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Annaly Capital Management, Inc. Reports 4th Quarter 2013 Results

Annaly Capital Management, Inc. (NYSE: NLY) today announced financial results for the quarter ended December 31, 2013.

Financial Performance

GAAP net income for the quarter ended December 31, 2013 was $1.0 billion or $1.07 per average common share as compared to GAAP net income of $192.5 million or $0.18 per average common share for the quarter ended September 30, 2013, and GAAP net income of $700.5 million or $0.70 per average common share for the quarter ended December 31, 2012. The increase from both prior periods was largely attributable to higher unrealized gains on interest rate swaps, trading assets and interest-only Agency mortgage-backed securities. Core earnings for the quarter ended December 31, 2013 was $350.1 million or $0.35 per average common share as compared to $282.3 million or $0.28 per average common share for the quarter ended September 30, 2013, and $335.1 million or $0.32 per average common share for the quarter ended December 31, 2012. "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 loss on extinguishment of the 4% Convertible Senior Notes due 2015, net gains and losses on trading assets, impairment losses and loss on previously held equity interest in CreXus Investment Corp.

GAAP net income for the years ended December 31, 2013 and 2012, respectively was $3.7 billion or $3.86 per average common share and $1.7 billion or $1.74 per average common share. Core earnings for the years ended December 31, 2013 and 2012, was $1.2 billion or $1.21 per average common share and $1.5 billion or $1.54 per average common share, respectively.

For the quarter ended December 31, 2013, the annualized yield on average interest-earning assets was 3.50% and the annualized cost of funds on average interest-bearing liabilities, including the net interest payments on interest rate swaps, was 2.07%, which resulted in an average interest rate spread of 1.43%. This was a 36 basis point increase from the 1.07% average interest rate spread for the quarter ended September 30, 2013, and a 49 basis point increase from the 0.94% average interest rate spread for the quarter ended December 31, 2012. Our annualized yield on average interest-earning assets increased for the quarter ended December 31, 2013 when compared to the quarter ended September 30, 2013 due to lower amortization expense on our Investment Securities, primarily driven by lower prepayment speeds experienced during the current quarter. Our annualized cost of funds on average interest-bearing liabilities increased for the quarter ended December 31, 2013 when compared to the quarter ended September 30, 2013 due to higher interest rate swap notional amounts and higher cost of interest rate swaps coupled with lower repurchase agreements balances during the current quarter.

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