Exhibit 99.1
Annaly Mortgage Management, Inc. Announces 3rd Quarter 2005 Earnings
NEW YORK--(BUSINESS WIRE)--Oct. 26, 2005--Annaly Mortgage Management, Inc.
(NYSE: NLY) today reported net income for the quarter ended September 30, 2005
of $21.2 million, or $0.14 basic net income per share available to common
shareholders, as compared to $66.6 million or $0.53 basic net income per share
available to common shareholders for the quarter ended September 30, 2004 and
$47.0 million, or $0.36 basic net income per share available to common
shareholders for the quarter ended June 30, 2005.
The Company was able to provide an annualized return on average equity of
5.20% for the quarter ended September 30, 2005, as compared to 16.59% for the
quarter ended September 30, 2004 and 11.36% for the quarter ended June 30, 2005.
Common dividends declared for the quarter ended September 30, 2005 were $0.13
per share, as compared to $0.50 per share for the quarter ended September 30,
2004 and $0.36 per share for the quarter ended June 30, 2005. The annualized
dividend yield on common stock for the quarter, based on the September 30, 2005
closing price of $12.95, was 4.02%.
"The third quarter was a continuation of the unfavorable market conditions
we have been highlighting in past conference calls and earnings and dividend
releases," said Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of the Company. "These market conditions adversely affect our results
in two ways. First, our spread is compressed as our cost of funds continues to
rise relative to the yield on our assets. Second, the transition to a flat curve
with the short end rising relative to the long end pressures asset prices and
enables prepayment speeds to stay relatively flat. Our shareholders should
understand that our results will continue to reflect these conditions while they
persist, and they may persist while the Federal Reserve maintains its current
course of monetary policy. We have operated through Fed tightening cycles and
rising rate environments before, however, each environment presents its unique
set of challenges. We will continue to explore all available portfolio
management options to help strengthen our position to weather the current
environment until such time as the interest rate cycle moves into its next
stage."
For the quarter ended September 30, 2005, the annualized yield on average
earning assets was 3.75% and the annualized cost of funds on the average
repurchase balance was 3.51%, which equates to an interest rate spread of 0.24%.
This is a 132 basis point decrease over the 1.56% annualized interest rate
spread for the quarter ended September 30, 2004 and a 36 basis point decrease
over the 0.60% annualized interest rate spread for the quarter ended June 30,
2005. For the quarter ended September 30, 2004, the annualized yield on average
earning assets was 3.36% and the annualized cost of funds on the average
repurchase balance was 1.80%. For the quarter ended June 30, 2005, the
annualized yield on average earning assets was 3.63% and the annualized cost of
funds on the average repurchase balance was 3.03%. At September 30, 2005, the
annualized yield on earning assets was 3.96% and the annualized cost of funds on
the repurchase balance was 3.69%, which equates to an interest rate spread of
0.27%.
For the quarters ended September 30, 2005, September 30, 2004, and June 30,
2005, the Company's gain on sale of Mortgage-Backed Securities was $32,000, $1.4
million, and $11.4 million, respectively.
The Constant Prepayment Rate was 28% during the third quarter of 2005, as
compared to 25% during the third quarter of 2004, and 27% during the second
quarter of 2005. The weighted average purchase price of the Company's portfolio
was 102.1 at September 30, 2005, 102.4 at September 30, 2004 and 102.2 at June
30, 2005. The net amortization of premiums and accretion of discounts on
investment securities for the quarters ended September 30, 2005, September 30,
2004, and June 30, 2005 was $43.7 million, $39.7 million, and $42.7 million,
respectively. The total net unamortized premium at September 30, 2005, September
30, 2004, and June 30, 2005 was $376.0 million, $409.2 million, and $401.4
million, respectively. Leverage at September 30, 2005 was 10.9:1, in comparison
to 9.4:1 at September 30, 2004 and 10.1:1at June 30, 2005.
"The landscape for our third quarter performance was dramatic bond market
volatility and fast prepayment activity," said Wellington Denahan-Norris, Vice
Chairman and Chief Investment Officer of Annaly. "The challenge for Annaly has
been that a substantial portion of our portfolio was positioned in the period in
and around the refinancing boom of 2003, when Fed Funds stood at 1% and the
10-year Treasury yield was at or below 4%. As a result, our legacy portfolio was
largely purchased at higher dollar prices and lower yields than are generally
available today. Going forward, the impact of generally higher interest rates
should flow through to our portfolio as we reinvest into higher-yielding assets,
and as amortization expense declines further. Indeed, we observed that
prepayment speeds declined during the last month of the quarter as the recent
back-up in long-term rates has begun to work through the mortgage refinancing
pipeline."
General and administrative expenses as a percentage of average assets were
0.13%, 0.14%, and 0.14% for the quarters ended September 30, 2005, September 30,
2004, and June 30, 2005, respectively. At September 30, 2005, September 30,
2004, and June 30, 2005, the Company had a common stock book value per share of
$11.18, $12.84, and $12.43, respectively. The Company classifies all investment
securities as "available for sale," thus requiring the Company to record the
entire portfolio at market value. Fixed rate securities comprised approximately
34% of the Company's portfolio at September 30, 2005. The balance of the
portfolio was comprised of 61% adjustable rate mortgages and 5% LIBOR floating
rate collateralized mortgage obligations. The Company has continued to avoid the
introduction of credit risk into its portfolio. As of September 30, 2005, 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.
At September 30, 2005, FIDAC, Annaly's wholly-owned registered investment
advisor, had under management approximately $2.9 billion in net assets and $26.8
billion in gross assets, as compared to $3.1 billion in net assets and $27.8
billion in gross assets at June 30, 2005 and $1.9 billion in net assets and
$15.9 billion in gross assets at December 31, 2004. For the quarter ended
September 30, 2005, FIDAC earned investment advisory and service fees, net of
fees paid to distributors, of $8.5 million, as compared to $7.5 million for the
quarter ended June 30, 2005. FIDAC, organized as a taxable REIT subsidiary of
Annaly, generally receives net investment advisory fees of approximately 10 to
20 basis points of the gross assets it manages, assists in managing or
supervises.
"The fee income we earn at FIDAC is an important diversification of our
revenue stream at Annaly that we intend to grow over time," said Mr. Farrell.
"Our asset growth in 2005 reflects continued investor demand for high credit
quality, income-oriented investment opportunities."
Annaly manages assets on behalf of institutional and individual investors
worldwide through Annaly and through the funds managed by its wholly-owned
registered investment advisor, FIDAC. The Company's principal business objective
is to generate net income for distribution to investors from the spread between
the interest income on its mortgage-backed securities and the cost of borrowing
to finance their acquisition and from dividends Annaly receives from FIDAC,
which earns investment advisory fee income. The Company, a Maryland corporation
that has elected to be taxed as a real estate investment trust ("REIT"),
currently has 123,684,931 shares of common stock outstanding.
The Company will hold the third quarter 2005 earnings conference call on
Thursday, October 27, 2005 at 10:00 a.m. EST. The number to call is
1-800-299-9086 for domestic and 1-617-786-2903 for international calls and the
pass code is 93922351. The replay will be available for 48 hours, and can be
accessed by dialing 1-888-286-8010 for domestic calls and 1-617-801-6888 for
international calls and the pass code is 30091668. There will be a web cast of
the call on www.annaly.com which will be available for 48 hours. 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,
FIDAC's clients' removal of assets FIDAC manages, FIDAC's regulatory
requirements, and competition in the investment management business. 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, 2004. 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.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
Sept. 30, June 30, March 31,
2005 2005 2005
(Unaudited) (Unaudited) (Unaudited)
------------ ----------- -----------
ASSETS
Cash and cash equivalents $ 1,684 $ 3,669 $ 2,417
Mortgage-Backed Securities, at
fair value 18,697,385 19,165,744 18,702,470
Agency Debentures, at fair value 258,616 391,092 388,593
Receivable for Mortgage-Backed
Securities sold 788 - -
Accrued interest receivable 83,806 87,960 80,172
Receivable for advisory and
service fees 4,579 4,334 2,883
Intangible for customer
relationships 15,367 15,552 15,613
Goodwill 23,122 23,122 23,122
Other assets 1,218 1,472 1,873
----------- ----------- -----------
Total assets $19,086,565 $19,692,945 $19,217,143
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $17,038,226 $17,251,594 $17,438,609
Payable for Mortgage-Backed
Securities purchased 429,502 659,325 75,165
Accrued interest payable 34,171 29,654 33,770
Dividends payable 16,079 44,120 54,575
Other liabilities 625 1,241 1,569
Accounts payable 8,602 6,523 4,079
----------- ----------- -----------
Total liabilities 17,527,205 17,992,457 17,607,767
----------- ----------- -----------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred Stock:
8,000,000 authorized,
7,412,500, 7,412,500,
7,412,500, 7,412,500, and
4,250,000 shares issued and
outstanding, respectively 177,088 177,088 177,077
Common stock: par value $.01 per
share; 500,000,000 authorized,
123,684,931, 122,554,831,
121,277,698, 121,263,000, and
121,235,702 shares issued and
outstanding, respectively 1,237 1,226 1,213
Additional paid-in capital 1,679,452 1,662,347 1,638,911
Accumulated other comprehensive
loss (304,555) (144,853) (213,280)
Retained earnings 6,138 4,680 5,455
----------- ----------- -----------
Total stockholders' equity 1,559,360 1,700,488 1,609,376
----------- ----------- -----------
Total liabilities and
stockholders' equity $19,086,565 $19,692,945 $19,217,143
=========== =========== ===========
Dec. 31, Sept. 30,
2004 2004
(Unaudited)
------------ -----------
ASSETS
Cash and cash equivalents $ 5,853 $ 6,772
Mortgage-Backed Securities, at fair value 19,038,386 17,571,593
Agency Debentures, at fair value 390,509 639,437
Receivable for Mortgage-Backed Securities sold 1,025 -
Accrued interest receivable 81,557 74,291
Receivable for advisory and service fees 2,359 1,637
Intangible for customer relationships 15,613 15,613
Goodwill 23,122 23,122
Other assets 1,875 1,371
----------- -----------
Total assets $19,560,299 $18,333,836
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $16,707,879 $15,579,196
Payable for Mortgage-Backed Securities
purchased 1,044,683 999,380
Accrued interest payable 35,721 24,483
Dividends payable 60,632 60,618
Other liabilities 2,819 4,061
Accounts payable 8,095 6,508
----------- -----------
Total liabilities 17,859,829 16,674,246
----------- -----------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock: 8,000,000 authorized,
7,412,500, 7,412,500, 7,412,500, 7,412,500,
and 4,250,000 shares issued and
outstanding, respectively 177,077 102,708
Common stock: par value $.01 per share;
500,000,000 authorized, 123,684,931,
122,554,831, 121,277,698, 121,263,000, and
121,235,702 shares issued and outstanding,
respectively 1,213 1,212
Additional paid-in capital 1,638,635 1,638,309
Accumulated other comprehensive loss (120,800) (91,987)
Retained earnings 4,345 9,348
----------- -----------
Total stockholders' equity 1,700,470 1,659,590
----------- -----------
Total liabilities and stockholders' equity $19,560,299 $18,333,836
=========== ===========
ANNALY MORTGAGE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the Quarters Ending
September 30, June 30, March 31,
2005 2005 2005
------------- ---------- -----------
Interest income $177,474 $171,595 $176,289
Interest expense 155,043 133,758 113,993
------------- ---------- -----------
Net interest income 22,431 37,837 62,296
------------- ---------- -----------
Other income
Investment advisory and service
fees 10,945 9,669 6,309
Gain on sale of Mortgage-Backed
Securities 32 11,435 580
------------- ---------- -----------
Total other income 10,977 21,104 6,889
------------- ---------- -----------
Expenses
Distribution fees 2,414 2,126 1,610
General and administrative
expenses 6,455 6,800 6,664
------------- ---------- -----------
Total expenses 8,869 8,926 8,274
------------- ---------- -----------
Income before income taxes 24,539 50,015 60,911
Income taxes 3,353 3,022 1,578
------------- ---------- -----------
Net income $21,186 46,993 59,333
Dividend on preferred stock 3,648 3,648 3,648
------------- ---------- -----------
Net income available to common
shareholders $17,538 $43,345 $55,685
============= ========== ===========
Net income per share available to
common shareholders:
Basic $0.14 $0.36 $0.46
============= ========== ===========
Diluted $0.14 $0.36 $0.46
============= ========== ===========
Weighted average number of shares
outstanding:
Basic 123,169,910 121,740,256 121,270,867
============= ========== ===========
Diluted 123,330,645 122,013,050 121,564,320
============= ========== ===========
Net income $21,186 $46,993 $59,333
------------- ---------- -----------
Comprehensive income (loss):
Unrealized gain (loss) on
available-for-sale securities (159,670) 79,862 (91,900)
Less: reclassification
adjustment for net gains
included in net income (32) (11,435) (580)
------------- ---------- -----------
Other comprehensive income
(loss) (159,702) 68,427 (92,480)
------------- ---------- -----------
Comprehensive income (loss) ($138,516) $115,420 ($33,147)
============= ========== ===========
For the Quarters Ending
December September
31, 30,
2004 2004
----------- ------------
Interest income $156,783 $138,970
Interest expense 93,992 70,173
----------- ------------
Net interest income 62,791 68,797
----------- ------------
Other income
Investment advisory and service fees 6,143 4,811
Gain on sale of Mortgage-Backed Securities 1,144 1,350
----------- ------------
Total other income 7,287 6,161
----------- ------------
Expenses
Distribution fees 1,538 1,024
General and administrative expenses 6,862 6,159
----------- ------------
Total expenses 8,400 7,183
----------- ------------
Income before income taxes 61,678 67,775
Income taxes 2,384 1,155
----------- ------------
Net income 59,294 66,620
Dividend on preferred stock 3,665 2,082
----------- ------------
Net income available to common shareholders $55,629 $64,538
=========== ============
Net income per share available to common
shareholders:
Basic $0.46 $0.53
=========== ============
Diluted $0.46 $0.53
=========== ============
Weighted average number of shares outstanding:
Basic 121,246,246 120,802,814
=========== ============
Diluted 121,514,941 120,994,191
=========== ============
Net income $59,294 $66,620
----------- ------------
Comprehensive income (loss):
Unrealized gain (loss) on available-for-sale
securities (27,669) 86,852
Less: reclassification adjustment for net
gains included in net income (1,144) (1,350)
----------- ------------
Other comprehensive income (loss) (28,813) 85,502
----------- ------------
Comprehensive income (loss) $30,481 $152,122
=========== ============
ANNALY MORTGAGE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the nine months
ended
September September
30, 30,
2005 2004
------------ -----------
Interest income $525,358 $375,545
Interest expense 402,794 176,124
------------ -----------
Net interest income 122,564 199,421
------------ -----------
Other income
Investment advisory and service fees 26,923 6,369
Gain on sale of Mortgage-Backed Securities 12,047 4,071
------------ -----------
Total other income 38,970 10,440
------------ -----------
Expenses
Distribution fees 6,151 1,322
General and administrative expenses 19,919 17,167
------------ -----------
Total expenses 26,070 18,489
------------ -----------
Income before income taxes 135,464 191,372
Income taxes 7,952 2,074
------------ -----------
Net income 127,512 189,298
Dividend on preferred stock 10,945 4,080
------------ -----------
Net income available to common shareholders $116,567 $185,218
============ ===========
Net income per share available to common
shareholders:
Basic $0.95 $1.58
============ ===========
Diluted $0.95 $1.58
============ ===========
Weighted average number of shares outstanding:
Basic 122,067,300 117,208,336
============ ===========
Diluted 122,265,351 117,439,248
============ ===========
Net income $127,512 $189,298
------------ -----------
Comprehensive income (loss):
Unrealized gain (loss) on available-for-sale
securities (171,709) (40,655)
Less: reclassification adjustment for net
gains included in net income (12,047) (4,071)
------------ -----------
Other comprehensive income (loss) (183,756) (44,726)
------------ -----------
Comprehensive income (loss) ($56,244) $144,572
============ ===========
CONTACT: Annaly Mortgage Management, Inc.
Investor Relations:
1-888-8Annaly
www.annaly.com