Exhibit 99.1
Annaly Capital Management, Inc. Reports 2nd Quarter Core EPS of $0.28;
Earnings Continue to Improve Through Volatile Environment
NEW YORK--(BUSINESS WIRE)--July 30, 2007--Annaly Capital
Management, Inc. (NYSE: NLY) today reported Core Earnings for the
quarter ended June 30, 2007 of $79.1 million or $0.28 per average
share available to common shareholders as compared to Core Earnings of
$31.3 million or $0.16 per average share available to common
shareholders for the quarter ended June 30, 2006 and Core Earnings of
$61.7 million or $0.26 per average share available to common
shareholders for the quarter ended March 31, 2007. "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 June 30, 2007 was $85.7 million or $0.30
basic net income per average share available to common shareholders,
as compared to a 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 and net income of $67.4 million or $0.29 basic net
income per average share available to common shareholders for the
quarter ended March 31, 2007.
During the quarter ended June 30, 2007, the Company sold $1.4
billion of Mortgage-Backed Securities, resulting in a realized gain of
$7.3 million. During the quarter ended June 30, 2006, the Company sold
$852 million of Mortgage-Backed Securities, resulting in a realized
loss of $1.2 million. During the quarter ended March 31, 2007, the
Company sold $1.2 billion of Mortgage-Backed Securities, resulting in
a realized gain of $6.1 million and terminated interest rate swaps
with a notional value of $300 million, resulting in a realized gain of
$67,000. In addition, during the quarter, the Company had a loss on
other-than-temporarily impaired securities of $698,000 as compared to
other-than-temporary impairments of $20.1 million and $491,000 for the
quarters ended June 30, 2006 and March 31, 2007 respectively.
Common dividends declared for the quarter ended June 30, 2007 were
$0.24 per share, as compared to $0.13 per share for the quarter ended
June 30, 2006 and $0.20 per share for the quarter ended March 31,
2007. The annualized dividend yield on the Company's common stock for
the quarter ended June 30, 2007, based on the June 29, 2007 closing
price of $14.42, was 6.66%. On a Core Earnings basis, the Company
provided an annualized return on average equity of 9.68% for the
quarter ended June 30, 2007, as compared to 7.63% for the quarter
ended June 30, 2006 and 8.13% for the quarter ended March 31, 2007. On
a GAAP basis, the Company provided an annualized return on average
equity of 10.49% for the quarter ended June 30, 2007, as compared to
2.09% for the quarter ended June 30, 2006, and 8.88% for the quarter
ended March 31, 2007.
As previously announced, subsequent to quarter-end the Company
completed a public offering of 54,050,000 shares of common stock. The
estimated net proceeds of the offering, including the exercise of the
underwriters' over-allotment option, were approximately $720.7
million, following offering expenses.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "The
financial markets remain volatile, with the steadfastness of the
Federal Reserve affecting expectations for future monetary policy and
the level and shape of the yield curve. The bond market sell-off in
the second quarter has begun to reverse itself. The economic backdrop
is equally volatile, with the continued weakness in housing and the
related deterioration in mortgage credit beginning to ripple through
to broader economic performance. In this environment, Annaly is poised
to benefit from our focus on high credit quality Agency
mortgage-backed securities and our ability to access the capital
markets. Our second quarter results--including the sixth consecutive
increase in our quarterly dividend--demonstrate the continued
improvement in portfolio performance through this challenging part of
the business cycle, and we believe our recent capital raise will
continue this trend."
For the quarter ended June 30, 2007, the annualized yield on
average earning assets was 5.73% and the annualized cost of funds on
the average repurchase balance was 5.13%, which equates to an interest
rate spread of 0.60%. This is a 26 basis point increase over the 0.34%
annualized interest rate spread for the quarter ended June 30, 2006
and a 2 basis point increase over the 0.58% annualized interest rate
spread for the quarter ended March 31, 2007. 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%. 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%.
At June 30, 2007, the weighted average yield on assets was 5.71% and
the cost of funds was 5.10%, which equates to an interest rate spread
of 0.61%. Leverage at June 30, 2007 was 11.2:1, in comparison to
11.5:1 at June 30, 2006 and 9.8:1 at March 31, 2007.
Fixed rate securities comprised 76% of the Company's portfolio at
June 30, 2007. The balance of the portfolio was comprised of 19%
adjustable rate mortgages and 5% LIBOR floating rate collateralized
mortgage obligations. At June 30, 2007, the Company had entered into
interest rate swaps with a notional amount of $12.8 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 June 30, 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.
"As a result of the recent back-up in interest rates, returns on
newly-invested capital have become more attractive," said Wellington
Denahan-Norris, Annaly's Vice Chairman, Chief Investment Officer and
Chief Operating Officer. "The proceeds of our recent stock offering
will be promptly deployed at accretive levels, which should enable the
portfolio to perform in a range of possible interest rate outcomes,
including the continuation of the current environment. After taking
into account the effect of interest rate swaps, at June 30, 2007, our
portfolio of short duration assets was effectively comprised of 43%
fixed-rate, 19% adjustable-rate and 38% floating-rate exposure, which
is consistent with the historical portfolio composition of our
portfolio in our barbell strategy."
The following table summarizes portfolio information for the
Company:
June 30, June 30, March 31,
2007 2006 2007
-------------------------------
Leverage at period-end 11.2:1 11.5:1 9.8:1
Fixed-rate investment securities as %
of portfolio 76% 67% 75%
Adjustable-rate investment securities
as % of portfolio 19% 24% 19%
Floating-rate investment securities as
% of portfolio 5% 9% 6%
Notional amount of interest rate swaps
as % of portfolio 33% 34% 34%
Annualized yield on average earning
assets during the quarter 5.73% 5.17% 5.68%
Annualized cost of funds on average
repurchase balance during the quarter 5.13% 4.83% 5.10%
Weighted average yield on assets at
period-end 5.71% 5.42% 5.67%
Weighted average cost of funds at
period-end 5.10% 5.01% 5.17%
The Constant Prepayment Rate was 15% during the second quarter of
2007, as compared to 19% during the second quarter of 2006, and 17%
during the first quarter of 2007. The weighted average cost basis was
100.6 at June 30, 2007. The net amortization of premiums and accretion
of discounts on investment securities for the quarters ended June 30,
2007, June 30, 2006 and March 31, 2007 was $16.7 million, $17.9
million, and $15.4 million, respectively. The total net premium
remaining unamortized at June 30, 2007, June 30, 2006 and March 31,
2007 was $211.4 million, $161.7 million, and $195.6 million,
respectively.
General and administrative expenses as a percentage of average
assets were 0.12%, 0.18%, and 0.15% for the quarters ended June 30,
2007, June 30, 2006, and March 31, 2007, respectively. At June 30,
2007, June 30, 2006, and March 31, 2007 the Company had a common stock
book value per share of $10.52, $9.48 and $11.90, respectively.
At June 30, 2007, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.6 billion in
net assets and $15.7 billion in gross assets, as compared to $2.6
billion in net assets and $14.1 billion in gross assets at June 30,
2006 and $2.5 billion in net assets and $16.1 billion in gross assets
at March 31, 2007. For the quarter ended June 30, 2007, FIDAC earned
investment advisory and service fees, net of fees paid to
distributors, of $4.5 million, as compared to $4.5 million for the
quarter ended June 30, 2006 and $4.7 million for the quarter ended
March 31, 2007. 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 323,435,348 shares of common stock
outstanding.
The Company will hold the second quarter 2007 earnings conference
call on July 31, 2007 at 10:00 a.m. EST. The number to call is
1-866-770-7051 for domestic calls and 617-213-8064 for international
calls and the pass code is 85595027. The replay number is
1-888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 69019468. 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)
June 30, March 31, December 31,
2007 2007 2006(1)
(Unaudited) (Unaudited)
------------------------------------
ASSETS
Cash and cash equivalents $ 91,781 $ 96,610 $ 91,782
Mortgage-Backed Securities, at
fair value 38,603,002 39,176,227 30,167,509
Agency debentures, at fair value 150,507 54,421 49,500
Trading securities, at fair value 12,131 7,872 18,365
Receivable for Mortgage-Backed
Securities sold - 28,643 200,535
Accrued interest receivable 197,060 179,816 146,089
Receivable for advisory and
service fees 2,954 2,949 3,178
Intangible for customer
relationships 10,513 10,849 11,184
Goodwill 22,966 22,966 22,966
Interest rate swaps, at fair value 93,404 1,028 2,558
Other assets 3,146 3,138 2,314
------------------------------------
Total assets $39,187,464 $39,584,519 $30,715,980
====================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $35,093,856 $33,348,011 $27,514,020
Payable for Investment
Securities purchased 744,027 2,590,429 338,172
Trading securities sold, not yet
purchased, at fair value 37,734 39,679 41,948
Accrued interest payable 104,456 79,362 83,998
Dividends payable 64,652 52,577 39,016
Accounts payable and other
liabilities 14,520 7,942 18,816
Interest rate swaps, at fair
value 838 42,871 20,179
------------------------------------
Total liabilities 36,060,083 36,160,871 28,056,149
------------------------------------
Minority interest in equity of
consolidated affiliate 5,623 5,610 5,324
------------------------------------
6.00% Series B Cumulative
Convertible Preferred Stock:
4,600,000 shares authorized,
issued and outstanding
111,466 111,466 111,466
------------------------------------
Stockholders' Equity:
7.875% Series A Cumulative
Redeemable Preferred Stock:
4,887,500 authorized,
4,250,000 shares issued and
outstanding 177,088 177,088 177,088
Common stock: par value $.01 per
share;
487,762,500 authorized,
269,385,348, 262,887,391,
205,345,591, 204,845,591,
and 164,015,156 outstanding,
respectively 2,694 2,629 2,053
Additional paid-in capital 3,447,964 3,352,417 2,615,016
Accumulated other comprehensive
loss (467,640) (60,040) (76,112)
Accumulated deficit (149,814) (165,522) (175,004)
------------------------------------
Total stockholders' equity 3,010,292 3,306,572 2,543,041
------------------------------------
Total liabilities, minority
interest, Series B Cumulative
Convertible Preferred Stock and
stockholders' equity $39,187,464 $39,584,519 $30,715,980
====================================
September 30, June 30,
2006 2006
(Unaudited) (Unaudited)
--------------------------
ASSETS
Cash and cash equivalents $ 66,844 $ 53,849
Mortgage-Backed Securities, at fair value 28,348,027 23,474,006
Agency debentures, at fair value - -
Trading securities, at fair value 23,409 -
Receivable for Mortgage-Backed Securities
sold 5,325 -
Accrued interest receivable 130,348 110,647
Receivable for advisory and service fees 3,124 3,114
Intangible for customer relationships 11,662 12,206
Goodwill 22,966 22,966
Interest rate swaps, at fair value - 105,435
Other assets 2,679 1,567
--------------------------
Total assets $28,614,384 $23,783,790
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $24,901,420 $21,256,703
Payable for Investment Securities
purchased 942,871 607,789
Trading securities sold, not yet
purchased, at fair value 29,740 -
Accrued interest payable 66,547 42,100
Dividends payable 30,403 21,322
Accounts payable and other liabilities 13,367 6,979
Interest rate swaps, at fair value 30,333 -
--------------------------
Total liabilities 26,014,681 21,934,893
--------------------------
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
111,466 111,471
--------------------------
Stockholders' Equity:
7.875% Series A Cumulative Redeemable
Preferred Stock:
4,887,500 authorized,
4,250,000 shares issued and
outstanding 177,088 177,088
Common stock: par value $.01 per share;
487,762,500 authorized,
269,385,348, 262,887,391,
205,345,591, 204,845,591,
and 164,015,156 outstanding,
respectively 2,048 1,640
Additional paid-in capital 2,607,995 2,131,358
Accumulated other comprehensive loss (119,973) (384,912)
Accumulated deficit (183,949) (192,748)
--------------------------
Total stockholders' equity 2,483,209 1,732,426
--------------------------
Total liabilities, minority interest, Series
B Cumulative Convertible Preferred Stock
and stockholders' equity $28,614,384 $23,783,790
==========================
(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
June 30, March 31, December 31,
2007 2007 2006
--------------------------------------
Interest income $ 556,262 $ 449,564 $ 407,092
Interest expense 468,748 380,164 349,302
--------------------------------------
Net interest income 87,514 69,400 57,790
--------------------------------------
Other income (loss)
Investment advisory and
service fees 5,366 5,562 5,178
Gain (loss) on sale of
Mortgage-Backed Securities 7,293 6,145 4,829
Gain on termination of
interest rate swaps - 67 2,260
Income from trading securities 243 3,429 3,382
Loss on other-than-temporarily
impaired securities (698) (491) (5,504)
--------------------------------------
Total other income (loss) 12,204 14,712 10,145
--------------------------------------
Expenses
Distribution fees 861 904 795
General and administrative
expenses 12,272 12,886 12,219
--------------------------------------
Total expenses 13,133 13,790 13,014
--------------------------------------
Impairment of intangible for
customer relationships - - -
--------------------------------------
Income before income taxes and
minority interest 86,585 70,322 54,921
Income taxes 839 2,604 1,288
--------------------------------------
Income before minority interest 85,746 67,718 53,633
Minority interest 13 286 296
--------------------------------------
Net income 85,733 67,432 53,337
--------------------------------------
Dividend on preferred stock 5,373 5,373 5,373
--------------------------------------
Net income available to common
shareholders $ 80,360 $ 62,059 $ 47,964
======================================
Net income available per share
to common shareholders:
Basic $ 0.30 $ 0.29 $ 0.23
======================================
Diluted $ 0.30 $ 0.28 $ 0.23
======================================
Weighted average number of
shares outstanding:
Basic 264,990,422 217,490,205 205,092,330
======================================
Diluted 273,578,836 225,928,127 213,455,555
======================================
Net income $ 85,733 $ 67,432 $ 53,335
--------------------------------------
Comprehensive (loss) income
Unrealized gain (loss) gain on
available-for-sale securities (535,413) 45,948 35,979
Unrealized gain (loss) on
interest rate swaps 134,408 (24,155) 14,971
Reclassification adjustment
for net (gains) losses
included in net income or
loss (6,595) (5,721) (7,089)
--------------------------------------
Other comprehensive income
(loss) (407,600) 16,072 43,861
--------------------------------------
Comprehensive (loss) income ($321,867) $ 83,504 $ 97,196
======================================
For the Quarters ending
September June 30,
30, 2006 2006
-------------------------
Interest income $ 339,737 $ 280,171
Interest expense 295,726 242,473
-------------------------
Net interest income 44,011 37,698
-------------------------
Other income (loss)
Investment advisory and service fees 4,966 5,210
Gain (loss) on sale of Mortgage-Backed
Securities (446) (1,239)
Gain on termination of interest rate swaps 8,414 -
Income from trading securities 612 -
Loss on other-than-temporarily impaired
securities - (20,114)
-------------------------
Total other income (loss) 13,546 (16,143)
-------------------------
Expenses
Distribution fees 724 755
General and administrative expenses 11,682 8,985
-------------------------
Total expenses 12,406 9,740
------------ ------------
Impairment of intangible for customer
relationships - 1,345
-------------------------
Income before income taxes and minority
interest 45,151 10,470
Income taxes 2,273 1,892
-------------------------
Income before minority interest 42,878 8,578
Minority interest 28 -
-------------------------
Net income 42,850 8,578
-------------------------
Dividend on preferred stock 5,373 5,163
-------------------------
Net income available to common shareholders $ 37,477 $ 3,415
=========================
Net income available per share to common
shareholders:
Basic $ 0.21 $ 0.02
=========================
Diluted $ 0.20 $ 0.02
=========================
Weighted average number of shares
outstanding:
Basic 181,767,106 158,632,865
=========================
Diluted 189,952,159 158,703,614
=========================
Net income $ 42,850 $ 8,578
-------------------------
Comprehensive (loss) income
Unrealized gain (loss) gain on available-
for-sale securities 400,261 (225,771)
Unrealized gain (loss) on interest rate
swaps (127,354) 68,965
Reclassification adjustment for net
(gains) losses
included in net income or loss (7,968) 21,353
-------------------------
Other comprehensive income (loss) 264,939 (135,453)
-------------------------
Comprehensive (loss) income $ 307,789 ($126,875)
=========================
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the six months ended
June 30, June 30,
2007 2006
--------------------------
Interest income $ 1,005,826 $ 475,053
Interest expense 848,912 409,985
--------------------------
Net interest income 156,914 65,068
--------------------------
Other income
Investment advisory and service fees 10,928 12,206
Gain (loss) on sale of Mortgage-Backed
Securities 13,438 (8,245)
Gain on termination of interest rate swaps 67 -
Income from trading securities 3,672 -
Loss on other-than-temporarily impaired
securities (1,189) (46,843)
--------------------------
Total other income 26,916 (42,882)
--------------------------
Expenses
Distribution fees 1,765 1,925
General and administrative expenses 25,158 16,162
--------------------------
Total expenses 26,923 18,087
--------------------------
Impairment of intangible for customer
relationships - 2,493
--------------------------
Income before income taxes and minority
interest 156,907 1,606
Income taxes 3,443 3,977
--------------------------
(Loss) income before minority interest 153,464 (2,371)
Minority interest 299 -
--------------------------
Net income (loss) 153,165 (2,371)
--------------------------
Dividend on preferred stock 10,746 8,811
--------------------------
Net (loss) income available (related) to
common shareholders $ 142,419 ($11,182)
==========================
Net (loss) income per share available
(related) to common shareholders:
Basic $ 0.59 ($0.08)
==========================
Diluted $ 0.58 ($0.08)
==========================
Weighted average number of shares
outstanding:
Basic 241,371,530 141,476,532
==========================
Diluted 249,924,374 141,476,532
==========================
Net (loss) income $ 153,165 ($2,371)
--------------------------
Comprehensive loss
Unrealized loss on available-for-sale
securities (489,465) (338,861)
Unrealized gain on interest rate swaps 110,253 105,978
Reclassification adjustment for net
(gains) losses included in net income (12,316) 55,088
--------------------------
Other comprehensive loss (391,528) (177,795)
--------------------------
Comprehensive loss ($238,363) ($180,166)
==========================
CONTACT: Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com