-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ltp5cEazAG+s61sSdHZYPx41UCTCe6hwysuG3zS95yx1d2QNBmrk/9VYszHJpacN DrFiibKPBfA4TnFVxonaAA== 0001157523-07-007488.txt : 20070730 0001157523-07-007488.hdr.sgml : 20070730 20070730161542 ACCESSION NUMBER: 0001157523-07-007488 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070730 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070730 DATE AS OF CHANGE: 20070730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANNALY CAPITAL MANAGEMENT INC CENTRAL INDEX KEY: 0001043219 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 223479661 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13447 FILM NUMBER: 071009705 BUSINESS ADDRESS: STREET 1: 1211 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 212 696 0100 MAIL ADDRESS: STREET 1: 1211 AVENUE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: ANNALY MORTGAGE MANAGEMENT INC DATE OF NAME CHANGE: 19970729 8-K 1 a5459151.txt ANNALY CAPITAL MANAGEMENT, INC. 8-K ------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) July 30, 2007 Annaly Capital Management, Inc. --------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Maryland 1-13447 22-3479661 ---------------- --------------- ---------- State or Other Jurisdiction (Commission (I.R.S. Employer Of Incorporation) File Number) Identification No.) 1211 Avenue of the Americas Suite 2902 New York, New York 10036 ---------------------------- --------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (212) 696-0100 (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02. Results of Operations and Financial Condition On July 30, 2007, the registrant issued a press release announcing its financial results for the quarter ended June 30, 2007. A copy of the press release is furnished as Exhibit 99.1 to this report. Item 9.01 Financial Statements and Exhibits (c) Exhibits 99.1 Press Release, dated July 30, 2007 issued by Annaly Capital Management, Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ANNALY CAPITAL MANAGEMENT, INC. By: /s/ Kathryn Fagan ------------------- Name: Kathryn Fagan Title: Chief Financial Officer Dated: July 30, 2007 EX-99.1 2 a5459151ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 Annaly Capital Management, Inc. Reports 2nd Quarter Core EPS of $0.28; Earnings Continue to Improve Through Volatile Environment NEW YORK--(BUSINESS WIRE)--July 30, 2007--Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings for the quarter ended June 30, 2007 of $79.1 million or $0.28 per average share available to common shareholders as compared to Core Earnings of $31.3 million or $0.16 per average share available to common shareholders for the quarter ended June 30, 2006 and Core Earnings of $61.7 million or $0.26 per average share available to common shareholders for the quarter ended March 31, 2007. "Core Earnings" represents a non-GAAP measure and is defined as net income (loss) excluding impairment losses and gains or losses on sales of securities and termination of interest rate swaps. On a GAAP basis, the net income for the quarter ended June 30, 2007 was $85.7 million or $0.30 basic net income per average share available to common shareholders, as compared to a net income of $8.6 million or $0.02 basic net income per average share available to common shareholders for the quarter ended June 30, 2006 and net income of $67.4 million or $0.29 basic net income per average share available to common shareholders for the quarter ended March 31, 2007. During the quarter ended June 30, 2007, the Company sold $1.4 billion of Mortgage-Backed Securities, resulting in a realized gain of $7.3 million. During the quarter ended June 30, 2006, the Company sold $852 million of Mortgage-Backed Securities, resulting in a realized loss of $1.2 million. During the quarter ended March 31, 2007, the Company sold $1.2 billion of Mortgage-Backed Securities, resulting in a realized gain of $6.1 million and terminated interest rate swaps with a notional value of $300 million, resulting in a realized gain of $67,000. In addition, during the quarter, the Company had a loss on other-than-temporarily impaired securities of $698,000 as compared to other-than-temporary impairments of $20.1 million and $491,000 for the quarters ended June 30, 2006 and March 31, 2007 respectively. Common dividends declared for the quarter ended June 30, 2007 were $0.24 per share, as compared to $0.13 per share for the quarter ended June 30, 2006 and $0.20 per share for the quarter ended March 31, 2007. The annualized dividend yield on the Company's common stock for the quarter ended June 30, 2007, based on the June 29, 2007 closing price of $14.42, was 6.66%. On a Core Earnings basis, the Company provided an annualized return on average equity of 9.68% for the quarter ended June 30, 2007, as compared to 7.63% for the quarter ended June 30, 2006 and 8.13% for the quarter ended March 31, 2007. On a GAAP basis, the Company provided an annualized return on average equity of 10.49% for the quarter ended June 30, 2007, as compared to 2.09% for the quarter ended June 30, 2006, and 8.88% for the quarter ended March 31, 2007. As previously announced, subsequent to quarter-end the Company completed a public offering of 54,050,000 shares of common stock. The estimated net proceeds of the offering, including the exercise of the underwriters' over-allotment option, were approximately $720.7 million, following offering expenses. Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly, commented on the quarter's results. "The financial markets remain volatile, with the steadfastness of the Federal Reserve affecting expectations for future monetary policy and the level and shape of the yield curve. The bond market sell-off in the second quarter has begun to reverse itself. The economic backdrop is equally volatile, with the continued weakness in housing and the related deterioration in mortgage credit beginning to ripple through to broader economic performance. In this environment, Annaly is poised to benefit from our focus on high credit quality Agency mortgage-backed securities and our ability to access the capital markets. Our second quarter results--including the sixth consecutive increase in our quarterly dividend--demonstrate the continued improvement in portfolio performance through this challenging part of the business cycle, and we believe our recent capital raise will continue this trend." For the quarter ended June 30, 2007, the annualized yield on average earning assets was 5.73% and the annualized cost of funds on the average repurchase balance was 5.13%, which equates to an interest rate spread of 0.60%. This is a 26 basis point increase over the 0.34% annualized interest rate spread for the quarter ended June 30, 2006 and a 2 basis point increase over the 0.58% annualized interest rate spread for the quarter ended March 31, 2007. For the quarter ended June 30, 2006, the annualized yield on average earning assets was 5.17% and the annualized cost of funds on the average repurchase balance was 4.83%. For the quarter ended March 31, 2007, the annualized yield on average earning assets was 5.68% and the annualized cost of funds on the average repurchase balance was 5.10%. At June 30, 2007, the weighted average yield on assets was 5.71% and the cost of funds was 5.10%, which equates to an interest rate spread of 0.61%. Leverage at June 30, 2007 was 11.2:1, in comparison to 11.5:1 at June 30, 2006 and 9.8:1 at March 31, 2007. Fixed rate securities comprised 76% of the Company's portfolio at June 30, 2007. The balance of the portfolio was comprised of 19% adjustable rate mortgages and 5% LIBOR floating rate collateralized mortgage obligations. At June 30, 2007, the Company had entered into interest rate swaps with a notional amount of $12.8 billion. The Company's swaps are designated as cash flow hedges against the benchmark interest rate risk associated with the Company's borrowings. The purpose of the swaps is to mitigate the risk of rising interest rates that affect the Company's cost of funds. Since the Company will be receiving a floating rate on the notional amount of the swaps, the effect of the swaps will be to enhance the earnings potential of a portion of the fixed rate assets in the portfolio in a rising rate environment. The Company has continued to avoid the introduction of credit risk into its portfolio. As of June 30, 2007, substantially all of the assets in the Company's portfolio were FNMA, GNMA and FHLMC mortgage-backed securities and agency debentures, which carry an actual or implied "AAA" rating. "As a result of the recent back-up in interest rates, returns on newly-invested capital have become more attractive," said Wellington Denahan-Norris, Annaly's Vice Chairman, Chief Investment Officer and Chief Operating Officer. "The proceeds of our recent stock offering will be promptly deployed at accretive levels, which should enable the portfolio to perform in a range of possible interest rate outcomes, including the continuation of the current environment. After taking into account the effect of interest rate swaps, at June 30, 2007, our portfolio of short duration assets was effectively comprised of 43% fixed-rate, 19% adjustable-rate and 38% floating-rate exposure, which is consistent with the historical portfolio composition of our portfolio in our barbell strategy." The following table summarizes portfolio information for the Company: June 30, June 30, March 31, 2007 2006 2007 ------------------------------- Leverage at period-end 11.2:1 11.5:1 9.8:1 Fixed-rate investment securities as % of portfolio 76% 67% 75% Adjustable-rate investment securities as % of portfolio 19% 24% 19% Floating-rate investment securities as % of portfolio 5% 9% 6% Notional amount of interest rate swaps as % of portfolio 33% 34% 34% Annualized yield on average earning assets during the quarter 5.73% 5.17% 5.68% Annualized cost of funds on average repurchase balance during the quarter 5.13% 4.83% 5.10% Weighted average yield on assets at period-end 5.71% 5.42% 5.67% Weighted average cost of funds at period-end 5.10% 5.01% 5.17% The Constant Prepayment Rate was 15% during the second quarter of 2007, as compared to 19% during the second quarter of 2006, and 17% during the first quarter of 2007. The weighted average cost basis was 100.6 at June 30, 2007. The net amortization of premiums and accretion of discounts on investment securities for the quarters ended June 30, 2007, June 30, 2006 and March 31, 2007 was $16.7 million, $17.9 million, and $15.4 million, respectively. The total net premium remaining unamortized at June 30, 2007, June 30, 2006 and March 31, 2007 was $211.4 million, $161.7 million, and $195.6 million, respectively. General and administrative expenses as a percentage of average assets were 0.12%, 0.18%, and 0.15% for the quarters ended June 30, 2007, June 30, 2006, and March 31, 2007, respectively. At June 30, 2007, June 30, 2006, and March 31, 2007 the Company had a common stock book value per share of $10.52, $9.48 and $11.90, respectively. At June 30, 2007, FIDAC, Annaly's wholly-owned registered investment advisor, had under management approximately $2.6 billion in net assets and $15.7 billion in gross assets, as compared to $2.6 billion in net assets and $14.1 billion in gross assets at June 30, 2006 and $2.5 billion in net assets and $16.1 billion in gross assets at March 31, 2007. For the quarter ended June 30, 2007, FIDAC earned investment advisory and service fees, net of fees paid to distributors, of $4.5 million, as compared to $4.5 million for the quarter ended June 30, 2006 and $4.7 million for the quarter ended March 31, 2007. FIDAC, organized as a taxable REIT subsidiary of Annaly, generally receives net investment advisory fees of approximately 10 to 20 basis points of the gross assets it manages, assists in managing or supervises. Annaly manages assets on behalf of institutional and individual investors worldwide through Annaly and through the funds managed by its wholly-owned registered investment advisor, FIDAC. The Company's principal business objective is to generate net income for distribution to investors from the spread between the interest income on its mortgage-backed securities and the cost of borrowing to finance their acquisition and from dividends Annaly receives from FIDAC, which earns investment advisory fee income. The Company, a Maryland corporation that has elected to be taxed as a real estate investment trust ("REIT"), currently has 323,435,348 shares of common stock outstanding. The Company will hold the second quarter 2007 earnings conference call on July 31, 2007 at 10:00 a.m. EST. The number to call is 1-866-770-7051 for domestic calls and 617-213-8064 for international calls and the pass code is 85595027. The replay number is 1-888-286-8010 for domestic calls and 617-801-6888 for international calls and the pass code is 69019468. The replay is available for 48 hours after the earnings call. 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, changes in the market value of our assets, changes in business conditions and the general economy, and risks associated with the investment advisory business of FIDAC, including the removal by FIDAC's clients of assets FIDAC manages, FIDAC's regulatory requirements, and competition in the investment advisory business, changes in government regulations affecting our business, and our ability to maintain our qualification as a REIT for federal income tax purposes. 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, 2006 and all subsequent Quarterly Reports on Form 10-Q. 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 CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands) June 30, March 31, December 31, 2007 2007 2006(1) (Unaudited) (Unaudited) ------------------------------------ ASSETS Cash and cash equivalents $ 91,781 $ 96,610 $ 91,782 Mortgage-Backed Securities, at fair value 38,603,002 39,176,227 30,167,509 Agency debentures, at fair value 150,507 54,421 49,500 Trading securities, at fair value 12,131 7,872 18,365 Receivable for Mortgage-Backed Securities sold - 28,643 200,535 Accrued interest receivable 197,060 179,816 146,089 Receivable for advisory and service fees 2,954 2,949 3,178 Intangible for customer relationships 10,513 10,849 11,184 Goodwill 22,966 22,966 22,966 Interest rate swaps, at fair value 93,404 1,028 2,558 Other assets 3,146 3,138 2,314 ------------------------------------ Total assets $39,187,464 $39,584,519 $30,715,980 ==================================== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Repurchase agreements $35,093,856 $33,348,011 $27,514,020 Payable for Investment Securities purchased 744,027 2,590,429 338,172 Trading securities sold, not yet purchased, at fair value 37,734 39,679 41,948 Accrued interest payable 104,456 79,362 83,998 Dividends payable 64,652 52,577 39,016 Accounts payable and other liabilities 14,520 7,942 18,816 Interest rate swaps, at fair value 838 42,871 20,179 ------------------------------------ Total liabilities 36,060,083 36,160,871 28,056,149 ------------------------------------ Minority interest in equity of consolidated affiliate 5,623 5,610 5,324 ------------------------------------ 6.00% Series B Cumulative Convertible Preferred Stock: 4,600,000 shares authorized, issued and outstanding 111,466 111,466 111,466 ------------------------------------ Stockholders' Equity: 7.875% Series A Cumulative Redeemable Preferred Stock: 4,887,500 authorized, 4,250,000 shares issued and outstanding 177,088 177,088 177,088 Common stock: par value $.01 per share; 487,762,500 authorized, 269,385,348, 262,887,391, 205,345,591, 204,845,591, and 164,015,156 outstanding, respectively 2,694 2,629 2,053 Additional paid-in capital 3,447,964 3,352,417 2,615,016 Accumulated other comprehensive loss (467,640) (60,040) (76,112) Accumulated deficit (149,814) (165,522) (175,004) ------------------------------------ Total stockholders' equity 3,010,292 3,306,572 2,543,041 ------------------------------------ Total liabilities, minority interest, Series B Cumulative Convertible Preferred Stock and stockholders' equity $39,187,464 $39,584,519 $30,715,980 ==================================== September 30, June 30, 2006 2006 (Unaudited) (Unaudited) -------------------------- ASSETS Cash and cash equivalents $ 66,844 $ 53,849 Mortgage-Backed Securities, at fair value 28,348,027 23,474,006 Agency debentures, at fair value - - Trading securities, at fair value 23,409 - Receivable for Mortgage-Backed Securities sold 5,325 - Accrued interest receivable 130,348 110,647 Receivable for advisory and service fees 3,124 3,114 Intangible for customer relationships 11,662 12,206 Goodwill 22,966 22,966 Interest rate swaps, at fair value - 105,435 Other assets 2,679 1,567 -------------------------- Total assets $28,614,384 $23,783,790 ========================== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Repurchase agreements $24,901,420 $21,256,703 Payable for Investment Securities purchased 942,871 607,789 Trading securities sold, not yet purchased, at fair value 29,740 - Accrued interest payable 66,547 42,100 Dividends payable 30,403 21,322 Accounts payable and other liabilities 13,367 6,979 Interest rate swaps, at fair value 30,333 - -------------------------- Total liabilities 26,014,681 21,934,893 -------------------------- Minority interest in equity of consolidated affiliate 5,028 5,000 -------------------------- 6.00% Series B Cumulative Convertible Preferred Stock: 4,600,000 shares authorized, issued and outstanding 111,466 111,471 -------------------------- Stockholders' Equity: 7.875% Series A Cumulative Redeemable Preferred Stock: 4,887,500 authorized, 4,250,000 shares issued and outstanding 177,088 177,088 Common stock: par value $.01 per share; 487,762,500 authorized, 269,385,348, 262,887,391, 205,345,591, 204,845,591, and 164,015,156 outstanding, respectively 2,048 1,640 Additional paid-in capital 2,607,995 2,131,358 Accumulated other comprehensive loss (119,973) (384,912) Accumulated deficit (183,949) (192,748) -------------------------- Total stockholders' equity 2,483,209 1,732,426 -------------------------- Total liabilities, minority interest, Series B Cumulative Convertible Preferred Stock and stockholders' equity $28,614,384 $23,783,790 ========================== (1) Derived from the audited consolidated financial statements at December 31, 2006. ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (dollars in thousands) For the Quarters ending June 30, March 31, December 31, 2007 2007 2006 -------------------------------------- Interest income $ 556,262 $ 449,564 $ 407,092 Interest expense 468,748 380,164 349,302 -------------------------------------- Net interest income 87,514 69,400 57,790 -------------------------------------- Other income (loss) Investment advisory and service fees 5,366 5,562 5,178 Gain (loss) on sale of Mortgage-Backed Securities 7,293 6,145 4,829 Gain on termination of interest rate swaps - 67 2,260 Income from trading securities 243 3,429 3,382 Loss on other-than-temporarily impaired securities (698) (491) (5,504) -------------------------------------- Total other income (loss) 12,204 14,712 10,145 -------------------------------------- Expenses Distribution fees 861 904 795 General and administrative expenses 12,272 12,886 12,219 -------------------------------------- Total expenses 13,133 13,790 13,014 -------------------------------------- Impairment of intangible for customer relationships - - - -------------------------------------- Income before income taxes and minority interest 86,585 70,322 54,921 Income taxes 839 2,604 1,288 -------------------------------------- Income before minority interest 85,746 67,718 53,633 Minority interest 13 286 296 -------------------------------------- Net income 85,733 67,432 53,337 -------------------------------------- Dividend on preferred stock 5,373 5,373 5,373 -------------------------------------- Net income available to common shareholders $ 80,360 $ 62,059 $ 47,964 ====================================== Net income available per share to common shareholders: Basic $ 0.30 $ 0.29 $ 0.23 ====================================== Diluted $ 0.30 $ 0.28 $ 0.23 ====================================== Weighted average number of shares outstanding: Basic 264,990,422 217,490,205 205,092,330 ====================================== Diluted 273,578,836 225,928,127 213,455,555 ====================================== Net income $ 85,733 $ 67,432 $ 53,335 -------------------------------------- Comprehensive (loss) income Unrealized gain (loss) gain on available-for-sale securities (535,413) 45,948 35,979 Unrealized gain (loss) on interest rate swaps 134,408 (24,155) 14,971 Reclassification adjustment for net (gains) losses included in net income or loss (6,595) (5,721) (7,089) -------------------------------------- Other comprehensive income (loss) (407,600) 16,072 43,861 -------------------------------------- Comprehensive (loss) income ($321,867) $ 83,504 $ 97,196 ====================================== For the Quarters ending September June 30, 30, 2006 2006 ------------------------- Interest income $ 339,737 $ 280,171 Interest expense 295,726 242,473 ------------------------- Net interest income 44,011 37,698 ------------------------- Other income (loss) Investment advisory and service fees 4,966 5,210 Gain (loss) on sale of Mortgage-Backed Securities (446) (1,239) Gain on termination of interest rate swaps 8,414 - Income from trading securities 612 - Loss on other-than-temporarily impaired securities - (20,114) ------------------------- Total other income (loss) 13,546 (16,143) ------------------------- Expenses Distribution fees 724 755 General and administrative expenses 11,682 8,985 ------------------------- Total expenses 12,406 9,740 ------------ ------------ Impairment of intangible for customer relationships - 1,345 ------------------------- Income before income taxes and minority interest 45,151 10,470 Income taxes 2,273 1,892 ------------------------- Income before minority interest 42,878 8,578 Minority interest 28 - ------------------------- Net income 42,850 8,578 ------------------------- Dividend on preferred stock 5,373 5,163 ------------------------- Net income available to common shareholders $ 37,477 $ 3,415 ========================= Net income available per share to common shareholders: Basic $ 0.21 $ 0.02 ========================= Diluted $ 0.20 $ 0.02 ========================= Weighted average number of shares outstanding: Basic 181,767,106 158,632,865 ========================= Diluted 189,952,159 158,703,614 ========================= Net income $ 42,850 $ 8,578 ------------------------- Comprehensive (loss) income Unrealized gain (loss) gain on available- for-sale securities 400,261 (225,771) Unrealized gain (loss) on interest rate swaps (127,354) 68,965 Reclassification adjustment for net (gains) losses included in net income or loss (7,968) 21,353 ------------------------- Other comprehensive income (loss) 264,939 (135,453) ------------------------- Comprehensive (loss) income $ 307,789 ($126,875) ========================= ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (dollars in thousands) For the six months ended June 30, June 30, 2007 2006 -------------------------- Interest income $ 1,005,826 $ 475,053 Interest expense 848,912 409,985 -------------------------- Net interest income 156,914 65,068 -------------------------- Other income Investment advisory and service fees 10,928 12,206 Gain (loss) on sale of Mortgage-Backed Securities 13,438 (8,245) Gain on termination of interest rate swaps 67 - Income from trading securities 3,672 - Loss on other-than-temporarily impaired securities (1,189) (46,843) -------------------------- Total other income 26,916 (42,882) -------------------------- Expenses Distribution fees 1,765 1,925 General and administrative expenses 25,158 16,162 -------------------------- Total expenses 26,923 18,087 -------------------------- Impairment of intangible for customer relationships - 2,493 -------------------------- Income before income taxes and minority interest 156,907 1,606 Income taxes 3,443 3,977 -------------------------- (Loss) income before minority interest 153,464 (2,371) Minority interest 299 - -------------------------- Net income (loss) 153,165 (2,371) -------------------------- Dividend on preferred stock 10,746 8,811 -------------------------- Net (loss) income available (related) to common shareholders $ 142,419 ($11,182) ========================== Net (loss) income per share available (related) to common shareholders: Basic $ 0.59 ($0.08) ========================== Diluted $ 0.58 ($0.08) ========================== Weighted average number of shares outstanding: Basic 241,371,530 141,476,532 ========================== Diluted 249,924,374 141,476,532 ========================== Net (loss) income $ 153,165 ($2,371) -------------------------- Comprehensive loss Unrealized loss on available-for-sale securities (489,465) (338,861) Unrealized gain on interest rate swaps 110,253 105,978 Reclassification adjustment for net (gains) losses included in net income (12,316) 55,088 -------------------------- Other comprehensive loss (391,528) (177,795) -------------------------- Comprehensive loss ($238,363) ($180,166) ========================== CONTACT: Annaly Capital Management, Inc. 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