Annaly Mortgage Management, Inc. Increases Net Income Per Share by 17% Year Over Year to $0.68 for the Quarter Ended September 30, 2002.Business Editors NEW YORK--(BUSINES WIRE)--Oct. 23, 2002 Annaly Annaly (Irish Angaile) was a medieval lordship in central Ireland. Its territory roughly coincided with modern County Longford. It was associated with the O'Farrell family[1]. Mortgage Management, Inc. (NYSE NYSE See: New York Stock Exchange :NLY) today reported earnings per average share for the quarter ended September September: see month. 30, 2002 of $0.68 per average share, an increase of 17% from $0.58 per average share for the quarter ended September 30, 2001. Earnings for the quarter ended September 30, 2002 totaled $56,668,000, compared to $26,345,000 in the prior comparable quarter. Weighted average shares outstanding were 83,668,422 and 45,503,179 for the quarters ended September 30, 2002 and 2001, respectively. Earnings per average share for the nine months ended September 30, 2002 were $2.08 per average share, an increase of 38% from $1.51 per average share for the nine months ended September 30, 2001. Earnings for the nine months ended September 30, 2002 totaled $169,081,000 compared to $53,270,000 in the prior comparable nine-month period. Weighted average shares outstanding were 81,206,156 and 35,260,086 for the nine months ended September 30, 2002 and 2001, respectively. For the quarter ended September 30, 2002, the yield on average mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. was 4.10% 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 2.13%, which equates to an interest rate spread of 1.97%. This is a 48 basis point decrease from the 2.45% interest rate spread for the quarter ended June 30, 2002, when the yield on average mortgage-backed securities was 4.55% and the cost of funds on the average repurchase balance was 2.10%, and a 10 basis point increase over the 1.87% interest rate spread for the quarter ended September 30, 2001, when the yield on average mortgage-backed securities was 5.76% and the cost of funds on the average repurchase balance was 3.89%. 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 for the quarter ended September 30, 2002 was 34%, which was a 9 percentage point increase over the previous quarter's rate of 25%. This equates to a 36% increase in prepayment rates for the quarter ended September 30, 2002. In the Company's structure, the increased prepayment rate has a negative impact on the yield earned on its mortgage-backed securities. For the quarter ended September 30, 2002, the Company's gain on sale of assets was $4,747,000, as compared to the prior year's third quarter of $1,184,000. General and administrative expenses, as a percentage of average assets, was 0.12% and 0.13 %, respectively, for the quarters ended September 30, 2002 and 2001. Leverage at September 30, 2002 was 9.0:1 compared to 8.1:1 at September 30, 2001. 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 21.24% for the quarter ended September 30, 2002, as compared to 23.26% for the quarter ended September 30, 2001. Dividends declared for the quarter were $0.68 per share. The annualized dividend yield for the quarter, based on the September 30, 2002 closing price of $18.45, was 14.74%. At September 30, 2002, the Company had a book value of $12.84 per share, a 2% increase from the June 30, 2002 book value of $12.65 and a 13% increase from the September 30, 2001 book value of $11.41. The Company raised 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). of $28,024,000 in the Shelf Equity Program during the quarter, at a weighted average net price of $18.94. The Company classifies all investment securities as "available for sale"; therefore the Company is required to record the entire portfolio at market value. At September 30, 2002, the Company's portfolio was comprised of 32% fixed rate mortgage-backed securities, 30% 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. mortgage-backed securities, and 38% 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. . The Company has continued to avoid the introduction of credit risk to its portfolio. As of September 30, 2002, 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 or FHLMC See Federal Home Loan Mortgage Corporation. securities, 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 has not acquired any 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. , or total rate of return swaps. As of September 30, 2002, all assets in the portfolio were REIT-eligible assets. "The third quarter of 2002 presented the mortgage market with challenges of historic proportions," said Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly. "Weak economic and stock market conditions prompted strong investment demand for high quality bonds, which drove down long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. interest rates, including mortgage rates, to levels not seen since the Eisenhower administration. As a result, mortgage prepayment rates soared to unprecedented speeds. Fortunately for Annaly, our portfolio is prudently constructed to perform well in a variety of interest rate environments. We expect that the flexibility afforded by our portfolio mix of adjustable- , floating- , and fixed-rate US agency mortgage-backed securities will continue to reward our shareholders." 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 84,507,065 shares of common stock outstanding. The Company will hold the third quarter 2002 earnings conference call on Thursday, October 24 at 4:00 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 1-800-388-8975. The re-play number is 1-800-428-6051 and the pass code is 266321. 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, 2001. 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
SEPTEMBER 30, 2002 DECEMBER 31, 2001
(Unaudited)
------------------ -----------------
(dollars in thousands)
ASSETS
Cash and cash equivalents $ 2,002 $ 429
Mortgage-Backed Securities,
at fair value 11,489,538 7,575,379
Receivable for Mortgage-Backed
Securities sold 77,232 94,503
Accrued interest receivable 49,950 46,804
Other assets 1,260 199
----------------- ------------------
Total assets $11,619,982 $7,717,314
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $9,809,968 $6,367,710
Payable for Mortgage-Backed
Securities purchased 634,598 627,064
Accrued interest payable 28,035 16,043
Dividends payable 57,465 35,896
Other liabilities 2,592 2,010
Accounts payable 2,319 1,234
---------------- -----------------
Total liabilities 10,534,977 7,049,957
---------------- -----------------
Stockholders' Equity:
Common stock: par value $.01 per
share; 500,000,000 authorized,
84,507,065 and 59,826,975 shares
issued and outstanding, respectively 845 598
Additional paid-in capital 1,002,197 623,986
Accumulated other comprehensive gain 74,382 38,169
Retained earnings 7,581 4,604
---------------- -----------------
Total stockholders' equity 1,085,005 667,357
---------------- -----------------
Total liabilities and
stockholders' equity $11,619,982 $7,717,314
================ =================
ANNALY MORTGAGE MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
For the For the For the For the
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
September September September September
30, 2002 30, 2001 30, 2002 30, 2001
--------- --------- ----------- -----------
(dollars in thousands)
INTEREST INCOME:
Mortgage-Backed
Securities and
cash Equivalents $109,201 $75,774 $311,524 $182,998
INTEREST EXPENSE:
Repurchase agreements 54,012 48,620 141,884 127,357
--------- --------- ------------ -----------
NET INTEREST INCOME 55,189 27,154 169,640 55,641
GAIN ON SALE OF
MORTGAGE-BACKED
SECURITIES 4,747 1,184 9,500 1,936
GENERAL AND
ADMINISTRATIVE EXPENSES 3,268 1,993 10,059 4,307
--------- --------- ------------ -----------
NET INCOME 56,668 26,345 169,081 53,270
--------- --------- ------------ -----------
OTHER COMPREHENSIVE INCOME:
Unrealized gain on
available-for-sale
Securities 11,846 53,001 45,713 71,657
Less: reclassification
adjustment for net
gains included in
net income (4,747) (1,184) (9,500) (1,936)
--------- --------- ------------ -----------
Other comprehensive
gain 7,099 51,817 36,213 69,721
--------- --------- ------------ -----------
COMPREHENSIVE INCOME $63,767 $78,162 $205,294 $122,991
========= ========= ============ ===========
NET INCOME PER SHARE:
Basic $0.68 $0.58 $2.08 $1.51
========= ========= ============ ===========
Diluted $0.68 $0.57 $2.07 $1.49
========= ========= ============ ===========
AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 83,668,422 45,503,179 81,206,156 35,260,086
========== ========== ============ ===========
Diluted 83,939,870 45,959,693 81,490,436 35,768,890
========== ========== ============ ===========
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