Annaly Capital Management, Inc. Announces 4th Quarter Dividend of $0.50 per Share
The Board of Directors of Annaly Capital Management, Inc. (NYSE: NLY) declared the fourth quarter 2008 common stock cash dividend of $0.50 per common share. This dividend is payable January 29, 2009 to common shareholders of record on December 30, 2008. The ex-dividend date is December 26, 2008.
The Company distributes dividends based on its current estimate of taxable earnings per common share, not GAAP earnings. Taxable and GAAP earnings will differ because of non-taxable unrealized and realized losses, differences in premium amortization, and non-deductible general and administrative expenses. Beginning in the fourth quarter of 2008, the Company will no longer apply hedge accounting to its interest rate swaps under Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities. As a result, unrealized gains and losses on interest rate swaps will be reported in earnings for GAAP net income. The Company designates its interest rate swaps as tax hedges and any unrealized gains or losses should not affect its distributable net income.
Dividends may be reinvested through Annaly's Dividend Reinvestment Plan. Plan information may be obtained from the Plan Administrator, Mellon Investor Services at 1-800-301-5234, at www.annaly.com, or by contacting the Company.
Annaly manages assets on behalf of institutional and individual investors worldwide. The Company’s principal business objective is to generate net income for distribution to investors from its investment securities and from its subsidiaries. Annaly is a Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”), and currently has 541,472,181 shares of common stock outstanding.
Annaly Capital Management, Inc. Reports 1st Quarter 2008 Core EPS of $0.51, an Increase of 96% from Prior Year and 38% from Prior Quarter
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings for the quarter ended March 31, 2008 of $233.6 million or $0.51 per average share available to common shareholders as compared to Core Earnings of $61.7 million or $0.26 per average share available to common shareholders for the quarter ended March 31, 2007, and Core Earnings of $151.1 million or $0.37 per average share available to common shareholders for the quarter ended December 31, 2007. “Core Earnings” represents a non-GAAP measure and is defined as net income (loss) excluding impairment losses and gains or losses on sales of securities and termination of interest rate swaps. On a GAAP basis, net income for the quarter ended March 31, 2008 was $243.0 million or $0.54 basic net income per average share available to common shareholders, as compared to net income of $67.4 million or $0.29 basic net income per average share available to common shareholders for the quarter ended March 31, 2007, and net income of $152.9 million or $0.38 basic net income per average share available to common shareholders for the quarter ended December 31, 2007.
During the quarter ended March 31, 2008, the Company sold $4.1 billion of Mortgage-Backed Securities, resulting in a realized gain of $9.4 million. During the quarter ended March 31, 2007, the Company sold $1.2 billion of Mortgage-Backed Securities, resulting in a realized gain of $6.1 million. In addition, the Company had a $67,000 gain on the termination of interest rate swaps with a notional value of $300 million. During the quarter ended December 31, 2007, the Company sold $549.4 million of Mortgage-Backed Securities, resulting in a realized gain of $1.8 million.
Common dividends declared for the quarter ended March 31, 2008 were $0.48 per share, as compared to $0.20 per share for the quarter ended March 31, 2007 and $0.34 per share for the quarter ended December 31, 2007. The annualized dividend yield on the Company’s common stock for the quarter ended March 31, 2008, based on the March 31, 2008 closing price of $15.32, was 12.53%. On a Core Earnings basis, the Company provided an annualized return on average equity of 16.01% for the quarter ended March 31, 2008, as compared to 8.13% for the quarter ended March 31, 2007 and 12.92% for the quarter ended December 31, 2007. On a GAAP basis, the Company provided an annualized return on average equity of 16.66% for the quarter ended March 31, 2008, as compared to 8.88% for the quarter ended March 31, 2007, and 13.07% for the quarter ended December 31, 2007.
During the quarter ended March 31, 2008, the Company completed a public offering of 58,650,000 shares of common stock. The estimated net proceeds of the offering, including the exercise of the underwriters’ over-allotment option, were approximately $1.1 billion, net of offering expenses.
Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly, commented on the quarter’s results. “In the first quarter of 2008, the deflating global credit bubble threatened system-wide financial stability, raised anxiety levels in the financing markets and reduced liquidity for many asset classes. To put it simply, much of the credit markets were essentially frozen during the second and third weeks of March, and the crisis prompted unconventional and unprecedented actions by policymakers. We are pleased that the combination of these policy initiatives, along with the ongoing efforts to recapitalize financial institutions, has had a calming effect, but we believe markets will continue to experience periods of volatility for some time. In this environment, we expect operating fundamentals to remain favorable for us, and will continue to manage Annaly’s portfolio conservatively and for the long-term benefit of our shareholders.”
For the quarter ended March 31, 2008, the annualized yield on average earning assets was 5.64% and the annualized cost of funds on the average repurchase balance was 4.18%, which results in an interest rate spread of 1.46%. This is an 88 basis point increase over the 0.58% annualized interest rate spread for the quarter ended March 31, 2007 and a 58 basis point increase over the 0.88% annualized interest rate spread for the quarter ended December 31, 2007. For the quarter ended March 31, 2007, the annualized yield on average earning assets was 5.68% and the annualized cost of funds on the average repurchase balance was 5.10%. For the quarter ended December 31, 2007, the annualized yield on average earning assets was 5.81% and the annualized cost of funds on the average repurchase balance was 4.93%. At March 31, 2008, the weighted average yield on assets was 5.36% and the cost of funds, including the effect of interest rate swaps, was 3.85%, which results in an interest rate spread of 1.51%. Leverage at March 31, 2008 was 8.1:1, in comparison to 9.8:1 at March 31, 2007 and 8.7:1 at December 31, 2007.
Fixed rate securities comprised 69% of the Company’s portfolio at March 31, 2008. The balance of the portfolio was comprised of 21% adjustable rate mortgages and 10% LIBOR floating rate collateralized mortgage obligations. At March 31, 2008, the Company had entered into interest rate swaps with a notional amount of $17.0 billion. The Company’s swaps are designated as cash flow hedges against the benchmark interest rate risk associated with the Company’s borrowings. The purpose of the swaps is to mitigate the risk of rising interest rates that affect the Company’s cost of funds. Since the Company will be receiving a floating rate on the notional amount of the swaps, the effect of the swaps is to lock in a spread relative to the cost of financing. The Company has continued to avoid the introduction of credit risk into its portfolio. As of March 31, 2008, substantially all of the assets in the Company’s portfolio were FNMA, GNMA and FHLMC mortgage-backed securities and agency debentures, which carry an actual or implied “AAA” rating.
“In spite of the volatility during the quarter, Agency mortgage-backed securities performed relatively well,” said Wellington Denahan-Norris, Annaly’s Vice Chairman, Chief Investment Officer and Chief Operating Officer. “In our portfolio, after taking into account the effect of interest rate swaps, at March 31, 2008 our portfolio of short duration assets was comprised of 39% fixed-rate, 21% adjustable-rate and 40% floating-rate assets. The spread widened between the yield on our portfolio assets and the cost to finance them as the Federal Reserve reduced short-term rates, and we managed our financing operations at the low end of our leverage range. We will likely remain at this leverage level for as long as the current environment remains uncertain, as well as continue to prudently take advantage of the attractive spreads available for new investments.”
The following table summarizes portfolio information for the Company:
March 31,
2008
March 31,
2007
December 31,
2007
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