively.Investment Securities pledged as collateral under these repurchase agreements and interest rate swaps had an estimated fair value of $56.9 billion at March 31, 2010 and $57.9 billion at December 31, 2009. At March 31, 2010 and December 31, 2009, the repurchase agreements had the following remaining maturities: March 31, 2010 December 31, 2009 (dollars in thousands) 1 day $ 5,000,336 $ - 2 to 29 days 26,372,405 38,341,206 30 to 59 days 11,237,539 7,163,255 60 to 89 days - 192,005 90 to 119 days 831,183 139,966 Over 120 days 10,343,017 8,761,696 Total $ 53,784,480 $ 54,598,128 The Company did not have an amount at risk greater than 10% of the equity of the Company with any counterparty as of March 31, 2010 or December 31, 2009. The Company has entered into structured term repurchase agreements which provide the counterparty with the right to call the balance prior to maturity date.These repurchase agreements totaled $7.0 billion and the fair value of the option to call was ($345.5 million) at March 31, 2010.The repurchase agreements totaled $7.0 billion and the fair value of the option to call was ($352.4 million) at December 31, 2009.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 term repurchase agreements are modeled and priced such that the Company pays fixed interest rates to the counterparty and receives floating interest rates. The counterparty has the option to cancel the swap after an initial lockout period. Therefore the structured term repurchase agreements are priced as a combination of an interest rate swap with an embedded call option. The Company reports cash flows from repurchase agreements as investment activities in the Statements of Cash Flows.RCap reports cash flows from repurchase agreements as financing activities in the Statements of Cash Flows |
Interest Rate Swaps
Interest Rate Swaps | |
3 Months Ended
Mar. 31, 2010 | |
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 economically hedges a portion of its interest rate risk by entering into derivative financial instrument contracts.As of March 31, 2010, 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 March 31, 2010 are as follows: Location on Statement of Financial Condition Notional Amount Net Estimated Fair Value/Carrying Value (dollars in thousands) March 31, 2010 Liabilities $ 22,773,000 $ 608,688 December 31, 2009 Liabilities $ 18,823,300 $ 533,362 December 31, 2009 Assets $ 2,700,000 $ 5,417 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 Gain (Loss) on Interest Rate Swaps (dollars in thousands) For the Quarter Ended March 31, 2010 $ 180,838 $ (116,732 ) For the Quarter Ended March 31, 2009 $ 176,559 $ 35,545 The weighted average pay rate at March 31, 2010 was 3.66% and the weighted average receive rate was 0.24%.The weighted average pay rate at March 31, 2009 was 4.55% and the weighted average receive rate was 0.55%. |
Convertible Senior Notes
Convertible Senior Notes | |
3 Months Ended
Mar. 31, 2010 | |
Convertible Senior Notes [Abstract] | |
Convertible Senior Notes [Text Block] | 11.CONVERTIBLE SENIOR NOTES During the quarter ended March 31, 2010, Company issued $600.0 million in aggregate principal amount of its 4% convertible senior notes due 2015 (Convertible Senior Notes) for net proceeds following underwriting expenses of approximately $582.0 million.Interest on the Convertible Senior Notes is paid semi-annually at a rate of 4% per year and the Convertible Senior Notes will mature on February 15, 2015 unless earlier repurchased or converted.The Convertible Senior Notes are convertible into shares of Common Stock at an initial conversion rate and conversion rate at March 31, 2010 of 46.6070 and 48.3595 shares of Common Stock per $1,000 principal amount of Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $21.456and $20.769 per share of Common Stock, respectively, subject to adjustment in certain circumstances. |
Preferred Stock And Common Stoc
Preferred Stock And Common Stock | |
3 Months Ended
Mar. 31, 2010 | |
Preferred Stock And Common Stock [Abstract] | |
Preferred Stock And Common Stock [Text Block] | 12. PREFERRED STOCK AND COMMON STOCK (A) Common Stock Issuances During the quarter ended March 31, 2010, 90,247 options were exercised under the Long-Term Stock Incentive Plan, or Incentive Plan, for an aggregate exercise price of $1.5 million.During the quarter ended March 31, 2010, 645 shares of Series B Preferred Stock were converted into 1,511 shares of common stock, respectively. During the quarter ended March 31, 2010, the Company raised $115.5 million by issuing 6.4 million shares, through the Direct Purchase and Dividend Reinvestment Program. During the year ended December 31, 2009, 423,160 options were exercised under the Long-Term Stock Incentive Plan, or Incentive Plan, for an aggregate exercise price of $4.9 million.During the year ended December 31, 2009, 7,550 shares of restricted stock were issued under the Incentive Plan. During the year ended December 31, 2009, 1.4 million shares of Series B Preferred Stock were converted into 2.8 million shares of common stock, respectively. During the year ended December 31, 2009, the Company raised $141.8 million by issuing 8.4 million shares, through the Direct Purchase and Dividend Reinvestment Program. (B) Preferred Stock At March 31, 2010 and December 31, 2009, the Company had issued and outstanding 7,412,500 shares of Series A Cumulative Redeemable Preferred Stock (Series A Preferred Stock), with a par value $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series A Preferred Stock must be paid a dividend at a rate of 7.875% per year on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series A Preferred Stock is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company's option commencing on April 5, 2009 (subject to the Company's right under limited circumstances to redeem the Series A Preferred Stock earlier in order to preserve its qualification as a REIT). The Series A Preferred Stock is senior to the Company's common stock and is on parity with the Series B Preferred Stock with respect to dividends and distributions, including distributions upon liquidation, dissolution or winding up. The Series A Preferred Stock generally does not have any voting rights, except if the Company fails to pay dividends on the Series A Preferred Stock for six or more quarterly periods (whether or not consecutive). Under such circumstances, the Series A Preferred Stock, together with the Series B Preferred Stock, will be entitled to vote to elect two additional directors to the Board, until all unpaid dividends have been paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of the Series A Preferred Stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of Series A Preferred Stock and Series B Preferred Stock. Through March 31, 2010, the Company had declared and paid all required quarterly dividends on the Series A Preferred Stock. At March 31, 2010 and December 31, 2009, |
Net Income Per Common Share
Net Income Per Common Share | |
3 Months Ended
Mar. 31, 2010 | |
Net Income Per Common Share [Abstract] | |
Net Income Per Common Share [Text Block] | 13.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 ended March 31, 2010 and 2009. For the Quarters Ended March 31, 2010 March 31, 2009 Net income attributable to controlling interest $ 281,065 $ 349,893 Less: Preferred stock dividends 4,625 4,626 Net income available to common shareholders, prior to adjustment for Series B dividends, if necessary $ 276,440 $ 345,267 Add: Preferred Series B dividends, if Series B shares are dilutive 976 978 Convertible Senior Note interest, if Note is dilutive 3,195 - Net income available to common shareholders, as adjusted $ 280,611 $ 346,245 Weighted average shares of common stock outstanding-basic 554,995 542,903 Add:Effect of dilutive stock options and 224 113 Series B Cumulative Convertible Preferred Stock 6,293 5,535 Convertible Senior Note 14,347 Weighted average shares of common stock outstanding-diluted 575,859 548,551 Options to purchase 566,000 and 4.5 million shares of common stock were outstanding and considered anti-dilutive as their exercise price and option expense exceeded the average stock price for the quarters ended March 31, 2010 and 2009. |
Long-Term Stock Incentive Plan
Long-Term Stock Incentive Plan | |
3 Months Ended
Mar. 31, 2010 | |
Long Term Stock Incentive Plan [Abstract] | |
Long-Term Stock Incentive Plan [Text Block] | 14. 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 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 Quarter ended March 31, 2010 March 31, 2009 Number of Shares Weighted Average Exercise Price Number of Shares Weighted Average Exercise Price Options outstanding at the beginning of quarter 7,271,503 $ 15.20 5,180,164 $ 15.87 Exercised (90,247 ) 11.72 (55,887 ) 11.17 Options outstanding at the end of quarter 7,181,256 $ 15.24 5,124,277 $ 15.92 Options exercisable at the end of the quarter 1,769,180 $ 17.23 2,241,702 $ 16.12 The weighted average remaining contractual term was approximately 7.4 years for stock options outstanding and approximately 4.3 years for stock options exercisable as of March 31, 2010.As of March 31, 2010, there was approximately $12.4 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 2.7 years. The weighted average remaining contractual term was approximately 7.3 years for stock options outstanding and approximately 5.5 years for stock options exercisable as of March 31, 2009.As of March 31, 2009, there was approximately $8.5 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 3.1 years. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes [Abstract] | |
Income Taxes [Text Block] | 15.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 ended March 31, 2010, the Companys taxable REIT subsidiaries recorded $1.3 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 ended March 31, 2010, the Company recorded $6.0 million of income tax expense for a portion of earnings retained based on Section 162(m) limitations.The effective tax rate was 54% for the quarter ended March 31, 2010. During the quarter ended March 31, 2009, the Companys taxable REIT subsidiaries recorded $533,000 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 ended March 31, 2009, the Company recorded $5.9 million of income tax expense for a portion of earnings retained based on Section 162(m) limitations.The effective tax rate was 54% for the quarter ended March 31, 2009. The effective tax rates were calculated based on the Companys estimated taxable income after dividends paid deduction and differ from the federal statutory rate as a result of state and local taxes and permanent difference pertaining to employee remuneration as discussed above. The statutory combined federal, state, and city corporate tax rate is 45%.This 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. |
Lease Commitments And Contingen
Lease Commitments And Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Lease Commitments And Contingencies [Abstract] | |
Lease Commitments And Contingencies [Text Block] | 16.LEASE COMMITMENTS AND CONTINGENCIES The Company amended its 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 $9.6 million.The following table details the lease payments. Year Ending December Lease Commitment Sublease Income Net Amount (dollars in thousands) 2010 (remaining) $ 1,571 $ 42 $ 1,529 2011 2,120 - 2,120 2012 2,130 - 2,130 2013 2,170 - 2,170 2014 1,677 - 1,677 $ 9,668 $ 42 $ 9,626 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 March 31, 2010 and December 31, 2009. 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 | |
3 Months Ended
Mar. 31, 2010 | |
Interest Rate Risk [Abstract] | |
Interest Rate Risk [Text Block] | 17. 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 March 31, 2010 and December 31, 2009the Company entered into interest rate swaps to pay a fixed rate and receive a floating rate of interest, with a total notional amount of $22.8 billion and $21.5 billion, respectively. 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 | |
3 Months Ended
Mar. 31, 2010 | |
Related Party Transactions [Abstract] | |
Related Party Transactions [Text Block] | 18.RELATED PARTY TRANSACTIONS At March 31, 2010, the Company had $10.3 billion of repurchase agreements outstanding with RCap.The weighted average interest rate is 0.29% and the terms are one to two months.These agreements are collateralized by agency mortgage backed securities, with an estimated market value of$10.6 billion. For the quarter ended March 31, 2010, RCap had $7.9 million in interest income from the Company. At December 31, 2009, the Company had lent $259.0 million to Chimera in a reverse repurchase agreement which is callable weekly.This amount is included in the principal amount which approximates fair value in the Companys Statement of Financial Condition.The interest rate at December 31, 2009 was at the rate of 1.72%. On April 15, 2009, the Company purchased approximately 25.0 million shares of Chimera common stock at a price of $3.00 for aggregate proceeds of approximately $74.9 million.On May 27, 2009, the Company purchased approximately 4.7 million shares of Chimera common stock at a price of $3.22 for aggregate proceeds of approximately $15.2 million.Chimera is managed by FIDAC, and the Company owns approximately 6.8% of Chimera's common stock. |
Regulatory Requirements
Regulatory Requirements | |
3 Months Ended
Mar. 31, 2010 | |
Regulatory Requirements [Abstract] | |
Regulatory Requirements [Text Block] | 19.REGULATORY REQUIREMENTS Annalys broker dealer subsidiary is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping, and conduct of directors, officers and employees. As a self clearing, registered broker dealer, RCap Securities, Inc. is subject to the minimum net capital requirements of the Financial Industry Regulatory Authority (FINRA). As of March 31, 2010, RCap had a minimum net capital requirement of $2.3 million and would be required to notify FINRA if capital was to fall below the early warning threshold of $2.8 million. RCap consistently operates with capital significantly in excess of its regulatory capital requirements. RCaps regulatory net capital as defined by SEC Rule 15c3-1, as of March 31, 2010 was $175.1 million with excess net capital of $172.8 million. |