_________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
February 24, 2015
Annaly Capital Management, Inc.
(Exact Name of Registrant as Specified in its Charter)
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Maryland
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1-13447
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22-3479661
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State or Other Jurisdiction
Of Incorporation)
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(Commission
File Number)
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(I.R.S. Employer
Identification No.)
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1211 Avenue of the Americas
New York, New York
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10036
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (212) 696-0100
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition
On February 24, 2015, the registrant issued a press release announcing its financial results for the quarter ended December 31, 2014. A copy of the press release is furnished as Exhibit 99.1 to this report.
On February 24, 2015, the registrant posted supplemental financial information on the Investor Relations section of its website (www.annaly.com). A copy of the supplemental financial information is furnished as Exhibit 99.2 to this report and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 Press Release, dated February 24, 2015, issued by Annaly Capital Management, Inc.
99.2 Supplemental Financial Information for the quarter ended December 31, 2014
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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ANNALY CAPITAL MANAGEMENT, INC. |
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By: |
/s/ Glenn A. Votek |
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Name: Glenn A. Votek |
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Title: Chief Financial Officer |
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| Dated: |
February 24, 2015 |
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Exhibit 99.1
FOR IMMEDIATE RELEASE
ANNALY CAPITAL MANAGEMENT, INC. REPORTS 4th QUARTER 2014 RESULTS
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GAAP net loss of $658.3 million, $0.71 loss per common share
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Core earnings of $298.9 million, $0.30 earnings per common share
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Common stock book value of $13.10, up from $12.87 at prior quarter end
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Capital ratio of 15.1% and leverage of 5.4:1
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Net interest margin of 1.56%
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New York, New York–February 24, 2015–Annaly Capital Management, Inc. (NYSE: NLY) today announced its financial results for the quarter and year ended December 31, 2014.
Financial Performance
GAAP net loss for the quarter ended December 31, 2014 was $658.3 million, or $0.71 loss per average common share, compared to GAAP net income of $354.9 million, or $0.36 per average common share, for the quarter ended September 30, 2014, and GAAP net income of $1.0 billion, or $1.07 per average common share, for the quarter ended December 31, 2013. The decrease in net income for the quarter ended December 31, 2014 compared to the quarters ended September 30, 2014 and December 31, 2013 was primarily attributable to mark-to-market losses on our interest rate swaps. Core earnings for the quarter ended December 31, 2014 was $298.9 million, or $0.30 per average common share, compared to $308.6 million, or $0.31 per average common share, for the quarter ended September 30, 2014, and $350.1 million, or $0.35 per average common share, for the quarter ended December 31, 2013. "Core earnings" represents a non-GAAP measure and is defined as net income (loss) excluding gains or losses on disposals of investments and termination of interest rate swaps, unrealized gains or losses on interest rate swaps and Agency interest-only mortgage-backed securities, net gains and losses on trading assets, impairment losses, net income (loss) attributable to noncontrolling interest, and certain other non-recurring gains or losses.
GAAP net loss for the year ended December 31, 2014 was $842.3 million, or $0.96 loss per average common share and GAAP net income for the year ended December 31, 2013 was $3.7 billion, or $3.86 per average common share. Core earnings for the years ended December 31, 2014 and 2013, respectively, were $1.1 billion or $1.14 per average common share and $1.2 billion, or $1.21 per average common share.
Net interest margin for the quarters ended December 31, 2014, September 30, 2014 and December 31, 2013 was 1.56%, 1.61% and 1.78%, respectively. Net interest margin represents the Company’s annualized economic net interest income, inclusive of interest expense on interest rate swaps, divided by its average interest-earning assets. For the quarter ended December 31, 2014, the average yield on interest earning assets was 2.98% and the average cost of interest bearing liabilities, including interest expense on interest rate swaps, was 1.69%, which resulted in a net interest spread of 1.29%. Our average yield on interest earning assets was relatively unchanged for the quarter ended December 31, 2014 when compared to the quarter ended September 30, 2014. Our average yield on interest earning assets decreased for the quarter ended December 31, 2014 when compared to the quarter ended December 31, 2013 due to higher amortization expense in the current quarter resulting from faster prepayment speeds. Our average cost of interest bearing liabilities increased for the quarter ended December 31, 2014 when compared to the quarter ended September 30, 2014 due to higher interest expense on interest rate swaps. Our average cost of interest bearing liabilities decreased for the quarter ended December 31, 2014 when compared to the quarter ended December 31, 2013 due to lower interest rate swap and swaption notional balances as a percentage of repurchase agreements.
Wellington J. Denahan, Chairman and Chief Executive Officer of Annaly, commented on the Company’s results. “We fully expect the Federal Reserve to adjust policy accommodation sometime this year and the markets to endure higher levels of volatility. We look forward to the opportunities that will accompany that adjustment and remain comfortable in our continued ability to deliver attractive relative returns.”
Kevin Keyes, President of Annaly, added “In addition to our size, liquidity and industry-low leverage, our diversified Agency and Commercial strategies help to insulate the Company from heightened volatility while providing complimentary and more durable earnings over time.”
Asset Portfolio
Investment Securities, which are comprised of Agency mortgage-backed securities and Agency debentures, were $82.9 billion at December 31, 2014, compared to $82.8 billion at September 30, 2014 and $73.4 billion at December 31, 2013. As of December 31, 2014, substantially all of the Company’s Investment Securities were Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities and debentures. Fixed-rate Agency mortgage-backed securities and debentures comprised 95% of the Company’s Investment Securities portfolio at December 31, 2014 and adjustable-rate Agency mortgage-backed securities and debentures comprised the remainder of the Company’s Investment Securities portfolio.
During the quarter ended December 31, 2014, the Company disposed of $7.3 billion of Investment Securities, resulting in a realized gain of $3.2 million. During the quarter ended September 30, 2014, the Company disposed of $4.2 billion of Investment Securities, resulting in a realized gain of $4.7 million. During the quarter ended December 31, 2013, the Company disposed of $11.9 billion of Investment Securities, resulting in a realized gain of $49.6 million.
During the year ended December 31, 2014, the Company disposed of $22.5 billion of Investment Securities, resulting in a realized gain of $94.5 million. During the year ended December 31, 2013, the Company disposed of $56.8 billion of Investment Securities, resulting in a realized gain of $424.1 million.
The weighted average experienced constant prepayment rate for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013, was 8%, 9% and 7%, respectively. The net amortization of premiums and accretion of discounts on Investment Securities for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013, was $198.0 million, $197.7 million, and $30.7 million, respectively. The total net premium balance on Investment Securities at December 31, 2014, September 30, 2014, and December 31, 2013, was $5.3 billion, $5.5 billion, and $4.6 billion, respectively. The weighted average amortized cost basis of the Company’s non-interest-only Investment Securities at December 31, 2014, September 30, 2014, and December 31, 2013, was 105.3%, 105.4%, and 105.0%, respectively. The weighted average amortized cost basis of the Company’s interest-only Investment Securities at December 31, 2014, September 30, 2014, and December 31, 2013, was 15.4%, 15.2%, and 14.1%, respectively.
Commercial real estate debt and preferred equity, including securitized loans, totaled $1.5 billion and investments in commercial real estate totaled $210.0 million at December 31, 2014. Commercial real estate debt and preferred equity, including securitized loans, totaled $1.6 billion and investments in commercial real estate totaled $73.8 million at September 30, 2014. The commercial investment portfolio, net of financing, represented 11% of stockholders’ equity at December 31, 2014 and September 30, 2014. The weighted average yield on commercial real estate debt and preferred equity as of December 31, 2014, September 30, 2014, and December 31, 2013, was 9.00%, 9.23% and 9.17%, respectively. The weighted average levered equity yield on investments in commercial real estate, excluding real estate held-for-sale, as of December 31, 2014, September 30, 2014, and December 31, 2013, was 13.95%, 11.46% and 10.80%, respectively.
Capital and Funding
At December 31, 2014, total stockholders’ equity was $13.3 billion. Leverage at December 31, 2014, September 30, 2014, and December 31, 2013, was 5.4:1, 5.4:1 and 5.0:1, respectively. Leverage includes repurchase agreements, Convertible Senior Notes, securitized debt, loan participation and mortgages payable. Securitized debt, loan participation and mortgages payable are non-recourse to the Company. At December 31, 2014, September 30, 2014, and December 31, 2013, the Company’s capital ratio, which represents the ratio of stockholders’ equity to total assets, was 15.1%, 15.0%, and 15.1%, respectively. At December 31, 2014, September 30, 2014, and December 31, 2013, the Company’s net capital ratio was 15.1%, 15.0%, and 15.9%, respectively. The Company’s net capital ratio takes into account the net balances of its reverse repurchase agreements and repurchase agreements, U.S Treasury securities and U.S Treasury securities sold, not yet purchased, and securities borrowed and securities loaned, as applicable. On a GAAP basis, the Company produced an annualized return (loss) on average equity for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013 of (19.91%), 10.69%, and 32.46%, respectively. On a Core earnings basis, the Company provided an annualized return on average equity for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013, of 9.04%, 9.30%, and 11.05%, respectively.
At December 31, 2014, September 30, 2014, and December 31, 2013 the Company had outstanding $71.4 billion, $69.6 billion, and $61.8 billion of repurchase agreements, respectively, with weighted average remaining maturities of 141 days, 159 days, and 204 days, respectively, and with weighted average borrowing rates of 1.62%, 1.61%, and 2.33%, respectively, after giving effect to the Company’s interest rate swaps.
At December 31, 2014, September 30, 2014, and December 31, 2013, the Company had a common stock book value per share of $13.10, $12.87 and $12.13, respectively.
The following table presents the principal balance and weighted average rate of repurchase agreements by maturity at December 31, 2014:
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Maturity
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Principal Balance
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Weighted Average Rate
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(dollars in thousands) |
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Within 30 days
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$ |
28,354,167 |
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0.35 |
% |
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30 to 59 days
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17,336,469 |
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0.43 |
% |
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60 to 89 days
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4,040,677 |
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0.38 |
% |
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90 to 119 days
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2,945,495 |
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0.50 |
% |
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Over 120 days(1)
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18,685,118 |
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1.24 |
% |
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Total
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$ |
71,361,926 |
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0.61 |
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(1) Approximately 15% of the total repurchase agreements have a remaining maturity over 1 year.
Hedge Portfolio
At December 31, 2014, the Company had outstanding interest rate swaps with a net notional amount of $31.5 billion and interest rate swaptions with a net notional amount of $1.8 billion, representing 47% of the Company’s repurchase agreements.
Interest rate swaps and swaptions represented 48% of the Company’s repurchase agreements at September 30, 2014 and 92% of the Company’s repurchase agreements at December 31, 2013. Changes in the unrealized gains or losses on the interest rate swaps are reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss). The purpose of the interest rate swaps is to mitigate the risk of rising interest rates that affect the Company’s cost of funds. Since the Company pays a fixed rate and receives a floating rate on the notional amount of the swaps, the intended effect of the swaps is to lock in a cost of financing. As of December 31, 2014, the swap portfolio, excluding forward starting swaps, had a weighted average pay rate of 2.49%, a weighted average receive rate of 0.22% and weighted average maturity of 8.38 years.
At December 31, 2014, the Company had outstanding interest rate swaptions with a net notional amount of $1.8 billion. Changes in the unrealized gains or losses on the interest rate swaptions are reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss). The interest rate swaptions provide the Company with the option to enter into an interest rate swap agreement for a specified notional amount, duration, and pay and receive rates. As of December 31, 2014, the long swaption portfolio had a weighted average pay rate of 2.88% and weighted average expiration of 3.59 months. As of December 31, 2014, there were no short swaption positions.
The following table summarizes certain characteristics of the Company’s interest rate swaps at December 31, 2014:
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Maturity
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Current Notional (1)
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Weighted
Average Pay
Rate (2) (3)
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Weighted
Average Receive
Rate (2)
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Weighted
Average Years
to Maturity (2)
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(dollars in thousands)
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0 - 3 years
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$ |
2,502,505 |
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1.63 |
% |
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0.17 |
% |
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2.64 |
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3 - 6 years
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11,138,000 |
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2.06 |
% |
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0.22 |
% |
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5.18 |
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6 - 10 years
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13,069,200 |
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2.67 |
% |
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0.23 |
% |
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8.57 |
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Greater than 10 years
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4,751,800 |
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3.58 |
% |
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0.20 |
% |
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19.53 |
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Total / Weighted Average
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$ |
31,461,505 |
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2.49 |
% |
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0.22 |
% |
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8.38 |
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(1) Notional amount includes $0.5 billion in forward starting pay fixed swaps.
(2) Excludes forward starting swaps.
(3) Weighted average fixed rate on forward starting pay fixed swaps was 3.25%.
The following table summarizes certain characteristics of the Company’s interest rate swaptions at December 31, 2014:
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Current Underlying
Notional
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Weighted Average Underlying Pay
Rate
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Weighted Average Underlying Receive
Rate
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Weighted Average Underlying Years to Maturity
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Weighted Average Months
to Expiration
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(dollars in thousands) |
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Long
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$ |
1,750,000 |
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2.88 |
% |
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3M LIBOR
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9.17 |
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3.59 |
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Short
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$ |
- |
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- |
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- |
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- |
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- |
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Key Metrics
The following table presents key metrics of the Company’s portfolio, liabilities and hedging positions, and performance as of and for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013:
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December 31, 2014
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September 30, 2014
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December 31, 2013
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Portfolio Related Metrics:
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Fixed-rate Agency mortgage-backed securities and debentures as a percentage of Investment Securities
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95 |
% |
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95 |
% |
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91 |
% |
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Adjustable-rate Agency mortgage-backed securities and debentures as a percentage of Investment Securities
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5 |
% |
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5 |
% |
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9 |
% |
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Weighted average yield on commercial real estate debt and preferred equity at period-end
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9.00 |
% |
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9.23 |
% |
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9.17 |
% |
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Weighted average net equity yield on investments in commercial real estate at period-end (1)
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13.95 |
% |
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11.46 |
% |
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10.80 |
% |
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Liabilities and Hedging Metrics:
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Weighted average days to maturity on repurchase agreements outstanding at period-end
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141 |
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159 |
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204 |
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Notional amount of interest rate swaps and swaptions as a percentage of repurchase agreements
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47 |
% |
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48 |
% |
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92 |
% |
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Weighted average pay rate on interest rate swaps at period-end (2)
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2.49 |
% |
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2.48 |
% |
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2.14 |
% |
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Weighted average receive rate on interest rate swaps at period-end (2)
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0.22 |
% |
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0.21 |
% |
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0.20 |
% |
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Weighted average net rate on interest rate swaps at period-end (2)
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2.27 |
% |
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2.27 |
% |
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1.94 |
% |
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Leverage at period-end (3)
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5.4:1
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5.4:1
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5.0:1
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Capital ratio at period end
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15.1 |
% |
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15.0 |
% |
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15.1 |
% |
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Net capital ratio at period end
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15.1 |
% |
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15.0 |
% |
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15.9 |
% |
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Performance Related Metrics:
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Net interest margin (4)
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1.56 |
% |
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1.61 |
% |
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1.78 |
% |
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Average yield on interest earning assets (5)
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2.98 |
% |
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2.99 |
% |
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3.50 |
% |
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Average cost of interest bearing liabilities (6)
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1.69 |
% |
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1.64 |
% |
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2.07 |
% |
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Net interest spread
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1.29 |
% |
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1.35 |
% |
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1.43 |
% |
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Annualized return (loss) on average equity
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(19.91 |
%) |
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10.69 |
% |
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32.46 |
% |
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Annualized Core return on average equity
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|
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9.04 |
% |
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9.30 |
% |
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|
11.05 |
% |
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Common dividend declared during the quarter
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$ |
0.30 |
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$ |
0.30 |
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$ |
0.30 |
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Book value per common share
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$ |
13.10 |
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$ |
12.87 |
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$ |
12.13 |
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| (1) |
Excludes real estate held-for-sale.
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| (2) |
Excludes forward starting swaps.
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| (3) |
Includes repurchase agreements, Convertible Senior Notes, securitized debt, loan participation and mortgages payable. Securitized debt, loan participation and mortgages payable are non-recourse to the Company.
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| (4) |
Represents the Company’s annualized economic net interest income, inclusive of interest expense on interest rate swaps, divided by its average interest-earning assets.
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| (5) |
Average interest earning assets reflects the average amortized cost of our investments during the period.
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| (6) |
Includes interest expense on interest rate swaps.
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The following table presents a reconciliation between GAAP net income and Core earnings for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013:
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For the quarters ended
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December 31, 2014
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September 30, 2014
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December 31, 2013
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(dollars in thousands)
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GAAP net income (loss)
|
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$ |
(658,272 |
) |
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$ |
354,856 |
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|
$ |
1,028,749 |
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Adjustments:
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|
|
|
|
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|
|
|
|
|
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Realized (gains) losses on termination of interest rate swaps
|
|
|
- |
|
|
|
- |
|
|
|
13,177 |
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Unrealized (gains) losses on interest rate swaps
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|
|
873,468 |
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(98,593 |
) |
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|
(561,101 |
) |
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Net (gains) losses on disposal of investments
|
|
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(3,420 |
) |
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(4,693 |
) |
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|
(28,602 |
) |
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Net (gains) losses on trading assets
|
|
|
57,454 |
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|
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(4,676 |
) |
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|
(41,936 |
) |
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Net unrealized (gains) losses on interest-only Agency mortgage-backed securities
|
|
|
29,520 |
|
|
|
37,944 |
|
|
|
(60,181 |
) |
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Other non-recurring loss (1)
|
|
|
- |
|
|
|
23,783 |
|
|
|
- |
|
|
GAAP net income attributable to noncontrolling interest
|
|
|
196 |
|
|
|
- |
|
|
|
- |
|
|
Core earnings
|
|
$ |
298,946 |
|
|
$ |
308,621 |
|
|
$ |
350,106 |
|
|
GAAP net income (loss) per average common share
|
|
$ |
(0.71 |
) |
|
$ |
0.36 |
|
|
$ |
1.07 |
|
|
Core earnings per average common share
|
|
$ |
0.30 |
|
|
$ |
0.31 |
|
|
$ |
0.35 |
|
| (1) |
Represents a one-time payment made by FIDAC to Chimera Investment Corp. (Chimera) during the quarter ended September 30, 2014 to resolve issues raised in derivative demand letters sent to Chimera’s board of directors. This amount is a component of Other income (loss) in the Company’s Consolidated Statements of Comprehensive Income (Loss). |
The following table presents a reconciliation between GAAP net income and Core earnings for the years ended December 31, 2014 and 2013:
| |
|
For the years ended
|
| |
|
December 31, 2014
|
|
December 31, 2013
|
| |
|
(dollars in thousands)
|
|
GAAP net income (loss)
|
|
$ |
(842,279 |
) |
|
$ |
3,729,698 |
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
Realized (gains) losses on termination of interest rate swaps
|
|
|
779,333 |
|
|
|
101,862 |
|
|
Unrealized (gains) losses on interest rate swaps
|
|
|
948,755 |
|
|
|
(2,002,200 |
) |
|
Net (gains) losses on disposal of investments
|
|
|
(93,716 |
) |
|
|
(403,045 |
) |
|
Net (gains) losses on trading assets
|
|
|
245,495 |
|
|
|
(1,509 |
) |
|
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities
|
|
|
86,172 |
|
|
|
(244,730 |
) |
|
Impairment of goodwill
|
|
|
- |
|
|
|
23,987 |
|
|
Loss on previously held equity interest in CreXus
|
|
|
- |
|
|
|
18,896 |
|
|
Other non-recurring expense (1)
|
|
|
23,783 |
|
|
|
- |
|
|
GAAP net income attributable to noncontrolling interest
|
|
|
196 |
|
|
|
- |
|
|
Core earnings
|
|
$ |
1,147,739 |
|
|
$ |
1,222,959 |
|
|
GAAP net income per average common share
|
|
$ |
(0.96 |
) |
|
$ |
3.86 |
|
|
Core earnings per average common share
|
|
$ |
1.14 |
|
|
$ |
1.21 |
|
(1) Represents a one-time payment made by FIDAC to Chimera Investment Corp. (Chimera) to resolve issues raised in derivative demand letters sent to Chimera’s board of directors. This amount is a component of Other income (loss in the Company’s Consolidated Statements of Comprehensive Income (Loss).
The following table presents the components of the Company’s interest income and interest expense for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013:
| |
|
For the quarters ended
|
| |
|
December 31,
|
|
September 30,
|
|
December 31,
|
| |
|
2014
|
|
2014
|
|
2013
|
| |
|
(dollars in thousands)
|
| |
|
|
|
|
|
|
|
|
|
|
Interest income:
|
|
|
|
|
|
|
|
|
|
|
Investment Securities
|
|
$ |
606,746 |
|
|
$ |
606,331 |
|
|
$ |
721,670 |
|
|
Commercial investment portfolio(1)
|
|
|
40,913 |
|
|
|
38,113 |
|
|
|
37,702 |
|
|
U.S. Treasury securities
|
|
|
- |
|
|
|
- |
|
|
|
8,125 |
|
|
Securities loaned
|
|
|
- |
|
|
|
- |
|
|
|
2,087 |
|
|
Reverse repurchase agreements
|
|
|
429 |
|
|
|
135 |
|
|
|
1,587 |
|
|
Other
|
|
|
56 |
|
|
|
61 |
|
|
|
78 |
|
|
Total interest income
|
|
|
648,144 |
|
|
|
644,640 |
|
|
|
771,249 |
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
|
|
107,540 |
|
|
|
102,750 |
|
|
|
111,038 |
|
|
Convertible Senior Notes
|
|
|
25,701 |
|
|
|
22,376 |
|
|
|
17,788 |
|
|
U.S. Treasury securities sold, not yet purchased
|
|
|
- |
|
|
|
- |
|
|
|
6,684 |
|
|
Securities borrowed
|
|
|
- |
|
|
|
- |
|
|
|
1,718 |
|
|
Securitized debt of consolidated VIE
|
|
|
1,106 |
|
|
|
1,780 |
|
|
|
- |
|
|
Participation sold
|
|
|
165 |
|
|
|
163 |
|
|
|
165 |
|
|
Total interest expense
|
|
|
134,512 |
|
|
|
127,069 |
|
|
|
137,393 |
|
|
Net interest income
|
|
$ |
513,632 |
|
|
$ |
517,571 |
|
|
$ |
633,856 |
|
(1) Consists of commercial real estate debt and preferred equity and corporate debt.
Dividend Declarations
Common dividends declared for the quarters ended December 31, 2014, September 30, 2014, and December 31, 2013 were $0.30, $0.30, and $0.30 per common share, respectively. The annualized dividend yield on the Company’s common stock for the quarter ended December 31, 2014, based on the December 31, 2014 closing price of $10.81, was 11.10%, compared to 11.24% for the quarter ended September 30, 2014, and 12.04% for the quarter ended December 31, 2013.
Other Information
Annaly’s principal business objective is to generate net income for distribution to its shareholders from its investments. Annaly is a Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”). Annaly is managed and advised by Annaly Management Company LLC.
The Company prepares a supplement to provide additional quarterly information for the benefit of its shareholders. The supplement can be found at the Company’s website in the Investor Relations section under “Quarterly Supplemental Information”.
Conference Call
The Company will hold the fourth quarter 2014 earnings conference call on February 25, 2015 at 9:00 a.m. Eastern Time. The number to call is 888-317-6003 for domestic calls and 412-317-6061 for international calls. The conference passcode is 1590772. There will also be an audio webcast of the call on www.annaly.com. The replay of the call is available for one week following the conference call. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 10060573. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on Investor Relations, then select Email Alerts and complete the email notification form.
This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and 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 and other securities for purchase; the availability of financing and, if available, the terms of any financings; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow the commercial mortgage business; credit risks related to our investments in commercial real estate assets and corporate debt; our ability to consummate any contemplated investment opportunities; changes in government regulations affecting our business; our ability to maintain our qualification as a REIT for federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; risks associated with the businesses of our subsidiaries, including the investment advisory business of a wholly-owned subsidiary and the broker-dealer business of a wholly-owned subsidiary. 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.
|
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
|
(dollars in thousands, except per share data)
|
| |
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
| |
|
2014
|
|
2014
|
|
2014
|
|
2014
|
|
2013(1)
|
| |
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
1,741,244 |
|
|
$ |
1,178,621 |
|
|
$ |
1,320,666 |
|
|
$ |
924,197 |
|
|
$ |
552,436 |
|
|
Reverse repurchase agreements
|
|
|
100,000 |
|
|
|
- |
|
|
|
- |
|
|
|
444,375 |
|
|
|
100,000 |
|
|
Securities borrowed
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
513,500 |
|
|
|
2,582,893 |
|
|
Investments, at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,117,915 |
|
|
Agency mortgage-backed securities
|
|
|
81,565,256 |
|
|
|
81,462,387 |
|
|
|
81,055,337 |
|
|
|
75,350,388 |
|
|
|
70,388,949 |
|
|
Agency debentures
|
|
|
1,368,350 |
|
|
|
1,334,181 |
|
|
|
1,348,727 |
|
|
|
2,408,259 |
|
|
|
2,969,885 |
|
|
Investment in affiliates
|
|
|
143,045 |
|
|
|
136,748 |
|
|
|
143,495 |
|
|
|
137,647 |
|
|
|
139,447 |
|
|
Commercial real estate debt and preferred equity (2)
|
|
|
1,518,165 |
|
|
|
1,554,958 |
|
|
|
1,586,169 |
|
|
|
1,640,206 |
|
|
|
1,583,969 |
|
|
Investments in commercial real estate
|
|
|
210,032 |
|
|
|
73,827 |
|
|
|
74,355 |
|
|
|
40,313 |
|
|
|
60,132 |
|
|
Corporate debt, held for investment
|
|
|
166,464 |
|
|
|
144,451 |
|
|
|
151,344 |
|
|
|
145,394 |
|
|
|
117,687 |
|
|
Receivable for investments sold
|
|
|
1,010,094 |
|
|
|
855,161 |
|
|
|
856,983 |
|
|
|
19,116 |
|
|
|
1,193,730 |
|
|
Accrued interest and dividends receivable
|
|
|
278,489 |
|
|
|
287,231 |
|
|
|
283,423 |
|
|
|
276,007 |
|
|
|
273,079 |
|
|
Receivable for investment advisory income
|
|
|
10,402 |
|
|
|
8,369 |
|
|
|
6,380 |
|
|
|
6,498 |
|
|
|
6,839 |
|
|
Goodwill
|
|
|
94,781 |
|
|
|
94,781 |
|
|
|
94,781 |
|
|
|
94,781 |
|
|
|
94,781 |
|
|
Interest rate swaps, at fair value
|
|
|
75,225 |
|
|
|
198,066 |
|
|
|
170,604 |
|
|
|
340,890 |
|
|
|
559,044 |
|
|
Other derivatives, at fair value
|
|
|
5,499 |
|
|
|
19,407 |
|
|
|
7,938 |
|
|
|
40,105 |
|
|
|
146,725 |
|
|
Other assets
|
|
|
68,321 |
|
|
|
39,798 |
|
|
|
50,743 |
|
|
|
33,101 |
|
|
|
34,949 |
|
|
Total assets
|
|
$ |
88,355,367 |
|
|
$ |
87,387,986 |
|
|
$ |
87,150,945 |
|
|
$ |
82,414,777 |
|
|
$ |
81,922,460 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities sold, not yet purchased, at fair value
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,918,394 |
|
|
Repurchase agreements
|
|
|
71,361,926 |
|
|
|
69,610,722 |
|
|
|
70,372,218 |
|
|
|
64,543,949 |
|
|
|
61,781,001 |
|
|
Securities loaned
|
|
|
- |
|
|
|
7 |
|
|
|
7 |
|
|
|
513,510 |
|
|
|
2,527,668 |
|
|
Payable for investments purchased
|
|
|
264,984 |
|
|
|
2,153,789 |
|
|
|
781,227 |
|
|
|
1,898,507 |
|
|
|
764,131 |
|
|
Convertible Senior Notes
|
|
|
845,295 |
|
|
|
836,625 |
|
|
|
831,167 |
|
|
|
827,486 |
|
|
|
825,262 |
|
|
Securitized debt of consolidated VIE
|
|
|
260,700 |
|
|
|
260,700 |
|
|
|
260,700 |
|
|
|
260,700 |
|
|
|
- |
|
|
Mortgages payable
|
|
|
146,553 |
|
|
|
42,635 |
|
|
|
30,316 |
|
|
|
19,317 |
|
|
|
19,332 |
|
|
Participation sold
|
|
|
13,693 |
|
|
|
13,768 |
|
|
|
13,866 |
|
|
|
13,963 |
|
|
|
14,065 |
|
|
Accrued interest payable
|
|
|
180,501 |
|
|
|
180,345 |
|
|
|
157,782 |
|
|
|
170,644 |
|
|
|
160,921 |
|
|
Dividends payable
|
|
|
284,293 |
|
|
|
284,278 |
|
|
|
284,261 |
|
|
|
284,247 |
|
|
|
284,230 |
|
|
Interest rate swaps, at fair value
|
|
|
1,608,286 |
|
|
|
857,658 |
|
|
|
928,789 |
|
|
|
1,272,616 |
|
|
|
1,141,828 |
|
|
Other derivatives, at fair value
|
|
|
8,027 |
|
|
|
- |
|
|
|
6,533 |
|
|
|
6,045 |
|
|
|
55,518 |
|
|
Accounts payable and other liabilities
|
|
|
47,328 |
|
|
|
36,511 |
|
|
|
35,160 |
|
|
|
39,081 |
|
|
|
25,055 |
|
|
Total liabilities
|
|
|
75,021,586 |
|
|
|
74,277,038 |
|
|
|
73,702,026 |
|
|
|
69,850,065 |
|
|
|
69,517,405 |
|
|
Stockholders’ Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.875% Series A Cumulative Redeemable Preferred Stock:
7,412,500 authorized, issued and outstanding
|
|
|
177,088 |
|
|
|
177,088 |
|
|
|
177,088 |
|
|
|
177,088 |
|
|
|
177,088 |
|
|
7.625% Series C Cumulative Redeemable Preferred Stock
12,650,000 authorized, 12,000,000 issued and outstanding
|
|
|
290,514 |
|
|
|
290,514 |
|
|
|
290,514 |
|
|
|
290,514 |
|
|
|
290,514 |
|
|
7.50% Series D Cumulative Redeemable Preferred Stock:
18,400,000 authorized, issued and outstanding
|
|
|
445,457 |
|
|
|
445,457 |
|
|
|
445,457 |
|
|
|
445,457 |
|
|
|
445,457 |
|
|
Common stock, par value $0.01 per share, 1,956,937,500 authorized, 947,643,079, 947,540,823, 947,488,945, 947,432,862 and 947,304,761 issued and outstanding, respectively
|
|
|
9,476 |
|
|
|
9,476 |
|
|
|
9,475 |
|
|
|
9,475 |
|
|
|
9,474 |
|
|
Additional paid-in capital
|
|
|
14,786,509 |
|
|
|
14,781,308 |
|
|
|
14,776,302 |
|
|
|
14,770,553 |
|
|
|
14,765,761 |
|
|
Accumulated other comprehensive income (loss)
|
|
|
204,883 |
|
|
|
(967,820 |
) |
|
|
(572,256 |
) |
|
|
(2,088,479 |
) |
|
|
(2,748,933 |
) |
|
Accumulated deficit
|
|
|
(2,585,436 |
) |
|
|
(1,625,075 |
) |
|
|
(1,677,661 |
) |
|
|
(1,039,896 |
) |
|
|
(534,306 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
13,328,491 |
|
|
|
13,110,948 |
|
|
|
13,448,919 |
|
|
|
12,564,712 |
|
|
|
12,405,055 |
|
|
Noncontrolling interest
|
|
|
5,290 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total equity
|
|
|
13,333,781 |
|
|
|
13,110,948 |
|
|
|
13,448,919 |
|
|
|
12,564,712 |
|
|
|
12,405,055 |
|
|
Total liabilities and equity
|
|
$ |
88,355,367 |
|
|
$ |
87,387,986 |
|
|
$ |
87,150,945 |
|
|
$ |
82,414,777 |
|
|
$ |
81,922,460 |
|
(1) Derived from the audited consolidated financial statements at December 31, 2013.
(2) Includes senior securitized mortgages of consolidated VIE with a carrying value of $398.6 million, $398.4 million, $398.3 million, $398.1 million and $0, respectively.
|
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
(UNAUDITED)
|
|
(dollars in thousands, except per share data)
|
| |
|
For the quarters ended
|
| |
|
December 31,
|
|
September 30,
|
|
June 30,
|
|
March 31,
|
|
December 31,
|
| |
|
2014
|
|
2014
|
|
2014
|
|
2014
|
|
2013
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$ |
648,144 |
|
|
$ |
644,640 |
|
|
$ |
683,962 |
|
|
$ |
655,901 |
|
|
$ |
771,249 |
|
|
Interest expense
|
|
|
134,512 |
|
|
|
127,069 |
|
|
|
126,107 |
|
|
|
124,971 |
|
|
|
137,393 |
|
|
Net interest income
|
|
|
513,632 |
|
|
|
517,571 |
|
|
|
557,855 |
|
|
|
530,930 |
|
|
|
633,856 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gains (losses) on interest rate swaps(1)
|
|
|
(174,908 |
) |
|
|
(169,083 |
) |
|
|
(220,934 |
) |
|
|
(260,435 |
) |
|
|
(242,182 |
) |
|
Realized gains (losses) on termination of interest rate swaps
|
|
|
- |
|
|
|
- |
|
|
|
(772,491 |
) |
|
|
(6,842 |
) |
|
|
(13,177 |
) |
|
Unrealized gains (losses) on interest rate swaps
|
|
|
(873,468 |
) |
|
|
98,593 |
|
|
|
175,062 |
|
|
|
(348,942 |
) |
|
|
561,101 |
|
|
Subtotal
|
|
|
(1,048,376 |
) |
|
|
(70,490 |
) |
|
|
(818,363 |
) |
|
|
(616,219 |
) |
|
|
305,742 |
|
|
Investment advisory income
|
|
|
10,858 |
|
|
|
8,253 |
|
|
|
6,109 |
|
|
|
6,123 |
|
|
|
8,490 |
|
|
Net gains (losses) on disposal of investments
|
|
|
3,420 |
|
|
|
4,693 |
|
|
|
5,893 |
|
|
|
79,710 |
|
|
|
28,602 |
|
|
Dividend income from affiliates
|
|
|
4,048 |
|
|
|
4,048 |
|
|
|
4,048 |
|
|
|
13,045 |
|
|
|
4,048 |
|
|
Net gains (losses) on trading assets
|
|
|
(57,454 |
) |
|
|
4,676 |
|
|
|
(46,489 |
) |
|
|
(146,228 |
) |
|
|
41,936 |
|
|
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities
|
|
|
(29,520 |
) |
|
|
(37,944 |
) |
|
|
2,085 |
|
|
|
(20,793 |
) |
|
|
60,181 |
|
|
Other income (loss)
|
|
|
3,365 |
|
|
|
(22,249 |
) |
|
|
4,687 |
|
|
|
1,460 |
|
|
|
3,945 |
|
|
Subtotal
|
|
|
(65,283 |
) |
|
|
(38,523 |
) |
|
|
(23,667 |
) |
|
|
(66,683 |
) |
|
|
147,202 |
|
|
Total other income (loss)
|
|
|
(1,113,659 |
) |
|
|
(109,013 |
) |
|
|
(842,030 |
) |
|
|
(682,902 |
) |
|
|
452,944 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation and management fee
|
|
|
38,734 |
|
|
|
39,028 |
|
|
|
39,277 |
|
|
|
38,521 |
|
|
|
43,385 |
|
|
Other general and administrative expenses
|
|
|
19,720 |
|
|
|
12,289 |
|
|
|
12,912 |
|
|
|
8,857 |
|
|
|
12,909 |
|
|
Total general and administrative expenses
|
|
|
58,454 |
|
|
|
51,317 |
|
|
|
52,189 |
|
|
|
47,378 |
|
|
|
56,294 |
|
|
Income (loss) before income taxes
|
|
|
(658,481 |
) |
|
|
357,241 |
|
|
|
(336,364 |
) |
|
|
(199,350 |
) |
|
|
1,030,506 |
|
|
Income taxes
|
|
|
(209 |
) |
|
|
2,385 |
|
|
|
(852 |
) |
|
|
4,001 |
|
|
|
1,757 |
|
|
Net income (loss)
|
|
|
(658,272 |
) |
|
|
354,856 |
|
|
|
(335,512 |
) |
|
|
(203,351 |
) |
|
|
1,028,749 |
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
(196 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Net income (loss) attributable to Annaly
|
|
|
(658,076 |
) |
|
|
354,856 |
|
|
|
(335,512 |
) |
|
|
(203,351 |
) |
|
|
1,028,749 |
|
|
Dividends on preferred stock
|
|
|
17,992 |
|
|
|
17,992 |
|
|
|
17,992 |
|
|
|
17,992 |
|
|
|
17,992 |
|
|
Net income (loss) available (related) to common stockholders
|
|
$ |
(676,068 |
) |
|
$ |
336,864 |
|
|
$ |
(353,504 |
) |
|
$ |
(221,343 |
) |
|
$ |
1,010,757 |
|
|
Net income (loss) per share available (related) to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.71 |
) |
|
$ |
0.36 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.23 |
) |
|
$ |
1.07 |
|
|
Diluted
|
|
$ |
(0.71 |
) |
|
$ |
0.35 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.23 |
) |
|
$ |
1.03 |
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
947,615,793 |
|
|
|
947,565,432 |
|
|
|
947,515,127 |
|
|
|
947,458,813 |
|
|
|
947,386,060 |
|
|
Diluted
|
|
|
947,615,793 |
|
|
|
987,315,527 |
|
|
|
947,515,127 |
|
|
|
947,458,813 |
|
|
|
995,625,622 |
|
|
Dividends Declared Per Share of Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$ |
(658,272 |
) |
|
$ |
354,856 |
|
|
$ |
(335,512 |
) |
|
$ |
(203,351 |
) |
|
$ |
1,028,749 |
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
|
1,175,864 |
|
|
|
(390,871 |
) |
|
|
1,522,126 |
|
|
|
741,172 |
|
|
|
(1,244,500 |
) |
|
Reclassification adjustment for net (gains) losses included in net income (loss)
|
|
|
(3,161 |
) |
|
|
(4,693 |
) |
|
|
(5,903 |
) |
|
|
(80,718 |
) |
|
|
(49,643 |
) |
|
Other comprehensive income (loss)
|
|
|
1,172,703 |
|
|
|
(395,564 |
) |
|
|
1,516,223 |
|
|
|
660,454 |
|
|
|
(1,294,143 |
) |
|
Comprehensive income (loss)
|
|
|
514,431 |
|
|
|
(40,708 |
) |
|
|
1,180,711 |
|
|
|
457,103 |
|
|
|
(265,394 |
) |
|
Comprehensive income (loss) attributable to noncontrolling interest
|
|
|
(196 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Comprehensive income (loss) attributable to Annaly
|
|
$ |
514,627 |
|
|
$ |
(40,708 |
) |
|
$ |
1,180,711 |
|
|
$ |
457,103 |
|
|
$ |
(265,394 |
) |
| (1) |
Interest expense related to the Company’s interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss). |
|
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
(dollars in thousands, except per share data)
|
|
(Unaudited)
|
| |
|
For the years ended
|
| |
|
December 31,
|
|
December 31,
|
| |
|
2014
|
|
2013(2)
|
| |
|
(Unaudited)
|
|
|
|
|
Net interest income:
|
|
|
|
|
|
|
|
Interest income
|
|
$ |
2,632,647 |
|
|
$ |
2,918,562 |
|
|
Interest expense
|
|
|
512,659 |
|
|
|
624,714 |
|
|
Net interest income
|
|
|
2,119,988 |
|
|
|
2,293,848 |
|
| |
|
|
|
|
|
|
|
|
|
Other income (loss):
|
|
|
|
|
|
|
|
|
|
Realized gains (losses) on interest rate swaps(1)
|
|
|
(825,360 |
) |
|
|
(908,294 |
) |
|
Realized gains (losses) on termination of interest rate swaps
|
|
|
(779,333 |
) |
|
|
(101,862 |
) |
|
Unrealized gains (losses) on interest rate swaps
|
|
|
(948,755 |
) |
|
|
2,002,200 |
|
|
Subtotal
|
|
|
(2,553,448 |
) |
|
|
992,044 |
|
|
Investment advisory income
|
|
|
31,343 |
|
|
|
43,643 |
|
|
Net gains (losses) on disposal of investments
|
|
|
93,716 |
|
|
|
403,045 |
|
|
Dividend income from affiliates
|
|
|
25,189 |
|
|
|
18,575 |
|
|
Net gains (losses) on trading assets
|
|
|
(245,495 |
) |
|
|
1,509 |
|
|
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities
|
|
|
(86,172 |
) |
|
|
244,730 |
|
|
Impairment of goodwill
|
|
|
- |
|
|
|
(23,987 |
) |
|
Loss on previously held equity interest in CreXus
|
|
|
- |
|
|
|
(18,896 |
) |
|
Other income (loss)
|
|
|
(12,737 |
) |
|
|
15,481 |
|
|
Subtotal
|
|
|
(194,156 |
) |
|
|
684,100 |
|
|
Total other income (loss)
|
|
|
(2,747,604 |
) |
|
|
1,676,144 |
|
| |
|
|
|
|
|
|
|
|
|
General and administrative expenses:
|
|
|
|
|
|
|
|
|
|
Compensation and management fee
|
|
|
155,560 |
|
|
|
167,366 |
|
|
Other general and administrative expenses
|
|
|
53,778 |
|
|
|
64,715 |
|
|
Total general and administrative expenses
|
|
|
209,338 |
|
|
|
232,081 |
|
|
Income (loss) before income taxes
|
|
|
(836,954 |
) |
|
|
3,737,911 |
|
|
Income taxes
|
|
|
5,325 |
|
|
|
8,213 |
|
|
Net income (loss)
|
|
|
(842,279 |
) |
|
|
3,729,698 |
|
|
Net income (loss) attributable to noncontrolling interest
|
|
|
(196 |
) |
|
|
- |
|
|
Net income (loss) attributable to Annaly
|
|
|
(842,083 |
) |
|
|
3,729,698 |
|
|
Dividends on preferred stock
|
|
|
71,968 |
|
|
|
71,968 |
|
|
Net income (loss) available (related) to common stockholders
|
|
$ |
(914,051 |
) |
|
$ |
3,657,730 |
|
|
Net income (loss) per share available (related) to common stockholders:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$ |
(0.96 |
) |
|
$ |
3.86 |
|
|
Diluted
|
|
$ |
(0.96 |
) |
|
$ |
3.74 |
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
947,539,294 |
|
|
|
947,337,915 |
|
|
Diluted
|
|
|
947,539,294 |
|
|
|
995,557,026 |
|
|
Net income (loss)
|
|
$ |
(842,279 |
) |
|
$ |
3,729,698 |
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on available-for-sale securities
|
|
|
3,048,291 |
|
|
|
(5,378,089 |
) |
|
Reclassification adjustment for net (gains) losses included in net income (loss)
|
|
|
(94,475 |
) |
|
|
(424,086 |
) |
|
Other comprehensive income (loss)
|
|
|
2,953,816 |
|
|
|
(5,802,175 |
) |
|
Comprehensive income (loss)
|
|
|
2,111,537 |
|
|
|
(2,072,477 |
) |
|
Comprehensive income (loss) attributable to noncontrolling interest
|
|
|
(196 |
) |
|
|
- |
|
|
Comprehensive income (loss) attributable to Annaly
|
|
$ |
2,111,733 |
|
|
$ |
(2,072,477 |
) |
| (1) |
Interest expense related to the Company’s interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss).
|
| (2) |
Derived from the audited consolidated financial statements at December 31, 2013. |
9
Exhibit 99.2
February 24, 2015 4Q 2014 Stockholder Supplement
1 This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and 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 and other securities for purchase; the availability of financing and, if available, the terms of any financings; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow the commercial mortgage business; credit risks related to our investments in commercial real estate assets and corporate debt; our ability to consummate any contemplated investment opportunities; changes in government regulations affecting our business; our ability to maintain our qualification as a REIT for federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; risks associated with the businesses of our subsidiaries, including the investment advisory business of a wholly-owned subsidiary and the broker-dealer business of a wholly-owned subsidiary. 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. Safe Harbor Notice
2 (1)"Core earnings" represents a non-GAAP measure and is defined as net income (loss) excluding gains or losses on disposals of investments and termination of interest rate swaps, unrealized gains or losses on interest rate swaps and Agency interest-only mortgage-backed securities, net gains and losses on trading assets, impairment losses, net income (loss) attributable to noncontrolling interest, and certain other non-recurring gains or losses. (2)Includes repurchase agreements, Convertible Senior Notes, securitized debt, loan participation and mortgages payable. Securitized debt, loan participation and mortgages payable are non-recourse to the Company. (3)Total stockholders’ equity divided by total assets. (4)Consists of Investment Securities, U.S. Treasury Securities, securities borrowed, commercial real estate debt and preferred equity, corporate debt, reverse repurchase agreements and cash and cash equivalents. Interest earning assets reflects the average amortized cost of our investments during the period. (5)Represents the Company’s annualized economic net interest income, inclusive of interest expense on interest rate swaps, divided by its average interest-earning assets. (6)Investment Securities consist of Agency mortgage-backed securities and Agency debentures. (7)Represents annualized cash-on-cash return based on current in-place rents and forecasted annual operating expenses. 4Q14 Financial Overview GAAP net loss of $658.3 million, or $0.71 loss per average common share, resulting in an annualized GAAP loss on average equity of (19.91%) Core earnings(1) of $298.9 million, or $0.30 per average common share, generating an annualized core return on average equity of 9.04% Declared a $0.30 dividend per common share Common stock book value per share of $13.10 End of period total debt to equity of 5.4x(2) End of period capital ratio of 15.1%(3) Weighted average days to maturity on repurchase agreements of 141 days ▪Average yield on interest earning assets(4) of 2.98% and net interest spread of 1.29% during the quarter; net interest margin(5) of 1.56% ▪End of period Investment Securities(6) of $82.9 billion ▪End of period commercial real estate debt and preferred equity of $1.5 billion with a weighted-average yield of 9.00% at quarter end and commercial real estate held for investment of $210.0 million with a net equity yield of 13.95%(7) Income Statement Balance Sheet Portfolio Unaudited
3 Strategy Overview Portfolio Positioning Market Opportunities Liability and Interest Rate Management Unaudited QE3 officially ended in the fourth quarter, but the Federal Reserve remains supportive of the MBS market through reinvestment of portfolio runoff, which is expected to persist at least until lift-off of the Federal Funds target rate During the fourth quarter of 2014, leverage remained relatively unchanged as we purchased $8.8 billion of Investment Securities and disposed of $7.3 billion of Investment Securities resulting in a realized gain of $3.2 million Commercial investments (net of financing) are relatively stable and represent 11% of stockholders’ equity Expected levered return on equity of 8% to 10% on purchase of Agency mortgage-backed securities (“Agency MBS”) in current market environment Pay-ups on specified pools have increased meaningfully in light of lower interest rates and elevated volatility. While the specified sector still offers fair value at current pricing, recent outperformance has marginally increased the relative attractiveness of TBAs, in spite of diminished dollar roll specialness. Expected unlevered return of 3.5% to 5.0% for commercial first mortgages pre-securitization with opportunity to hold subordinated tranches yielding 8% to 10% post-securitization, and 7% to 9% unlevered return on equity through commercial mezzanine investments Expected unlevered stabilized return on commercial real estate property investments of 6% to 7% with opportunity to attractively finance with debt that increases cash-on-cash return to 9%+, not including the potential for asset price appreciation Selectively add to portfolio as opportunities are presented, taking advantage of the flexibility provided by our current leverage profile Continue to maintain focus on longer term funding agreements to manage short term interest rate uncertainty Selectively utilize derivatives and futures contracts to hedge against higher interest rates and spikes in volatility
4 Source: Bloomberg. Data as of February 17, 2015. Interest Rate Market Performance Longer-dated rates declined over the course of Q4 2014 and Q1 2015 to-date Declines driven by a combination of continued concerns over global growth and inflation outlook, foreign central bank policy developments and elevated geopolitical risks Rapid declines in the price of oil led to declining medium and longer-term inflation expectations, contributing to the decline in nominal yields Despite significant decline in longer-rates, rates in the U.S. look attractive relative to global counterparts, in large part owing to the QE initiative announced by the ECB and ongoing QE in Japan Market anticipates the Fed’s initial rates increase to occur in late-2015 and the path of subsequent increases to be substantially more gradual compared to Fed’s December 2014 consensus -50 -40 -30 -20 -10 0 10 20 1Y 2Y 3Y 5Y 7Y 10Y 30Y Bps Treasury Yield Changes Change Over Q4 Change Over Q4'14 / Q1'15 (Through 02/17/2015) 1.00% 1.20% 1.40% 1.60% 1.80% 2.00% 2.20% 2.40% 0.00% 0.50 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Growing Gap Between Treasury & Bund Yields 10yr Treasury vs. Bund Yield Spread (Right) 10yr U.S. Treasury Yield (Left) 10yr German Bund Yield (Left) 5 5 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% -3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Hundreds $ MBS Hedge-Adjusted Price Performance * 10y Swaps Yield (Right) FN30 3.5% FN30 4.0% FN15 3.0% FN15 3.5% Source: Barclays, JPMorgan, Annaly calculations * MBS relative performance vs. swaps reflects cumulative price performance of a $100 MBS position hedged with a combination of 2y, 5y and 10y interest rate swaps on September 30, 2014. Calculations are based on Barclays’ model partial duration profile. Cumulative performance does not include net coupon earnings. Q1 2015 cumulative performance is through February 17, 2015.
5 MBS Market Performance MBS performed generally in line with interest rates in Q4 2014 As longer-dated rates declined significantly over the course of January 2015, mortgages underperformed rates, though most of the underperformance has been retraced through mid-February as rates backed-up from lows Lower coupons (30y 3% & 3.5%) modestly outperformed higher coupons (30y 4% & 4.5%) as prepayment expectations for higher coupons increased 15yr MBS outperformed 30yr owing to their more stable cash flow profile Specified pool pay-ups increased significantly in Q4 2014 / early-2015 As rates declined and interest rate volatility spiked, investor demand for prepayment protection increased Increase in pay-ups in some sectors exceeded expectations after adjusting for longer durations of specified pools vs. TBAs After moderating for most of 2014, dollar roll specialness exhibited an uptick in recent weeks Year-End 2014 0.00 1.00 2.00 3.00 4.00 5.00 6.00 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 32nd of a point in price Monthly Dollar Roll Specialness FN30 3.5% FN30 4.0% FN15 3.0% FN15 3.5% Year-End 2014
6 Last Four Quarters Financial Performance Unaudited Core EPS Annualized Core Return on Equity Average Yield on Interest Earning Assets Capital Ratio $0.23 $0.30 $0.31 $0.30 $0.10 $0.20 $0.30 $0.40 $0.50 1Q14 2Q144Q14 3.21% 3.20% 2.99% 2.98% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 1Q14 2Q14 3Q14 4Q14 15.2% 15.4% 15.0% 15.1% 10.0% 12.5% 15.0% 17.5% 20.0% 1Q14 2Q14 3Q14 4Q14 7.68% 9.24% 9.30% 9.04% 6.00% 7.50% 9.00% 10.50% 12.00% 1Q14 2Q14 3Q14 4Q14
7 7 Unaudited, numbers in thousands except per share amounts Summary Balance Sheet and Applicable Information (1)Consists of commercial real estate debt and preferred equity and corporate debt. (2)Consists of common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit. (3)Total stockholders’ equity divided by total assets less the net balances of U.S. Treasury securities and U.S. Treasury securities sold, not yet purchased, reverse repurchase agreements and repurchase agreements, and securities borrowed and securities loaned. For the quarters ended December 31, September 30, December 31, 2014 2014 2013 Investment Securities $82,933,606 $82,796,568 $73,358,834 Commercial real estate investments 1,728,197 1,628,785 1,644,101 Corporate debt, held for investment 166,464 144,451 117,687 Total Investment Securities and commercial investment portfolio(1) $84,828,267 $84,569,804 $75,120,622 Total assets $88,355,367 $87,387,986 $81,922,460 Repurchase agreements $71,361,926 $69,610,722 $61,781,001 Convertible Senior Notes 845,295 836,625 825,262 Securitized debt of consolidated VIE 260,700 260,700 - Mortgages payable 146,553 42,635 19,332 Participation sold 13,693 13,768 14,065 Total debt $72,628,167 $70,764,450 $62,639,660 Total liabilities $75,021,586 $74,277,038 $69,517,405 Cumulative redeemable preferred stock $913,059 $913,059 $913,059 Common equity(2) 12,415,432 12,197,889 11,491,996 Total stockholders' equity $13,328,491 $13,110,948 $12,405,055 Non-controlling interest 5,290 - - Total equity $13,333,781 $13,110,948 $12,405,055 Total debt to total equity 5.4x 5.4x 5.0x Capital ratio 15.1% 15.0% 15.1% Net capital ratio(3) 15.1% 15.0% 15.9% Common stock book value per share $13.10 $12.87 $12.13 Total common stock shares outstanding 947,643 947,592 947,433
8 8 Unaudited, dollars in thousands except per share amounts Summary Income Statement and Applicable Information (1)Includes realized gains (losses) on interest rate swaps. For the quarters ended December 31, September 30, December 31, 2014 2014 2013 Total interest income $648,144 $644,640 $771,249 Total economic interest expense(1) 309,420 296,152 379,575 Economic net interest income(1) $338,724 $348,488 $391,674 GAAP Net income (loss) ($658,272) $354,856 $1,028,749 GAAP Net income (loss) available (related) to common shareholders (676,068) 336,864 1,010,757 GAAP Earnings per common share ($0.71) $0.36 $1.07 Core earnings (loss) $298,946 $308,621 $350,106 Core earnings (loss) available (related) to common shareholders 280,954 290,629 332,114 Core earnings per common share $0.30 $0.31 $0.35 Dividends declared per common share $0.30 $0.30 $0.30 Annualized GAAP return on average equity (19.91%) 10.69% 32.46% Annualized core return on average equity 9.04% 9.30% 11.05% Annualized core return on average equity per unit of leverage 1.66% 1.72% 2.19% Net interest margin 1.56% 1.61% 1.78% Average yield on interest earning assets 2.98% 2.99% 3.50% Average cost of interest bearing liabilities 1.69% 1.64% 2.07% Net interest spread 1.29% 1.35% 1.43% Weighted average three-month constant prepayment rate (CPR) 8% 9% 7%
9 Unaudited, dollars in thousands Components of Economic Net Interest Income (1)Interest expense related to the Company’s interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss). For the quarters ended December 31, September 30, December 31, 2014 2014 2013 Interest income: Investment Securities $606,746 $606,331 $721,670 Commercial investment portfolio 40,913 38,113 37,702 U.S. Treasury securities - - 8,125 Securities loaned - - 2,087 Reverse repurchase agreements 429 135 1,587 Other 56 61 78 Total interest income $648,144 $644,640 $771,249 Economic interest expense: Repurchase agreements $107,540 $102,750 $111,038 Realized losses on interest rate swaps(1) 174,908 169,083 242,182 Convertible Senior Notes 25,701 22,376 17,788 U.S. Treasury Securities sold, not yet purchased - - 6,684 Securities borrowed - - 1,718 Securitized debt of consolidated VIE 1,106 1,780 - Participation sold 165 163 165 Total economic interest expense $309,420 $296,152 $379,575 Economic net interest income $338,724 $348,488 $391,674
10 Unaudited Change in Net Interest Margin Change from 3Q14 to 4Q14 Note: Graph shows relative changes in contribution from 3Q14 to 4Q14. For example, economic interest expense decreased net interest margin by 0.05% more in 4Q14 versus 3Q14. (1) Includes realized gains (losses) on interest rate swaps. 1.56% 1.61% 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 2.25% 2.50% 3Q14 Net interest margin Net amortization of premiums and accretion of discounts Coupon on average interest-earning assets Economic interest expense(1) 4Q14 Net interest margin (0.01%) (0.05%) 0.01%
11 Unaudited Change in Net Interest Spread Change from 3Q14 to 4Q14 Note: Graph shows relative changes in contribution from 3Q14 to 4Q14. For example, average cost of interest bearing liabilities decreased net interest spread by 0.05% more in 4Q14 versus 3Q14. (1) Includes realized gains (losses) on interest rate swaps. 1.29% 1.35% 0.00% 0.25% 0.50% 0.75% 1.00% 1.25% 1.50% 1.75% 2.00% 3Q14 Net interest spread Coupon on average interest-earning assets Average cost of interest bearing liabilities(1) 4Q14 Net interest spread (0.01%) (0.05%)
12 Unaudited, dollars in thousands Reconciliation to Core Earnings Reconciliation of 4Q14 GAAP Net Income to Core Earnings $298,946 ($658,272) -$800,000 -$700,000 -$600,000 -$500,000 -$400,000 -$300,000 -$200,000 -$100,000 $0 $100,000 $200,000 $300,000 $400,000 GAAP net income Unrealized (gains) / losses on interest rate swaps Net (gains) / losses on trading assets Net unrealized (gains) / losses on IO Agency MBS Loss attributable to non-controlling interests Net (gains) / losses on disposal of investments Core earnings $29,520 $57,454 $873,468 ($3,420) $196
13 Unaudited Change in Annualized GAAP Return on Average Equity Change from 3Q14 to 4Q14 Note: Graph shows relative changes in contribution from 3Q14 to 4Q14. For example, unrealized (gains)/losses on interest rate swaps decreased annualized ROE by 29.39% more in 4Q14 versus 3Q14. (1)Other includes investment advisory income, dividend income from affiliates, other income (loss), general and administrative expenses, and income taxes. (19.91%) 10.69% (25.0%) (20.0%) (15.0%) (10.0%) (5.0%) 0.0% 5.0% 10.0% 15.0% 20.0% 3Q14 GAAP ROE Other(1) Coupon income Net amortization of premiums and accretion of discounts Economic interest expense Realized / unrealized (gains) / losses on inv. and trading assets Unrealized (gains) / losses on interest rate swaps 4Q14 GAAP ROE (1.67%) (0.44%) (0.02%) 0.21% 0.71% (29.39%)
14 Unaudited Change in Annualized Core Return on Average Equity Change from 3Q14 to 4Q14 Note: Graph shows relative changes in contribution from 3Q14 to 4Q14. For example, economic interest expense decreased annualized core ROE by 0.44% more in 4Q14 versus 3Q14. (1) Other includes investment advisory income, dividend income from affiliates, other income (loss) excluding non-recurring gains or losses, general and administrative expenses, and income taxes. 9.04% 9.30% 0.00% 3.00% 6.00% 9.00% 12.00% 15.00% 3Q14 Core ROE Coupon income Other(1) Net amortization of premiums and accretion of discounts Economic interest expense 4Q14 Core ROE 0.21% (0.44%) (0.02%) (0.01%)
15 Unaudited, dollars in thousands Agency MBS and Debentures Portfolio Net Premium and Discount Balance and Constant Prepayment Rate $4,600,158 $5,063,692 $5,437,108 $5,487,733 $5,349,150 37.08% 40.30% 40.43% 41.86% 40.13% 7% 6% 7% 9% 8% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% $0 $1,000,000 $2,000,000
$3,000,000 $4,000,000 $5,000,000 $6,000,000 4Q13 1Q14 2Q14 3Q14 4Q14 Net premium and discount balance Net premium and discount balance as % of stockholders' equity Weighted average three-month constant prepayment rate
16 Unaudited Interest Rate and Liability Management (1) Excludes forward starting swaps. Note: Net rates do not take into consideration outstanding Convertible Senior Notes, securitized debt of consolidated VIE , loan participation or mortgages payable. (1) 204 187 173 159 141 1.94% 1.97% 2.27% 2.27% 2.27% 0.68% 0.65% 0.59% 0.58% 0.61% 0 25 50 75 100 125 150 175 200 225 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 4Q13 1Q14 2Q14 3Q14 4Q14 Weighted average days to maturity on repurchase agreements Weighted average net rate on interest rate swaps Weighted average rate on repurchase agreements
17 Hedging and Liabilities as of December 31, 2014 Unaudited, dollars in thousands (1)Notional amount includes $0.5 billion in forward starting pay fixed swaps. (2)Excludes forward starting swaps. (3)Weighted average fixed rate on forward starting pay fixed swaps was 3.25%. (4)Approximately 15% of the total repurchase agreements have a remaining maturity over one year. Interest Rate Swaps Current Weighted Avg. Weighted Avg. Weighted Avg. Maturity Notional(1) Pay Rate(2)(3) Receive Rate(2) Years to Maturity(2) 0 to <3 years $2,502,505 1.63% 0.17% 2.64 >=3 to <6 years 11,138,000 2.06% 0.22% 5.18 >= 6 to <10 years 13,069,200 2.67% 0.23% 8.57 Greater than 10 years 4,751,800 3.58% 0.20% 19.53 Total / Weighted Avg. $31,461,505 2.49% 0.22% 8.38 Interest Rate Swaptions Current Weighted-Avg. Weighted-Avg. Weighted Avg. Weighted Avg. Underlying Underlying Underlying Underlying Months to Type Notional Pay Rate Receive Rate Years to Maturity Expiration Long $1,750,000 2.88% 3M LIBOR 9.17 3.59 Short - - - - - Repurchase Agreements Principal Weighted Avg. Maturity Balance Rate Within 30 days $28,354,167 0.35% 30 to 59 days 17,336,469 0.43% 60 to 89 days 4,040,677 0.38% 90 to 119 days 2,945,495 0.50% Over 120 days(4) 18,685,118 1.24% Total / Weighted Avg. $71,361,926 0.61%
18 Unaudited, dollars in thousands Agency MBS and Debentures Overview as of December 31, 2014 (1) Weighted averages for percentages subject to HARP and three-month CPR exclude Callables and Step-up securities. Agency Fixed-Rate Securities Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Subject to Weighted Avg. Estimated Years to Maturity Face Value % Coupon Amortized Cost Fair Value HARP 3-Month CPR Fair Value <=15 years $9,424,283 13.5% 3.15% 103.9% 104.5% 2.2% 4.8% $9,850,085 20 years 7,511,729 10.7% 3.63% 105.2% 106.1% 0.1% 8.1% 7,966,640 >=30 years 52,971,351 75.6% 3.89% 106.1% 106.1% 2.2% 8.6% 56,228,957 Callables 158,805 0.2% 3.16% 99.6% 95.4% 0.0% 0.0% 151,563 Total/Weighted Avg.(1) $70,066,168 100.0% 3.76% 105.7% 105.9% 2.0% 8.0% $74,197,245 Agency Adjustable-Rate Securities Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Subject to Weighted Avg. Estimated Months to Reset Face Value % Coupon Amortized Cost Fair Value HARP 3-Month CPR Fair Value 0 - 24 months $1,535,110 39.7% 2.53% 99.8% 106.5% 98.6% 10.5% $1,634,051 25 - 40 months 138,433 3.6% 5.10% 98.6% 106.9% 60.1% 21.7% 147,783 41 - 60 months 28,355 0.7% 4.62% 102.0% 106.4% 34.2% 24.9% 30,164 61 - 90 months 286,928 7.4% 3.71% 102.6% 105.5% 0.0% 18.2% 302,623 >90 months 631,784 16.3% 3.18% 102.9% 103.6% 0.0% 10.2% 654,302 Step-Ups 1,250,000 32.3% 2.52% 99.9% 97.3% 0.0% 0.0% 1,216,787 Total/Weighted Avg.(1) $3,870,610 100.0% 2.83% 100.5% 103.0% 61.3% 12.0% $3,985,710
19 Unaudited, dollars in thousands Agency MBS and Debentures Overview as of December 31, 2014 (cont’d) Agency Fixed-Rate and Floating-Rate Collateralized Mortgage-Backed Obligations Current Weighted Avg. Weighted Avg. Weighted Avg. Subject to Weighted Avg. Estimated Type Face Value % Coupon Amortized Cost Fair Value HARP 3-Month CPR Fair Value Fixed-Rate $3,455,026 100.0% 3.15% 102.4% 102.1% 5.0% 12.3% $3,528,217 Floating-Rate - - - - - - - - Total/Weighted Avg. $3,455,026 100.0% 3.15% 102.4% 102.1% 5.0% 12.3% $3,528,217 Agency Interest-Only Collateralized Mortgage-Backed Obligations Current Notional Weighted Avg. Weighted Avg. Weighted Avg. Subject to Weighted Avg. Estimated Type Value % Coupon Amortized Cost Fair Value HARP 3-Month CPR Fair Value Interest-Only $6,050,320 75.5% 3.31% 13.1% 13.1% 2.4% 9.1% $791,497 Inverse Interest-Only 1,958,218 24.5% 6.12% 22.5% 22.0% 0.0% 9.6% 430,937 Total/Weighted Avg. $8,008,538 100.0% 4.00% 15.4% 15.3% 1.9% 9.2% $1,222,434
20 Unaudited Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity (1)Scenarios include Investment Securities and derivative instruments. (2)NAV represents book value of common equity. Assumptions: The interest rate sensitivity and spread sensitivity are based on the portfolios as of December 31, 2014 and September 30, 2014 The interest rate sensitivities reflect instantaneous parallel shifts in rates The spread sensitivity shifts MBS spreads instantaneously and reflects exposure to MBS basis risk All tables assume no active management of the portfolio in response to rate or spread changes Interest Rate Sensitivity As of December 31, 2014 As of September 30, 2014 Interest Rate Change (bps) Estimated Percentage Change in Portfolio Value(1) Estimated Change as a % of NAV(1)(2) Estimated Percentage Change in Portfolio Value(1) Estimated Change as a % of NAV(1)(2) (75) 0.2% 1.3% 0.8% 5.2% (50) 0.3% 1.8% 0.7% 4.5% (25) 0.2% 1.4% 0.4% 2.8% 25 (0.3%) (2.0%) (0.5%) (3.6%) 50 (0.7%) (4.7%) (1.2%) (7.8%) 75 (1.2%) (8.0%) (1.8%) (12.3%) MBS Spread Sensitivity As of December 31, 2014 As of September 30, 2014 MBS Spread Shock (bps) Estimated Change in Portfolio Market Value Estimated Change as a % of NAV(1)(2) Estimated Change in Portfolio Market Value Estimated Change as a % of NAV(1)(2) (25) 1.2% 7.7% 1.3% 8.9% (15) 0.7% 4.6% 0.8% 5.3% (5) 0.2% 1.6% 0.3% 1.8% 5 (0.2%) (1.4%) (0.3%) (1.8%) 15 (0.7%) (4.4%) (0.8%) (5.2%) 25 (1.1%) (7.4%) (1.3%) (8.7%)
21 Unaudited, dollars in thousands Commercial Real Estate Overview as of December 31, 2014 (1)Book values include net origination fees. (2)Total weighted based on book value. (3)Based on most recent third party appraisal, which may be prior to loan origination/purchase date, and on an “as is” basis at the time of underwriting. (4)Maturity dates assume all of the borrowers’ extension options are exercised. (5)Total weighted based on net equity investment value. (6)Represents annualized cash-on-cash return based on current in-place rents and forecasted annual operating expenses. Debt Investments Number of Loans Book Values (1) % of Portfolio Yield (2) Weighted Avg LTV (2) (3) Weighted Avg Maturity (years) (2) (4) Financeable Debt Investments 5 $123,437 8% 5.05% 69% 4.35 Securitized Investments 10 398,634 26% 5.97% 73% 3.07 Balance Sheet Debt Investments: Senior Debt Investments 3 260,458 17% 9.81% 69% 0.54 Mezzanine Loan Investments 28 522,731 35% 10.89% 74% 3.87 Preferred Equity Investments 5 212,905 14% 11.37% 87% 5.55 Balance Sheet Debt Investment Subtotal: 36 $996,094 66% 10.71% 76% 3.36 Total Debt Investments 51 $1,518,165 100% 9.00% 75% 3.37 Equity Investments Number of Properties Book Value % of Portfolio Yield (5)(6) Real Estate Held for Investment 16 $210,032 100% 13.95% Total Equity Investments 16 $210,032 100% 13.95%
22 Unaudited, dollars in thousands Last Five Quarters Summary Data For the quarters ended December 31, September 30, June 30, March 31, December 31, 2014 2014 2014 2014 2013 Portfolio-Related Data: Investment Securities $82,933,606 $82,796,568 $82,404,064 $77,758,647 $73,358,834 Commercial real estate investments $1,728,197 $1,628,785 $1,660,524 $1,680,519 $1,644,101 Corporate debt $166,464 $144,451 $151,344 $145,394 $117,687 Total Investment Securities and commercial investment portfolio $84,828,267 $84,569,804 $84,215,932 $79,584,560 $75,120,622 Total assets $88,355,367 $87,387,986 $87,150,945 $82,414,777 $81,922,460 Agency mortgage-backed securities and debentures: % Fixed-rate 95% 95% 95% 93% 91% % Adjustable-rate 5% 5% 5% 7% 9% Weighted-average three-month constant prepayment rate (CPR) 8% 9% 7% 6% 7% Net premium and discount balance in Agency MBS and debentures portfolio $5,349,150 $5,487,733 $5,437,108 $5,063,692 $4,600,158 Net premium and discount balance as % of stockholder's equity 40.13% 41.86% 40.43% 40.30% 37.08%
23 Unaudited, dollars in thousands except per share amounts Last Five Quarters Summary Data (cont’d) (1)Notional amount includes $0.5 billion in forward starting pay fixed swaps as of December 31, 2014, $0.8 billion in forward starting pay fixed swaps as of September 30, 2014, $1.3 billion in forward starting pay fixed swaps as of June 30, 2014 and $3.1 billion in forward starting pay fixed swaps, offset by $1.4 billion in forward starting receive fixed swaps, as of March 31, 2014. (2)Excludes forward starting swaps. (3)Weighted average fixed rate on forward starting pay fixed swaps was 3.25%, 3.24%, 3.10% and 3.00% as of December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. (4)Weighted average fixed rate on forward starting receive fixed swaps was 1.18% as of March 31, 2014. For the quarters ended December 31, September 30, June 30, March 31, December 31, 2014 2014 2014 2014 2013 Liabilities, Capital and Hedging Data: Repurchase agreements $71,361,926 $69,610,722 $70,372,218 $64,543,949 $61,781,001 Convertible Senior Notes $845,295 $836,625 $831,167 $827,486 $825,262 Securitized debt of consolidated VIE $260,700 $260,700 $260,700 $260,700 - Mortgages payable $146,553 $42,635 $30,316 $19,317 $19,332 Participation sold $13,693 $13,768 $13,866 $13,963 $14,065 Total debt $72,628,167 $70,764,450 $71,508,267 $65,665,415 $62,639,660 Total liabilities $75,021,586 $74,277,038 $73,702,026 $69,850,065 $69,517,405 Cumulative redeemable preferred stock $913,059 $913,059 $913,059 $913,059 $913,059 Common equity $12,415,432 $12,197,889 $12,535,860 $11,651,653 $11,491,996 Total Annaly stockholders' equity $13,328,491 $13,110,948 $13,448,919 $12,564,712 $12,405,055 Non-controlling interests $5,290 - - - - Total equity $13,333,781 $13,110,948 $13,448,919 $12,564,712 $12,405,055 Weighted average days to maturity of repurchase agreements 141 159 173 187 204 Weighted average rate on repurchase agreements 0.61% 0.58% 0.59% 0.65% 0.68% Total debt to total stockholders' equity 5.4x 5.4x 5.3x 5.2x 5.0x Capital ratio 15.1% 15.0% 15.4% 15.2% 15.1% Net capital ratio 15.1% 15.0% 15.4% 15.4% 15.9% Common stock book value per share $13.10 $12.87 $13.23 $12.30 $12.13 Total common stock shares outstanding 947,643 947,592 947,541 947,489 947,433 Interest rate swaps: Notional amount of interest rate swaps(1) and swaptions as a % of repurchase agreements 47% 48% 48% 94% 92% Weighted average pay rate on interest rate swaps(2)(3) 2.49% 2.48% 2.48% 2.16% 2.14% Weighted average receive rate on interest rate swaps(2)(4) 0.22% 0.21% 0.21% 0.19% 0.20% Weighted average net rate on interest rate swaps 2.27% 2.27% 2.27% 1.97% 1.94%
24 Unaudited, dollars in thousands except per share amounts Last Five Quarters Summary Data (cont’d) For the quarters ended December 31, September 30, June 30, March 31, December 31, 2014 2014 2014 2014 2013 Performance-Related Data: Total interest income $648,144 $644,640 $683,962 $655,901 $771,249 Total economic interest expense $309,420 $296,152 $347,041 $385,406 $379,575 Economic net interest income $338,724 $348,488 $336,921 $270,495 $391,674 GAAP Net income (loss) ($658,272) $354,856 ($335,512) ($203,351) $1,028,749 GAAP Net income (loss) available (related) to common shareholders ($676,068) $336,864 ($353,504) ($221,343) $1,010,757 GAAP Earnings per common share ($0.71) $0.36 ($0.37) ($0.23) $1.07 Core earnings $298,946 $308,621 $300,428 $239,744 $350,106 Core earnings available to common shareholders $280,954 $290,629 $282,436 $221,752 $332,114 Core earnings per common share $0.30 $0.31 $0.30 $0.23 $0.35 Dividends declared per common share $0.30 $0.30 $0.30 $0.30 $0.30 Total common and preferred dividends declared $302,285 $302,270 $302,253 $302,239 $302,222 Annualized GAAP return on average equity (19.91%) 10.69% (10.32%) (6.52%) 32.46% Annualized core return on average equity 9.04% 9.30% 9.24% 7.68% 11.05% Annualized core return on average equity per unit of leverage 1.66% 1.72% 1.74% 1.47% 2.19% Net interest margin 1.56% 1.61% 1.57% 1.32% 1.78% Net interest spread during the quarter: Average yield on interest earning assets 2.98% 2.99% 3.20% 3.21% 3.50% Average cost of interest bearing liabilities 1.69% 1.64% 1.94% 2.31% 2.07% Net interest spread 1.29% 1.35% 1.26% 0.90% 1.43%
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