Exhibit 99.1
Annaly Capital Management, Inc. Reports 3rd Quarter Core EPS of $0.31;
Continued Performance Improvement Through Turbulent Markets
NEW YORK--(BUSINESS WIRE)--Oct. 29, 2007--Annaly Capital
Management, Inc. (NYSE: NLY) today reported Core Earnings for the
quarter ended September 30, 2007 of $102.5 million or $0.31 per
average share available to common shareholders as compared to Core
Earnings of $34.9 million or $0.16 per average share available to
common shareholders for the quarter ended September 30, 2006 and Core
Earnings of $79.1 million or $0.28 per average share available to
common shareholders for the quarter ended June 30, 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 September 30, 2007 was $108.3
million or $0.33 basic net income per average share available to
common shareholders, as compared to a net income of $42.9 million or
$0.21 basic net income per average share available to common
shareholders for the quarter ended September 30, 2006 and net income
of $85.7 million or $0.30 basic net income per average share available
to common shareholders for the quarter ended June 30, 2007.
During the quarter ended September 30, 2007, the Company sold $1.8
billion of Mortgage-Backed Securities, resulting in a realized gain of
$3.8 million. In addition the Company had a $2.0 million gain on the
termination of interest rate swaps with a notional value of $600
million. During the quarter ended September 30, 2006, the Company sold
$484 million of Mortgage-Backed Securities, 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. 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.
Common dividends declared for the quarter ended September 30, 2007
were $0.26 per share, as compared to $0.14 per share for the quarter
ended September 30, 2006 and $0.24 per share for the quarter ended
June 30, 2007. The annualized dividend yield on the Company's common
stock for the quarter ended September 30, 2007, based on the September
28, 2007 closing price of $15.93, was 6.53%. On a Core Earnings basis,
the Company provided an annualized return on average equity of 11.44%
for the quarter ended September 30, 2007, as compared to 6.29% for the
quarter ended September 30, 2006, and 9.68% for the quarter ended June
30, 2007. On a GAAP basis, the Company provided an annualized return
on average equity of 12.09% for the quarter ended September 30, 2007,
as compared to 7.72% for the quarter ended September 30, 2006, and
10.49% for the quarter ended June 30, 2007.
As previously announced, subsequent to quarter-end the Company
completed a public offering of 71,300,000 shares of common stock. The
estimated net proceeds of the offering, including the exercise of the
underwriters' over-allotment option, were approximately $1.0 billion,
net of offering expenses.
Michael A.J. Farrell, Chairman, Chief Executive Officer and
President of Annaly, commented on the quarter's results. "The Annaly
team has done a terrific job navigating through a difficult market
environment by prudently executing our investment strategy and
focusing on only the highest quality assets. Our ability to improve
our portfolio through utilizing the proceeds of successful capital
raises has been an important element in our performance. Broad market
conditions remain uncertain, but we believe that the portfolio steps
we have taken have positioned us to perform in a range of possible
outcomes and that our investing discipline will continue to reward
long-term investors."
For the quarter ended September 30, 2007, the annualized yield on
average earning assets was 5.84% and the annualized cost of funds on
the average repurchase balance was 5.17%, which equates to an interest
rate spread of 0.67%. This is a 35 basis point increase over the 0.32%
annualized interest rate spread for the quarter ended September 30,
2006 and a 7 basis point increase over the 0.60% annualized interest
rate spread for the quarter ended June 30, 2007. 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%. 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%. At September 30,
2007, the weighted average yield on assets was 5.74% and the cost of
funds was 4.99%, which equates to an interest rate spread of 0.75%.
Leverage at September 30, 2007 was 9.9:1, in comparison to 9.6:1 at
September 30, 2006 and 11.2:1 at June 30, 2007.
Fixed rate securities comprised 71% of the Company's portfolio at
September 30, 2007. The balance of the portfolio was comprised of 22%
adjustable rate mortgages and 7% LIBOR floating rate collateralized
mortgage obligations. At September 30, 2007, the Company had entered
into interest rate swaps with a notional amount of $14.7 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 September 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.
"The investing environment is attractive for our strategy," said
Wellington Denahan-Norris, Annaly's Vice Chairman, Chief Investment
Officer and Chief Operating Officer. "The combination of wider spreads
on Agency mortgage-backed securities and somewhat lower cost of funds
following the Fed ease on September 18, 2007 enables us to deploy the
proceeds of our recent stock offerings at accretive levels. After
taking into account the effect of interest rate swaps, at September
30, 2007, our portfolio of short duration assets was effectively
comprised of 38% fixed-rate, 22% adjustable-rate and 40% floating-rate
exposure, which is consistent with the historical composition of our
portfolio in our barbell strategy."
The following table summarizes portfolio information for the
Company:
September 30, September 30, June 30,
2007 2006 2007
------------- ------------- --------
Leverage at period-end 9.9:1 9.6:1 11.2:1
Fixed-rate investment securities
as % of portfolio 71% 71% 76%
Adjustable-rate investment
securities as % of portfolio 22% 20% 19%
Floating-rate investment
securities as % of portfolio 7% 9% 5%
Notional amount of interest rate
swaps as % of portfolio 33% 32% 33%
Annualized yield on average
earning assets during the quarter 5.84% 5.44% 5.73%
Annualized cost of funds on
average repurchase balance during
the quarter 5.17% 5.12% 5.13%
Annualized interest rate spread
during the quarter 0.67% 0.32% 0.60%
Weighted average yield on assets
at period-end 5.74% 5.58% 5.71%
Weighted average cost of funds at
period-end 4.99% 5.12% 5.10%
Interest rate spread at period-end 0.75% 0.46% 0.61%
The Constant Prepayment Rate was 14% during the third quarter of
2007, as compared to 16% during the third quarter of 2006, and 15%
during the second quarter of 2007. The weighted average cost basis was
100.5 at September 30, 2007. The net amortization of premiums and
accretion of discounts on investment securities for the quarters ended
September 30, 2007, September 30, 2006 and June 30, 2007 was $16.9
million, $14.9 million, and $16.7 million, respectively. The total net
premium remaining unamortized at September 30, 2007, September 30,
2006 and June 30, 2007 was $229.7 million, $139.7 million, and $211.4
million, respectively.
General and administrative expenses as a percentage of average
assets were 0.16%, 0.18%, and 0.12% for the quarters ended September
30, 2007, September 30, 2006, and June 30, 2007, respectively. At
September 30, 2007, September 30, 2006, and June 30, 2007 the Company
had a common stock book value per share of $11.36, $11.26 and $10.52,
respectively.
At September 30, 2007, FIDAC, Annaly's wholly-owned registered
investment advisor, had under management approximately $2.5 billion in
net assets and $13.9 billion in gross assets, as compared to $2.6
billion in net assets and $14.6 billion in gross assets at September
30, 2006 and $2.6 billion in net assets and $15.7 billion in gross
assets at June 30, 2007. For the quarter ended September 30, 2007,
FIDAC earned investment advisory and service fees, net of fees paid to
distributors, of $4.4 million, as compared to $4.3 million for the
quarter ended September 30, 2006 and $4.5 million for the quarter
ended June 30, 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 401,809,203 shares of common stock
outstanding.
The Company will hold the third quarter 2007 earnings conference
call on Tuesday, October 30, 2007 at 10:00 a.m. EST. The number to
call is 866-825-3209 for domestic calls and 617-213-8061 for
international calls and the pass code is 76424167. The replay number
is 888-286-8010 for domestic calls and 617-801-6888 for international
calls and the pass code is 72272256. 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)
September 30, June 30, March 31,
2007 2007 2007
(Unaudited) (Unaudited) (Unaudited)
------------- ----------- ------------
ASSETS
Cash and cash equivalents $ 90,028 $ 91,781 $ 96,610
Mortgage-Backed Securities, at
fair value 44,641,352 38,603,002 39,176,227
Agency debentures, at fair value 249,281 150,507 54,421
Trading securities, at fair
value 10,987 12,131 7,872
Receivable for Mortgage-Backed
Securities sold 516,140 - 28,643
Accrued interest receivable 235,787 197,060 179,816
Receivable for advisory and
service fees 2,933 2,954 2,949
Intangible for customer
relationships 10,178 10,513 10,849
Goodwill 22,966 22,966 22,966
Interest rate swaps, at fair
value - 93,404 1,028
Other assets 3,026 3,146 3,138
------------- ----------- ------------
Total assets $45,782,678 $39,187,464 $39,584,519
============= =========== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase agreements $40,140,113 $35,093,856 $33,348,011
Payable for Investment
Securities purchased 1,169,324 744,027 2,590,429
Trading securities sold, not
yet purchased, at fair value 26,823 37,734 39,679
Accrued interest payable 148,462 104,456 79,362
Dividends payable 85,932 64,652 52,577
Accounts payable and other
liabilities 25,237 14,520 7,942
Interest rate swaps, at fair
value 142,061 838 42,871
------------- ----------- ------------
Total liabilities 41,737,952 36,060,083 36,160,871
------------- ----------- ------------
Minority interest in equity of
consolidated affiliate 1,329 5,623 5,610
------------- ----------- ------------
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:
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, 330,509,203,
269,385,348, 262,887,391,
205,345,591 and 204,845,591
outstanding, respectively
3,305 2,694 2,629
Additional paid-in capital 4,270,330 3,447,964 3,352,417
Accumulated other comprehensive
loss (385,960) (467,640) (60,040)
Accumulated deficit (132,832) (149,814) (165,522)
------------- ----------- ------------
Total stockholders' equity 3,931,931 3,010,292 3,306,572
------------- ----------- ------------
Total liabilities, minority
interest, Series B Cumulative
Convertible Preferred Stock and
stockholders' equity $45,782,678 $39,187,464 $39,584,519
============= =========== ============
(1) Derived from the audited consolidated
financial statements at December 31, 2006.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
December September
31, 30, 2006
2006(1) (Unaudited)
------------ ------------
ASSETS
Cash and cash equivalents $ 91,782 $ 66,844
Mortgage-Backed Securities, at fair value 30,167,509 28,348,027
Agency debentures, at fair value 49,500 -
Trading securities, at fair value 18,365 23,409
Receivable for Mortgage-Backed Securities
sold 200,535 5,325
Accrued interest receivable 146,089 130,348
Receivable for advisory and service fees 3,178 3,124
Intangible for customer relationships 11,184 11,662
Goodwill 22,966 22,966
Interest rate swaps, at fair value 2,558 -
Other assets 2,314 2,679
------------ ------------
Total assets $30,715,980 $28,614,384
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $27,514,020 $24,901,420
Payable for Investment Securities purchased 338,172 942,871
Trading securities sold, not yet purchased,
at fair value 41,948 29,740
Accrued interest payable 83,998 66,547
Dividends payable 39,016 30,403
Accounts payable and other liabilities 18,816 13,367
Interest rate swaps, at fair value 20,179 30,333
------------ ------------
Total liabilities 28,056,149 26,014,681
------------ ------------
Minority interest in equity of consolidated
affiliate 5,324 5,028
------------ ------------
6.00% Series B Cumulative Convertible
Preferred Stock: 4,600,000 shares
authorized, issued and outstanding
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
Common stock: par value $.01 per share;
487,762,500 authorized, 330,509,203,
269,385,348, 262,887,391, 205,345,591 and
204,845,591 outstanding, respectively
2,053 2,048
Additional paid-in capital 2,615,016 2,607,995
Accumulated other comprehensive loss (76,112) (119,973)
Accumulated deficit (175,004) (183,949)
------------ ------------
Total stockholders' equity 2,543,041 2,483,209
------------ ------------
Total liabilities, minority interest, Series
B Cumulative Convertible Preferred Stock and
stockholders' equity $30,715,980 $28,614,384
============ ============
(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 ended
September June 30, March 31,
30,
2007 2007 2007
------------ ------------ -------------
Interest income $ 628,696 $ 556,262 $ 449,564
Interest expense 519,118 468,748 380,164
------------ ------------ -------------
Net interest income 109,578 87,514 69,400
------------ ------------ -------------
Other income
Investment advisory and
service fees 5,464 5,366 5,562
Gain (loss) on sale of
Mortgage-Backed Securities 3,795 7,293 6,145
Gain on termination of
interest rate swaps 2,029 - 67
Income from trading
securities 8,288 243 3,429
Loss on other-than-
temporarily impaired
securities - (698) (491)
------------ ------------ -------------
Total other income 19,576 12,204 14,712
------------ ------------ -------------
Expenses
Distribution fees 1,100 861 904
General and administrative
expenses 17,334 12,272 12,886
------------ ------------ -------------
Total expenses 18,434 13,133 13,790
------------ ------------ -------------
Income before income taxes and
minority interest 110,720 86,585 70,322
Income taxes 2,327 839 2,604
------------ ------------ -------------
Income before minority interest 108,393 85,746 67,718
Minority interest 106 13 286
------------ ------------ -------------
Net income 108,287 85,733 67,432
------------ ------------ -------------
Dividend on preferred stock 5,373 5,373 5,373
------------ ------------ -------------
Net income available to common
shareholders $ 102,914 $ 80,360 $ 62,059
============ ============ =============
Net income available per share
to common shareholders:
Basic $ 0.33 $ 0.30 $ 0.29
============ ============ =============
Diluted $ 0.32 $ 0.30 $ 0.28
============ ============ =============
Weighted average number of
shares outstanding:
Basic 315,969,814 264,990,422 217,490,205
============ ============ =============
Diluted 324,614,534 273,578,836 225,928,127
============ ============ =============
Net income $ 108,287 $ 85,733 $ 67,432
------------ ------------ -------------
Comprehensive income (loss)
Unrealized gain (loss) on
available-for-sale
securities 320,102 (535,413) 45,948
Unrealized (loss) gain on
interest rate swaps (232,598) 134,408 (24,155)
Reclassification adjustment
for gains included in net
income
(5,824) (6,595) (5,721)
------------ ------------ -------------
Other comprehensive income
(loss) 81,680 (407,600) 16,072
------------ ------------ -------------
Comprehensive income (loss) $ 189,967 ($321,867) $ 83,504
============ ============ =============
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the quarters ended
December 31, September
30,
2006 2006
------------- ------------
Interest income $ 407,092 $ 339,737
Interest expense 349,302 295,726
------------- ------------
Net interest income 57,790 44,011
------------- ------------
Other income
Investment advisory and service fees 5,178 4,966
Gain (loss) on sale of Mortgage-Backed
Securities 4,829 (446)
Gain on termination of interest rate swaps 2,260 8,414
Income from trading securities 3,382 612
Loss on other-than-temporarily impaired
securities (5,504) -
------------- ------------
Total other income 10,145 13,546
------------- ------------
Expenses
Distribution fees 795 724
General and administrative expenses 12,219 11,682
------------- ------------
Total expenses 13,014 12,406
------------- ------------
Income before income taxes and minority
interest 54,921 45,151
Income taxes 1,288 2,273
------------- ------------
Income before minority interest 53,633 42,878
Minority interest 296 28
------------- ------------
Net income 53,337 42,850
------------- ------------
Dividend on preferred stock 5,373 5,373
------------- ------------
Net income available to common shareholders $ 47,964 $ 37,477
============= ============
Net income available per share to common
shareholders:
Basic $ 0.23 $ 0.21
============= ============
Diluted $ 0.23 $ 0.20
============= ============
Weighted average number of shares
outstanding:
Basic 205,092,330 181,767,106
============= ============
Diluted 213,455,555 189,952,159
============= ============
Net income $ 53,337 $ 42,850
------------- ------------
Comprehensive income (loss)
Unrealized gain (loss) on available-for-
sale securities 35,979 400,261
Unrealized (loss) gain on interest rate
swaps 14,971 (127,354)
Reclassification adjustment for gains
included in net income
(7,089) (7,968)
------------- ------------
Other comprehensive income (loss) 43,861 264,939
------------- ------------
Comprehensive income (loss) $ 97,198 $ 307,789
============= ============
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands)
For the nine months ended
September September
30, 30,
2007 2006
------------ ------------
Interest income $ 1,634,522 $ 814,790
Interest expense 1,368,030 705,711
------------ ------------
Net interest income 266,492 109,079
------------ ------------
Other income (loss)
Investment advisory and service fees 16,392 17,173
Gain (loss) on sale of Mortgage-Backed
Securities 17,233 (8,691)
Gain on termination of interest rate swaps 2,096 8,414
Income from trading securities 11,960 612
Loss on other-than-temporarily impaired
securities (1,189) (46,844)
------------ ------------
Total other income (loss) 46,492 (29,336)
------------ ------------
Expenses
Distribution fees 2,865 2,649
General and administrative expenses 42,492 27,844
------------ ------------
Total expenses 45,357 30,493
------------ ------------
Impairment of intangible for customer
relationships - 2,493
------------ ------------
Income before income taxes and minority
interest 267,627 46,757
------------ ------------
Income taxes 5,770 6,250
------------ ------------
Income before minority interest 261,857 40,507
Minority interest 405 28
------------ ------------
Net income 261,452 40,479
------------ ------------
Dividend on preferred stock 16,119 14,184
------------ ------------
Net income available to common shareholders $ 245,333 $ 26,295
============ ============
Net income per share available to common
shareholders:
Basic $ 0.92 $ 0.17
============ ============
Diluted $ 0.91 $ 0.16
============ ============
Weighted average number of shares
outstanding:
Basic 266,510,879 155,054,308
============ ============
Diluted 275,146,595 160,211,191
============ ============
Net income $ 261,452 $ 40,479
------------ ------------
Comprehensive (loss) income
Unrealized (loss) gain on available-for-
sale securities (169,363) 61,399
Unrealized loss on interest rate swaps (122,345) (21,376)
Reclassification adjustment for net gains
(losses) included in net income (18,140) 47,121
------------ ------------
Other comprehensive (loss) gain (309,848) 87,144
------------ ------------
Comprehensive (loss) income ($48,396) $ 127,623
============ ============
CONTACT: Annaly Capital Management, Inc.
Investor Relations
1- (888) 8Annaly
www.annaly.com