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Annaly Capital Management, Inc. Reports 3rd Quarter 2013 Results

Stocks in this article: NLY

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 2013 third quarter earnings conference call on November 7, 2013 at 10:00 a.m. EST. The number to call is 888-317-6003 for domestic calls and 412-317-6061 for international calls. The conference passcode is 1606800. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 10035689. The replay is available for 48 hours after the earnings call. There will be a web cast of the call on www.annaly.com. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on Investor Relations, then select 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 within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements which are based on various assumptions (some of which are beyond our control) may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates, changes in the yield curve, changes in prepayment rates, the availability of mortgage-backed securities and other securities for purchase, the availability of financing and, if available, the terms of any financing, changes in the market value of our assets, changes in business conditions and the general economy, our ability to consummate any contemplated investment opportunities, our ability to integrate and grow the commercial mortgage business, 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 broker-dealer business of our subsidiary, and risks associated with the investment advisory business of our subsidiary, including the removal by clients of assets it manages, its regulatory requirements and competition in the investment advisory business. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. We do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

             
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in thousands, except share and per share data)
 
 
September 30,

2013

(Unaudited)

  June 30,

2013

(Unaudited)

 

March 31,

2013

(Unaudited)

 

 

December 31,

2012 (1)

 

September 30,

2012

(Unaudited)

ASSETS
 
Cash and cash equivalents $   1,122,722 $   725,537 $   1,862,550 $   615,789 $   2,264,854
Reverse repurchase agreements 31,074 171,234 4,933,465 1,811,095 1,612,384
Securities borrowed 3,439,954 2,425,024 2,688,485 2,160,942 1,602,692
Investments, at fair value:
U.S. Treasury securities 2,459,617 - 1,645,930 752,076 2,242,039
Agency mortgage-backed securities 79,902,834 92,487,318 108,256,671 123,963,207 129,597,714
Agency debentures 3,128,853 3,306,473 3,970,279 3,009,568 2,935,538
Investments in affiliates 136,748 134,948 267,547 234,120 224,899
Commercial real estate debt and preferred equity 1,227,182 938,357 - - -
Investments in commercial real estate 60,424 67,203 - - -
Corporate debt, held for investment 75,988 61,682 66,539 63,944 64,928
Receivable for investments sold 934,964 1,499,140 1,292,478 290,722 470,266
Accrued interest and dividends receivable 297,161 340,671 388,665 419,259 434,026
Receivable from Prime Broker - - - - 3,272
Receivable for investment advisory income 10,055 10,374 12,817 17,730 20,271
Intangible for customer relationships 4,572 6,474 6,731 6,989 9,146
Goodwill 103,245 102,783 55,417 55,417 55,417
Interest rate swaps, at fair value 360,373 38,950 - - -
Other derivatives, at fair value 85,180 91,270 - 9,830 559
Other assets     52,211         61,146         54,282         41,607         38,595  
 
Total assets $   93,433,157     $   102,468,584     $   125,501,856     $   133,452,295     $   141,576,600  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
Liabilities:
U.S. Treasury securities sold, not yet purchased, at fair value $ 2,403,524 $ - $ 611,167 $ 495,437 $ 1,418,750
Repurchase agreements 69,211,309 81,397,335 100,322,942 102,785,697 101,033,146
Securities loaned 3,299,090 2,284,245 2,330,060 1,808,315 1,248,968
Payable for investments purchased 2,546,467 2,833,214 3,203,461 8,256,957 16,107,038
Payable for share buyback program - - - 141,149 -
Convertible Senior Notes 824,512 824,229 824,902 825,541 999,749
Mortgages payable 19,346 19,361 - - -
Participation sold 14,164 14,324 - - -
Accrued interest payable 162,755 164,190 175,749 186,896 181,502
Dividends payable 331,557 396,888 426,173 432,154 487,237
Interest rate swaps, at fair value 1,504,258 1,189,178 2,259,173 2,584,907 2,926,461
Other derivatives, at fair value 125,468 - 4,812 - -
Accounts payable and other liabilities     44,983         82,316         37,048         10,798         83,086  
 
Total liabilities     80,487,433         89,205,280         110,195,487         117,527,851         124,485,937  
 
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, respectively

445,457 445,457 445,457 445,457 445,457

Common stock, par value $0.01 per share, 1,956,937,500 authorized,

 

 

947,304,761, 947,483,487, 947,293,099, 947,213,204, and

 

 

974,799,779, issued and outstanding, respectively

9,473 9,475 9,473 9,472 9,748
Additional paid-in capital 14,759,738 14,754,681 14,746,579 14,740,774 15,144,200
Accumulated other comprehensive income (loss) (1,454,790 ) (1,289,246 ) 2,003,248 3,053,242 4,069,607
Accumulated deficit     (1,281,756 )       (1,124,665 )       (2,365,990 )       (2,792,103 )       (3,045,951 )  
 
Total stockholders’ equity     12,945,724         13,263,304         15,306,369         15,924,444         17,090,663  
 
Total liabilities and stockholders’ equity $   93,433,157     $   102,468,584     $   125,501,856     $   133,452,295     $   141,576,600  

 

(1)   Derived from the audited consolidated financial statements at December 31, 2012.
     
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars in thousands, except share and per share data)
 
For the quarters ended
September 30,     June 30,     March 31,     December 31,     September 30,
2013     2013     2013     2012     2012
Interest income:
Investment Securities $659,058 $686,577 $724,820 $748,122 $751,739
U.S. Treasury securities 7,718 7,242 5,996 3,819 4,588
Securities loaned 1,787 2,302 2,612 2,106 2,581
Commercial real estate debt and preferred equity 26,066 13,906 - - -
Reverse repurchase agreements 2,461 2,775 3,636 2,449 2,225
Other 70     134     153     165     132
Total interest income 697,160     712,936     737,217     756,661     761,265
Interest expense:
Repurchase agreements 120,123 141,945 157,064 165,600 158,150
Convertible Senior Notes 17,092 16,364 15,813 15,503 18,026
U.S. Treasury securities sold, not yet purchased 6,688 4,075 2,788 2,930 3,739
Securities borrowed 1,405 1,737 1,925 1,458 1,978
Participation sold 168     134     -     -     -
Total interest expense 145,476     164,255     177,590     185,491     181,893
Net interest income 551,684     548,681     559,627     571,170     579,372
 
Other income (loss):
Investment advisory income 9,558 12,187 13,408 18,773 20,915
Net gains (losses) on disposal of investments 43,602 147,998 182,843 114,831 142,172
Net loss on extinguishment of 4% Convertible Senior Notes - - - (75,012) (87,328)
Dividend income from affiliates 4,048 4,048 6,431 7,097 7,097
Net gains (losses) on trading assets (96,022) 54,046 1,549 15,181 1,368
Net unrealized gains (losses) on interest-only Agency mortgage-

backed securities

(7,099)

111,521

80,127

(31,148)

(33,563)

Impairment of goodwill - (23,987) - - -
Loss on previously held equity interest in CreXus - (18,896) - - -
Other income (loss) 4,212     7,192     132     161     119
Subtotal (41,701)     294,109     284,490     49,883     50,780
Realized gains (losses) on interest rate swaps (1) (227,909) (212,727) (225,476) (228,155) (224,272)
Realized gains (losses) on termination of interest rate swaps (36,658) (35,649) (16,378) - -
Unrealized gains (losses) on interest rate swaps 6,343     1,109,022     325,734     341,554     (104,197)
Subtotal (258,224)     860,646     83,880     113,399     (328,469)
Total other income (loss) (299,925)     1,154,755     368,370     163,282     (277,689)
 
General and administrative expenses:
Compensation and management fee 41,774 43,764 38,443 25,842 52,310
Other general and administrative expenses 16,970     21,367     13,469     14,242     10,694
Total general and administrative expenses 58,744     65,131     51,912     40,084     63,004
 
Income (loss) before income taxes 193,015 1,638,305 876,085 694,368 238,679
 
Income taxes 557     92     5,807     (6,127)     13,921
 
Net income (loss) 192,458 1,638,213 870,278 700,495 224,758
 
Dividends on preferred stock 17,992     17,992     17,992     19,717     9,367
 
Net income (loss) available (related) to common shareholders $174,466     $1,620,221     $852,286     $680,778     $215,391
 

Net income (loss) per share available (related) to common

shareholders:
Basic $0.18     $1.71     $0.90     $0.70     $0.22
Diluted $0.18     $1.64     $0.87     $0.68     $0.22
 
Weighted average number of common shares outstanding:
Basic 947,303,205     947,411,380     947,249,901     970,602,863     974,729,078
Diluted 955,690,471     995,229,637     994,815,169     1,017,925,849     997,007,829
 
Net income (loss) $192,458     $1,638,213     $870,278     $700,495     $224,758
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities (121,942) (3,144,496) (867,151) (894,972) 798,269
Reclassification adjustment for net (gains) losses included in net

income (loss)

(43,602)

   

(147,998)

   

(182,843)

   

(121,393)

   

(141,982)

Other comprehensive income (loss) (165,544)     (3,292,494)     (1,049,994)     (1,016,365)     656,287
Comprehensive income (loss) $26,914     ($1,654,281)     ($179,716)     ($315,870)     $881,045
 
(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.
             
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(Dollars in thousands, except share and per share data)
 
For the nine months ended
September 30, 2013         September 30, 2012
Interest income:        
Investment Securities $2,070,455 $2,477,147
U.S. Treasury securities 20,956 13,403
Securities loaned 6,701 7,797
Commercial real estate debt and preferred equity 39,972 -
Reverse repurchase agreements 8,872 3,769
Other 357         368
Total interest income 2,147,313         2,502,484
Interest expense:
Repurchase agreements 419,132 411,643
Convertible Senior Notes 49,269 51,718
U.S. Treasury securities sold, not yet purchased 13,551 12,184
Securities borrowed 5,067 6,136
Participation sold 302         -
Total interest expense 487,321         481,681
Net interest income 1,659,992         2,020,803
 
Other income (loss):
Investment advisory income 35,153 63,365
Net gains (losses) on disposal of investments 374,443 317,308
Net loss on extinguishment of Convertible Senior Notes - (87,328)
Dividend income from affiliates 14,527 21,239
Net gains (losses) on trading assets (40,427) 7,729
Net unrealized gains (losses) on interest-only Agency mortgage-

backed securities

184,549

(28,789)

Impairment of goodwill (23,987) -
Loss on previously held equity interest in CreXus (18,896) -
Other income (loss) 11,536         364
Subtotal 536,898         293,888
Realized gains (losses) on interest rate swaps (1) (666,112) (665,614)
Realized gains (losses) on termination of interest rate swaps (88,685) (2,385)
Unrealized gains (losses) on interest rate swaps 1,441,099         (373,773)
Subtotal 686,302         (1,041,772)
Total other income (loss) 1,223,200         (747,884)
 
General and administrative expenses:
Compensation and management fee 123,981 164,860
Other general and administrative expenses 51,806         30,615
Total general and administrative expenses 175,787         195,475
 
Income (loss) before income taxes 2,707,405 1,077,444
 
Income taxes 6,456         42,039
 
Net income (loss) 2,700,949 1,035,405
 
Dividends on preferred stock 53,976         19,813
 
Net income (loss) available (related) to common shareholders $2,646,973         $1,015,592
 
Net income (loss) per share available (related) to common shareholders:
Basic $2.79         $1.04
Diluted $2.69         $1.00
 
Weighted average number of common shares outstanding:
Basic 947,321,691         973,674,586
Diluted 995,319,670         1,035,365,251
 
Net income (loss) $2,700,949         $1,035,405
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities (4,133,589) 1,377,737
Reclassification adjustment for net (gains) losses included in net income (loss) (374,443)         (317,118)
Other comprehensive income (loss) (4,508,032)         1,060,619
Comprehensive income (loss) ($1,807,083)         $2,096,024
(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.




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