Annaly Announces Increased Earnings.NEW YORK--(BUSINESS WIRE)--July 22, 1999-- Annaly Mortgage Management, Inc. (NYSE NYSE See: New York Stock Exchange : NLY) today reported earnings for the quarter ended June 30, 1999 of $4,863,949, or $0.38 per average share outstanding. For the quarter ended June 30, 1998, net income totaled $3,386,530, or $0.27 per average share outstanding. Earnings for the six months ended June 30, 1999 were $9,182,405, or $0.72 per average share outstanding, as compared to $8,094,680, or $0.64 per average share outstanding for the six months ended June 30, 1998. For the quarter ended June 30, 1999, the yield on average assets was 5.95% and the cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. on the average repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. balance was 4.91%. Whereas, for the quarter ended June 30, 1998, the yield on average assets was 6.13% and the cost of funds on the average repurchase balance was 5.60%. Consequently, the interest rate spread increased to 1.04% for the second quarter of 1999 from 0.53% for the second quarter of 1998. The interest rate spread has increased for the second quarter of 1999 over the first quarter's rate spread of 0.90%. The weighted average Constant Prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. Rate, "CPR Cardiopulmonary Resuscitation (CPR) Definition Cardiopulmonary resuscitation (CPR) is a procedure to support and maintain breathing and circulation for a person who has stopped breathing (respiratory arrest) and/or whose heart has stopped (cardiac ," for the second quarter decreased to 21% from 23% for the quarter ended March 31, 1999. For the quarter ended June 30, 1999 and 1998, the Company's gain on sale of assets was $25,853 and $295,875, respectively. Income for the second quarter of 1999 reflects an improvement in net interest income and less dependence on gains on disposition of assets, when compared to the second quarter of 1998. Net interest income increased because of lower funding costs for the period. This increase was partially offset by lower yields on assets. General and administration expenses, as a percent of average assets was 0.15% and 0.13% for the quarters ended June 30, 1999 and 1998, respectively. The leverage ratio was 11.8:1 at June 30, 1999. Annaly has maintained its optimal leverage range of 10:1 to 12:1. Dividends declared for the quarter were $0.35 per average share. The annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. dividend yield for the quarter, based on the June 30, 1999 closing price of $11.25, was 12.44%. At June 30, 1999, Annaly had a book value of $8.95, which was a decline from the March 31, 1999 book value of $9.97. The Company classifies all investment securities as "available for sale." Consequently, the entire portfolio is recorded at market value. The fair value of the Company's Mortgage-Backed Securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. portfolio at June 30, 1999 was $1,474,103,767. Even with a decline in book value, Annaly continues to provide extremely positive financial results. For the quarter ended June 30, 1999, the Company's annualized return on average equity was 16.20% as compared to 10.31% for the quarter ended June 30, 1998. As we have stated previously, Annaly has the intention to buy and hold assets. Our primary focus is to provide spread income for distribution to our shareholders. Fixed rate Mortgage-Backed Securities comprised approximately 35% of the portfolio at June 30, 1999. The balance of the portfolio is comprised of 42% Adjustable Rate Mortgages This article is about the US mortgage type. For an international perspective, see Variable rate mortgage. An adjustable rate mortgage (ARM) is a mortgage loan where the interest rate on the note is periodically adjusted based on an index. (ARMS) and 23% LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). Floating Rate Collateralized Mortgage Obligations Collateralized mortgage obligation (CMO) A security backed by a pool of pass-through rates , structured so that there are several classes of bondholders with varying maturities, called tranches. (CMO CMO See: Collateralized mortgage obligation CMO See collateralized mortgage obligation (CMO). Floaters floaters /float·ers/ (flo´ters) “spots before the eyes”; deposits in the vitreous of the eye, usually moving about and probably representing fine aggregates of vitreous protein occurring as a benign degenerative change. ). The Company has continued to avoid the introduction of credit risk in its portfolio. All of the assets in the portfolio are FNMA FNMA abbr. Federal National Mortgage Association Noun 1. FNMA - a federally chartered corporation that purchases mortgages Fannie Mae, Federal National Mortgage Association , GNMA GNMA abbr. Government National Mortgage Association or FHLMC See Federal Home Loan Mortgage Corporation. securities, which carry an implied "AAA AAA: see American Automobile Association. (Triple A) A common single-cell battery used in a myriad of electronic devices of all variety. Like its double A (AA) cousin, it provides 1.5 volts of DC power. When used in series, the voltage is multiplied. " rating. No derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. , interest rate swaps Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. , swaptions, options, currency swaps Currency Swap A swap that involves the exchange of principal and interest in one currency for the same in another currency. Notes: Currency swaps were originally done to get around the problem of exchange controls. , total rate of return swaps were acquired. All assets in the portfolio were REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). eligible assets. In commenting on the quarter's results, Mike Farrell For the Northern Irish civil rights activist, see . For the Australian cricketer, see . Mike Farrell (born February 6, 1939) is an American actor, best known for his role as Captain B.J. Hunnicutt on the popular television series M*A*S*H (1975-83). , Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Annaly said, "I am extremely proud of Annaly's exceptional operating results during this very volatile interest rate period. Since its inception in February 1997, the Company has created a strong, reliable earnings stream for its investors. As compared to the second quarter of 1998 our earnings increased by 40%, from $0.27 to $0.38 per average share. Our operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for the second quarter almost doubled when compared to second quarter 1998 levels. The current operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. continues to be very favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. as compared to the prior two and a half years. Our acquisition policies, when reflected against this environment, demonstrate a very attractive return on equity profile across almost all sectors of the mortgage market. Investors familiar with our Company's conservative nature will recall that we mark all of our assets and liabilities to market every day. This creates a snapshot (1) A saved copy of memory including the contents of all memory bytes, hardware registers and status indicators. It is periodically taken in order to restore the system in the event of failure. (2) A saved copy of a file before it is updated. of our portfolio at any given time, and in times of extreme volatility will create a volatile book valuation. As noted in this release prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. , which have been a drain on earnings in the past, continue to slow. This is a direct result of the massive 100 basis point increase in yields since the beginning of the year. We do not believe that the full positive impact of this slowing is fully reflected yet in the pricing valuation of many high quality, premium assets. As the low cost provider of this strategy, we believe we continue to be well positioned to take advantage of any weakness in the sector." Annaly Mortgage Management, Inc. a Maryland corporation owns and manages a portfolio of Mortgage-Backed Securities. The Company's principal business objective is to generate net income for distribution to stockholders from the spread between the interest income on its Mortgage-Backed Securities and the costs of borrowing to finance its acquisition of Mortgage-Backed Securities. The Company has elected to be taxed as a real estate investment trust (REIT) and currently has 12,697,548 shares of common stock outstanding. The Company will hold a second quarter earnings conference call Friday, July 23, 1999 at 3:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. . The number to call is 1-800-210-5592 (REF: Annaly Mortgage Management - 2nd Quarter Earnings Call) This press release contains "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such forward-looking statements involve known and unknown risks, uncertainties of other factors, which may cause actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. For more complete information concerning factors which could affect the Company's results, see "Risk Factors" in the Company's Registration Statements and Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. . -0-
ANNALY MORTGAGE MANAGEMENT, INC.
BALANCE SHEETS
----------------------------------------------------------------------
June 30, 1999 December 31, 1998
(Unaudited)
-------------------------------------------
ASSETS
CASH AND CASH EQUIVALENTS $ 52,402 $ 69,020
MORTGAGE-BACKED SECURITIES,
At fair value 1,474,103,767 1,520,288,762
ACCRUED INTEREST RECEIVABLE 7,402,365 6,782,043
OTHER ASSETS 403,165 212,214
--------------------------------------------
TOTAL ASSETS $ 1,481,961,699 $ 1,527,352,039
============================================
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES:
Repurchase agreements $ 1,344,740,000 $ 1,280,510,000
Payable for
Mortgage-Backed
Securities purchased 9,987,500 111,921,205
Accrued interest payable 8,767,821 5,052,626
Dividends payable 4,444,142 3,857,663
Accounts payable 430,329 139,236
-------------------------------------------
Total liabilities 1,368,369,792 1,401,480,730
-------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock: par value
$.01 per share;
100,000,000 authorized;
12,807,148 and 12,758,024
shares issued and
outstanding,
respectively 128,071 127,580
Additional paid-in
capital 132,966,180 132,770,175
Accumulated other
comprehensive income (19,428,328) (6,404,275)
Treasury stock at cost
(109,600 shares) (903,163) (903,163)
Retained earnings 829,147 280,992
---------------------------------------------
Total stockholders'
equity 113,591,907 125,871,309
----------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 1,481,961,699 $ 1,527,352,039
==============================================
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
----------------------------------------------------------------------
FOR THE QUARTER FOR THE QUARTER
ENDED JUNE 30, 1999 ENDED JUNE 30, 1998
-------------------------------------------
INTEREST INCOME:
Mortgage-Backed
Securities $ 22,264,812 $ 23,761,946
Money market account 118 7
------------------------------------------
Total interest income 22,264,930 23,761,953
INTEREST EXPENSE:
Repurchase agreements 16,865,824 20,177,580
------------------------------------------
NET INTEREST INCOME 5,399,106 3,584,373
GAIN ON SALE OF
MORTGAGE-BACKED SECURITIES 25,853 295,875
GENERAL AND ADMINISTRATIVE
EXPENSES 561,010 493,718
------------------------------------------
NET INCOME 4,863,949 3,386,530
------------------------------------------
OTHER COMPREHENSIVE INCOME
Unrealized gain (loss)
on available-for-sale
securities (13,419,555) 474,026
Less: reclassification
adjustment for gains
included in net income (25,853) (295,875)
------------------------------------------
Other comprehensive gain
(loss) (13,445,408) 178,151
-------------------------------------------
COMPREHENSIVE INCOME $ (8,581,459) $ 3,564,681
===========================================
NET INCOME PER SHARE:
Basic $0.38 $0.27
===========================================
Diluted $0.37 $0.26
===========================================
AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 12,697,338 12,757,674
===========================================
Diluted 13,110,275 12,959,771
===========================================
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
----------------------------------------------------------------------
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 ENDED JUNE 30, 1998
-------------------------------------------
INTEREST INCOME:
Mortgage-Backed Securities $ 44,279,733 $ 43,840,637
Money market account 138 37
-------------------------------------------
Total interest income 44,279,871 43,840,674
INTEREST EXPENSE:
Repurchase agreements 34,016,865 36,491,054
-------------------------------------------
NET INTEREST INCOME 10,263,006 7,349,620
GAIN ON SALE OF
MORTGAGE-BACKED SECURITIES 90,413 1,722,959
GENERAL AND ADMINISTRATIVE
EXPENSES 1,171,014 977,899
--------------------------------------------
NET INCOME 9,182,405 8,094,680
--------------------------------------------
OTHER COMPREHENSIVE INCOME
Unrealized loss on
available-for-sale
securities (12,933,640) (2,211,198)
Less: reclassification
adjustment for gains
included in net income (90,413) (1,722,959)
---------------------------------------------
Other comprehensive loss (13,024,053) (3,934,157)
---------------------------------------------
COMPREHENSIVE INCOME $ (3,841,648) $ 4,160,523
=============================================
NET INCOME PER SHARE:
Basic $0.72 $0.64
=============================================
Diluted $0.71 $0.63
==============================================
AVERAGE NUMBER OF SHARES
OUTSTANDING
Basic 12,677,718 12,742,623
==============================================
Diluted 12,957,718 12,941,535
==============================================
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