Annaly Mortgage Management, Inc. Increases Net Income for the Year 2002 by 20% over Prior Year.Business Editors NEW YORK--(BUSINESS WIRE)--Feb. 4, 2003 Annaly Mortgage Management, Inc. (NYSE NYSE See: New York Stock Exchange : NLY) today reported earnings for the quarter ended December 31, 2002 of $50,426,000 or $0.60 per average share outstanding, as compared to $39,006,000 or $0.65 per average share outstanding for the quarter ended December 31, 2001. Earnings for the year ended December 31, 2002 were $219,507,000 or $2.68 per average share outstanding, as compared to $92,278,000 or $2.23 per average share outstanding for the year ended December 31, 2001. The earnings per average share for 2002 increased by 20% over the previous year. The Company was able to provide 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 18.63% for the quarter ended December 31, 2002, as compared to 23.13% for the quarter ended December 31, 2001. The return on average equity for the year ended December 31, 2002 was 22.44%, as compared to 21.10% for the previous year. Dividends declared for the quarter ended December 31, 2002 were $0.68 per share, compared to $0.68 for the quarter ended September 30, 2002 and $0.60 per share for the quarter ended December 31, 2001. Dividends declared for 2002 were $2.67, compared to $1.75 for 2001. The annualized dividend yield for the quarter, based on the December 31, 2002 closing price of $18.80, was 14.47%. "As advertised, the year 2002 presented managers of leveraged portfolios of mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. with many challenges," said Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly. "Even as refinancings reached historically high levels and nominal interest rates Nominal Interest Rate The interest rate unadjusted for inflation. Notes: Not taking into account inflation gives a less realistic number. See also: Inflation, Interest Rate, Real Interest Rate Nominal interest rate reached historically low levels, I am proud to say that the hallmarks of our strategy--liquidity, transparency (1) The quality of being able to see through a material. The terms transparency and translucency are often used synonymously; however, transparent would technically mean "seeing through clear glass," while translucent would mean "seeing through frosted glass." See alpha blending. and low operating costs--enabled us to deliver to shareholders a stable book value and exceptional return on equity. Taking a page from our "barbell strategy Barbell strategy A fixed income strategy in which the maturities of the securities included in the portfolio are concentrated at two extremes. " playbook, we were able to maintain our consistently high dividend yield, and we now find ourselves positioned to create very competitive returns during 2003." For the quarter ended December 31, 2002, 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 3.56% 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 1.98%, which equates to an interest rate spread of 1.58%. This is a 55 basis point decrease over the 2.13% interest rate spread for the quarter ended December 31, 2001, when the yield on average earning assets was 4.77% and the cost of funds on the average repurchase balance was 2.64%, and a 39 basis point decrease over the 1.97% interest rate spread for the prior quarter, when the yield on average earning assets was 4.10% and the cost of funds on the average repurchase balance was 2.13%. For the year ended December 31, 2002, the yield on average earning assets was 4.22% and the cost of funds on the average repurchase balance was 2.10%. For the year ended December 31, 2001, the yield on average earning assets was 5.62% and the cost of funds on the average repurchase balance was 3.83%. The interest rate spread increased to 2.12% in 2002 from 1.79% during the prior year. 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 43% during the fourth quarter of 2002, as compared to 35% in the fourth quarter of 2001 and 34% for the quarter ended September 30, 2002. The homeowner's 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 of return of principal. In general, prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. decrease the total yield on a bond purchased at a premium, because over the life of the bond that premium has to be amortized. The faster prepayments come in, the faster that premium is amortized. "In a low yield environment like we have today," said Wellington Denahan, Vice Chairman and Chief Investment officer, "most of the mortgage-backed securities available in the market are priced at a premium. With refinancing Refinancing An extension and/or increase in amount of existing debt. at historically high speeds, the prepayment effect on yields is the biggest challenge facing an MBS See Mb/sec. MBS - mobile broadband services portfolio manager. We managed through this period by, among other things, acquiring assets as close to par as possible, buying securities that are less affected by prepayments, and selling fixed-rate mortgages which normally experience capital gains when rates fall." The weighted average purchase price of the portfolio at December 31, 2002 was 102.6. For the quarter ended December 31, 2002, the Company's gain on sale of assets was $11.6 million as compared to $2.7 million for the same quarter in the prior year. Gain on sale of assets represented 23% and 7% of net income for the quarters ended December 31, 2002 and December 31, 2001, respectively. For the year ended December 31, 2002, the Company's gain on sale of assets was $21.1 million as compared to the prior year of $4.6 million. Gain on sale of assets represented 10% and 5% of net income for the years ended December 31, 2002 and December 31, 2001, respectively. Commenting on the portfolio dynamics during the quarter, Ms. Denahan said, "Our 'barbell strategy' of owning a portfolio of fixed-, floating- and adjustable-rate mortgage-backed securities has continued to work well through this challenging period: As high levels of prepayments reduce net interest income on some portfolio assets, we are able to take advantage of the appreciated value of other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. . As we are managing for the long-term performance of our portfolio, we are still positioned defensively, including keeping our leverage ratio at the low end of our target range." Leverage at December 31, 2002 was 9.4:1, in comparison to 9.0:1 at September 31, 2002 and 9.5:1 at December 31, 2001. General and administration expenses, as a percent of average assets was 0.13% and 0.14% for the years ended December 31, 2002 and 2001, respectively. In addition, the Company's Dividend Efficiency Ratio, calculated as general and administrative expenses divided by dividends paid, was 6.2% and 8.3% for the years ended December 31, 2002 and 2001, respectively. Mr. Farrell commented, "A little-appreciated facet facet /fac·et/ (fas´it) a small plane surface on a hard body, as on a bone. fac·et n. 1. A small smooth area on a bone or other firm structure. 2. of our business of which I am particularly proud is that we continue to be the low-cost provider of dividends in the REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). structure. This succinctly suc·cinct adj. suc·cinct·er, suc·cinct·est 1. Characterized by clear, precise expression in few words; concise and terse: a succinct reply; a succinct style. 2. explains why we generate consistently higher dividend yields at comparable price-to-book ratios. Our shareholders get paid a larger percentage of our earnings, thanks to our internal management structure and our lack of performance bonuses." During the year ended December 31, 2002, 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 $379 million in additional capital. Total stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. at December 31, 2002 was $1.1 billion compared to $667.4 million at December 31, 2001. At December 31, 2002, the Company had a book value of $12.77, which was a 15% increase from the December 31, 2001 book value of $11.15. The Company classifies all investment securities as "available for sale"; therefore requiring the Company to record the entire portfolio at market value. Fixed rate mortgage-backed securities comprised approximately 37% of the Company's portfolio at December 31, 2002. The balance of the portfolio was comprised of 30% 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. and 33% 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 into its portfolio. As of December 31, 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. As of December 31, 2002, all assets in the portfolio were REIT eligible assets. The Company is a Maryland 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") and currently has 84,569,206 shares of common stock outstanding. The Company will hold the annual 2002 earnings conference call on February 5, 2003 at 10:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The number to call is 1-800-360-9865. The re-play number is 1-800-428-6051 and the pass code is 285536. 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
DECEMBER 31, DECEMBER 31,
2002 2001
------------ -----------
(dollars in thousands)
ASSETS
Cash and cash equivalents $726 $429
Mortgage-Backed Securities, at fair value 11,551,857 7,575,379
Receivable for Mortgage-Backed Securities sold 55,954 94,503
Accrued interest receivable 49,707 46,804
Other assets 840 199
------------ -----------
Total assets $11,659,084 $7,717,314
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Repurchase agreements $10,163,174 $6,367,710
Payable for Mortgage-Backed Securities
purchased 338,691 627,064
Accrued interest payable 14,935 16,043
Dividends payable 57,499 35,896
Other liabilities 2,812 2,010
Accounts payable 1,907 1,234
------------ -----------
Total liabilities 10,579,018 7,049,957
------------ -----------
Stockholders' Equity:
Common stock: par value $.01 per share;
500,000,000 authorized,
84,569,206 and 59,826,975
shares issued and outstanding,
respectively 846 598
Additional paid-in capital 1,003,200 623,986
Accumulated other comprehensive gain 75,511 38,169
Retained earnings 509 4,604
------------ -----------
Total stockholders' equity 1,080,066 667,357
------------ -----------
Total liabilities and stockholders' equity $11,659,084 $7,717,314
============ ===========
ANNALY MORTGAGE MANAGEMENT, INC
STATEMENTS OF OPERATIONS
Unaudited
For the For the For the For the
Quarter Quarter Year Year
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
2002 2001 2002 2001
--------- -------- ----------- ----------
(dollars in thousands, except per share data)
INTEREST INCOME:
Mortgage-Backed
Securities and cash
equivalents $92,641 $80,059 $404,165 $263,058
INTEREST EXPENSE:
Repurchase agreements 49,874 40,698 191,758 168,055
----------- ----------- ----------- -----------
NET INTEREST INCOME 42,767 39,361 212,407 95,003
GAIN ON SALE OF
MORTGAGE-BACKED
SECURITIES 11,563 2,651 21,063 4,586
GENERAL AND
ADMINISTRATIVE
EXPENSES 3,904 3,006 13,963 7,311
----------- ----------- ----------- -----------
NET INCOME 50,426 39,006 219,507 92,278
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE
INCOME:
Unrealized gain(loss)
on available-for-
sale securities 12,692 (15,857) 58,405 55,800
Less:
reclassification
adjustment
for net gains
included in net
income (11,563) (2,651) (21,063) (4,586)
----------- ----------- ----------- -----------
Other comprehensive
gain (loss) 1,129 (18,508) 37,342 51,214
----------- ----------- ----------- -----------
COMPREHENSIVE INCOME $51,555 $20,498 $256,849 $143,492
=========== =========== =========== ===========
NET INCOME PER SHARE:
Basic $0.60 $0.65 $2.68 $2.23
=========== =========== =========== ===========
Diluted $0.60 $0.65 $2.67 $2.21
=========== =========== =========== ===========
AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 84,525,171 59,776,777 82,044,141 41,439,631
=========== =========== =========== ===========
Diluted 84,766,747 60,155,994 82,282,883 41,857,498
=========== =========== =========== ===========
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