Annaly Mortgage Management, Inc. Announces 2nd Quarter 2003 Earnings.Business Editors NEW YORK--(BUSINESS WIRE)--July 28, 2003 Annaly Mortgage Management, Inc. (NYSE NYSE See: New York Stock Exchange : NLY)(the "Company")today reported earnings for the quarter ended June 30, 2003 of $58,152,000 or $0.62 per average share outstanding, as compared to $59,369,000 or $0.72 per average share outstanding for the quarter ended June 30, 2002. During the quarter the Company raised approximately $151.3 million in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). through a secondary offering of 9,300,700 shares of common stock. The Company provided an 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. return on average equity of 20.79% for the quarter ended June 30, 2003, as compared to 18.83% for the quarter ended March 31, 2003 and 23.08% for the quarter ended June 30, 2002. Dividends declared for the quarter ended June 30, 2003 were $0.60 per share, compared to $0.60 for the quarter ended March 31, 2003 and $0.68 per share for the quarter ended June 30, 2002. The annualized dividend yield for the quarter, based on the June 30, 2003 closing price of $19.91, was 12.05%. "As managers, our job is to create for shareholders a steady stream of income in the form of dividends," said Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly. "That stream of income will fluctuate with the nominal level This article is about the term used in sound and signal processing. For usage in statistics, see nominal measurement. Nominal level is the operating level at which an electronic signal processing device is designed to operate. of rates and as the yields that we earn on our assets change in relation to our 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. . Investors in all markets--equities, money markets, credit-sensitive securities--have had to adjust their return expectations in response to the nominally low interest rate environment and the sluggish economy Sluggish Economy A state in the economy in which the growth is slow, flat or declining. The term can refer to the economy as a whole or a component of the economy, such as weak housing starts. , and we are no different. Our results for the quarter reflect these market conditions, particularly the effect of high mortgage refinancing Refinancing An extension and/or increase in amount of existing debt. activity. As we navigate (1) "Surfing the Web." To move from page to page on the Web. (2) To move through the menu structure in a software application. through these markets, we believe that our portfolio of adjustable-rate and fixed-rate mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. will continue to offer competitive returns." For the quarter ended June 30, 2003, the yield on average earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin was 2.93% and the cost of funds 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 1.68%, which equates to an interest rate spread of 1.25%. This is a 30 basis point decrease over the 1.55% interest rate spread for the quarter ended March 31, 2003, when the yield on average earning assets was 3.23% and the cost of funds on the average repurchase balance was 1.68%, and a 120 basis point decrease over the 2.45% interest rate spread for the quarter ended June 30, 2002, when the yield on average earning assets was 4.55% and the cost of funds on the average repurchase balance was 2.10%. The 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 increased to 44% during the second quarter of 2003, as compared to 41% in the first quarter of 2003 and 25% for the quarter ended June 30, 2002. The homeowners' prepayment option makes the average term, yield and performance of a mortgage-backed security Noun 1. mortgage-backed security - a security created when a group of mortgages are gathered together and bonds are sold to other institutions or the public; investors receive a portion of the interest payments on the mortgages as well as the principal payments; uncertain because of the uncertainty in timing the return of principal. In general, prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. decrease the yield on a security purchased at a premium. The faster prepayments come in, the faster that premium is amortized. The weighted average purchase price of the portfolio was 102.5 at June 30, 2003, 102.6 at March 31, 2003, and 102.2 at June 30, 2002. "The dominant challenge today for any mortgage-backed securities portfolio manager is maintaining performance through these periods of extremely fast prepayments and historically low yields," said Wellington Denahan, Vice Chairman and Chief Investment Officer. "Prepayments have reduced our spread income through the high levels of premium amortization, and we expect to see these effects continue near term. Nevertheless, the recent backup in 10 year Treasury yields from 3.50% at quarter end to 4.17% on July 24, 2003 should result in slowing refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. activity. This slowing, along with low funding costs, should be advantageous for the Company in the long term." For the quarter ended June 30, 2003, the Company's gain on sale of assets was $20.2 million as compared to $11.0 million in the quarter ended March 31, 2003 and $1.3 million for the quarter ended June 30, 2002. Leverage at June 30, 2003 was 10.5:1, in comparison to 9.5:1 at March 31, 2003 and 8.8:1 at June 30, 2002. General and administrative expenses as a percent of average assets was 0.12% for the quarters ended June 30, 2003 and March 31, 2003 and 0.13% for the quarter ended June 30, 2002. In addition, the Company's Dividend Efficiency Ratio, calculated as general and administrative expenses divided by dividends paid, was 7.4%, 7.3%, and 6.3% for the quarters ended June 30, 2003, March 31, 2003, and June 30, 2002, respectively. At June 30, 2003, March 31, 2003, and June 30, 2002, the Company had a book value of $12.35, $12.72, and $12.65, respectively. The Company classifies all investment securities as "available for sale;" therefore requiring the Company to record the entire portfolio at market value. Fixed rate securities comprised approximately 36% of the Company's portfolio at June 30, 2003. The balance of the portfolio was comprised of 42% adjustable rate Adjustable rate Applies mainly to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually according to a standard market rate outside the control of the bank or savings institution, such as that prevailing on Treasury bonds or notes. securities and 22% LIBOR LIBOR See: London Interbank Offered Rate LIBOR See London interbank offered rate (LIBOR). floating rate securities. The Company has continued to avoid the introduction of credit risk into its portfolio. As of June 30, 2003, all of the assets in the Company's portfolio were 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 , FHLMC See Federal Home Loan Mortgage Corporation. mortgage-backed securities, and agency debentures, which carry an actual or 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. The Company is a Maryland Maryland (mâr`ələnd), one of the Middle Atlantic states of the United States. It is bounded by Delaware and the Atlantic Ocean (E), the District of Columbia (S), Virginia and West Virginia (S, W), and Pennsylvania (N). corporation which 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 cost of borrowing to finance their acquisition. The Company has elected to be taxed as a real estate investment trust ("REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ") and currently has 94,032,753 shares of common stock outstanding. The Company will hold the 2nd quarter 2003 earnings conference call on Tuesday, July 29, 2003 at 10:00 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The number to call is 1-800-915-4836. The re-play number is 1-800-428-6051 and the pass code is 302067. 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 E-Mail alerts, enter your e-mail address See Internet address. e-mail address - electronic mail address where indicated and click the Subscribe button. This news release and our public documents to which we refer contain or incorporate by reference certain 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 Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 yield curve, changes in prepayment rates, the availability of mortgage-backed securities for purchase, the availability of financing and, if available, the terms of any financing. 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 Annual Report on 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. for the fiscal year ended December 31, 2002. We do not undertake, and specifically disclaim dis·claim v. dis·claimed, dis·claim·ing, dis·claims v.tr. 1. To deny or renounce any claim to or connection with; disown. 2. To deny the validity of; repudiate. 3. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or after the date of such statements.
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF FINANCIAL CONDITION
JUNE 30, DECEMBER 31,
2003 2002
(Unaudited)
(dollars in thousand)
----------------------------
ASSETS
Cash and cash equivalents $304 $726
Mortgage-Backed Securities, at fair value 12,887,495 11,551,857
Agency debentures, at fair value 1,375,980 -
Receivable for Mortgage-Backed Securities
sold 387,218 55,954
Accrued interest receivable 58,026 49,707
Other assets 1,104 840
------------ ------------
Total assets $14,710,127 $11,659,084
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $12,162,333 $10,163,174
Payable for investment securities purchased 1,306,238 338,691
Accrued interest payable 16,788 14,935
Dividends payable 56,420 57,499
Other liabilities 4,708 2,812
Accounts payable 2,202 1,907
------------ ------------
Total liabilities 13,548,689 10,579,018
------------ ------------
Stockholders' Equity:
Common stock: par value $.01 per share;
500,000,000 authorized, 94,030,753 and
84,569,206 shares issued and
outstanding, respectively 940 846
Additional paid-in capital 1,157,092 1,003,200
Accumulated other comprehensive gain 1,190 75,511
Retained earnings 2,216 509
------------ ------------
Total stockholders' equity 1,161,438 1,080,066
------------ ------------
Total liabilities and stockholders' equity $14,710,127 $11,659,084
============ ============
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the For the For the Six For the Six
Quarter Quarter Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
(dollars in thousands)
---------------------------------------------
INTEREST INCOME $93,892 $109,423 $181,392 $202,323
INTEREST EXPENSE 51,770 47,860 95,818 87,872
--------------------------------------------
NET INTEREST INCOME 42,122 61,563 85,574 114,451
GAIN ON SALE OF MORTGAGE-
BACKED SECURITIES 20,231 1,342 31,252 4,753
GENERAL AND ADMINISTRATIVE
EXPENSES 4,201 3,536 7,898 6,791
--------------------------------------------
NET INCOME 58,152 59,369 108,928 112,413
--------------------------------------------
OTHER COMPREHENSIVE INCOME
(LOSS):
Unrealized gain (loss)
on available-for-sale
securities (49,579) 38,123 (43,069) 33,866
Less: reclassification
adjustment for net
gains included in net
income (20,231) (1,342) (31,252) (4,753)
--------------------------------------------
Other comprehensive
gain (loss) (69,810) 36,781 (74,321) 29,113
--------------------------------------------
COMPREHENSIVE INCOME
(LOSS) $(11,658) $96,150 $34,607 $141,526
===============================================
NET INCOME PER SHARE:
Basic $0.62 $0.72 $1.22 $1.41
===============================================
Diluted $0.62 $0.71 $1.22 $1.40
===============================================
AVERAGE NUMBER OF SHARES
OUTSTANDING:
Basic 93,384,128 82,910,206 89,109,821 79,954,529
===============================================
Diluted 93,588,024 83,186,865 89,231,272 80,245,372
===============================================
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