Exhibit 99.1
Annaly Mortgage Management, Inc. Announces 4th Quarter
and Annual 2005 Results
NEW YORK--(BUSINESS WIRE)--Feb. 9, 2006--Annaly Mortgage
Management, Inc. (NYSE: NLY) today reported a net loss for the quarter
ended December 31, 2005 of $136.8 million or $1.14 basic net loss per
average share available to common shareholders, as compared to net
income of $59.3 million or $0.46 basic net income per average share
available to common shareholders for the quarter ended December 31,
2004 and $21.2 million or $0.14 basic net income per average share
available to common shareholders for the quarter ended September 30,
2005. The net loss for the year ended December 31, 2005 was $9.3
million or $0.19 net loss per average share available to common
shareholders, as compared to net income of $248.6 million or $2.04
basic net income per average share available to common shareholders
for the year ended December 31, 2004. As previously disclosed, during
the fourth quarter of 2005, the Company undertook a portfolio
rebalancing and recognized non-cash impairment charges relating to
certain securities in its portfolio which had been held in an
unrealized loss position. "Core Earnings," defined as net income
available to common shareholders excluding impairment loss and the 4th
quarter losses on sales of securities, for the quarter ended December
31, 2005 was $8.0 million, or $0.06 per share available to common
shareholders, and for the year ended December 31, 2005 the "Core
Earnings" was $112.5 million, or $0.92 per average share available to
common shareholders.
The rebalancing is being accomplished through asset sales and
reinvestment into the market. During the fourth quarter $2.3 billion
face amount of securities were sold, resulting in a realized loss of
$65.3 million, or $0.53 per share. In addition, approximately $2.9
billion face amount of securities were reclassified as
other-than-temporarily impaired as of December 31, 2005, with an
approximate loss of $83 million, or approximately $0.67 per share. The
non-cash loss on the securities deemed other-than-temporarily impaired
that remain in the Company's portfolio was reflected in the income
statement based on the fair value of the securities on December 31,
2005, and recognition of such impairment charges will not reduce the
taxable income of the Company.
Common dividends declared for the quarter ended December 31, 2005
were $0.10 per share, as compared to $0.50 per share for the quarter
ended December 31, 2004 and $0.13 for the quarter ended September 30,
2005. Common dividends declared for the year ended December 31, 2005
were $1.04 per share, as compared to $1.98 per share for the year
ended December 31, 2004. The annualized dividend yield on common stock
for the quarter ended December 31, 2005, based on the December 31,
2005 closing price of $10.94, was 3.66% and the dividend yield for the
year ended December 31, 2005, based on the average closing price
during the year of $16.24 was 6.40%. For the quarter ended December
31, 2005, the Company provided an annualized return on average equity
of (35.71%) and a 3.04% return on average equity excluding realized
losses and the Other-Than-Temporary Impairment Charge, as compared to
14.12% for the quarter ended December 31, 2004 and 5.20% for the
quarter ended September 30, 2005. For the year ended December 31,
2005, the Company provided a return on average equity of (0.57%) and a
7.87% return on average equity excluding realized losses and the
Other-Than-Temporary Impairment Charge, as compared to 16.04% for the
year ended December 31, 2004.
"Our results for the fourth quarter reflect our Company's response
to the persistence of current market conditions," said Michael A.J.
Farrell, Chairman, Chief Executive Officer and President of the
Company. "No financial institution is immune from the rise in the cost
of funds and the flattening of the yield curve. Investors are entitled
to know, however, how a company manages for these conditions. At
Annaly, we have taken steps to improve our financial position while
staying true to our barbell strategy, our commitment to "AAA" assets
and our transparency. In addition, while the non-cash charges related
to our repositioning have resulted in a loss on the income statement,
there was minimal book value effect as substantially all of the
realized and unrealized losses were already reflected in the September
30, 2005 balance sheet as Accumulated Other Comprehensive Loss. The
net result of our decisions is that we have increased the weighted
average yield on the portfolio by selling assets acquired during the
much-lower interest rate environment of the past two years, added more
floating rate exposure through, among other things, the introduction
of fixed-for-floating interest rate swaps and positioned the portfolio
to deliver higher returns than it otherwise would have been able to
deliver. Most importantly from a strategic point of view, our asset
sales have enabled us to take greater advantage of the value created
in the mortgage market from the 20 month sell-off in the short-end of
the curve. We will continue to reposition our portfolio into these
more favorable market conditions using all tools at our disposal."
For the quarter ended December 31, 2005, the annualized yield on
average earning assets was 4.10% and the annualized cost of funds on
the average repurchase balance was 4.01%, which equates to an interest
rate spread of 0.09%. This is a 118 basis point decrease over the
1.27% annualized interest rate spread for the quarter ended December
31, 2004 and a 15 basis point decrease over the 0.24% annualized
interest rate spread for the quarter ended September 30, 2005. For the
quarter ended December 31, 2004, the annualized yield on average
earning assets was 3.50% and the annualized cost of funds on the
average repurchase balance was 2.23%. 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%. For the year ended December 31, 2005, the yield on average
earning assets was 3.80% and the cost of funds on the average
repurchase balance 3.27%. For the year ended December 31, 2004, the
annualized yield on average earning assets was 3.25% and the
annualized cost of funds on the average repurchase balance was 1.74%.
For the year ended December 31, 2005 the interest rate spread was
0.53%, which was a 98 basis point decline over the 1.51% interest rate
spread for the year ended December 31, 2004. At December 31, 2005, the
weighted average yield on assets was 4.68% and the cost of funds was
4.16%. Leverage at December 31, 2005 was 9.0:1, in comparison to 9.8:1
at December 31, 2004 and 10.9:1 at September 30, 2005.
Fixed rate securities comprised 39% of the Company's portfolio at
December 31, 2005. The balance of the portfolio was comprised of 55%
adjustable rate mortgages and 6% LIBOR floating rate collateralized
mortgage obligations. The Company has continued to avoid the
introduction of credit risk into its portfolio. As of December 31,
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. During the fourth quarter, the
Company entered into swap transactions. The Company agrees to pay a
fixed rate of interest and to receive a variable interest rate. The
Company's swaps are designated as cash flow hedges against the
benchmark interest rate risk associated with the Company's borrowings.
The purpose of the swap is to mitigate risk of rising interest rates
that affect our cost of funds. Since the Company will be receiving a
floating rate on the notional amount of the swap, the effect of the
swap will be to enhance the earnings potential of a portion of the
fixed rate assets in the portfolio in a rising rate environment.
"The impetus of rebalancing was to accelerate the natural process
of principal and interest reinvestment into higher yielding assets,"
said Wellington Denahan-Norris, Vice Chairman, Chief Investment
Officer and Chief Operating Officer of Annaly. "Of the $2.3 billion in
assets sold during the quarter, approximately 78% were hybrid
adjustable-rate mortgage-backed securities. A significant portion of
the assets we sold were replaced with fixed-rate mortgage-backed
securities, the cash flows of which have been swapped into floating
rate cash flows. The net result is that at December 31, 2005,
approximately 9% of our portfolio's cash flows are floating rate in
nature. The rebalancing was designed to strengthen the portfolio for
the long term, benefiting performance regardless of the direction in
interest rates."
The following table summarizes portfolio information for Annaly:
Dec. 31, Sept. 30, Dec. 31,
2005 2005 2004
Leverage at period-end 9.0:1 10.9:1 9.8:1
Fixed-rate mortgage-backed securities as % of
portfolio 39% 34% 29%
Adjustable-rate mortgage-backed securities as %
of portfolio 55% 61% 62%
Floating-rate mortgage-backed securities as % of
portfolio 6% 5% 9%
Notional amount of interest rate swap as % of NA NA
portfolio 3%
Annualized yield on average earning assets
during the quarter 4.10% 3.75% 3.25%
Annualized cost of funds on avg. repurchase
balance during the quarter 4.01% 3.51% 1.74%
Weighted average yield on assets at period-end 4.68% 3.96% 3.43%
Weighted average cost of funds at period-end 4.16% 3.69% 2.46%
The Constant Prepayment Rate was 28% during the fourth quarter of
2005, as compared to 27% during the fourth quarter of 2004, and 28%
during the third quarter of 2005. The weighted average purchase price
of the portfolio was 102.0 at December 31, 2005, 102.3 at December 31,
2004 and 102.4 at September 30, 2005. The weighted average cost basis,
after the Other-Than-Temporary Impairment Charge, was 101.4 at
December 31, 2005. The net amortization of premiums and accretion of
discounts on investment securities for the quarters ended December 31,
2005, December 31, 2004, and September 30, 2005 was $31.9 million,
$42.3 million, and $43.7 million, respectively. The net amortization
of premiums and accretion of discounts on investment securities for
the years ended December 31, 2005 and December 31, 2004 was $154.3
million and $179.6 million, respectively. The total net premium
remaining unamortized at December 31, 2005, December 31, 2004, and
September 30, 2005 was $220.6 million, $425.8 million and $376.0
million respectively.
General and administrative expenses as a percentage of average
assets were 0.14%, 0.14%, and 0.13% for the quarters ended December
31, 2005, December 31, 2004, and September 30, 2005, respectively.
General and administrative expenses as a percentage of average assets
were 0.14% for the years ended December 31, 2005 and 2004. At December
31, 2005, December 31, 2004, and September 30, 2005, the Company had a
common stock book value per share of $10.73, $12.56 and $11.18
respectively.
At December 31, 2005, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.3 billion in
net assets and $18.7 billion in gross assets, as compared to $2.9
billion in net assets and $26.8 billion in gross assets at September
30, 2005 and $1.9 billion in net assets and $15.9 billion in gross
assets at December 31, 2004. For the quarter ended December 31, 2005,
FIDAC earned investment advisory and service fees, net of fees paid to
distributors, of $6.9 million, as compared to $4.6 million for the
quarter ended December 31, 2004 and $8.5 million for the quarter ended
September 30, 2005. For the year ended December 31, 2005, FIDAC earned
investment advisory and service fees, net of fees paid to
distributors, of $27.6 million, as compared to $9.7 million for the
year ended December 31, 2004. 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.
"We are proud of the fact that we have grown our asset management
business over 20% in 2005 in the face of a hostile Federal Reserve and
the unprecedented long duration of this tightening cycle," said Mr.
Farrell. "Going forward, we will be working toward continued growth in
our core strategy at FIDAC, and towards diversifying our product
offerings, in order to grow the fee income component of our revenue
stream."
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 Annual 2005 earnings conference call on
Friday February 10, 2006 at 10:00 a.m. EST. The number to call is
1-866-202-3048 for domestic calls and 617-213-8843 for international
calls and the pass code is 92013110. The re-play number is
1-888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 41563267. 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, 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)
DEC. 31, 2005 SEPT. 30, JUNE 30,
2005 2005
(Unaudited) (Unaudited) (Unaudited)
-------------- ------------ ------------
ASSETS
Cash and cash equivalents $4,808 $1,684 $3,669
Mortgage-Backed Securities,
at fair value 15,929,864 18,697,385 19,165,744
Agency Debentures, at fair
value - 258,616 391,092
Receivable for Mortgage-
Backed Securities sold 13,449 788 -
Accrued interest receivable 71,340 83,806 87,960
Receivable for advisory and
service fees 3,497 4,579 4,334
Intangible for customer
relationships 15,183 15,367 15,552
Goodwill 23,122 23,122 23,122
Other assets 2,159 1,218 1,472
-------------- ------------ ------------
Total assets $16,063,422 $19,086,565 $19,692,945
============== ============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $13,576,301 $17,038,226 $17,251,594
Payable for Mortgage-Backed
Securities purchased 933,051 429,502 659,325
Accrued interest payable 27,994 34,171 29,654
Dividends payable 12,368 16,079 44,120
Other liabilities 305 625 1,241
Accounts payable 8,837 8,602 6,523
Interest rate swaps, at
fair value 543 - -
-------------- ------------ ------------
Total liabilities 14,559,399 17,527,205 17,992,457
-------------- ------------ ------------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred Stock:
8,000,000 authorized,
7,412,500 shares issued
and outstanding 177,088 177,088 177,088
Common stock: par value
$.01 per share;
500,000,000 authorized,
123,684,931, 123,684,931,
122,554,831, 121,277,698,
and 121,263,000 shares
issued and outstanding,
respectively 1,237 1,237 1,226
Additional paid-in capital 1,679,452 1,679,452 1,662,347
Accumulated other
comprehensive loss (207,117) (304,555) (144,853)
Retained (deficit) earnings (146,637) 6,138 4,680
-------------- ------------ ------------
Total stockholders' equity 1,504,023 1,559,360 1,700,488
-------------- ------------ ------------
Total liabilities and
stockholders' equity $16,063,422 $19,086,565 $19,692,945
============== ============ ============
MARCH 31, 2005 DEC. 31, 2004
(Unaudited)
--------------- ------------
ASSETS
Cash and cash equivalents $2,417 $5,853
Mortgage-Backed Securities, at fair value 18,702,470 19,038,386
Agency Debentures, at fair value 388,593 390,509
Receivable for Mortgage-Backed Securities sold - 1,025
Accrued interest receivable 80,172 81,557
Receivable for advisory and service fees 2,883 2,359
Intangible for customer relationships 15,613 15,613
Goodwill 23,122 23,122
Other assets 1,873 1,875
--------------- ------------
Total assets $19,217,143 $19,560,299
=============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $17,438,609 $16,707,879
Payable for Mortgage-Backed Securities
purchased 75,165 1,044,683
Accrued interest payable 33,770 35,721
Dividends payable 54,575 60,632
Other liabilities 1,569 2,819
Accounts payable 4,079 8,095
Interest rate swaps, at fair value - -
--------------- ------------
Total liabilities 17,607,767 17,859,829
--------------- ------------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock: 8,000,000
authorized,
7,412,500 shares issued and
outstanding 177,077 177,077
Common stock: par value $.01 per share;
500,000,000 authorized, 123,684,931,
123,684,931, 122,554,831, 121,277,698,
and 121,263,000 shares
issued and outstanding, respectively 1,213 1,213
Additional paid-in capital 1,638,911 1,638,635
Accumulated other comprehensive loss (213,280) (120,800)
Retained (deficit) earnings 5,455 4,345
--------------- ------------
Total stockholders' equity 1,609,376 1,700,470
--------------- ------------
Total liabilities and stockholders'
equity $19,217,143 $19,560,299
=============== ============
ANNALY MORTGAGE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the Quarters Ending
December 31, September 30, June 30,
2005 2005 2005
------------ ------------ ------------
Interest income $179,688 $177,474 $171,595
Interest expense 165,766 155,043 133,758
------------ ------------ ------------
Net interest income 13,922 22,431 37,837
------------ ------------ ------------
Other income
Investment advisory and
service fees 8,702 10,945 9,669
Gain (loss) on sale of
Mortgage-Backed Securities (65,285) 32 11,435
------------ ------------ ------------
Total other income (loss) (56,583) 10,977 21,104
------------ ------------ ------------
Expenses
Distribution fees 1,850 2,414 2,126
General and administrative
expenses 6,359 6,455 6,800
------------ ------------ ------------
Total expenses 8,209 8,869 8,926
------------ ------------ ------------
Loss on other-than-temporarily
impaired securities 83,098 - -
------------ ------------ ------------
Income (loss) before income
taxes (133,968) 24,539 50,015
Income taxes 2,791 3,353 3,022
------------ ------------ ------------
Net (loss) income (136,759) 21,186 46,993
Dividend on preferred stock 3,649 3,648 3,648
------------ ------------ ------------
Net (loss) income available to
common shareholders ($140,408) $17,538 $43,345
============ ============ ============
Net (loss) income per share
available to common shareholders:
Basic ($1.14) $0.14 $0.36
============ ============ ============
Diluted ($1.14) $0.14 $0.36
============ ============ ============
Weighted average number of
shares outstanding:
Basic 123,684,931 123,169,910 121,740,256
============ ============ ============
Diluted 123,684,931 123,330,645 122,013,050
============ ============ ============
Net income (loss) ($136,759) $21,186 $46,993
------------ ------------ ------------
Comprehensive income (loss):
Unrealized (loss) gain on
available-for-sale
securities (50,402) (159,670) 79,862
Unrealized loss on interest
rate swaps (543) - -
------------ ------------ ------------
Reclassification adjustment
for net gains (losses)
included in net income or
loss 148,383 (32) (11,435)
------------ ------------ ------------
Other comprehensive income
(loss) 97,438 (159,702) 68,427
------------ ------------ ------------
Comprehensive income (loss) ($39,321) ($138,516) $115,420
============ ============ ============
For the Quarters Ending
March 31, December 31,
2005 2004
------------ ------------
Interest income $176,289 $156,783
Interest expense 113,993 93,992
------------ ------------
Net interest income 62,296 62,791
------------ ------------
Other income
Investment advisory and service fees 6,309 6,143
Gain (loss) on sale of Mortgage-Backed
Securities 580 1,144
------------ ------------
Total other income (loss) 6,889 7,287
------------ ------------
Expenses
Distribution fees 1,610 1,538
General and administrative expenses 6,664 6,862
------------ ------------
Total expenses 8,274 8,400
------------ ------------
Loss on other-than-temporarily impaired
securities - -
------------ ------------
Income (loss) before income taxes 60,911 61,678
Income taxes 1,578 2,384
------------ ------------
Net (loss) income 59,333 59,294
Dividend on preferred stock 3,648 3,665
------------ ------------
Net (loss) income available to common
shareholders $55,685 $55,629
============ ============
Net (loss) income per share available to
common shareholders:
Basic $0.46 $0.46
============ ============
Diluted $0.46 $0.46
============ ============
Weighted average number of shares
outstanding:
Basic 121,270,867 121,246,246
============ ============
Diluted 121,564,320 121,514,941
============ ============
Net income (loss) $59,333 $59,294
------------ ------------
Comprehensive income (loss):
Unrealized (loss) gain on available-for-
sale securities (91,900) (27,669)
Unrealized loss on interest rate swaps - -
------------ ------------
Reclassification adjustment for net gains
(losses) included in net income or loss (580) (1,144)
------------ ------------
Other comprehensive income (loss) (92,480) (28,813)
------------ ------------
Comprehensive income (loss) ($33,147) $30,481
============ ============
ANNALY MORTGAGE MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands)
For the Year Ended
December 31, December 31,
2005 2004
(unaudited)
------------ ------------
Interest income $705,046 $532,328
Interest expense 568,560 270,116
------------ ------------
Net interest income 136,486 262,212
------------ ------------
Other (loss) income
Investment advisory and service fees 35,625 12,512
(Loss) gain on sale of Mortgage-Backed
Securities (53,238) 5,215
------------ ------------
Total other (loss) income (17,613) 17,727
------------ ------------
Expenses
Distribution fees 8,000 2,860
General and administrative expenses 26,278 24,029
------------ ------------
Total expenses 34,278 26,889
------------ ------------
Loss on other-than-temporarily impaired
securities 83,098 -
------------ ------------
Income before income taxes 1,497 253,050
Income taxes 10,744 4,458
------------ ------------
Net (loss) income (9,247) 248,592
Dividend on preferred stock 14,593 7,745
------------ ------------
Net (loss) income available to common
shareholders ($23,840) $240,847
============ ============
Net (loss) income per share available to
common shareholders:
Basic ($0.19) $2.04
============ ============
Diluted ($0.19) $2.03
============ ============
Weighted average number of shares
outstanding:
Basic 122,475,032 118,223,330
============ ============
Diluted 122,475,032 118,459,145
============ ------------
Net (loss) income ($9,247) $248,592
------------ ------------
Comprehensive (loss) income:
Unrealized gain (loss) on available-for-
sale securities (222,110) (68,324)
Unrealized loss on interest rate swaps (543) -
------------ ------------
Reclassification adjustment for net losses
(gains) included in net
income or loss 136,336 (5,215)
------------ ------------
Other comprehensive loss (86,317) (73,539)
------------ ------------
Comprehensive (loss) income ($95,564) $175,053
============ ============
CONTACT: Annaly Mortgage Management, Inc.
Investor Relations, 1-888-8Annaly
www.annaly.com