- GAAP net income of $900.1 million,
$0.93 earnings per common share
- Core earnings of $411.1 million, $0.41
earnings per common share
- Common stock book value of $12.32,
leverage of 4.8:1, economic leverage of 5.9:1
- Share repurchase program of up to $1
billion authorized
- Diversification strategy advancing with
internalization of Chimera’s management
Annaly Capital Management, Inc. (NYSE:NLY) today announced its
financial results for the quarter ended June 30, 2015.
Financial
Performance
The Company reported GAAP net income for the quarter ended June
30, 2015 of $900.1 million, or $0.93 per average common share,
compared to a GAAP net loss of $476.5 million, or $0.52 loss per
average common share, for the quarter ended March 31, 2015, and a
GAAP net loss of $335.5 million, or $0.37 loss per average common
share, for the quarter ended June 30, 2014. The increase for the
quarter ended June 30, 2015 compared to each of the quarters ended
March 31, 2015 and June 30, 2014 is the result of favorable changes
in realized and unrealized losses on our interest rate swaps given
the higher interest rate environment.
Core earnings for the quarter ended June 30, 2015 was $411.1
million, or $0.41 per average common share, compared to $254.1
million, or $0.25 per average common share, for the quarter ended
March 31, 2015, and $300.4 million, or $0.30 per average common
share, for the quarter ended June 30, 2014. Core earnings improved
during the quarter ended June 30, 2015 compared to the quarter
ended March 31, 2015 due to lower amortization expense on
Investment Securities, a result of higher interest rates and slower
prepayment expectations. Core earnings increased during the quarter
ended June 30, 2015 compared to the quarter ended June 30, 2014 due
to lower amortization expense on Investment Securities and a
decline in interest expense on swaps due to a shift in the
Company’s hedging strategy. "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
financial instruments measured at fair value through earnings, net
gains and losses on trading assets, impairment losses, net income
(loss) attributable to noncontrolling interest, and certain other
non-recurring gains or losses, and inclusive of dollar roll income
(a component of Net gains (losses) on trading assets).
Net interest margin, inclusive of TBA dollar rolls, for the
quarters ended June 30, 2015, March 31, 2015, and June 30, 2014 was
2.01%, 1.26% and 1.57%, respectively. Net interest margin
represents the sum of the Company’s annualized economic net
interest income, inclusive of interest expense on interest rate
swaps used to hedge cost of funds, plus TBA dollar roll income less
interest expense on swaps used to hedge dollar roll transactions
divided by the sum of its average interest-earning assets plus
average outstanding TBA contract balances. For the quarter ended
June 30, 2015, the average yield on interest earning assets was
3.23% and the average cost of interest bearing liabilities,
including interest expense on interest rate swaps used to hedge
cost of funds, was 1.59%, which resulted in a net interest spread
of 1.64%. The growth in average yield on interest earning assets
for the quarter ended June 30, 2015 when compared to the quarters
ended March 31, 2015 and June 30, 2014 is attributable to lower
amortization expense in the current quarter due to slower estimated
prepayment speeds. Our average cost of interest bearing liabilities
decreased for the quarter ended June 30, 2015 when compared to the
quarter ended March 31, 2015 due to lower weighted average coupons
on securitized debt of consolidated VIEs. Our average cost of
interest bearing liabilities declined for the quarter ended June
30, 2015 when compared to the quarter ended June 30, 2014 due to a
reduction in swap costs for the current period.
“Our quarterly results are a strong reminder of the positive
impacts higher rates can have on our earnings. We are very
comfortable with our portfolio and look forward to the
opportunities ahead,” remarked Wellington Denahan, Annaly’s Chief
Executive Officer and incoming Executive Chairman.
Share Repurchase
Program
Annaly separately announced today that its Board of Directors
has authorized the repurchase of up to $1 billion of its
outstanding common shares through December 31, 2016. Purchases made
pursuant to the program will be made in either the open market or
in privately negotiated transactions from time to time as permitted
by securities laws and other legal requirements. The timing,
manner, price and amount of any repurchases will be determined by
the Company in its discretion and will be subject to economic and
market conditions, stock price, applicable legal requirements and
other factors. The authorization does not obligate the Company to
acquire any particular amount of common shares and the program may
be suspended or discontinued at the Company’s discretion without
prior notice. The Board will assess the effects of this program at
its completion.
Kevin Keyes, President and incoming Chief Executive Officer of
Annaly commented, “I want to congratulate our investment teams for
their performance in the quarter. While we believe our
diversification strategy uniquely positions us to generate
attractive risk-adjusted returns, we also feel it is prudent to
have a share repurchase program in place as a capital allocation
option as we approach periods of increased volatility tied to a
potential shift in monetary policy.”
Internalization of
Chimera’s Management
Annaly today announced the termination of the management
agreement between its wholly-owned subsidiary Fixed Income Discount
Advisory Company (“FIDAC”) and Chimera Investment Corporation
(“Chimera”) so that Annaly can directly invest in non-Agency
residential mortgages and securities. This transaction advances
Annaly’s build-out and capital deployment in residential mortgage
credit investments and is expected to accelerate growth and
diversification. As a result of the internalization, FIDAC
personnel who focus their efforts on Chimera will become employees
of Chimera. In connection with the transaction, Chimera will
purchase Annaly’s 4.4% stake in Chimera for a purchase price of
$126.4 million ($14.05 per share).
Mr. Keyes made the following remarks: “As we have grown our
investment teams and corporate infrastructure, we have consistently
evaluated and selectively expanded Annaly’s targeted investment
classes. Investing directly in the non-Agency sector allows Annaly
to more efficiently expand our portfolio into assets with
complementary risk and return characteristics and better positions
us to manage various interest rate cycles in the future.”
Mr. Keyes continued: “The U.S. residential credit market offers
Annaly a compelling opportunity as the composition of the housing
finance market continues to change. Issuance has climbed to
post-crisis highs with the emergence of new products primarily
established to transfer risk to the private sector. In addition,
significant assets are emerging from legacy sellers given the new
regulatory environment and evolution of housing finance reform. Our
size, liquidity and expertise provide us with significant growth
prospects in this sector.”
Ms. Denahan commented: “When we were a smaller company it was
sufficient to achieve exposure to mortgage and commercial credit
investments through our stock holdings in the companies we managed
through FIDAC. With the growth of our capital base and the changing
market landscape, we see greater opportunity to leverage our
balance sheet to directly participate in the non-government agency
mortgage markets.”
Ms. Denahan added: “While investing in the Agency sector will
remain the core of our business, we are excited about the broad
opportunities to produce strong risk adjusted returns in the
non-Agency residential mortgage credit market.”
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 June 30, 2015, March 31, 2015, and June
30, 2014:
June 30, 2015
March 31, 2015 June 30, 2014 Portfolio
Related Metrics:
Fixed-rate Investment Securities as a
percentage of total Investment Securities
94 % 94 % 95 %
Adjustable-rate and floating-rate
Investment Securities as a percentage of total Investment
Securities
6 % 6 % 5 %
Weighted average yield on commercial real
estate debt and preferred equity at period-end
8.29 % 8.75 % 8.93 %
Weighted average net equity yield on
investments in commercial real estate at period-end (1)
12.53 % 13.09 % 9.71 %
Liabilities and Hedging Metrics:
Weighted average days to maturity on
repurchase agreements outstanding at period-end
149 149 173 Hedge ratio (2) 54 % 48 % 48 % Weighted average pay
rate on interest rate swaps at period-end (3) 2.29 % 2.37 % 2.48 %
Weighted average receive rate on interest rate swaps at period-end
(3) 0.40 % 0.35 % 0.21 % Weighted average net rate on interest rate
swaps at period-end (3) 1.89 % 2.02 % 2.27 % Leverage at period-end
(4) 4.8:1 4.8:1 5.3:1 Economic leverage at period-end (5) 5.9:1
5.7:1 5.3:1 Capital ratio at period end 14.2 %
14.1 % 15.4 %
Performance Related
Metrics: Net interest margin (6) 2.01 % 1.26 % 1.57 %
Average yield on interest earning assets (7) 3.23 % 2.47 % 3.20 %
Average cost of interest bearing liabilities (8) 1.59 % 1.64 % 1.94
% Net interest spread 1.64 % 0.83 % 1.26 % Annualized return (loss)
on average equity 28.00 % (14.41 %) (10.32 %) Annualized Core
return on average equity 12.79 % 7.69 % 9.24 % Common dividend
declared during the quarter $ 0.30 $ 0.30 $ 0.30 Book value per
common share $ 12.32 $ 12.88 $ 13.23
(1) Excludes real estate held-for-sale.
(2) Measures total notional balances of interest rate swaps,
interest rate swaptions and futures relative to repurchase
agreements and TBA notional outstanding. (3) Excludes forward
starting swaps. (4) Debt consists of repurchase agreements, other
secured financing, Convertible Senior Notes, securitized debt,
participation sold and mortgages payable. Securitized debt,
participation sold and mortgages payable are non-recourse to the
Company. (5) Computed as the sum of debt, TBA derivative notional
outstanding and net forward purchases of Investment Securities
divided by total equity. (6) Represents the sum of the Company’s
annualized economic net interest income, inclusive of interest
expense on interest rate swaps used to hedge cost of funds, plus
TBA dollar roll income less interest expense on swaps used to hedge
dollar roll transactions divided by the sum of its average
interest-earning assets plus average outstanding TBA derivative
balances. (7) Average interest earning assets reflects the average
amortized cost of our investments during the period. (8) Includes
interest expense on interest rate swaps used to hedge cost of
funds.
The following table presents a reconciliation between GAAP net
income and core earnings for the quarters ended June 30, 2015,
March 31, 2015, and June 30, 2014:
For the quarters ended June
30, 2015 March 31, 2015 June 30,
2014 (dollars in thousands) GAAP net income (loss) $
900,071 $ (476,499 ) $ (335,512 ) Less: Realized (gains)
losses on termination of interest rate swaps - 226,462 772,491
Unrealized (gains) losses on interest rate swaps (700,792 ) 466,202
(175,062 ) Net (gains) losses on disposal of investments (3,833 )
(62,356 ) (5,893 ) Net (gains) losses on trading assets 114,230
6,906 46,489
Net unrealized (gains) losses on financial
instruments measured at fair value through earnings
(17,581 ) 33,546 (2,085 ) Impairment of goodwill 22,966 - - GAAP
net (income) loss attributable to noncontrolling interest 149 90 -
Plus: TBA dollar roll income (1) 95,845
59,731 - Core earnings $ 411,055
$ 254,082 $ 300,428 GAAP net
income (loss) per average basic common share $ 0.93 $
(0.52 ) $ (0.37 ) Core earnings per average basic common
share $ 0.41 $ 0.25 $ 0.30
(1)
Represents a component of Net gains
(losses) on trading assets.
Asset
Portfolio
Investment Securities, which are comprised of Agency
mortgage-backed securities, Agency debentures and Agency CRT
securities, totaled $68.2 billion at June 30, 2015, compared to
$70.5 billion at March 31, 2015 and $82.4 billion at June 30, 2014.
The Company’s Investment Securities portfolio at June 30, 2015 was
comprised of 94% fixed-rate assets with the remainder constituting
adjustable or floating-rate investments. During the quarter ended
June 30, 2015, the Company disposed of $2.5 billion of Investment
Securities, resulting in a net realized gain of $3.9 million.
During the quarter ended March 31, 2015, the Company disposed of
$14.9 billion of Investment Securities, resulting in a net realized
gain of $62.3 million. During the quarter ended June 30, 2014, the
Company disposed of $6.1 billion of Investment Securities,
resulting in a net realized gain of $5.9 million.
At June 30, 2015 the Company had outstanding $13.0 billion in
notional balances of TBA derivative positions. Realized and
unrealized gains (losses) on TBA derivatives are recorded in Net
gains (losses) on trading assets in the Company’s Consolidated
Statements of Comprehensive Income (Loss). The following table
summarizes certain characteristics of the Company’s TBA derivatives
at June 30, 2015:
Purchase and sale contracts
forderivative TBAs
Notional Implied Cost Basis
Implied Market Value Net Carrying Value
(dollars in thousands) Purchase contracts $ 13,000,000 $
13,311,297 $ 13,317,254 $ 5,957 Sale contracts -
- - - Net TBA derivatives $
13,000,000 $ 13,311,297 $ 13,317,254 $ 5,957
The Company uses a third-party model to project prepayment
speeds for purposes of determining amortization of related premiums
and discounts on Investment Securities. Changes to model
assumptions, including interest rates and other market data, as
well as periodic revisions to the model may cause changes in the
results. The net amortization of premiums and accretion of
discounts on Investment Securities for the quarters ended June 30,
2015, March 31, 2015, and June 30, 2014, was $94.0 million, $284.8
million, and $149.6 million, respectively. The total net premium
balance on Investment Securities at June 30, 2015, March 31, 2015,
and June 30, 2014, was $4.8 billion, $4.7 billion, and $5.4
billion, respectively. The weighted average amortized cost basis of
the Company’s non-interest-only Investment Securities at June 30,
2015, March 31, 2015, and June 30, 2014, was 105.4%, 105.1%, and
105.5%, respectively. The weighted average amortized cost basis of
the Company’s interest-only Investment Securities at June 30, 2015,
March 31, 2015, and June 30, 2014, was 16.0%, 15.7%, and 15.1%,
respectively. The weighted average experienced constant prepayment
rate on our Agency mortgage-backed securities for the quarters
ended June 30, 2015, March 31, 2015, and June 30, 2014, was 12%, 9%
and 7%, respectively.
The Company’s commercial investment portfolio consists of
commercial real estate investments and corporate debt. Commercial
real estate debt and preferred equity, including securitized loans
of consolidated variable interest entities (“VIEs”) totaled $4.1
billion and investments in commercial real estate totaled $216.8
million at June 30, 2015. Commercial real estate debt and preferred
equity, including securitized loans of consolidated VIEs, totaled
$3.0 billion and investments in commercial real estate totaled
$207.2 million at March 31, 2015. Corporate debt investments
totaled $311.6 million as of June 30, 2015, up from $227.8 million
at March 31, 2015. The commercial investment portfolio, net of
financing, represented 13% of stockholders’ equity at June 30, 2015
and March 31, 2015. The weighted average yield on commercial real
estate debt and preferred equity as of June 30, 2015, March 31,
2015, and June 30, 2014, was 8.29%, 8.75% and 8.93%, respectively.
The weighted average levered equity yield on investments in
commercial real estate, excluding real estate held-for-sale, as of
June 30, 2015, March 31, 2015, and June 30, 2014, was 12.53%,
13.09% and 9.71%, respectively.
During the quarter, the Company acquired the junior-most tranche
totaling $89.4 million issued by the Freddie Mac K-Series, and was
required to consolidate $1.2 billion of assets and $1.1 billion of
liabilities of the issuing trust as of June 30, 2015. The Company
also acquired AAA rated commercial mortgage-backed securities
totaling $90.0 million. In addition, the Company originated new
debt and preferred equity investments totaling $119.8 million, at a
weighted average coupon of 5.27%, and recorded $286.3 million of
principal reductions from investments that repaid or sold with a
weighted average coupon of 9.09%. During the quarter, the Company
grew its corporate debt portfolio by $83.8 million.
Capital and
Funding
At June 30, 2015, total stockholders’ equity was $12.6 billion.
Leverage at June 30, 2015, March 31, 2015, and June 30, 2014, was
4.8:1, 4.8:1 and 5.3:1, respectively. For purposes of calculating
the Company’s leverage ratio, debt consists of repurchase
agreements, other secured financing, Convertible Senior Notes,
securitized debt, participation sold and mortgages payable.
Securitized debt, participation sold and mortgages payable are
non-recourse to the Company. Economic leverage, which also
considers other forms of financing, was 5.9:1 at June 30, 2015,
compared to 5.7:1 at March 31, 2015. Economic leverage is computed
as the sum of debt, TBA derivative notional outstanding and net
forward purchases of Investment Securities divided by total equity.
At June 30, 2015, March 31, 2015, and June 30, 2014, the Company’s
capital ratio, which represents the ratio of stockholders’ equity
to total assets (inclusive of total market value of TBA
derivatives), was 14.2%, 14.1%, and 15.4%, respectively. On a GAAP
basis, the Company produced an annualized return (loss) on average
equity for the quarters ended June 30, 2015, March 31, 2015, and
June 30, 2014 of 28.00%, (14.41%), and (10.32%), respectively. On a
core earnings basis, the Company provided an annualized return on
average equity for the quarters ended June 30, 2015, March 31,
2015, and June 30, 2014, of 12.79%, 7.69%, and 9.24%,
respectively.
At June 30, 2015, March 31, 2015, and June 30, 2014, the Company
had a common stock book value per share of $12.32, $12.88 and
$13.23, respectively.
At June 30, 2015, March 31, 2015, and June 30, 2014, the Company
had outstanding $57.5 billion, $60.5 billion, and $70.4 billion of
repurchase agreements, respectively, with weighted average
remaining maturities of 149 days, 149 days, and 173 days,
respectively, and with weighted average borrowing rates of 1.73%,
1.65%, and 1.59%, respectively, after giving effect to the
Company’s interest rate swaps used to hedge cost of funds. During
the quarters ended June 30, 2015, March 31, 2015, and June 30,
2014, the weighted average rate on repurchase agreements was 0.67%,
0.60%, and 0.59% respectively.
The following table presents the principal balance and weighted
average rate of repurchase agreements by maturity at June 30,
2015:
Maturity
Principal Balance Weighted Average Rate
(dollars in thousands)
Within 30 days $ 23,163,749 0.55 % 30 to 59 days 8,157,729 0.52 %
60 to 89 days 7,132,012 0.42 % 90 to 119 days 1,507,387 0.43 % Over
120 days(1) 17,498,675 1.32 % Total $ 57,459,552
0.76 %
(1)
Approximately 17% of the total repurchase
agreements have a remaining maturity over 1 year.
Hedge
Portfolio
At June 30, 2015, the Company had outstanding interest rate
swaps with a net notional amount of $29.0 billion. 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 Company enters into interest rate swaps to mitigate the
risk of rising interest rates that affect the Company’s cost of
funds or its dollar roll transactions. As of June 30, 2015, the
swap portfolio, excluding forward starting swaps, had a weighted
average pay rate of 2.29%, a weighted average receive rate of 0.40%
and a weighted average maturity of 7.76 years.
At June 30, 2015, the Company had outstanding interest rate
swaptions with a net notional amount of $0.5 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 June 30, 2015, the long swaption portfolio had a weighted
average pay rate of 2.87% and weighted average expiration of 0.47
months. As of June 30, 2015, there were no short swaption
positions.
The following table summarizes certain characteristics of the
Company’s interest rate swaps at June 30, 2015:
Maturity
Current Notional (1)
WeightedAverage
PayRate (2) (3)
WeightedAverage
ReceiveRate (2)
WeightedAverage Yearsto
Maturity (2)
(dollars in thousands)
0 - 3 years $ 2,852,471 1.78 % 0.20 % 2.20 3 - 6 years 11,163,000
1.81 % 0.46 % 4.77 6 - 10 years 11,201,350 2.45 % 0.44 % 8.36
Greater than 10 years 3,734,400 3.70 % 0.23 %
19.87 Total / Weighted Average $ 28,951,221 2.29 %
0.40 % 7.76
(1)
(2)
(3)
Notional amount includes $2.6 billion in
forward starting pay fixed swaps.
Excludes forward starting swaps.
Weighted average fixed rate on forward
starting pay fixed swaps was 1.77%.
The following table summarizes certain characteristics of the
Company’s interest rate swaptions at June 30, 2015:
Current
UnderlyingNotional
Weighted AverageUnderlying
PayRate
Weighted AverageUnderlying
ReceiveRate
Weighted AverageUnderlying Years
toMaturity
Weighted Average Monthsto
Expiration
(dollars in thousands) Long $ 500,000 2.87 % 3M LIBOR 8.55
0.47
The Company enters into U.S. Treasury and Eurodollar futures
contracts to hedge a portion of its interest rate risk. The
following table summarizes outstanding futures positions as of June
30, 2015:
Notional - LongPositions
Notional -
ShortPositions
Weighted AverageYears to
Maturity
(dollars in thousands) 2-year swap equivalent Eurodollar
contracts $ - $ (5,000,000 ) 2.00 U.S. Treasury futures - 5 year -
(2,273,000 ) 4.42 U.S. Treasury futures - 10 year and greater
- (1,007,500 ) 6.92 Total $ - $
(8,280,500 ) 3.26
At June 30, 2015, March 31, 2015, and June 30, 2014, the
Company’s hedge ratio was 54%, 48% and 48%. Our hedge ratio
measures total notional balances of interest rate swaps, interest
rate swaptions and futures relative to repurchase agreements and
TBA notional outstanding.
Dividend
Declarations
Common dividends declared for each of the quarters ended June
30, 2015, March 31, 2015, and June 30, 2014 were $0.30 per common
share. The annualized dividend yield on the Company’s common stock
for the quarter ended June 30, 2015, based on the June 30, 2015
closing price of $9.19, was 13.06%, compared to 11.54% for the
quarter ended March 31, 2015, and 10.50% for the quarter ended June
30, 2014.
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 second quarter 2015 earnings
conference call on August 6, 2015 at 10:00 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 8288727. 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 10069760. 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 Agency CRT securities,
residential mortgage-backed securities and related residential
mortgage credit assets, commercial real estate assets and corporate
debt; our ability to grow our residential mortgage credit business;
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; and our ability to maintain our
exemption from registration under the Investment Company Act of
1940, as amended. 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) June 30, March 31, December
31, September 30, June 30, 2015
2015
2014(1)
2014 2014 (Unaudited)
(Unaudited) (Unaudited)
(Unaudited) ASSETS
Cash and cash equivalents $ 1,785,158 $ 1,920,326 $ 1,741,244 $
1,178,621 $ 1,320,666 Reverse repurchase agreements - 100,000
100,000 - - Investments, at fair value: Agency mortgage-backed
securities 67,605,287 69,388,001 81,565,256 81,462,387 81,055,337
Agency debentures 429,845 995,408 1,368,350 1,334,181 1,348,727
Agency CRT securities 214,130 108,337 - - - Commercial real estate
debt investments (2) 2,812,824 1,515,903 - - - Investment in
affiliate 123,343 141,246 143,045 136,748 143,495 Commercial real
estate debt and preferred equity, held for investment (3) 1,332,955
1,498,406 1,518,165 1,554,958 1,586,169 Investments in commercial
real estate 216,800 207,209 210,032 73,827 74,355 Corporate debt
311,640 227,830 166,464 144,451 151,344 Receivable for investments
sold 247,361 2,009,937 1,010,094 855,161 856,983 Accrued interest
and dividends receivable 234,006 247,801 278,489 287,231 283,423
Receivable for investment advisory income 10,589 10,268 10,402
8,369 6,380 Goodwill 71,815 94,781 94,781 94,781 94,781 Interest
rate swaps, at fair value 30,259 25,908 75,225 198,066 170,604
Other derivatives, at fair value 38,074 113,503 5,499 19,407 7,938
Other assets 81,594 70,813
68,321 39,798
50,743 Total assets $ 75,545,680
$ 78,675,677 $ 88,355,367 $ 87,387,986
$ 87,150,945
LIABILITIES AND
STOCKHOLDERS’ EQUITY Liabilities: Repurchase agreements
$ 57,459,552 $ 60,477,378 $ 71,361,926 $ 69,610,722 $ 70,372,218
Other secured financing 203,200 90,000 - - 5,000 Securities loaned
- - - 7 7 Convertible Senior Notes - 749,512 845,295 836,625
831,167 Securitized debt of consolidated VIEs (4) 2,610,974
1,491,829 260,700 260,700 260,700 Mortgages payable 146,359 146,470
146,553 42,635 30,316 Participation sold 13,490 13,589 13,693
13,768 13,866 Payable for investments purchased 673,933 5,205
264,984 2,153,789 781,227 Accrued interest payable 131,629 155,072
180,501 180,345 157,782 Dividends payable 284,331 284,310 284,293
284,278 284,261 Interest rate swaps, at fair value 1,328,729
2,025,170 1,608,286 857,658 928,789 Other derivatives, at fair
value 40,539 61,778 8,027 - 6,533 Accounts payable and other
liabilities 58,139 50,774
47,328 36,511
30,160 Total liabilities 62,950,875
65,551,087 75,021,586
74,277,038 73,702,026
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, 947,768,496, 947,698,431, 947,643,079,
947,591,766 and 947,540,823 issued and outstanding,
respectively
9,478 9,477 9,476 9,476 9,475 Additional paid-in capital 14,788,677
14,787,117 14,786,509 14,781,308 14,776,302 Accumulated other
comprehensive income (loss) (354,965 ) 773,999 204,883 (967,820 )
(572,256 ) Accumulated deficit (2,766,250 )
(3,364,147 ) (2,585,436 ) (1,625,075 )
(1,677,661 ) Total stockholders’ equity
12,589,999 13,119,505 13,328,491 13,110,948 13,448,919
Noncontrolling interest 4,806 5,085
5,290 -
- Total equity 12,594,805
13,124,590 13,333,781
13,110,948 13,448,919
Total liabilities and equity $ 75,545,680 $ 78,675,677
$ 88,355,367 $ 87,387,986 $ 87,150,945
(1) Derived from the audited consolidated
financial statements at December 31, 2014. (2) Includes senior
securitized commercial mortgage loans of consolidated VIEs with a
carrying value of $2.6 billion and $1.4 billion at June 30, 2015
and March 31, 2015, respectively. (3) Includes senior securitized
commercial mortgage loans of consolidated VIE with a carrying value
of $361.2 million, $361.2 million, $398.6 million, $398.4 million,
and $398.3, respectively. (4) Includes securitized debt of
consolidated VIEs carried at fair value of $2.4 billion and $1.3
billion at June 30, 2015 and March 31, 2015, 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 June 30, March 31, December 31,
September 30, June 30, 2015 2015
2014 2014 2014
Net interest
income: Interest income $ 624,346 $ 519,172 $ 648,144 $ 644,640
$ 683,962 Interest expense 113,072
129,420 134,512 127,069
126,107
Net interest income
511,274 389,752
513,632 517,571 557,855
Realized and unrealized gains (losses):
Realized gains (losses) on interest rate swaps(1) (144,465 )
(158,239 ) (174,908 ) (169,083 ) (220,934 ) Realized gains (losses)
on termination of interest rate swaps - (226,462 ) - - (772,491 )
Unrealized gains (losses) on interest rate swaps 700,792
(466,202 ) (873,468 )
98,593 175,062
Subtotal
556,327 (850,903 )
(1,048,376 ) (70,490 ) (818,363 ) Net
gains (losses) on disposal of investments 3,833 62,356 3,420 4,693
5,893 Net gains (losses) on trading assets (114,230 ) (6,906 )
(57,454 ) 4,676 (46,489 )
Net unrealized gains (losses) on financial
instruments measured at fair value through earnings
17,581 (33,546 ) (29,520 ) (37,944 ) 2,085 Impairment of goodwill
(22,966 ) - -
- -
Subtotal
(115,782 ) 21,904 (83,554
) (28,575 ) (38,511 )
Total realized
and unrealized gains (losses) 440,545
(828,999 ) (1,131,930 ) (99,065
) (856,874 )
Other income (loss):
Investment advisory income 10,604 10,464 10,858 8,253 6,109
Dividend income from affiliate 4,318 4,318 4,048 4,048 4,048 Other
income (loss) (22,344 ) (1,082 )
3,365 (22,249 ) 4,687
Total other income (loss) (7,422 )
13,700 18,271 (9,948 )
14,844
General and administrative
expenses: Compensation and management fee 37,014 38,629 38,734
39,028 39,277 Other general and administrative expenses
14,995 12,309 19,720
12,289 12,912
Total general and administrative expenses 52,009
50,938 58,454
51,317 52,189
Income (loss) before income taxes 892,388 (476,485 )
(658,481 ) 357,241 (336,364 )
Income taxes
(7,683 ) 14 (209 )
2,385 (852 )
Net income (loss)
900,071 (476,499 ) (658,272 ) 354,856 (335,512 )
Net
income (loss) attributable to noncontrolling interest
(149 ) (90 ) (196 ) -
-
Net income (loss)
attributable to Annaly 900,220 (476,409 ) (658,076 ) 354,856
(335,512 )
Dividends on preferred stock 17,992
17,992 17,992
17,992 17,992
Net income (loss) available (related) to common stockholders
$ 882,228 $ (494,401 ) $ (676,068 ) $
336,864 $ (353,504 )
Net income (loss) per
share available (related) to common stockholders: Basic $ 0.93
$ (0.52 ) $ (0.71 ) $ 0.36
$ (0.37 ) Diluted $ 0.93 $ (0.52 ) $
(0.71 ) $ 0.34 $ (0.37 )
Weighted
average number of common shares outstanding: Basic
947,731,493 947,669,831
947,615,793 947,565,432
947,515,127 Diluted 947,929,762
947,669,831 947,615,793
987,315,527 947,515,127
Net
income (loss) $ 900,071 $ (476,499 ) $
(658,272 ) $ 354,856 $ (335,512 )
Other
comprehensive income (loss): Unrealized gains (losses) on
available-for-sale securities (1,125,043 ) 631,472 1,175,864
(390,871 ) 1,522,126 Reclassification adjustment for net (gains)
losses included in net income (loss) (3,921 )
(62,356 ) (3,161 ) (4,693 )
(5,903 ) Other comprehensive income (loss) (1,128,964
) 569,116 1,172,703
(395,564 ) 1,516,223
Comprehensive income (loss) (228,893 ) 92,617 514,431 (40,708 )
1,180,711 Comprehensive income (loss) attributable to
noncontrolling interest (149 ) (90 )
(196 ) - -
Comprehensive income (loss) attributable to Annaly $
(228,744 ) $ 92,707 $ 514,627 $
(40,708 ) $ 1,180,711 (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 six months ended June
30, June 30, 2015 2014
Net interest income: Interest income $ 1,143,518 $
1,339,863 Interest expense 242,492
251,078
Net interest income 901,026
1,088,785
Realized and unrealized
gains (losses): Realized gains (losses) on interest rate
swaps(1) (302,704 ) (481,369 ) Realized gains (losses) on
termination of interest rate swaps (226,462 ) (779,333 ) Unrealized
gains (losses) on interest rate swaps 234,590
(173,880 )
Subtotal (294,576 )
(1,434,582 ) Net gains (losses) on disposal of investments 66,189
85,603
Net gains (losses) on trading assets
(121,136 ) (192,717 )
Net unrealized gains (losses) on financial
instruments measured at fair value through earnings
(15,965 ) (18,708 ) Impairment of goodwill (22,966 )
-
Subtotal (93,878 )
(125,822 )
Total realized and unrealized gains (losses)
(388,454 ) (1,560,404 )
Other income
(loss): Investment advisory income 21,068 12,232 Dividend
income from affiliate 8,636 17,093 Other income (loss)
(23,426 ) 6,147
Total other income
(loss) 6,278 35,472
General and administrative expenses: Compensation and
management fee 75,643 77,798 Other general and administrative
expenses 27,304 21,769
Total
general and administrative expenses 102,947
99,567
Income (loss) before income
taxes 415,903 (535,714 )
Income taxes
(7,669 ) 3,149
Net income (loss)
423,572 (538,863 )
Net income (loss) attributable to
noncontrolling interest (239 ) -
Net income (loss) attributable to Annaly
423,811 (538,863 )
Dividends on
preferred stock 35,984 35,984
Net income (loss) available (related) to common
stockholders $ 387,827 $ (574,847 )
Net
income (loss) per share available (related) to common
stockholders: Basic $ 0.41 $ (0.61 ) Diluted $
0.41 $ (0.61 )
Weighted average number of
common shares outstanding: Basic 947,700,832
947,487,125 Diluted 947,878,958
947,487,125
Dividends Declared Per
Share of Common Stock $ 0.60 $ 0.60
Net income (loss) $ 423,572 $ (538,863 )
Other comprehensive income (loss): Unrealized gains (losses)
on available-for-sale securities (493,571 ) 2,263,298
Reclassification adjustment for net (gains) losses included in net
income (loss) (66,277 ) (86,621 ) Other
comprehensive income (loss) (559,848 )
2,176,677 Comprehensive income (loss) (136,276 ) 1,637,814
Comprehensive income (loss) attributable to noncontrolling interest
(239 ) -
Comprehensive income (loss)
attributable to Annaly $ (136,037 ) $ 1,637,814
(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).
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Annaly Capital Management, Inc.Investor
Relations1-888-8Annalywww.annaly.com
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