PRESS RELEASE
FROM:
NYSE: NLY
ANNALY MORTGAGE MANAGEMENT, INC.
1211 AVENUE OF THE AMERICAS
SUITE 2902
NEW YORK, NEW YORK 10036
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FOR FURTHER INFORMATION
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Kathryn Fagan, Chief Financial Officer
212-696-0100
Investor Relations
1- (888) 8Annaly
www.annaly.com
FOR IMMEDIATE RELEASE
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ANNALY MORTGAGE MANAGEMENT, INC. ANNOUNCES 2nd QUARTER 2003 EARNINGS
New York, New York -July 28, 2003 - Annaly Mortgage Management, Inc. (NYSE: NLY)
(the "Company") today reported earnings for the quarter ended June 30, 2003 of
$58,152,000 or $0.62 per average share outstanding, as compared to $59,369,000
or $0.72 per average share outstanding for the quarter ended June 30, 2002.
During the quarter the Company raised approximately $151.3 million in net
proceeds through a secondary offering of 9,300,700 shares of common stock.
The Company provided an annualized return on average equity of 20.79% for the
quarter ended June 30, 2003, as compared to 18.83% for the quarter ended March
31, 2003 and 23.08% for the quarter ended June 30, 2002. Dividends declared for
the quarter ended June 30, 2003 were $0.60 per share, compared to $0.60 for the
quarter ended March 31, 2003 and $0.68 per share for the quarter ended June 30,
2002. The annualized dividend yield for the quarter, based on the June 30, 2003
closing price of $19.91, was 12.05%.
"As managers, our job is to create for shareholders a steady stream of income in
the form of dividends," said Michael A.J. Farrell, Chairman, Chief Executive
Officer and President of Annaly. "That stream of income will fluctuate with the
nominal level of rates and as the yields that we earn on our assets change in
relation to our cost of funds. Investors in all markets--equities, money
markets, credit-sensitive securities--have had to adjust their return
expectations in response to the nominally low interest rate environment and the
sluggish economy, and we are no different. Our results for the quarter reflect
these market conditions, particularly the effect of high mortgage refinancing
activity. As we navigate through these markets, we believe that our portfolio of
adjustable-rate and fixed-rate mortgage-backed securities will continue to offer
competitive returns."
For the quarter ended June 30, 2003, the yield on average earning assets was
2.93% and the cost of funds on the average repurchase balance was 1.68%, which
equates to an interest rate spread of 1.25%. This is a 30 basis point decrease
over the 1.55% interest rate spread for the quarter ended March 31, 2003, when
the yield on average earning assets was 3.23% and the cost of funds on the
average repurchase balance was 1.68%, and a 120 basis point decrease over the
2.45% interest rate spread for the quarter ended June 30, 2002, when the yield
on average earning assets was 4.55% and the cost of funds on the average
repurchase balance was 2.10%.
The Constant Prepayment Rate increased to 44% during the second quarter of 2003,
as compared to 41% in the first quarter of 2003 and 25% for the quarter ended
June 30, 2002. The homeowners' prepayment option makes the average term, yield
and performance of a mortgage-backed security uncertain because of the
uncertainty in timing the return of principal. In general, prepayments decrease
the yield on a security purchased at a premium. The faster prepayments come in,
the faster that premium is amortized. The weighted average purchase price of the
portfolio was 102.5 at June 30, 2003, 102.6 at March 31, 2003, and 102.2 at June
30, 2002. "The dominant challenge today for any mortgage-backed securities
portfolio manager is maintaining performance through these periods of extremely
fast prepayments and historically low yields," said Wellington Denahan, Vice
Chairman and Chief Investment Officer. "Prepayments have reduced our spread
income through the high levels of premium amortization, and we expect to see
these effects continue near term. Nevertheless, the recent backup in 10 year
Treasury yields from 3.50% at quarter end to 4.17% on July 24, 2003 should
result in slowing refinance activity. This slowing, along with low funding
costs, should be advantageous for the Company in the long term."
For the quarter ended June 30, 2003, the Company's gain on sale of assets was
$20.2 million as compared to $11.0 million in the quarter ended March 31, 2003
and $1.3 million for the quarter ended June 30, 2002. Leverage at June 30, 2003
was 10.5:1, in comparison to 9.5:1 at March 31, 2003 and 8.8:1 at June 30, 2002.
General and administrative expenses as a percent of average assets was 0.12% for
the quarters ended June 30, 2003 and March 31, 2003 and 0.13% for the quarter
ended June 30, 2002. In addition, the Company's Dividend Efficiency Ratio,
calculated as general and administrative expenses divided by dividends paid, was
7.4%, 7.3%, and 6.3% for the quarters ended June 30, 2003, March 31, 2003, and
June 30, 2002, respectively.
At June 30, 2003, March 31, 2003, and June 30, 2002, the Company had a book
value of $12.35, $12.72, and $12.65, respectively. The Company classifies all
investment securities as "available for sale;" therefore requiring the Company
to record the entire portfolio at market value. Fixed rate securities comprised
approximately 36% of the Company's portfolio at June 30, 2003. The balance of
the portfolio was comprised of 42% adjustable rate securities and 22% LIBOR
floating rate securities. The Company has continued to avoid the introduction of
credit risk into its portfolio. As of June 30, 2003, all of the assets in the
Company's portfolio were Federal National Mortgage Association, Government
National Mortgage Association, Federal Home Loan Mortgage Corporation
mortgage-backed securities, and agency debentures, which carry an actual or
implied "AAA" rating.
The Company is a Maryland corporation which owns and manages a portfolio of
mortgage-backed securities. The Company's principal business objective is to
generate net income for distribution to stockholders from the spread between the
interest income on its mortgage-backed securities and the cost of borrowing to
finance their acquisition. The Company has elected to be taxed as a real estate
investment trust ("REIT") and currently has 94,032,753 shares of common stock
outstanding.
The Company will hold the 2nd quarter 2003 earnings conference call on July 29th
at 10 a.m. EST. The number to call is 1-800-915-4836. The re-play number is
1-800-428-6051 and the pass code is 302067. There will be a web cast of the call
on www.annaly.com. If you would like to be added to the e-mail distribution
list, please visit www.annaly.com, click on E-Mail alerts, enter your e-mail
address where indicated and click the Subscribe button.
This news release and our public documents to which we refer contain or
incorporate by reference certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements which are based on various
assumptions (some of which are beyond our control) may be identified by
reference to a future period or periods or by the use of forward-looking
terminology, such as "may," "will," "believe," "expect," "anticipate,"
"continue," or similar terms or variations on those terms or the negative of
those terms. Actual results could differ materially from those set forth in
forward-looking statements due to a variety of factors, including, but not
limited to, changes in interest rates, changes in yield curve, changes in
prepayment rates, the availability of mortgage-backed securities for purchase,
the availability of financing and, if available, the terms of any financing. For
a discussion of the risks and uncertainties which could cause actual results to
differ from those contained in the forward-looking statements, see "Risk
factors" in our Annual Report on Form 10-K for the fiscal year ended December
31, 2002. We do not undertake, and specifically disclaim any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 2003 DECEMBER 31,
(UNAUDITED) 2002
(DOLLARS IN THOUSANDS)
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ASSETS
Cash and cash equivalents $ 304 $ 726
Mortgage-Backed Securities, at fair value 12,887,495 11,551,857
Agency debentures, at fair value 1,375,980 --
Receivable for Mortgage-Backed Securities sold 387,218 55,954
Accrued interest receivable 58,026 49,707
Other assets 1,104 840
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Total assets $ 14,710,127 $ 11,659,084
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $ 12,162,333 $ 10,163,174
Payable for investment securities purchased 1,306,238 338,691
Accrued interest payable 16,788 14,935
Dividends payable 56,420 57,499
Other liabilities 4,708 2,812
Accounts payable 2,202 1,907
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Total liabilities 13,548,689 10,579,018
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Stockholders' Equity:
Common stock: par value $.01 per share; 500,000,000
authorized, 94,030,753 and 84,569,206 shares issued
and outstanding, respectively 940 846
Additional paid-in capital 1,157,092 1,003,200
Accumulated other comprehensive gain 1,190 75,511
Retained earnings 2,216 509
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Total stockholders' equity 1,161,438 1,080,066
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Total liabilities and stockholders' equity $ 14,710,127 $ 11,659,084
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ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE FOR THE FOR THE SIX FOR THE SIX
QUARTER ENDED QUARTER ENDED MONTHS ENDED MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
2003 2002 2003 2002
(DOLLARS IN THOUSANDS)
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INTEREST INCOME $93,892 $109,423 $181,392 $202,323
INTEREST EXPENSE 51,770 47,860 95,818 87,872
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NET INTEREST INCOME 42,122 61,563 85,574 114,451
GAIN ON SALE OF MORTGAGE-BACKED SECURITIES
20,231 1,342 31,252 4,753
GENERAL AND ADMINISTRATIVE
EXPENSES 4,201 3,536 7,898 6,791
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NET INCOME 58,152 59,369 108,928 112,413
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OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain (loss) on available-for-
sale securities (49,579) 38,123 (43,069) 33,866
Less: reclassification adjustment for net
gains included in net income (20,231) (1,342) (31,252) (4,753)
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Other comprehensive gain (loss) (69,810) 36,781 (74,321) 29,113
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COMPREHENSIVE INCOME (LOSS) $(11,658) $96,150 $34,607 $141,526
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NET INCOME PER SHARE:
Basic $0.62 $0.72 $1.22 $1.41
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Diluted $0.62 $0.71 $1.22 $1.40
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AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 93,384,128 82,910,206 89,109,821 79,954,529
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Diluted 93,588,024 83,186,865 89,231,272 80,245,372
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