Exhibit 99.1
Annaly Capital Management, Inc. Reports 3rd Quarter 2006 Core EPS of $0.16;
Mid-Quarter Capital Raise Fully Invested by Quarter-End
NEW YORK--(BUSINESS WIRE)--Nov. 1, 2006--Annaly Capital
Management, Inc. (NYSE: NLY) today reported Core Earnings for the
quarter ended September 30, 2006 of $34.9 million or $0.16 per average
share available to common shareholders, as compared to Core Earnings
of $21.2 million or $0.14 per average share available to common
shareholders for the quarter ended September 30, 2005 and Core
Earnings of $31.3 million or $0.16 per average share available to
common shareholders for the quarter ended June 30, 2006. "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
income for the quarter ended September 30, 2006 was $42.9 million or
$0.21 basic net income per average share available to common
shareholders, as compared to net income of $21.2 million or $0.14
basic net income per average share available to common shareholders
for the quarter ended September 30, 2005 and net income of $8.6
million or $0.02 basic net income per average share available to
common shareholders for the quarter ended June 30, 2006.
During the third quarter $484 million of Mortgage-Backed
Securities were sold, resulting in a realized loss of $446,000. In
addition, the Company had an $8.4 million gain on the termination of
interest rate swaps with a notional value of $895 million.
Common dividends declared for the quarter ended September 30, 2006
were $0.14 per share, as compared to $0.13 per share for the quarter
ended September 30, 2005 and $0.13 per share for the quarter ended
June 30, 2006. The annualized dividend yield on common stock for the
quarter ended September 30, 2006, based on the September 30, 2006
closing price of $13.14, was 4.26%. On a Core Earnings basis, the
Company provided an annualized return on average equity of 6.29% for
the quarter ended September 30, 2006, as compared to 5.20% for the
quarter ended September 30, 2005 and 7.63% for the quarter ended June
30, 2006. On a GAAP basis, the Company provided an annualized return
on average equity of 7.72% for the quarter ended September 30, 2006,
as compared to 5.20% for the quarter ended September 30, 2005, and
2.09% for the quarter ended June 30, 2006.
During the third quarter, the Company completed a secondary
offering of common stock. The net proceeds from the offering,
including the exercise of the underwriters' over-allotment option,
were approximately $476.7 million, before offering expenses.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "The Federal
Reserve has been on hold since the June 28/29 FOMC meeting. As a
result, the front of the yield curve has been relatively range-bound.
For our portfolio, this has meant that our cost of funds has leveled
out, and pressure on book value has eased. We expect that the market
will remain in a relatively tight trading range until incoming
economic data offer clear direction as to the Federal Reserve's next
policy bias."
For the quarter ended September 30, 2006, the annualized yield on
average earning assets was 5.44% and the annualized cost of funds on
the average repurchase balance was 5.12%, which equates to an interest
rate spread of 0.32%. This is an 8 basis point increase over the 0.24%
annualized interest rate spread for the quarter ended September 30,
2005 and a 2 basis point decrease over the 0.34% annualized interest
rate spread for the quarter ended June 30, 2006. 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 quarter ended June 30, 2006, the annualized
yield on average earning assets was 5.17% and the annualized cost of
funds on the average repurchase balance was 4.83%. At September 30,
2006, the weighted average yield on assets was 5.58% and the cost of
funds was 5.12%, which equates to an interest rate spread of 46 basis
points. Leverage at September 30, 2006 was 9.6:1, in comparison to
10.9:1 at September 30, 2005 and 11.5:1 at June 30, 2006.
Fixed rate securities comprised 71% of the Company's portfolio at
September 30, 2006. The balance of the portfolio was comprised of 20%
adjustable rate mortgages and 9% LIBOR floating rate collateralized
mortgage obligations. The Company has continued to avoid the
introduction of credit risk into its portfolio. As of September 30,
2006, substantially all of the assets in the Company's portfolio were
FNMA, GNMA and FHLMC mortgage-backed securities, which carry an actual
or implied "AAA" rating. During the third quarter of 2006, the Company
entered into additional interest rate swap transactions, pursuant to
which the Company agrees to pay a fixed interest rate 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 is to mitigate the
risk of rising interest rates that affect the Company's 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 were able to fully leverage and invest the proceeds of our
capital raise by the end of the quarter," said Wellington
Denahan-Norris, Annaly's Vice Chairman, Chief Investment Officer and
Chief Operating Officer. "Giving effect to the swaps, at September 30,
2006 our portfolio of short duration assets was effectively comprised
of 39% fixed-rate, 20% adjustable-rate and 41% floating-rate exposure,
which is consistent with the portfolio composition in our barbell
strategy."
The following table summarizes portfolio information for the
Company:
September 30, September 30, June 30,
2006 2005 2006
Leverage at period-end 9.6:1 10.9:1 11.5:1
Fixed-rate mortgage-backed
securities as % of portfolio 71% 34% 67%
Adjustable-rate mortgage-backed
securities as % of portfolio 20% 61% 24%
Floating-rate mortgage-backed
securities as % of portfolio 9% 5% 9%
Notional amount of interest rate
swaps as % of portfolio 32% 0% 34%
Annualized yield on average
earning assets during the
quarter 5.44% 3.75% 5.17%
Annualized cost of funds on avg.
repurchase balance during the
quarter 5.12% 3.51% 4.83%
Weighted average yield on assets
at period-end 5.58% 3.96% 5.42%
Weighted average cost of funds at
period-end 5.12% 3.69% 5.01%
The Constant Prepayment Rate was 16% during the third quarter of
2006, as compared to 28% during the third quarter of 2005, and 19%
during the second quarter of 2006. The weighted average cost basis was
100.5 at September 30, 2006. The net amortization of premiums and
accretion of discounts on investment securities for the quarters ended
September 30, 2006, September 30, 2005 and June 30, 2006 was $14.9
million, $43.7 million, and $17.9 million, respectively. The total net
premium remaining unamortized at September 30, 2006, September 30,
2005 and June 30, 2006 was $139.7 million, $376.0 million, and $161.7
million, respectively.
General and administrative expenses as a percentage of average
assets were 0.18%, 0.13%, and 0.18% for the quarters ended September
30, 2006, September 30, 2005, and June 30, 2006, respectively. At
September 30, 2006, September 30, 2005, and June 30, 2006 the Company
had a common stock book value per share of $11.26, $11.18 and $9.48,
respectively.
At September 30, 2006, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.6 billion in
net assets and $14.6 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 $2.6 billion in net assets and $14.1 billion in gross
assets at June 30, 2006. For the quarter ended September 30, 2006,
FIDAC earned investment advisory and service fees, net of fees paid to
distributors, of $4.3 million, as compared to $8.5 million for the
quarter ended September 30, 2005 and $4.5 million for the quarter
ended June 30, 2006. 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 change in bond market sentiment has been positive for FIDAC,"
said Mr. Farrell. "Our team is committed to growing our asset
management business from here, as we endeavor to grow our fee income
stream to complement the spread income earned at the Annaly level."
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 204,845,591 shares of common stock
outstanding.
The Company will hold the third quarter 2006 earnings conference
call on November 2, 2006 at 10:00 a.m. EST. The number to call is
1-866-770-7129 for domestic calls and 617-213-8067 for international
calls and the pass code is 32765281. The re-play number is
1-888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 31915202. The replay 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, changes in the market value of
our assets, changes in business conditions and the general economy,
and risks associated with the investment advisory business of FIDAC,
including the removal by FIDAC's clients of assets FIDAC manages,
FIDAC's regulatory requirements, and competition in the investment
advisory business, changes in government regulations affecting our
business, and our ability to maintain our qualification as a REIT for
federal income tax purposes. 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
and all subsequent Quarterly Reports on Form 10-Q. 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 CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
September 30, June 30, March 31,
2006 2006 2006
(Unaudited) (Unaudited) (Unaudited)
----------------------------------------
ASSETS
Cash and cash equivalents $ 66,844 $ 53,849 $ 2,403
Mortgage-Backed Securities, at
fair value 28,348,027 23,474,006 16,176,348
Agency Debentures, at fair
value - - -
Trading securities, at fair
value 197,679
Receivable for Mortgage-Backed
Securities sold 5,325 - 139,491
Accrued interest receivable 130,348 110,647 75,092
Receivable for advisory and
service fees 3,124 3,114 3,805
Intangible for customer
relationships 11,662 12,206 13,851
Goodwill 22,966 22,966 22,966
Interest rate swaps, at fair
value - 105,435 36,470
Other assets 2,679 1,567 2,281
----------------------------------------
Total assets $28,788,654 $23,783,790 $16,472,707
========================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $24,901,420 $21,256,703 $14,629,883
Payable for Mortgage-Backed
Securities purchased 942,871 607,789 354,312
Trading securities sold, not
yet purchased, at fair
value 204,010 - -
Accrued interest payable 66,547 42,100 37,738
Dividends payable 30,403 21,322 13,607
Other liabilities - - -
Accounts payable and other
liabilities 13,367 6,979 3,238
Interest rate swaps, at fair
value 30,333 - -
----------------------------------------
Total liabilities 26,188,951 21,934,893 15,038,778
----------------------------------------
Minority interest in equity of
consolidated affiliate 5,028 5,000 -
----------------------------------------
6.00% Series B Cumulative
Convertible Preferred Stock:
4,600,000 shares authorized,
issued and outstanding at
September 30, 2006 and June
30, 2006 111,466 111,471 -
----------------------------------------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred Stock:
7,637,500 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, 204,845,591,
164,015,156, 123,701,656,
123,684,931, and 123,648,931
outstanding, respectively 2,048 1,640 1,237
Additional paid-in capital 2,607,995 2,131,358 1,679,904
Accumulated other
comprehensive loss (119,973) (384,912) (249,459)
(Accumulated deficit)
retained earnings (183,949) (192,748) (174,841)
----------------------------------------
Total stockholders' equity 2,483,209 1,732,426 1,433,929
----------------------------------------
Total liabilities, minority
interest, Series B Cumulative
Redeemable Preferred Stock
and stockholders' equity $28,788,654 $23,783,790 $16,472,707
========================================
December 31, September 30,
2005 (1) 2005
(Unaudited)
---------------------------
ASSETS
Cash and cash equivalents $ 4,808 $ 1,684
Mortgage-Backed Securities, at fair value 15,929,864 18,697,385
Agency Debentures, at fair value - 258,616
Trading securities, at fair value
Receivable for Mortgage-Backed Securities
sold 13,449 788
Accrued interest receivable 71,340 83,806
Receivable for advisory and service fees 3,497 4,579
Intangible for customer relationships 15,183 15,367
Goodwill 23,122 23,122
Interest rate swaps, at fair value - -
Other assets 2,159 1,218
---------------------------
Total assets $16,063,422 $19,086,565
===========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $13,576,301 $17,038,226
Payable for Mortgage-Backed Securities
purchased 933,051 429,502
Trading securities sold, not yet
purchased, at fair value - -
Accrued interest payable 27,994 34,171
Dividends payable 12,368 16,079
Other liabilities 305 625
Accounts payable and other liabilities 8,837 8,602
Interest rate swaps, at fair value 543 -
---------------------------
Total liabilities 14,559,399 17,527,205
---------------------------
Minority interest in equity of consolidated
affiliate - -
---------------------------
6.00% Series B Cumulative Convertible
Preferred Stock: 4,600,000 shares
authorized, issued and outstanding at
September 30, 2006 and June 30, 2006 - -
---------------------------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock: 7,637,500 authorized,
7,412,500 shares issued and outstanding 177,088 177,088
Common stock: par value $.01 per share;
500,000,000 authorized, 204,845,591,
164,015,156, 123,701,656, 123,684,931,
and 123,648,931 outstanding, respectively 1,237 1,237
Additional paid-in capital 1,679,452 1,679,452
Accumulated other comprehensive loss (207,117) (304,555)
(Accumulated deficit) retained earnings (146,637) 6,138
---------------------------
Total stockholders' equity 1,504,023 1,559,360
---------------------------
Total liabilities, minority interest,
Series B Cumulative Redeemable Preferred
Stock and stockholders' equity $16,063,422 $19,086,565
===========================
(1) Derived from the audited consolidated financial statements at
December 31, 2005.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the quarters ended
September 30, June 30, March 31,
2006 2006 2006
--------------------------------------
Interest income $339,737 $280,171 $194,882
Interest expense 295,726 242,473 167,512
--------------------------------------
Net interest income 44,011 37,698 27,370
--------------------------------------
Other income
Investment advisory and
service fees 4,978 5,210 6,997
(Loss) gain on sale of
Mortgage-Backed Securities (446) (1,239) (7,006)
Gain on termination of
interest rate swaps 8,414 - -
Income from trading securities 432 - -
--------------------------------------
Total other income (loss) 13,378 3,971 (9)
--------------------------------------
Expenses
Distribution fees 724 755 1,170
General and administrative
expenses 11,542 8,985 7,177
--------------------------------------
Total expenses 12,266 9,740 8,347
--------------------------------------
Impairment of intangible for
customer relationships - 1,345 1,148
--------------------------------------
Loss on other-than-temporarily
impaired securities - 20,114 26,730
--------------------------------------
Income (loss) before income
taxes 45,123 10,470 (8,864)
Income taxes 2,273 1,892 2,085
--------------------------------------
Net income (loss) 42,850 8,578 (10,949)
Dividend on preferred stock 5,373 5,163 3,648
--------------------------------------
Net income available (loss
related) to common shareholders $37,477 $3,415 ($14,597)
======================================
Net income (loss) per share
available (related) to common
shareholders:
Basic $0.21 $0.02 ($0.12)
======================================
Diluted $0.20 $0.02 ($0.12)
======================================
Weighted average number of
shares outstanding:
Basic 181,767,106 158,632,865 123,693,851
======================================
Diluted 189,952,159 158,703,614 123,693,851
======================================
Net income (loss) $42,850 $8,578 ($10,949)
--------------------------------------
Comprehensive income (loss)
Unrealized gain (loss) on
available-for-sale securities 400,261 (225,771) (113,091)
Unrealized (loss) gain on
interest rate swaps (127,354) 68,965 37,013
Reclassification adjustment
for net (gains) losses
included in net income or
loss (7,968) 21,353 33,736
--------------------------------------
Other comprehensive income
(loss) 264,939 (135,453) (42,342)
--------------------------------------
Comprehensive income (loss) $307,789 ($126,875) ($53,291)
======================================
For the quarters ended
December 31, September 30,
2005 2005
----------------------------
Interest income $179,688 $177,474
Interest expense 165,766 155,043
----------------------------
Net interest income 13,922 22,431
----------------------------
Other income
Investment advisory and service fees 8,702 10,945
(Loss) gain on sale of Mortgage-Backed
Securities (65,285) 32
Gain on termination of interest rate
swaps - -
Income from trading securities - -
----------------------------
Total other income (loss) (56,583) 10,977
----------------------------
Expenses
Distribution fees 1,850 2,414
General and administrative expenses 6,359 6,455
----------------------------
Total expenses 8,209 8,869
----------------------------
Impairment of intangible for customer
relationships - -
----------------------------
Loss on other-than-temporarily impaired
securities 83,098 -
----------------------------
Income (loss) before income taxes (133,968) 24,539
Income taxes 2,791 3,353
----------------------------
Net income (loss) (136,759) 21,186
Dividend on preferred stock 3,649 3,648
----------------------------
Net income available (loss related) to
common shareholders ($140,408) $17,538
============================
Net income (loss) per share available
(related) to common shareholders:
Basic ($1.14) $0.14
============================
Diluted ($1.14) $0.14
============================
Weighted average number of shares
outstanding:
Basic 123,684,931 123,169,910
============================
Diluted 123,684,931 123,330,645
============================
Net income (loss) ($136,759) $21,186
----------------------------
Comprehensive income (loss)
Unrealized gain (loss) on available-for-
sale securities (50,402) (159,670)
Unrealized (loss) gain on interest rate
swaps (543) -
Reclassification adjustment for net
(gains) losses included in net income
or loss 148,383 (32)
----------------------------
Other comprehensive income (loss) 97,438 (159,702)
----------------------------
Comprehensive income (loss) ($39,321) ($138,516)
============================
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the nine months ended
September 30, September 30,
2006 2005
---------------------------
Interest income $814,790 $525,358
Interest expense 705,711 402,794
---------------------------
Net interest income 109,079 122,564
---------------------------
Other income
Investment advisory and service fees 17,185 26,923
(Loss) gain on sale of Mortgage-Backed
Securities (8,691) 12,047
Gain on termination of interest rate
swaps 8,414 -
Income from trading securities 432 -
---------------------------
Total other income 17,340 38,970
---------------------------
Expenses
Distribution fees 2,649 6,151
General and administrative expenses 27,704 19,919
---------------------------
Total expenses 30,353 26,070
---------------------------
Impairment of intangible for customer
relationships 2,493 -
---------------------------
Loss on other-than-temporarily impaired
securities 46,844 -
---------------------------
Income before income taxes 46,729 135,464
Income taxes 6,250 7,952
---------------------------
Net income 40,479 127,512
Dividend on preferred stock 14,184 10,945
---------------------------
Net income available to common shareholders $26,295 $116,567
===========================
Net income per share available to common
shareholders:
Basic $0.17 $0.95
===========================
Diluted $0.16 $0.95
===========================
Weighted average number of shares
outstanding:
Basic 155,054,308 122,067,300
===========================
Diluted 160,211,191 122,265,351
===========================
Net income $40,479 $127,512
---------------------------
Comprehensive income (loss):
Unrealized gain (loss) on available-for-
sale securities 61,399 (171,709)
Unrealized loss on interest rate swap (21,376) -
Reclassification adjustment for net
(losses) included in net income 47,121 (12,047)
---------------------------
Other comprehensive income (loss) 87,144 (183,756)
---------------------------
Comprehensive income (loss) $127,623 ($56,244)
===========================
CONTACT: Annaly Capital Management, Inc.
Investor Relations, 1-888-8Annaly
www.annaly.com