EX-99.1 3 file002.txt PRESS RELEASE PRESS RELEASE FROM: NYSE: NLY ANNALY MORTGAGE MANAGEMENT, INC. 1211 AVENUE OF THE AMERICAS SUITE 2902 NEW YORK, NEW YORK 10036 ------------------------------------------------------------------------------- FOR FURTHER INFORMATION Kathryn Fagan, Chief Financial Officer 212-696-0100 Investor Relations 1- (888) 8Annaly www.annaly.com FOR IMMEDIATE RELEASE ANNALY MORTGAGE MANAGEMENT, INC. ANNOUNCES 3rd QUARTER 2003 EARNINGS New York, New York -October 21, 2003 - Annaly Mortgage Management, Inc. (NYSE: NLY) today reported earnings for the quarter ended September 30, 2003 of $28,479,000 or $0.30 per average share outstanding, as compared to $56,668,000 or $0.68 per average share outstanding for the quarter ended September 30, 2002. The Company was able to provide an annualized return on average equity of 9.88% for the quarter ended September 30, 2003, as compared to 20.79% for the quarter ended June 30, 2003, and 21.24% for the quarter ended September 30, 2002. Dividends declared for the quarter ended September 30, 2003 were $0.28 per share, compared to $0.60 for the quarter ended June 30, 2003 and $0.68 per share for the quarter ended September 30, 2002. The annualized dividend yield for the quarter, based on the September 30, 2003 closing price of $16.42, was 6.82%. "Our third quarter results reflect the transition from a period of very low interest rates and very high prepayment speeds to a period of higher rates and slower speeds," said Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly. "As we have reiterated time and again in 2002 and 2003, our job as managers during this time has been to protect capital and remain defensive until the fundamentals of the mortgage market improved. The good news is that amortization expense--which has exceeded interest expense through the first 9 months of the year--is now subsiding. Looking ahead to the fourth quarter and beyond, we expect that the substantial reduction in prepayment speeds and premium amortization will serve to enhance earnings." For the quarter ended September 30, 2003, the yield on average earning assets was 2.13% and the cost of funds on the average repurchase balance was 1.44%, which equates to an interest rate spread of 0.69%. This is a 56 basis point decrease over the 1.25% interest rate spread for the quarter ended June 30, 2003, when the yield on average earning assets was 2.93% and the cost of funds on the average repurchase balance was 1.68%, and a 128 basis point decrease over the 1.97% interest rate spread for the quarter ended September 30, 2002, when the yield on average earning assets was 4.10% and the cost of funds on the average repurchase balance was 2.13%. The Constant Prepayment Rate increased to 48% during the third quarter of 2003, as compared to 44% in the second quarter of 2003 and 34% for the quarter ended September 30, 2002. The homeowners' prepayment option makes the average term, yield and performance of a mortgage-backed security uncertain because of the uncertainty in timing the return of principal. In general, prepayments 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, the shorter the life of the security, which results in the increased amortization. The total amount of amortization for the quarters ended September 30, 2003, June 30, 2003, and September 30, 2002 were $72,047,000, $57,615,000, and $28,229,000, respectively. The weighted average purchase price of the portfolio was 102.6 at September 30, 2003, 102.5 at June 30, 2003, and 102.3 at September 30, 2002. "While the bond market has shown remarkable price volatility during the quarter, its dominant feature has been the historically fast prepayment speeds due to refinancing activity," said Wellington Denahan, Vice Chairman and Chief Investment Officer. "Because of the two to three month lag between mortgage applications and their related cash flows, during the third quarter we recognized the amortization expense related to the second quarter peak in the MBA Refi Index. Since the peak on May 30, the MBA Refi Index has fallen approximately 75%. Accordingly, we expect to see our amortization expense fall beginning in the fourth quarter." For the quarter ended September 30, 2003, the Company's gain on sale of assets was $9.7 million as compared to $20.2 million in the quarter ended June 30, 2003 and $4.7 million for the quarter ended September 30, 2002. Leverage at September 30, 2003 was 9.8:1, in comparison to 10.5:1 at June 30, 2003 and 9.0:1 at September 30, 2002. General and administration expenses, as a percent of average assets was 0.12% for the quarters ended September 30, 2003, June 30, 2003 and September 30, 2002, respectively. In addition, the Company's Dividend Efficiency Ratio, calculated as general and administrative expenses divided by dividends paid, was 15.3%, 7.4% and 5.7% for the quarters ended September 30, 2003, June 30, 2003, and September 30, 2002, respectively. "In our simple, low G&A business model," said Mr. Farrell, "the increase in net interest income that comes about from reductions in premium amortization essentially drops to the bottom line." At September 30, 2003, June 30, 2003, and September 30, 2002, respectively, the Company had a book value of $11.94, $12.35 and $12.84. 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 31% of the Company's portfolio at September 30, 2003. The balance of the portfolio was comprised of 50% adjustable rate mortgages and 19% LIBOR floating rate collateralized mortgage obligations. The Company has continued to avoid the introduction of credit risk into its portfolio. As of September 30, 2003, all of the assets in the Company's portfolio were FNMA, GNMA, FHLMC mortgage-backed securities, and agency debentures, which carry an actual or implied "AAA" rating. 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 95,984,229 shares of common stock outstanding. The Company will hold the 3rd quarter 2003 earnings conference call on Wednesday, October 22, 2003 at 10:00 a.m. EST. The number to call is 1-800-838-4403. The re-play number is 1-800-428-6051 and the pass code is 310828. 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 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 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 for the fiscal year ended December 31, 2002. We do not undertake, and specifically disclaim 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 after the date of such statements. ANNALY MORTGAGE MANAGEMENT, INC. STATEMENTS OF FINANCIAL CONDITION (DOLLARS IN THE THOUSANDS)
SEPT. 30, 2003 JUNE 30, 2003 MARCH 31, 2003 DEC. 31, 2002 SEPT. 30, 2002 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) --------------- --------------- ----------------- --------------- ---------------- ASSETS Cash and cash equivalents $ 3,381 $ 304 $ 945 $ 726 $ 2,002 Mortgage-Backed Securities, at fair value 11,628,271 12,887,495 11,674,910 11,551,857 11,489,538 Agency Debentures, at fair value 976,814 1,375,980 643,160 - - Receivable for Mortgage-Backed Securities sold 177,304 387,218 304,766 55,954 77,232 Accrued interest receivable 53,955 58,026 50,087 49,707 49,950 Other assets 1,233 1,104 873 840 1,260 --------------- --------------- ----------------- --------------- ---------------- Total assets $12,840,958 $14,710,127 $12,674,741 $11,659,084 $11,619,982 =============== =============== ================= =============== ================ LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Repurchase agreements $11,201,897 $12,162,333 $10,192,049 $10,163,174 $9,809,968 Payable for Mortgage-Backed Securities purchased 445,148 1,306,238 1,335,427 338,691 634,598 Accrued interest payable 13,868 16,788 15,915 14,935 28,035 Dividends payable 26,876 56,420 50,789 57,499 57,465 Other liabilities 4,294 4,708 2,816 2,812 2,592 Accounts payable 3,147 2,202 1,033 1,907 2,319 --------------- --------------- ----------------- --------------- ---------------- Total liabilities 11,695,230 13,548,689 11,598,029 10,579,018 10,534,977 --------------- --------------- ----------------- --------------- ---------------- Stockholders' Equity: Common stock: par value $.01 per share; 500,000,000 authorized, 95,964,915, 94,030,753, 84,647,484, 84,569,206, and 84,507,065 shares issued and outstanding, respectively 960 940 846 846 845 Additional paid-in capital 1,192,819 1,157,092 1,004,370 1,003,200 1,002,197 Accumulated other comprehensive income (loss) (51,870) 1,190 71,000 75,511 74,382 Retained earnings 3,819 2,216 496 509 7,581 --------------- --------------- ----------------- --------------- ---------------- Total stockholders' equity 1,145,728 1,161,438 1,076,712 1,080,066 1,085,005 --------------- --------------- ----------------- --------------- ---------------- Total liabilities and stockholders' equity $12,840,958 $14,710,127 $12,674,741 $11,659,084 $11,619,982 =============== =============== ================= =============== ================
ANNALY MORTGAGE MANAGEMENT, INC. STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS)
(FOR THE QUARTERS ENDED) SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, SEPTEMBER 30, 2003 2003 2003 2002 2002 ----------------- --------------- ---------------- ---------------- ---------------- INTEREST INCOME $66,855 $93,892 $87,500 $92,641 $109,201 INTEREST EXPENSE 43,922 51,770 44,048 49,874 54,012 ----------------- --------------- ---------------- ---------------- ---------------- NET INTEREST INCOME 22,933 42,122 43,452 42,767 55,189 GAIN ON SALE OF MORTGAGE-BACKED SECURITIES 9,656 20,231 11,020 11,563 4,747 GENERAL AND ADMINISTRATIVE EXPENSES 4,110 4,201 3,697 3,904 3,268 ----------------- --------------- ---------------- ---------------- ---------------- NET INCOME 28,479 58,152 50,775 50,426 56,668 ----------------- --------------- ---------------- ---------------- ---------------- OTHER COMPREHENSIVE INCOME (LOSS): Unrealized gain (loss) on available-for-sale (43,405) (49,579) 6,509 12,692 11,846 securities Less: reclassification adjustment for net gains included in net income (9,656) (20,231) (11,020) (11,563) (4,747) ----------------- --------------- ---------------- ---------------- ---------------- Other comprehensive income (loss) (53,061) (69,810) (4,511) 1,129 7,099 ----------------- --------------- ---------------- ---------------- ---------------- COMPREHENSIVE INCOME (LOSS) $(24,582) $(11,658) $46,264 $51,555 $63,767 ================= =============== ================ ================ ================ NET INCOME PER SHARE: Basic $0.30 $0.62 $0.60 $0.60 $0.68 ================= =============== ================ ================ ================ Diluted $0.30 $0.62 $0.60 $0.60 $0.68 ================= =============== ================ ================ ================ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 94,685,685 93,384,128 84,606,786 84,525,171 83,668,422 ================= =============== ================ ================ ================ Diluted 95,500,486 93,588,024 84,837,390 84,766,747 83,939,870 ================= =============== ================ ================ ================
ANNALY MORTGAGE MANAGEMENT, INC. STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS)
FOR THE NINE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 2003 2002 ---------------------- ---------------------- INTEREST INCOME $248,247 $311,524 INTEREST EXPENSE 139,740 141,884 ---------------------- ---------------------- NET INTEREST INCOME 108,507 169,640 GAIN ON SALE OF MORTGAGE-BACKED SECURITIES 40,907 9,500 GENERAL AND ADMINISTRATIVE EXPENSES 12,008 10,059 ---------------------- ---------------------- NET INCOME 137,406 169,081 ---------------------- ---------------------- OTHER COMPREHENSIVE INCOME (LOSS): Unrealized gain (loss) on available-for-sale securities (86,474) 45,713 Less: reclassification adjustment for net gains included in net income (40,907) (9,500) ---------------------- ---------------------- Other comprehensive income (loss) (127,381) 36,213 ---------------------- ---------------------- COMPREHENSIVE INCOME (LOSS) $10,025 $205,294 ====================== ====================== NET INCOME PER SHARE: Basic $1.51 $2.08 ====================== ====================== Diluted $1.50 $2.07 ====================== ====================== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: Basic 90,929,196 81,206,156 ====================== ====================== Diluted 91,750,472 81,490,436 ====================== ======================