Exhibit 99.1
Annaly Mortgage Management, Inc. Reports 1st Quarter 2006 Core EPS of $0.16;
Portfolio Repositioning Strengthens Performance Through Challenging Market
NEW YORK--(BUSINESS WIRE)--May 1, 2006--Annaly Mortgage
Management, Inc. (NYSE: NLY) today reported Core Earnings for the
quarter ended March 31, 2006 of $23.9 million or $0.16 per average
share available to common shareholders, as compared to Core Earnings
of $58.8 million or $0.45 per average share available to common
shareholders for the quarter ended March 31, 2005 and Core Earnings of
$11.6 million or $0.06 per average share available to common
shareholders for the quarter ended December 31, 2005. "Core Earnings"
is defined as net (loss) income excluding impairment losses and gains
or losses on sales of securities. On a GAAP basis, the net loss for
the quarter ended March 31, 2006 was $10.9 million or $0.12 basic net
loss per average share related 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 March 31,
2005 and a net loss of $136.8 million or $1.14 basic net loss per
average share related to common shareholders for the quarter ended
December 31, 2005. The Company continued the portfolio rebalancing it
began in the fourth quarter of 2005 and recognized non-cash impairment
charges relating to certain securities in its portfolio which had been
held in an unrealized loss position.
The rebalancing is being accomplished through asset sales and
reinvestment into the market. During the first quarter $1.2 billion
face amount of securities were sold, which were previously classified
as other-than-temporarily impaired, resulting in a realized loss of
$7.0 million, or $0.06 per share. In addition, the Company had a loss
on other-than-temporarily impaired securities as of March 31, 2006 of
$26.7 million, or $0.22 per share. Of the $26.7 million, $17.8 million
resulted from further declines in value of securities classified as
other-than-temporarily impaired at December 31, 2005 and $8.9 million
from losses on additional securities that the Company determined to be
other-than-temporarily impaired at March 31, 2006. 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 March 31, 2006, and recognition
of such impairment charges will not reduce the taxable income of the
Company.
Common dividends declared for the quarter ended March 31, 2006
were $0.11 per share, as compared to $0.46 per share for the quarter
ended March 31, 2005 and $0.10 per share for the quarter ended
December 31, 2005. The annualized dividend yield on common stock for
the quarter ended March 31, 2006, based on the March 31, 2006 closing
price of $12.14, was 3.62%. On a Core Earnings basis, the Company
provided an annualized return on average equity of 6.52% for the
quarter ended March 31, 2006, as compared to 14.20% for the quarter
ended March 31, 2005 and 3.04% for the quarter ended December 31,
2005. On a GAAP basis, the Company provided an annualized return on
average equity of (2.98%) for the quarter ended March 31, 2006, as
compared to 14.34% for the quarter ended March 31, 2005, and (35.71%)
for the quarter ended December 31, 2005.
As previously announced, subsequent to quarter-end the Company
completed a public offering of common stock and Series B cumulative
convertible preferred stock. The estimated net proceeds of the
offering, including the exercise of the underwriters' over-allotment
option, were approximately $549 million, before offering expenses.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "Our results
in the first quarter represent an improvement over what they would
have been had we not initiated our portfolio repositioning. By selling
lower-yielding assets largely acquired in the much lower yield
environment of 2003 and 2004 and replacing them with assets reflecting
today's yields, we have accelerated the natural process by which our
portfolio of short duration mortgage-backed securities adjusts to
changing interest rates. With the capital raised in the first week of
the second quarter, we will be able to take further advantage of the
investment opportunities that have been created at the front end of
the yield curve. As a result, our company is better-positioned to
perform should the Federal Reserve continue its current course of
tightening monetary policy or should it stop.
"In addition, we are gratified by the response to our
just-concluded capital-raising," Mr. Farrell continued. "The market
voiced its support for our efforts at Annaly and at FIDAC, and our
team is committed to justifying that confidence. By continuing to stay
focused on our strategy of investing in high-quality, short-duration
assets in Annaly and growing the asset management business at FIDAC,
we believe we can deliver the returns to which long-term investors in
Annaly have become accustomed."
For the quarter ended March 31, 2006, the annualized yield on
average earning assets was 4.70% and the annualized cost of funds on
the average repurchase balance was 4.38%, which equates to an interest
rate spread of 0.32%. This is an 86 basis point decrease over the
1.18% annualized interest rate spread for the quarter ended March 31,
2005 and a 23 basis point increase over the 0.09% annualized interest
rate spread for the quarter ended December 31, 2005. For the quarter
ended March 31, 2005, the annualized yield on average earning assets
was 3.75% and the annualized cost of funds on the average repurchase
balance was 2.57%. 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%.
At March 31, 2006, the weighted average yield on assets was 5.03% and
the cost of funds was 4.51%, which equates to an interest rate spread
of 52 basis points. Leverage at March 31, 2006 was 10.2:1, in
comparison to 10.8:1 at March 31, 2005 and 9.0:1 at December 31, 2005.
Fixed rate securities comprised 52% of the Company's portfolio at
March 31, 2006. The balance of the portfolio was comprised of 42%
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 March 31, 2006,
all of the assets in the Company's portfolio were FNMA, GNMA, FHLMC
mortgage-backed securities, which carry an actual or implied "AAA"
rating. During the first quarter of 2006, the Company entered into
additional swap transactions, pursuant to which 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 swaps are to mitigate the 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 swaps, the
effect of the swaps will be to enhance the earnings potential of a
portion of the fixed rate assets in the portfolio in a rising rate
environment.
"We continue to add higher yielding assets and floating rate
exposure to the portfolio," said Wellington Denahan-Norris, Annaly's
Vice Chairman, Chief Investment Officer and Chief Operating Officer.
"Giving effect to the swaps, our portfolio at March 31, 2006 was
effectively comprised of 35% fixed-rate, 42% adjustable-rate and 23%
floating-rate exposure. While we have made significant progress in
managing through this challenging period, we will continue to use all
of the tools at our disposal to position the portfolio to perform
through a wide range of potential interest rate environments."
The following table summarizes portfolio information for Annaly:
March 31, March 31, Dec. 31,
2006 2005 2005
Leverage at period-end 10.2:1 10.8:1 9.0:1
Fixed-rate mortgage-backed securities
as % of portfolio 52% 29% 39%
Adjustable-rate mortgage-backed securities
as % of portfolio 42% 63% 55%
Floating-rate mortgage-backed securities
as % of portfolio 6% 8% 6%
Notional amount of interest rate swaps
as % of portfolio 17% NA 3%
Annualized yield on average earning
assets during the quarter 4.70% 3.75% 4.10%
Annualized cost of funds on avg.
repurchase balance during the quarter 4.38% 2.57% 4.01%
Weighted average yield on assets at
period-end 5.03% 3.96% 4.68%
Weighted average cost of funds at
period-end 4.51% 3.69% 4.16%
The Constant Prepayment Rate was 18% during the first quarter of
2006, as compared to 25% during the first quarter of 2005, and 28%
during the fourth quarter of 2005. The weighted average purchase price
of the portfolio was 101.6 at March 31, 2006, 102.3 at March 31, 2005
and 102.0 at December 31, 2005. The weighted average cost basis, after
the Other-Than-Temporary Impairment Charge, was 101.1 at March 31,
2006. The net amortization of premiums and accretion of discounts on
investment securities for the quarters ended March 31, 2006, March 31,
2005, and December 31, 2005 was $15.8 million, $36.1 million, and
$31.9 million, respectively. The total net premium remaining
unamortized at March 31, 2006, March 31, 2005, and December 31, 2005
was $173.7 million, $416.5 million, and $220.6 million, respectively.
General and administrative expenses as a percentage of average
assets were 0.18%, 0.14%, and 0.14% for the quarters ended March 31,
2006, March 31, 2005, and December 31, 2005, respectively. At March
31, 2006, March 31, 2005, and December 31, 2005, the Company had a
common stock book value per share of $10.16, $11.81 and $10.73
respectively.
At March 31, 2006, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.0 billion in
net assets and $16.9 billion in gross assets, as compared to $2.3
billion in net assets and $18.6 billion in gross assets at March 31,
2005 and $2.3 billion in net assets and $18.7 billion in gross assets
at December 31, 2005. For the quarter ended March 31, 2006, FIDAC
earned investment advisory and service fees, net of fees paid to
distributors, of $5.8 million, as compared to $4.7 million for the
quarter ended March 31, 2005 and $6.9 million for the quarter ended
December 31, 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.
"FIDAC continues to demonstrate that it was a beneficial
acquisition for Annaly shareholders," said Mr. Farrell. "Since its
acquisition in June 2004, FIDAC has virtually paid for itself out of
cumulative net advisory and service fees. Assets under management at
FIDAC have trended down due to late-cycle mark-to-market changes and
redemptions in open-end structures, but we remain focused on our
long-term goal of growing the fee income stream from FIDAC through our
core offerings and through diversification into new products and
strategies."
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 162,916,656 shares of common stock
outstanding.
The Company will hold the first quarter 2006 earnings conference
call on May 2, 2006 at 10:00 a.m. EST. The number to call is
1-866-713-8563 for domestic calls and 617-597-5311 for international
calls and the pass code is 85770262. The re-play number is
1-888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 49812631. The repay is available for 48
hours after the earnings call. 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, 2005. 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. AND SUBSIDIARY
STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
March 31, December 31, September 31,
2006 2005 2005
(Unaudited) (Unaudited)
-----------------------------------------
ASSETS
Cash and cash equivalents $ 2,403 $ 4,808 $ 1,684
Mortgage-Backed Securities,
at fair value 16,176,348 15,929,864 18,697,385
Agency Debentures, at fair
value - - 258,616
Receivable for Mortgage-
Backed Securities sold 139,491 13,449 788
Accrued interest receivable 75,092 71,340 83,806
Receivable for advisory and
service fees 3,805 3,497 4,579
Intangible for customer
relationships 13,851 15,183 15,367
Goodwill 22,966 23,122 23,122
Interest rate swaps, at fair
value 36,470 - -
Other assets 2,281 2,159 1,218
-------------------------------------
Total assets $16,472,707 $16,063,422 $19,086,565
=====================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $14,629,883 $13,576,301 $17,038,226
Payable for Mortgage-Backed
Securities purchased 354,312 933,051 429,502
Accrued interest payable 37,738 27,994 34,171
Dividends payable 13,607 12,368 16,079
Other liabilities - 305 625
Accounts payable and other
liabilities 3,238 8,837 8,602
Interest rate swaps, at fair
value - 543 -
-------------------------------------
Total liabilities 15,038,778 14,559,399 17,527,205
-------------------------------------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred
Stock: 7,637,500
authorized, 7,412,500
shares issued and
outstanding respectively 177,088 177,088 177,088
Common stock: par value $.01
per share; 500,000,000
authorized, 123,701,656,
123,684,931, 123,684,931,
122,554,831 and 121,277,698
shares issued and
outstanding, respectively 1,237 1,237 1,237
Additional paid-in capital 1,679,904 1,679,452 1,679,452
Accumulated other
comprehensive loss (249,459) (207,117) (304,555)
Retained (deficit) earnings (174,841) (146,637) 6,138
-------------------------------------
Total stockholders' equity 1,433,929 1,504,023 1,559,360
-------------------------------------
Total liabilities and
stockholders' equity $16,472,707 $16,063,422 $19,086,565
=====================================
June 30, March 31,
2005 2005
(Unaudited) (Unaudited)
------------------------
ASSETS
Cash and cash equivalents $ 3,669 $ 2,417
Mortgage-Backed Securities, at fair value 19,165,744 18,702,470
Agency Debentures, at fair value 391,092 388,593
Receivable for Mortgage-Backed Securities
sold - -
Accrued interest receivable 87,960 80,172
Receivable for advisory and service fees 4,334 2,883
Intangible for customer relationships 15,552 15,613
Goodwill 23,122 23,122
Interest rate swaps, at fair value - -
Other assets 1,472 1,873
------------------------
Total assets $19,692,945 $19,217,143
========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $17,251,594 $17,438,609
Payable for Mortgage-Backed Securities
purchased 659,325 75,165
Accrued interest payable 29,654 33,770
Dividends payable 44,120 54,575
Other liabilities 1,241 1,569
Accounts payable and other liabilities 6,523 4,079
Interest rate swaps, at fair value - -
------------------------
Total liabilities 17,992,457 17,607,767
------------------------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock: 7,637,500 authorized,
7,412,500 shares issued and outstanding
respectively 177,088 177,077
Common stock: par value $.01 per share;
500,000,000 authorized, 123,701,656,
123,684,931, 123,684,931, 122,554,831 and
121,277,698 shares issued and outstanding,
respectively 1,226 1,213
Additional paid-in capital 1,662,347 1,638,911
Accumulated other comprehensive loss (144,853) (213,280)
Retained (deficit) earnings 4,680 5,455
------------------------
Total stockholders' equity 1,700,488 1,609,376
------------------------
Total liabilities and stockholders'
equity $19,692,945 $19,217,143
========================
ANNALY MORTGAGE MANAGEMENT, INC. AND SUBSIDARY
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the Quarters Ending
March 31, December 31, September 30,
2006 2005 2005
-------------------------------------
Interest income $ 194,882 $ 179,688 $ 177,474
Interest expense 167,512 165,766 155,043
-------------------------------------
Net interest income 27,370 13,922 22,431
-------------------------------------
Other income
Investment advisory and
service fees 6,997 8,702 10,945
(Loss) gain on sale of
Mortgage-Backed Securities (7,006) (65,285) 32
-------------------------------------
Total other (loss) income (9) (56,583) 10,977
-------------------------------------
Expenses
Distribution fees 1,170 1,850 2,414
General and administrative
expenses 7,177 6,359 6,455
-------------------------------------
Total expenses 8,347 8,209 8,869
-------------------------------------
Impairment of intangible for
customer relationships 1,148 - -
-------------------------------------
Loss on other-than-temporarily
impaired securities 26,730 83,098 -
-------------------------------------
(Loss) income before income
taxes (8,864) (133,968) 24,539
Income taxes 2,085 2,791 3,353
-------------------------------------
Net (loss) income (10,949) (136,759) 21,186
Dividend on preferred stock 3,648 3,649 3,648
-------------------------------------
Net (loss) income (related)
available to common
shareholders ($14,597) ($140,408) $ 17,538
=====================================
Net (loss) income per share
(related) available to common
shareholders:
Basic ($0.12) ($1.14) $ 0.14
=====================================
Diluted ($0.12) ($1.14) $ 0.14
=====================================
Weighted average number of
shares outstanding:
Basic 123,693,851 123,684,931 123,169,910
=====================================
Diluted 123,693,851 123,684,931 123,330,645
=====================================
Net (loss) income ($10,949) ($136,759) $ 21,186
-------------------------------------
Comprehensive (loss) income
Unrealized (loss) gain on
available-for-sale securities (113,091) (50,402) (159,670)
Unrealized gain (loss) on
interest rate swaps 37,013 (543) -
Reclassification adjustment
for net losses (gains)
included in net loss or
income 33,736 148,383 (32)
-------------------------------------
Other comprehensive (loss)
income (42,342) 97,438 (159,702)
-------------------------------------
Comprehensive (loss) income ($53,291) ($39,321) ($138,516)
=====================================
For the Quarters Ending
June 30, March 31,
2005 2005
------------------------
Interest income $ 171,595 $ 176,289
Interest expense 133,758 113,993
------------------------
Net interest income 37,837 62,296
------------------------
Other income
Investment advisory and service fees 9,669 6,309
(Loss) gain on sale of Mortgage-Backed
Securities 11,435 580
------------------------
Total other (loss) income 21,104 6,889
------------------------
Expenses
Distribution fees 2,126 1,610
General and administrative expenses 6,800 6,664
------------------------
Total expenses 8,926 8,274
------------------------
Impairment of intangible for customer
relationships - -
------------------------
Loss on other-than-temporarily impaired
securities - -
------------------------
(Loss) income before income taxes 50,015 60,911
Income taxes 3,022 1,578
------------------------
Net (loss) income 46,993 59,333
Dividend on preferred stock 3,648 3,648
------------------------
Net (loss) income (related) available to
common shareholders $ 43,345 $ 55,685
========================
Net (loss) income per share (related)
available to common shareholders:
Basic $ 0.36 $ 0.46
========================
Diluted $ 0.36 $ 0.46
========================
Weighted average number of shares
outstanding:
Basic 121,740,256 121,270,867
========================
Diluted 122,013,050 121,564,320
========================
Net (loss) income $ 46,993 $ 59,333
------------------------
Comprehensive (loss) income
Unrealized (loss) gain on available-for-
sale securities 79,862 (91,900)
Unrealized gain (loss) on interest rate
swaps - -
Reclassification adjustment for net losses
(gains) included in net loss or income (11,435) (580)
------------------------
Other comprehensive (loss) income 68,427 (92,480)
------------------------
Comprehensive (loss) income $ 115,420 ($33,147)
=========================
CONTACT: Annaly Mortgage Management, Inc.
Investor Relations:
1-888-8Annaly
www.annaly.com