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Annaly Capital Management, Inc. Reports GAAP EPS for the 1st Quarter 2011 of $0.92 as Compared to $0.50 for the 1st Quarter 201

^{Published on 2011-05-04 18:20:41 - Market Wire}
 

NEW YORK--([ BUSINESS WIRE ])--Annaly Capital Management, Inc. (NYSE: NLY) today reported GAAP net income for the quarter ended March 31, 2011 of $699.9 million or $0.92 per average share available to common shareholders as compared to GAAP net income of $281.1 million or $0.50 per average share available to common shareholders for the quarter ended March 31, 2010, and GAAP net income of $1.2 billion or $1.94 per average share available to common shareholders for the quarter ended December 31, 2010.

"The first quarter saw prepayment speeds remain relatively slow and spreads to financing costs widen"

Without the effect of the unrealized gains or losses on interest rate swaps, net income for the quarter ended March 31, 2011, was $530.6 million or $0.70 per average share available to common shareholders as compared to $397.8 million or $0.71 per average share available to common shareholders for the quarter ended March 31, 2010, and $379.3 million or $0.60 per average share available to common shareholders for the quarter ended December 31, 2010.

During the quarter ended March 31, 2011, the Company disposed of $4.2 billion of mortgage-backed securities and agency debentures, resulting in a realized gain of $27.2 million. During the quarter ended March 31, 2010, the Company disposed of $1.6 billion of mortgage-backed securities and agency debentures, resulting in a realized gain of $47.0 million. During the quarter ended December 31, 2010, the Company disposed of $3.1 billion of mortgage-backed securities and agency debentures, resulting in a realized gain of $33.8 million.

Common dividends declared for the quarter ended March 31, 2011, were $0.62 per share as compared to $0.65 per share for the quarter ended March 31, 2010, and $0.64 per share for the quarter ended December 31, 2010. The Company distributes dividends based on its current estimate of taxable earnings per common share, not GAAP earnings. Taxable and GAAP earnings will typically differ due to items such as non-taxable unrealized and realized gains and losses, differences in premium amortization and discount accretion, and non-deductible general and administrative expenses.

The annualized dividend yield on the Companya™s common stock for the quarter ended March 31, 2011, based on the March 31, 2011 closing price of $17.45, was 14.21%, as compared to 15.13% for the quarter ended March 31, 2010, and 14.29% for the quarter ended December 31, 2010.

On a GAAP basis, the Company provided an annualized return on average equity of 24.56% for the quarter ended March 31, 2011, as compared to an annualized return on average equity of 11.67% for the quarter ended March 31, 2010, and an annualized return on average equity of 49.87% for the quarter ended December 31, 2010. Without the effect of the unrealized gains or losses on interest rate swaps, the Company provided an annualized return on average equity of 18.62% for the quarter ended March 31, 2011, as compared to an annualized return on average equity of 16.52% for the quarter ended March 31, 2010, and an annualized return on average equity of 15.52% for the quarter ended December 31, 2010.

During the quarter the Company issued 172.5 million shares of its common stock in two separate public offerings, resulting in aggregate net proceeds before expenses of approximately $2.9 billion. The first transaction settled on January 7, 2011, and the second transaction settled on February 18, 2011.

Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly, commented on the Companya™s results. aDuring the quarter we were able to take advantage of the attractive investment environment and grow our balance sheet in a prudent manner. We expect market conditions to continue to reflect the uncertainty of regulatory, fiscal and monetary policy outcomes, as well as overall domestic and global economic conditions. In this evolving landscape, our management team remains focused on preparing the portfolio and the company for a wide range of outcomes.a

For the quarter ended March 31, 2011, the annualized yield on average interest-earning assets was 3.79% and the annualized cost of funds on average interest-bearing liabilities was 1.62%, which resulted in an average interest rate spread of 2.17%. This was a 5 basis point decrease from the 2.22% annualized interest rate spread for the quarter ended March 31, 2010, and a 32 basis point increase from the 1.85% average interest rate spread for the quarter ended December 31, 2010. At March 31, 2011, the weighted average yield on interest-earning assets was 3.89% and the weighted average cost of funds on borrowings, including the effect of interest rate swaps, was 1.65%, which resulted in an interest rate spread of 2.24%. Leverage at March 31, 2011, was 6.3:1 compared to 5.6:1 at March 31, 2010, and 6.7:1 at December 31, 2010.

Fixed-rate mortgage-backed securities and agency debentures comprised 88% of the Companya™s portfolio at March 31, 2011. The balance of the mortgage-backed securities and agency debentures was comprised of 11% adjustable-rate mortgage-backed securities and agency debentures and 1% LIBOR floating-rate collateralized mortgage obligations. At March 31, 2011, the Company had entered into interest rate swaps with a notional amount of $33.4 billion, or 37% of the mortgage-backed securities and agency debentures portfolio. Changes in the unrealized gains or losses on the interest rate swaps are reflected in the Companya™s consolidated statement of operations. The purpose of the swaps is to mitigate the risk of rising interest rates that affect the Companya™s cost of funds. Since the Company receives a floating rate on the notional amount of the swaps, the intended effect of the swaps is to lock in a spread relative to the cost of financing. As of March 31, 2011, substantially all of the Companya™s Investment Securities were Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities and agency debentures, which carry an actual or implied aAAAa rating.

aThe first quarter saw prepayment speeds remain relatively slow and spreads to financing costs widen,a said Wellington Denahan-Norris, Annalya™s Vice Chairman, Chief Investment Officer and Chief Operating Officer. aOur successful capital raises enabled our portfolio management team to take advantage of these attractive market conditions in relatively conservative fashion. After taking into account the effect of interest rate swaps, our portfolio of mortgage-backed securities and agency debentures was comprised of 38% floating-rate, 11% adjustable-rate and 51% fixed-rate assets.a

The following table summarizes portfolio information for the Company:

The Constant Prepayment Rate was 17% during the first quarter of 2011, as compared to 34% during the first quarter of 2010, and 23% during the fourth quarter of 2010. The weighted average purchase price of the Companya™s mortgage-backed securities and agency debentures was 102.1% at March 31, 2011. The net amortization of premiums and accretion of discounts on mortgage-backed securities and agency debentures for the quarters ended March 31, 2011, March 31, 2010, and December 31, 2010 was $174.8 million, $164.0 million, and $207.4 million, respectively. The total net premium and discount balance at March 31, 2011, March 31, 2010, and December 31, 2010, was $2.9 billion, $1.3 billion, and $2.3 billion, respectively.

General and administrative expenses as a percentage of average assets were 0.23%, 0.23% and 0.22% for the quarters ended March 31, 2011, March 31, 2010, and December 31, 2010, respectively. At March 31, 2011, March 31, 2010, and December 31, 2010, the Company had a common stock book value per share of $15.76, $16.80 and $15.34, respectively.

At March 31, 2011, Annalya™s wholly-owned registered investment advisors had under management approximately $12.5 billion in net assets and $22.5 billion in gross assets, as compared to $11.6 billion in net assets and $20.3 billion in gross assets at March 31, 2010 and $12.4 billion in net assets and $20.1 billion in gross assets at December 31, 2010. For the quarter ended March 31, 2011, the investment advisors earned net investment advisory and service fees of $17.2 million, as compared to $12.2 million for the quarter ended March 31, 2010 and $16.3 million for the quarter ended December 31, 2010.

Annaly manages assets on behalf of institutional and individual investors worldwide. The Companya™s principal business objective is to generate net income for distribution to investors from its Investment Securities and from dividends it receives from its subsidiaries.

The Company will hold the 2011 first quarter earnings conference call on Thursday May 5, 2011 at 10:00 a.m. EDT. The number to call is 866-843-0890 for domestic calls and 412-317-9250 for international calls. The conference passcode is 9379876. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 450677. 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 Investor Relations, then select Investor Information and complete the E-Mail notification form.

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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 the 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, changes in government regulations affecting our business, our ability to maintain our qualification as a REIT for federal income tax purposes, risks associated with the broker-dealer business of our subsidiary, and risks associated with the investment advisory business of our subsidiaries, including the removal by clients of assets they manage, their regulatory requirements and competition in the investment advisory business. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our most recent Annual Report on Form 10-K and any 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.