Exhibit 99.1
Annaly Capital Management, Inc. Reports 1st Quarter Core EPS of $0.26;
End-of-Quarter Capital Raise Biggest in Company History
NEW YORK--(BUSINESS WIRE)--May 1, 2007--Annaly Capital Management,
Inc. (NYSE: NLY) today reported Core Earnings for the quarter ended
March 31, 2007 of $61.7 million or $0.26 per average share available
to common shareholders as compared to Core Earnings of $23.9 million
or $0.16 per average share available to common shareholders for the
quarter ended March 31, 2006 and Core Earnings of $51.7 million or
$0.23 per average share available to common shareholders for the
quarter ended December 31, 2006. "Core Earnings" represents a non-GAAP
measure and is defined as net income (loss) excluding impairment
losses and gains or losses on sales of securities and termination of
interest rate swaps. On a GAAP basis, the net income for the quarter
ended March 31, 2007 was $67.4 million or $0.29 basic net income per
average share available to common shareholders, as compared to a net
loss of $10.9 million or $0.12 basic net loss per average share
available to common shareholders for the quarter ended March 31, 2006
and net income of $53.3 million or $0.23 basic net income per average
share available to common shareholders for the quarter ended December
31, 2006.
During the quarter ended March 31, 2007, the Company sold $1.2
billion of Mortgage-Backed Securities, resulting in a gain of $6.1
million. In addition, the Company had a $67,000 gain on the
termination of interest rate swaps with a notional value of $300
million. During the quarter ended March 31, 2006, the Company sold
$1.2 billion of Mortgage-Backed Securities, resulting in a realized
loss of $7.0 million. During the quarter ended December 31, 2006, the
Company sold $701.3 million of Mortgage-Backed Securities, resulting
in a realized gain of $4.8 million and terminated interest rate swaps
with a notional value of $350 million, resulting in a gain of $2.3
million. In addition, the Company had a loss on other-than-temporarily
impaired securities for the quarters ended March 31, 2007, March 31,
2006, and December 31, 2006 of $491,000, $26.7 million, and $5.5
million, respectively.
Common dividends declared for the quarter ended March 31, 2007
were $0.20 per share, as compared to $0.11 per share for the quarter
ended March 31, 2006 and $0.19 per share for the quarter ended
December 31, 2006. The annualized dividend yield on common stock for
the quarter ended March 31, 2007, based on the March 31, 2007 closing
price of $15.48, was 5.17%. On a Core Earnings basis, the Company
provided an annualized return on average equity of 8.13% for the
quarter ended March 31, 2007, as compared to 6.52% for the quarter
ended March 31, 2006 and 7.89% for the quarter ended December 31,
2006. On a GAAP basis, the Company provided an annualized return on
average equity of 8.88% for the quarter ended March 31, 2007, as
compared to (2.98%) for the quarter ended March 31, 2006, and 8.13%
for the quarter ended December 31, 2006.
On March 13, 2007, the Company issued 57,500,000 shares of common
stock in a follow-on offering, raising net proceeds of approximately
$737.2 million.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "Annaly
continued the positive momentum that has been building over the past
year. Even with the increase in share count of almost 30% at the end
of the quarter--a result of the largest capital raise in our company's
history--we were able to increase our dividend for the fifth straight
quarter. We expect that the run rate in the second quarter will
reflect the full investment of the proceeds from our March offering."
Mr. Farrell continued: "We often speak about our transparent
business model. To us, this means that investors generally know the
risks we do and do not take in managing our company. Since inception,
our focus on Agency mortgage-backed securities has been a core tenet
of this philosophy. Because of the actual and implied triple-A rating
of these securities, we take virtually no credit risk. Instead, it
allows investors in Annaly to judge our performance and potential
performance based on our ability to manage interest rate risk. We
believe this choice has served our investors well over time and, given
the current state of both the credit cycle and the interest rate
cycle, leaves us strategically well-positioned for the current
environment."
For the quarter ended March 31, 2007, the annualized yield on
average earning assets was 5.68% and the annualized cost of funds on
the average repurchase balance was 5.10%, which equates to an interest
rate spread of 0.58%. This is a 26 basis point increase over the 0.32%
annualized interest rate spread for the quarter ended March 31, 2006
and a 9 basis point increase over the 0.49% annualized interest rate
spread for the quarter ended December 31, 2006. 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%. For the quarter ended December 31, 2006, the
annualized yield on average earning assets was 5.64% and the
annualized cost of funds on the average repurchase balance was 5.15%.
At March 31, 2007, the weighted average yield on assets was 5.67% and
the cost of funds was 5.17%, which equates to an interest rate spread
of 0.50%. Leverage at March 31, 2007 was 9.8:1, in comparison to
10.2:1 at March 31, 2006 and 10.4:1 at December 31, 2006.
Fixed rate securities comprised 75% of the Company's portfolio at
March 31, 2007. The balance of the portfolio was comprised of 19%
adjustable rate mortgages and 6% LIBOR floating rate collateralized
mortgage obligations. At March 31, 2007, the Company had entered into
interest rate swaps with a notional amount of $13.2 billion. 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. The Company has continued to avoid the introduction of
credit risk into its portfolio. As of March 31, 2007, substantially
all of the assets in the Company's portfolio were FNMA, GNMA and FHLMC
mortgage-backed securities and agency debentures, which carry an
actual or implied "AAA" rating.
"During this period of range bound bond markets, we continue to
look for ways to improve portfolio performance on both the asset and
liability sides of our balance sheet," said Wellington Denahan-Norris,
Annaly's Vice Chairman, Chief Investment Officer and Chief Operating
Officer. "Taking into account the effect of interest rate swaps, at
March 31, 2007, our portfolio of short duration assets was effectively
comprised of 41% fixed-rate, 19% adjustable-rate and 40% floating-rate
exposure, which is consistent with the portfolio composition in our
barbell strategy. This structure is designed to perform in a wide
range of possible interest rate outcomes, including the continuation
of the current environment."
The following table summarizes portfolio information for the
Company:
March 31, March 31, December 31,
2007 2006 2006
----------------------------------
Leverage at period-end 9.8:1 10.2:1 10.4:1
Fixed-rate investment securities as
% of portfolio 75% 52% 72%
Adjustable-rate investment
securities as % of portfolio 19% 42% 20%
Floating-rate investment securities
as % of portfolio 6% 6% 8%
Notional amount of interest rate
swaps as % of portfolio 34% 17% 31%
Annualized yield on average earning
assets during the quarter 5.68% 4.70% 5.64%
Annualized cost of funds on average
repurchase balance during the
quarter 5.10% 4.38% 5.15%
Weighted average yield on assets at
period-end 5.67% 5.03% 5.63%
Weighted average cost of funds at
period-end 5.17% 4.51% 5.14%
The Constant Prepayment Rate was 17% during the first quarter of
2007, as compared to 18% during the first quarter of 2006, and 15%
during the fourth quarter of 2006. The weighted average cost basis was
100.5 at March 31, 2007. The net amortization of premiums and
accretion of discounts on investment securities for the quarters ended
March 31, 2007, March 31, 2006 and December 31, 2006 was $15.4
million, $15.8 million, and $15.0 million, respectively. The total net
premium remaining unamortized at March 31, 2007, March 31, 2006 and
December 31, 2006 was $195.6 million, $173.7 million, and $140.7
million, respectively.
General and administrative expenses as a percentage of average
assets were 0.15%, 0.18%, and 0.16% for the quarters ended March 31,
2007, March 31, 2006, and December 31, 2006, respectively. At March
31, 2007, March 31, 2006, and December 31, 2006 the Company had a
common stock book value per share of $11.90, $10.16 and $11.52,
respectively.
At March 31, 2007, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.5 billion in
net assets and $16.1 billion in gross assets, as compared to $2.0
billion in net assets and $16.9 billion in gross assets at March 31,
2006 and $2.6 billion in net assets and $15.1 billion in gross assets
at December 31, 2006. For the quarter ended March 31, 2007, FIDAC
earned investment advisory and service fees, net of fees paid to
distributors, of $4.7 million, as compared to $5.8 million for the
quarter ended March 31, 2006 and $4.4 million for the quarter ended
December 31, 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.
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 262,887,516 shares of common stock
outstanding.
The Company will hold the first quarter 2007 earnings conference
call on May 2, 2007 at 10:00 a.m. EST. The number to call is
1-800-591-6923 for domestic calls and 617-614-4907 for international
calls and the pass code is 73970218. The replay number is
1-888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 57646033. 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, 2006
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)
March 31, December 31, September 30,
2007 2006(1) 2006
(Unaudited) (Unaudited)
---------------------------------------
ASSETS
Cash and cash equivalents $ 96,610 $ 91,782 $ 66,844
Mortgage-Backed Securities,
at fair value 39,176,227 30,167,509 28,348,027
Agency debentures, at fair
value 54,421 49,500 -
Trading securities, at fair
value 7,872 18,365 23,409
Receivable for Mortgage-
Backed Securities sold 28,643 200,535 5,325
Accrued interest receivable 179,816 146,089 130,348
Receivable for advisory and
service fees 2,949 3,178 3,124
Intangible for customer
relationships 10,849 11,184 11,662
Goodwill 22,966 22,966 22,966
Interest rate swaps, at fair
value 1,028 2,558 -
Other assets 3,138 2,314 2,679
---------------------------------------
Total assets $39,584,519 $30,715,980 $ 28,614,384
=======================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $33,348,011 $27,514,020 $ 24,901,420
Payable for Investment
Securities purchased 2,590,429 338,172 942,871
Trading securities sold, not
yet purchased, at fair value 39,679 41,948 29,740
Accrued interest payable 79,362 83,998 66,547
Dividends payable 52,577 39,016 30,403
Accounts payable and other
liabilities 7,942 18,816 13,367
Interest rate swaps, at fair
value 42,871 20,179 30,333
---------------------------------------
Total liabilities 36,160,871 28,056,149 26,014,681
---------------------------------------
Minority interest in equity
of consolidated affiliate 5,610 5,324 5,028
---------------------------------------
6.00% Series B Cumulative
Convertible Preferred Stock:
4,600,000 shares authorized,
issued and outstanding at
March 31, 2007, December 31,
2006, September 30, 2006,
and June 30, 2006 111,466 111,466 111,466
---------------------------------------
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; 487,762,500
authorized, 262,887,391,
205,345,591, 204,845,591,
164,015,156, and 123,701,656
outstanding, respectively 2,629 2,053 2,048
Additional paid-in capital 3,352,417 2,615,016 2,607,995
Accumulated other
comprehensive loss (60,040) (76,112) (119,973)
Accumulated deficit (165,522) (175,004) (183,949)
---------------------------------------
Total stockholders' equity 3,306,572 2,543,041 2,483,209
---------------------------------------
Total liabilities, minority
interest, Series B
Cumulative Convertible
Preferred Stock and
stockholders' equity $39,584,519 $30,715,980 $ 28,614,384
=======================================
June 30, March 31,
2006 2006
(Unaudited) (Unaudited)
-------------------------
ASSETS
Cash and cash equivalents $ 53,849 $ 2,403
Mortgage-Backed Securities, at
fair value 23,474,006 16,176,348
Agency debentures, at fair value - -
Trading securities, at fair value
Receivable for Mortgage-Backed
Securities sold - 139,491
Accrued interest receivable 110,647 75,092
Receivable for advisory and
service fees 3,114 3,805
Intangible for customer
relationships 12,206 13,851
Goodwill 22,966 22,966
Interest rate swaps, at fair value 105,435 36,470
Other assets 1,567 2,281
-------------------------
Total assets $23,783,790 $16,472,707
=========================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $21,256,703 $14,629,883
Payable for Investment Securities
purchased 607,789 354,312
Trading securities sold, not yet
purchased, at fair value - -
Accrued interest payable 42,100 37,738
Dividends payable 21,322 13,607
Accounts payable and other
liabilities 6,979 3,238
Interest rate swaps, at fair value - -
-------------------------
Total liabilities 21,934,893 15,038,778
-------------------------
Minority interest in equity of
consolidated affiliate 5,000 -
-------------------------
6.00% Series B Cumulative
Convertible Preferred Stock:
4,600,000 shares authorized,
issued and outstanding at March
31, 2007, December 31, 2006,
September 30, 2006, and June 30,
2006 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
Common stock: par value $.01 per
share; 487,762,500 authorized,
262,887,391, 205,345,591,
204,845,591, 164,015,156, and
123,701,656 outstanding,
respectively 1,640 1,237
Additional paid-in capital 2,131,358 1,679,904
Accumulated other comprehensive
loss (384,912) (249,459)
Accumulated deficit (192,748) (174,841)
-------------------------
Total stockholders' equity 1,732,426 1,433,929
-------------------------
Total liabilities, minority
interest, Series B Cumulative
Convertible Preferred Stock and
stockholders' equity $23,783,790 $16,472,707
=========================
(1) Derived from the audited consolidated financial statements at
December 31, 2006.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the Quarters ending
March 31, December 31, September 30,
2007 2006 2006
------------------------------------------
Interest income $ 449,564 $ 407,092 $ 339,737
Interest expense 380,164 349,302 295,726
------------------------------------------
Net interest income 69,400 57,790 44,011
------------------------------------------
Other income (loss)
Investment advisory and
service fees 5,562 5,178 4,966
Gain (loss) on sale of
Mortgage-Backed
Securities 6,145 4,829 (446)
Gain on termination of
interest rate swaps 67 2,260 8,414
Income from trading
securities 3,429 3,382 612
Loss on other-than-
temporarily impaired
securities (491) (5,504) -
------------------------------------------
Total other income
(loss) 14,712 10,145 13,546
------------------------------------------
Expenses
Distribution fees 904 795 724
General and
administrative expenses 12,886 12,219 11,682
------------------------------------------
Total expenses 13,790 13,014 12,406
------------------------------------------
Impairment of intangible
for customer relationships - - -
------------------------------------------
Income (loss) before income
taxes and minority
interest 70,322 54,921 45,151
Income taxes 2,604 1,288 2,273
------------------------------------------
Income (loss) before
minority interest 67,718 53,633 42,878
Minority interest 286 296 28
------------------------------------------
Net income (loss) 67,432 53,337 42,850
------------------------------------------
Dividend on preferred stock 5,373 5,373 5,373
------------------------------------------
Net income available (loss
related) to common
shareholders $ 62,059 $ 47,964 $ 37,477
==========================================
Net income available (loss
related) per share to
common shareholders:
Basic $ 0.29 $ 0.23 $ 0.21
==========================================
Diluted $ 0.28 $ 0.23 $ 0.20
==========================================
Weighted average number of
shares outstanding:
Basic 217,490,205 205,092,330 181,767,106
==========================================
Diluted 225,928,127 213,455,555 189,952,159
==========================================
Net income (loss) $ 67,432 $ 53,335 $ 42,850
------------------------------------------
Comprehensive income (loss)
Unrealized gain (loss) on
available-for-sale
securities 45,948 35,979 400,261
Unrealized (loss) gain on
interest rate swaps (24,155) 14,971 (127,354)
Reclassification
adjustment for net
(gains) losses included
in net income or loss (5,721) (7,089) (7,968)
------------------------------------------
Other comprehensive
income (loss) 16,072 43,861 264,939
------------------------------------------
Comprehensive income (loss) $ 83,504 $ 97,196 $ 307,789
==========================================
For the Quarters ending
June 30, March 31,
2006 2006
----------------------------
Interest income $ 280,171 $ 194,882
Interest expense 242,473 167,512
----------------------------
Net interest income 37,698 27,370
----------------------------
Other income (loss)
Investment advisory and
service fees 5,210 6,997
Gain (loss) on sale of
Mortgage-Backed Securities (1,239) (7,006)
Gain on termination of
interest rate swaps - -
Income from trading securities - -
Loss on other-than-temporarily
impaired securities (20,114) (26,730)
----------------------------
Total other income (loss) (16,143) (26,739)
----------------------------
Expenses
Distribution fees 755 1,170
General and administrative
expenses 8,985 7,177
Total expenses 9,740 8,347
----------------------------
Impairment of intangible for
customer relationships 1,345 1,148
----------------------------
Income (loss) before income
taxes and minority interest 10,470 (8,864)
Income taxes 1,892 2,085
----------------------------
Income (loss) before minority
interest 8,578 (10,949)
Minority interest - -
----------------------------
Net income (loss) 8,578 (10,949)
----------------------------
Dividend on preferred stock 5,163 3,648
----------------------------
Net income available (loss
related) to common shareholders $ 3,415 ($14,597)
============================
Net income available (loss
related) per share to common
shareholders:
Basic $ 0.02 ($0.12)
============================
Diluted $ 0.02 ($0.12)
============================
Weighted average number of
shares outstanding:
Basic 158,632,865 123,693,851
============================
Diluted 158,703,614 123,693,851
============================
Net income (loss) $ 8,578 ($10,949)
----------------------------
Comprehensive income (loss)
Unrealized gain (loss) on
available-for-sale securities (225,771) (113,091)
Unrealized (loss) gain on
interest rate swaps 68,965 37,013
Reclassification adjustment
for net (gains) losses
included in net income or
loss 21,353 33,736
----------------------------
Other comprehensive income
(loss) (135,453) (42,342)
----------------------------
Comprehensive income (loss) ($126,875) ($53,291)
============================
CONTACT: Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com