PRESS RELEASE
FROM:
NYSE: NLY
ANNALY MORTGAGE MANAGEMENT, INC.
1211 AVENUE OF THE AMERICAS
SUITE 2902
NEW YORK, NEW YORK 10036
- -------------------------------------------------------------------------------
FOR FURTHER INFORMATION
Kathryn Fagan, Chief Financial Officer
212-696-0100
Investor Relations
1- (888) 8Annaly
www.annaly.com
FOR IMMEDIATE RELEASE
ANNALY MORTGAGE MANAGEMENT, INC. ANNOUNCES 3rd QUARTER 2003 EARNINGS
New York, New York -October 21, 2003 - Annaly Mortgage Management, Inc. (NYSE:
NLY) today reported earnings for the quarter ended September 30, 2003 of
$28,479,000 or $0.30 per average share outstanding, as compared to $56,668,000
or $0.68 per average share outstanding for the quarter ended September 30, 2002.
The Company was able to provide an annualized return on average equity of 9.88%
for the quarter ended September 30, 2003, as compared to 20.79% for the quarter
ended June 30, 2003, and 21.24% for the quarter ended September 30, 2002.
Dividends declared for the quarter ended September 30, 2003 were $0.28 per
share, compared to $0.60 for the quarter ended June 30, 2003 and $0.68 per share
for the quarter ended September 30, 2002. The annualized dividend yield for the
quarter, based on the September 30, 2003 closing price of $16.42, was 6.82%.
"Our third quarter results reflect the transition from a period of very low
interest rates and very high prepayment speeds to a period of higher rates and
slower speeds," said Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly. "As we have reiterated time and again in 2002 and 2003, our
job as managers during this time has been to protect capital and remain
defensive until the fundamentals of the mortgage market improved. The good news
is that amortization expense--which has exceeded interest expense through the
first 9 months of the year--is now subsiding. Looking ahead to the fourth
quarter and beyond, we expect that the substantial reduction in prepayment
speeds and premium amortization will serve to enhance earnings."
For the quarter ended September 30, 2003, the yield on average earning assets
was 2.13% and the cost of funds on the average repurchase balance was 1.44%,
which equates to an interest rate spread of 0.69%. This is a 56 basis point
decrease over the 1.25% interest rate spread for the quarter ended June 30,
2003, when the yield on average earning assets was 2.93% and the cost of funds
on the average repurchase balance was 1.68%, and a 128 basis point decrease over
the 1.97% interest rate spread for the quarter ended September 30, 2002, when
the yield on average earning assets was 4.10% and the cost of funds on the
average repurchase balance was 2.13%.
The Constant Prepayment Rate increased to 48% during the third quarter of 2003,
as compared to 44% in the second quarter of 2003 and 34% for the quarter ended
September 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 total yield on a bond purchased at a premium, because over the life of the
bond that premium has to be amortized. The faster prepayments, the shorter the
life of the security, which results in the increased amortization. The total
amount of amortization for the quarters ended September 30, 2003, June 30, 2003,
and September 30, 2002 were $72,047,000, $57,615,000, and $28,229,000,
respectively. The weighted average
purchase price of the portfolio was 102.6 at September 30, 2003, 102.5 at June
30, 2003, and 102.3 at September 30, 2002.
"While the bond market has shown remarkable price volatility during the quarter,
its dominant feature has been the historically fast prepayment speeds due to
refinancing activity," said Wellington Denahan, Vice Chairman and Chief
Investment Officer. "Because of the two to three month lag between mortgage
applications and their related cash flows, during the third quarter we
recognized the amortization expense related to the second quarter peak in the
MBA Refi Index. Since the peak on May 30, the MBA Refi Index has fallen
approximately 75%. Accordingly, we expect to see our amortization expense fall
beginning in the fourth quarter."
For the quarter ended September 30, 2003, the Company's gain on sale of assets
was $9.7 million as compared to $20.2 million in the quarter ended June 30, 2003
and $4.7 million for the quarter ended September 30, 2002. Leverage at September
30, 2003 was 9.8:1, in comparison to 10.5:1 at June 30, 2003 and 9.0:1 at
September 30, 2002.
General and administration expenses, as a percent of average assets was 0.12%
for the quarters ended September 30, 2003, June 30, 2003 and September 30, 2002,
respectively. In addition, the Company's Dividend Efficiency Ratio, calculated
as general and administrative expenses divided by dividends paid, was 15.3%,
7.4% and 5.7% for the quarters ended September 30, 2003, June 30, 2003, and
September 30, 2002, respectively. "In our simple, low G&A business model," said
Mr. Farrell, "the increase in net interest income that comes about from
reductions in premium amortization essentially drops to the bottom line."
At September 30, 2003, June 30, 2003, and September 30, 2002, respectively, the
Company had a book value of $11.94, $12.35 and $12.84. 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 31% of the Company's portfolio at September 30, 2003.
The balance of the portfolio was comprised of 50% adjustable rate mortgages and
19% LIBOR floating rate collateralized mortgage obligations. The Company has
continued to avoid the introduction of credit risk into its portfolio. As of
September 30, 2003, all of the assets in the Company's portfolio were FNMA,
GNMA, FHLMC 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 95,984,229 shares of common stock
outstanding.
The Company will hold the 3rd quarter 2003 earnings conference call on
Wednesday, October 22, 2003 at 10:00 a.m. EST. The number to call is
1-800-838-4403. The re-play number is 1-800-428-6051 and the pass code is
310828. 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
(DOLLARS IN THE THOUSANDS)
SEPT. 30, 2003 JUNE 30, 2003 MARCH 31, 2003 DEC. 31, 2002 SEPT. 30, 2002
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------------- --------------- ----------------- --------------- ----------------
ASSETS
Cash and cash equivalents $ 3,381 $ 304 $ 945 $ 726 $ 2,002
Mortgage-Backed Securities, at fair value 11,628,271 12,887,495 11,674,910 11,551,857 11,489,538
Agency Debentures, at fair value 976,814 1,375,980 643,160 - -
Receivable for Mortgage-Backed Securities sold 177,304 387,218 304,766 55,954 77,232
Accrued interest receivable 53,955 58,026 50,087 49,707 49,950
Other assets 1,233 1,104 873 840 1,260
--------------- --------------- ----------------- --------------- ----------------
Total assets $12,840,958 $14,710,127 $12,674,741 $11,659,084 $11,619,982
=============== =============== ================= =============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $11,201,897 $12,162,333 $10,192,049 $10,163,174 $9,809,968
Payable for Mortgage-Backed Securities
purchased 445,148 1,306,238 1,335,427 338,691 634,598
Accrued interest payable 13,868 16,788 15,915 14,935 28,035
Dividends payable 26,876 56,420 50,789 57,499 57,465
Other liabilities 4,294 4,708 2,816 2,812 2,592
Accounts payable 3,147 2,202 1,033 1,907 2,319
--------------- --------------- ----------------- --------------- ----------------
Total liabilities 11,695,230 13,548,689 11,598,029 10,579,018 10,534,977
--------------- --------------- ----------------- --------------- ----------------
Stockholders' Equity:
Common stock: par value $.01 per share;
500,000,000 authorized, 95,964,915,
94,030,753, 84,647,484, 84,569,206,
and 84,507,065 shares issued and
outstanding, respectively 960 940 846 846 845
Additional paid-in capital 1,192,819 1,157,092 1,004,370 1,003,200 1,002,197
Accumulated other comprehensive income (loss) (51,870) 1,190 71,000 75,511 74,382
Retained earnings 3,819 2,216 496 509 7,581
--------------- --------------- ----------------- --------------- ----------------
Total stockholders' equity 1,145,728 1,161,438 1,076,712 1,080,066 1,085,005
--------------- --------------- ----------------- --------------- ----------------
Total liabilities and stockholders' equity $12,840,958 $14,710,127 $12,674,741 $11,659,084 $11,619,982
=============== =============== ================= =============== ================
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(FOR THE QUARTERS ENDED)
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30,
2003 2003 2003 2002 2002
----------------- --------------- ---------------- ---------------- ----------------
INTEREST INCOME $66,855 $93,892 $87,500 $92,641 $109,201
INTEREST EXPENSE 43,922 51,770 44,048 49,874 54,012
----------------- --------------- ---------------- ---------------- ----------------
NET INTEREST INCOME 22,933 42,122 43,452 42,767 55,189
GAIN ON SALE OF MORTGAGE-BACKED SECURITIES
9,656 20,231 11,020 11,563 4,747
GENERAL AND ADMINISTRATIVE
EXPENSES 4,110 4,201 3,697 3,904 3,268
----------------- --------------- ---------------- ---------------- ----------------
NET INCOME 28,479 58,152 50,775 50,426 56,668
----------------- --------------- ---------------- ---------------- ----------------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain (loss) on available-for-sale (43,405) (49,579) 6,509 12,692 11,846
securities
Less: reclassification adjustment for net
gains included in net income (9,656) (20,231) (11,020) (11,563) (4,747)
----------------- --------------- ---------------- ---------------- ----------------
Other comprehensive income (loss) (53,061) (69,810) (4,511) 1,129 7,099
----------------- --------------- ---------------- ---------------- ----------------
COMPREHENSIVE INCOME (LOSS) $(24,582) $(11,658) $46,264 $51,555 $63,767
================= =============== ================ ================ ================
NET INCOME PER SHARE:
Basic $0.30 $0.62 $0.60 $0.60 $0.68
================= =============== ================ ================ ================
Diluted $0.30 $0.62 $0.60 $0.60 $0.68
================= =============== ================ ================ ================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 94,685,685 93,384,128 84,606,786 84,525,171 83,668,422
================= =============== ================ ================ ================
Diluted 95,500,486 93,588,024 84,837,390 84,766,747 83,939,870
================= =============== ================ ================ ================
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
FOR THE NINE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2003 2002
---------------------- ----------------------
INTEREST INCOME $248,247 $311,524
INTEREST EXPENSE 139,740 141,884
---------------------- ----------------------
NET INTEREST INCOME 108,507 169,640
GAIN ON SALE OF MORTGAGE-BACKED SECURITIES 40,907 9,500
GENERAL AND ADMINISTRATIVE EXPENSES 12,008 10,059
---------------------- ----------------------
NET INCOME 137,406 169,081
---------------------- ----------------------
OTHER COMPREHENSIVE INCOME (LOSS):
Unrealized gain (loss) on available-for-sale securities (86,474) 45,713
Less: reclassification adjustment for net gains included in net income (40,907) (9,500)
---------------------- ----------------------
Other comprehensive income (loss) (127,381) 36,213
---------------------- ----------------------
COMPREHENSIVE INCOME (LOSS) $10,025 $205,294
====================== ======================
NET INCOME PER SHARE:
Basic $1.51 $2.08
====================== ======================
Diluted $1.50 $2.07
====================== ======================
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic 90,929,196 81,206,156
====================== ======================
Diluted 91,750,472 81,490,436
====================== ======================