Annaly Capital Management, Inc. |
(Exact Name of Registrant as Specified in its Charter) |
Maryland
|
1-13447
|
22-3479661
|
||
State or Other Jurisdiction
Of Incorporation)
|
(Commission
File Number)
|
(I.R.S. Employer
Identification No.)
|
1211 Avenue of the Americas
New York, New York
|
10036
|
|||
(Address of Principal Executive Offices)
|
(Zip Code)
|
ANNALY CAPITAL MANAGEMENT, INC. | |||
By: | /s/ Glenn A. Votek | ||
Name: | Glenn A. Votek | ||
Title: | Chief Financial Officer | ||
Dated: May 6, 2015 |
●
|
GAAP net loss of $476.5 million, $0.52 loss per common share
|
●
|
Core earnings of $254.1 million, $0.25 earnings per common share
|
●
|
Common stock book value of $12.88, leverage of 4.8:1, economic leverage of 5.7:1
|
●
|
Diversification strategy advancing – commercial asset growth of 15%, now representing 13% of equity
|
●
|
Repositioned Agency portfolio into TBA contracts, shorter maturity securities and initiated investment in GSE Credit Risk Transfer bonds
|
Purchase and sale contracts for
derivative TBAs
|
Notional
|
Implied Cost Basis
|
Implied Market Value
|
Net Carrying Value
|
||||||||||||
(dollars in thousands)
|
||||||||||||||||
Purchase contracts
|
$ | 13,750,000 | $ | 14,279,766 | $ | 14,392,695 | $ | 112,929 | ||||||||
Sale contracts
|
- | - | - | - | ||||||||||||
Net TBA derivatives
|
$ | 13,750,000 | $ | 14,279,766 | $ | 14,392,695 | $ | 112,929 |
Maturity
|
Principal Balance
|
Weighted Average Rate
|
||||||
(dollars in thousands)
|
||||||||
Within 30 days
|
$ | 23,738,473 | 0.47 | % | ||||
30 to 59 days
|
7,326,177 | 0.40 | % | |||||
60 to 89 days
|
9,534,614 | 0.40 | % | |||||
90 to 119 days
|
4,677,222 | 0.50 | % | |||||
Over 120 days(1)
|
15,200,892 | 1.45 | % | |||||
Total
|
$ | 60,477,378 | 0.70 | % |
(1) |
Approximately 18% of the total repurchase agreements have a remaining maturity over 1 year.
|
Maturity
|
Current Notional (1)
|
Weighted
Average Pay
Rate (2) (3)
|
Weighted
Average Receive
Rate (2)
|
Weighted
Average Years
to Maturity (2)
|
||||||||||||
(dollars in thousands)
|
||||||||||||||||
0 - 3 years
|
$ | 2,852,488 | 1.78 | % | 0.18 | % | 2.45 | |||||||||
3 - 6 years
|
10,463,000 | 1.85 | % | 0.41 | % | 4.99 | ||||||||||
6 - 10 years
|
11,110,100 | 2.60 | % | 0.37 | % | 8.64 | ||||||||||
Greater than 10 years
|
3,634,400 | 3.70 | % | 0.22 | % | 20.12 | ||||||||||
Total / Weighted Average
|
$ | 28,059,988 | 2.37 | % | 0.35 | % | 8.09 |
(1) | Notional amount includes $3.0 billion in forward starting pay fixed swaps. |
(2) | Excludes forward starting swaps. |
(3) |
Weighted average fixed rate on forward starting pay fixed swaps was 1.88%.
|
Current Underlying
Notional
|
Weighted Average
Underlying Pay
Rate
|
Weighted Average
Underlying Receive
Rate
|
Weighted Average
Underlying Years to
Maturity
|
Weighted Average
Months to Expiration
|
|||||||||||||
(dollars in thousands)
|
|||||||||||||||||
Long
|
$ | 1,000,000 | 2.61 | % |
3M LIBOR
|
8.19 | 2.15 |
Notional - Long
Positions
|
Notional - Short
Positions
|
Weighted Average
Years to Maturity
|
||||||||||
(dollars in thousands)
|
||||||||||||
2-year swap equivalent Eurodollar contracts
|
$ | - | $ | (3,000,000 | ) | 2.00 | ||||||
U.S. Treasury futures - 5 year
|
- | (2,000,000 | ) | 4.36 | ||||||||
U.S. Treasury futures - 10 year and greater
|
- | (1,800,000 | ) | 7.43 | ||||||||
Total
|
$ | - | $ | (6,800,000 | ) | 4.13 |
March 31, 2015
|
December 31, 2014
|
March 31, 2014
|
|
Portfolio Related Metrics:
|
|||
Fixed-rate Investment Securities as a percentage of total Investment Securities
|
94%
|
95%
|
93%
|
Adjustable-rate and floating-rate Investment Securities as a percentage of total Investment Securities
|
6%
|
5%
|
7%
|
Weighted average yield on commercial real estate debt and preferred equity at period-end
|
8.75%
|
9.00%
|
9.13%
|
Weighted average net equity yield on investments in commercial real estate at period-end (1)
|
13.09%
|
13.95%
|
10.80%
|
Liabilities and Hedging Metrics:
|
|||
Weighted average days to maturity on repurchase agreements outstanding at period-end
|
149
|
141
|
187
|
Notional amount of interest rate swaps and swaptions as a percentage of repurchase agreements
|
48%
|
47%
|
94%
|
Weighted average pay rate on interest rate swaps at period-end (2)
|
2.37%
|
2.49%
|
2.16%
|
Weighted average receive rate on interest rate swaps at period-end (2)
|
0.35%
|
0.22%
|
0.19%
|
Weighted average net rate on interest rate swaps at period-end (2)
|
2.02%
|
2.27%
|
1.97%
|
Leverage at period-end (3)
|
4.8:1
|
5.4:1
|
5.2:1
|
Economic leverage at period-end (4)
|
5.7:1
|
5.4:1
|
5.2:1
|
Capital ratio at period end
|
14.1%
|
15.1%
|
15.2%
|
Performance Related Metrics:
|
|||
Net interest margin (5)
|
1.26%
|
1.56%
|
1.32%
|
Average yield on interest earning assets (6)
|
2.47%
|
2.98%
|
3.21%
|
Average cost of interest bearing liabilities (7)
|
1.64%
|
1.69%
|
2.31%
|
Net interest spread
|
0.83%
|
1.29%
|
0.90%
|
Annualized return (loss) on average equity
|
(14.41%)
|
(19.91%)
|
(6.52%)
|
Annualized Core return on average equity
|
7.68%
|
9.04%
|
7.68%
|
Common dividend declared during the quarter
|
$0.30
|
$0.30
|
$0.30
|
Book value per common share
|
$12.88
|
$13.10
|
$12.30
|
(1) |
Excludes real estate held-for-sale.
|
(2) | Excludes forward starting swaps. |
(3) | Debt consists of repurchase agreements, Convertible Senior Notes, securitized debt, loan participation and mortgages payable. Securitized debt, loan participation and mortgages payable are non-recourse to the Company. |
(4) | Computed as the sum of debt, TBA derivative notional outstanding and net forward purchases of Investment Securities divided by total equity. |
(5) | Represents the sum of the Company’s annualized economic net interest income, inclusive of interest expense on interest rate swaps, plus dollar roll income divided by the sum of its average interest-earning assets plus average outstanding TBA derivative balances. |
(6) | Average interest earning assets reflects the average amortized cost of our investments during the period. |
(7) |
Includes interest expense on interest rate swaps.
|
For the quarters ended
|
||||||||||||
March 31, 2015
|
December 31, 2014
|
March 31, 2014
|
||||||||||
(dollars in thousands)
|
||||||||||||
GAAP net income (loss)
|
$ | (476,499 | ) | $ | (658,272 | ) | $ | (203,351 | ) | |||
Less:
|
||||||||||||
Realized (gains) losses on termination of interest rate swaps
|
226,462 | - | 6,842 | |||||||||
Unrealized (gains) losses on interest rate swaps
|
466,202 | 873,468 | 348,942 | |||||||||
Net (gains) losses on disposal of investments
|
(62,356 | ) | (3,420 | ) | (79,710 | ) | ||||||
Net (gains) losses on trading assets
|
6,906 | 57,454 | 146,228 | |||||||||
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities
|
33,546 | 29,520 | 20,793 | |||||||||
GAAP net (income) loss attributable to noncontrolling interest
|
90 | 196 | - | |||||||||
Plus:
|
||||||||||||
TBA dollar roll income (1)
|
59,731 | - | - | |||||||||
Core earnings
|
$ | 254,082 | $ | 298,946 | $ | 239,744 | ||||||
GAAP net income (loss) per average common share
|
$ | (0.52 | ) | $ | (0.71 | ) | $ | (0.23 | ) | |||
Core earnings per average common share
|
$ | 0.25 | $ | 0.30 | $ | 0.23 |
(1) |
Represents a component of Net gains (losses) on trading assets.
|
For the quarters ended
|
||||||||||||
March 31,
|
December 31,
|
March 31,
|
||||||||||
2015
|
2014
|
2014
|
||||||||||
(dollars in thousands)
|
||||||||||||
Interest income:
|
||||||||||||
Investment Securities
|
$ | 478,239 | $ | 606,746 | $ | 614,419 | ||||||
Commercial investment portfolio(1)
|
40,336 | 40,913 | 39,486 | |||||||||
U.S. Treasury securities
|
- | - | 1,329 | |||||||||
Securities loaned
|
- | - | 114 | |||||||||
Reverse repurchase agreements
|
539 | 429 | 500 | |||||||||
Other
|
58 | 56 | 53 | |||||||||
Total interest income
|
519,172 | 648,144 | 655,901 | |||||||||
Interest expense:
|
||||||||||||
Repurchase agreements
|
102,748 | 107,540 | 103,131 | |||||||||
Convertible Senior Notes
|
23,627 | 25,701 | 18,897 | |||||||||
U.S. Treasury securities sold, not yet purchased
|
- | - | 1,076 | |||||||||
Securities borrowed
|
- | - | 95 | |||||||||
Securitized debt of consolidated VIEs
|
2,882 | 1,106 | 1,611 | |||||||||
Participation sold
|
159 | 165 | 161 | |||||||||
Other
|
4 | - | - | |||||||||
Total interest expense
|
129,420 | 134,512 | 124,971 | |||||||||
Net interest income
|
$ | 389,752 | $ | 513,632 | $ | 530,930 |
(1) |
Consists of commercial real estate debt and preferred equity and corporate debt.
|
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
|
||||||||||||||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
||||||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||||||
March 31,
|
December 31,
|
September 30,
|
June 30,
|
March 31,
|
||||||||||||||||
2015
|
2014(1)
|
2014
|
2014
|
2014
|
||||||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||
ASSETS
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 1,920,326 | $ | 1,741,244 | $ | 1,178,621 | $ | 1,320,666 | $ | 924,197 | ||||||||||
Reverse repurchase agreements
|
100,000 | 100,000 | - | - | 444,375 | |||||||||||||||
Securities borrowed
|
- | - | - | - | 513,500 | |||||||||||||||
Investments, at fair value:
|
||||||||||||||||||||
Agency mortgage-backed securities
|
69,388,001 | 81,565,256 | 81,462,387 | 81,055,337 | 75,350,388 | |||||||||||||||
Agency debentures
|
995,408 | 1,368,350 | 1,334,181 | 1,348,727 | 2,408,259 | |||||||||||||||
Agency CRT securities
|
108,337 | - | - | - | - | |||||||||||||||
Commercial real estate debt investments (2)
|
1,515,903 | - | - | - | - | |||||||||||||||
Investment in affiliate
|
141,246 | 143,045 | 136,748 | 143,495 | 137,647 | |||||||||||||||
Commercial real estate debt and preferred equity, held for investment (3)
|
1,498,406 | 1,518,165 | 1,554,958 | 1,586,169 | 1,640,206 | |||||||||||||||
Investments in commercial real estate
|
207,209 | 210,032 | 73,827 | 74,355 | 40,313 | |||||||||||||||
Corporate debt, held for investment
|
227,830 | 166,464 | 144,451 | 151,344 | 145,394 | |||||||||||||||
Receivable for investments sold
|
2,009,937 | 1,010,094 | 855,161 | 856,983 | 19,116 | |||||||||||||||
Accrued interest and dividends receivable
|
247,801 | 278,489 | 287,231 | 283,423 | 276,007 | |||||||||||||||
Receivable for investment advisory income
|
10,268 | 10,402 | 8,369 | 6,380 | 6,498 | |||||||||||||||
Goodwill
|
94,781 | 94,781 | 94,781 | 94,781 | 94,781 | |||||||||||||||
Interest rate swaps, at fair value
|
25,908 | 75,225 | 198,066 | 170,604 | 340,890 | |||||||||||||||
Other derivatives, at fair value
|
113,503 | 5,499 | 19,407 | 7,938 | 40,105 | |||||||||||||||
Other assets
|
70,813 | 68,321 | 39,798 | 50,743 | 33,101 | |||||||||||||||
Total assets
|
$ | 78,675,677 | $ | 88,355,367 | $ | 87,387,986 | $ | 87,150,945 | $ | 82,414,777 | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||
Liabilities:
|
||||||||||||||||||||
Repurchase agreements
|
$ | 60,477,378 | $ | 71,361,926 | $ | 69,610,722 | $ | 70,372,218 | $ | 64,543,949 | ||||||||||
Securities loaned
|
- | - | 7 | 7 | 513,510 | |||||||||||||||
Payable for investments purchased
|
5,205 | 264,984 | 2,153,789 | 781,227 | 1,898,507 | |||||||||||||||
Convertible Senior Notes
|
749,512 | 845,295 | 836,625 | 831,167 | 827,486 | |||||||||||||||
Securitized debt of consolidated VIEs (4)
|
1,491,829 | 260,700 | 260,700 | 260,700 | 260,700 | |||||||||||||||
Mortgages payable
|
146,470 | 146,553 | 42,635 | 30,316 | 19,317 | |||||||||||||||
Participation sold
|
13,589 | 13,693 | 13,768 | 13,866 | 13,963 | |||||||||||||||
Accrued interest payable
|
155,072 | 180,501 | 180,345 | 157,782 | 170,644 | |||||||||||||||
Dividends payable
|
284,310 | 284,293 | 284,278 | 284,261 | 284,247 | |||||||||||||||
Interest rate swaps, at fair value
|
2,025,170 | 1,608,286 | 857,658 | 928,789 | 1,272,616 | |||||||||||||||
Other derivatives, at fair value
|
61,778 | 8,027 | - | 6,533 | 6,045 | |||||||||||||||
Accounts payable and other liabilities
|
140,774 | 47,328 | 36,511 | 35,160 | 39,081 | |||||||||||||||
Total liabilities
|
65,551,087 | 75,021,586 | 74,277,038 | 73,702,026 | 69,850,065 | |||||||||||||||
Stockholders’ Equity:
|
||||||||||||||||||||
7.875% Series A Cumulative Redeemable Preferred Stock:
7,412,500 authorized, issued and outstanding
|
177,088 | 177,088 | 177,088 | 177,088 | 177,088 | |||||||||||||||
7.625% Series C Cumulative Redeemable Preferred Stock
12,650,000 authorized, 12,000,000 issued and outstanding
|
290,514 | 290,514 | 290,514 | 290,514 | 290,514 | |||||||||||||||
7.50% Series D Cumulative Redeemable Preferred Stock:
18,400,000 authorized, issued and outstanding
|
445,457 | 445,457 | 445,457 | 445,457 | 445,457 | |||||||||||||||
Common stock, par value $0.01 per share, 1,956,937,500 authorized,
947,698,431, 947,643,079, 947,591,766, 947,540,823 and 947,488,945
issued and outstanding, respectively
|
9,477 | 9,476 | 9,476 | 9,475 | 9,475 | |||||||||||||||
Additional paid-in capital
|
14,787,117 | 14,786,509 | 14,781,308 | 14,776,302 | 14,770,553 | |||||||||||||||
Accumulated other comprehensive income (loss)
|
773,999 | 204,883 | (967,820 | ) | (572,256 | ) | (2,088,479 | ) | ||||||||||||
Accumulated deficit
|
(3,364,147 | ) | (2,585,436 | ) | (1,625,075 | ) | (1,677,661 | ) | (1,039,896 | ) | ||||||||||
Total stockholders’ equity
|
13,119,505 | 13,328,491 | 13,110,948 | 13,448,919 | 12,564,712 | |||||||||||||||
Noncontrolling interest
|
5,085 | 5,290 | - | - | - | |||||||||||||||
Total equity
|
13,124,590 | 13,333,781 | 13,110,948 | 13,448,919 | 12,564,712 | |||||||||||||||
Total liabilities and equity
|
$ | 78,675,677 | $ | 88,355,367 | $ | 87,387,986 | $ | 87,150,945 | $ | 82,414,777 |
(1) | Derived from the audited consolidated financial statements at December 31, 2014. |
(2) | Includes senior securitized commercial mortgage loans of consolidated VIE with a carrying value of $1.4 billion at March 31, 2015. |
(3) | Includes senior securitized commercial mortgage loans of consolidated VIE with a carrying value of $361.2 million, $398.6 million, $398.4 million, $398.3 million and $398.1 million, respectively. |
(4) |
Includes securitized debt of a consolidated VIE carried at fair value of $1.3 billion at March 31, 2015.
|
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
|
||||||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||||||
(UNAUDITED)
|
||||||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||||||
For the quarters ended
|
||||||||||||||||||||
March 31,
|
December 31,
|
September 30,
|
June 30,
|
March 31,
|
||||||||||||||||
2015
|
2014
|
2014
|
2014
|
2014
|
||||||||||||||||
Net interest income:
|
||||||||||||||||||||
Interest income
|
$ | 519,172 | $ | 648,144 | $ | 644,640 | $ | 683,962 | $ | 655,901 | ||||||||||
Interest expense
|
129,420 | 134,512 | 127,069 | 126,107 | 124,971 | |||||||||||||||
Net interest income
|
389,752 | 513,632 | 517,571 | 557,855 | 530,930 | |||||||||||||||
Other income (loss):
|
||||||||||||||||||||
Realized gains (losses) on interest rate swaps(1)
|
(158,239 | ) | (174,908 | ) | (169,083 | ) | (220,934 | ) | (260,435 | ) | ||||||||||
Realized gains (losses) on termination of interest rate swaps
|
(226,462 | ) | - | - | (772,491 | ) | (6,842 | ) | ||||||||||||
Unrealized gains (losses) on interest rate swaps
|
(466,202 | ) | (873,468 | ) | 98,593 | 175,062 | (348,942 | ) | ||||||||||||
Subtotal
|
(850,903 | ) | (1,048,376 | ) | (70,490 | ) | (818,363 | ) | (616,219 | ) | ||||||||||
Investment advisory income
|
10,464 | 10,858 | 8,253 | 6,109 | 6,123 | |||||||||||||||
Net gains (losses) on disposal of investments
|
62,356 | 3,420 | 4,693 | 5,893 | 79,710 | |||||||||||||||
Dividend income from affiliate
|
4,318 | 4,048 | 4,048 | 4,048 | 13,045 | |||||||||||||||
Net gains (losses) on trading assets
|
(6,906 | ) | (57,454 | ) | 4,676 | (46,489 | ) | (146,228 | ) | |||||||||||
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities
|
(33,546 | ) | (29,520 | ) | (37,944 | ) | 2,085 | (20,793 | ) | |||||||||||
Other income (loss)
|
(1,082 | ) | 3,365 | (22,249 | ) | 4,687 | 1,460 | |||||||||||||
Subtotal
|
35,604 | (65,283 | ) | (38,523 | ) | (23,667 | ) | (66,683 | ) | |||||||||||
Total other income (loss)
|
(815,299 | ) | (1,113,659 | ) | (109,013 | ) | (842,030 | ) | (682,902 | ) | ||||||||||
General and administrative expenses:
|
||||||||||||||||||||
Compensation and management fee
|
38,629 | 38,734 | 39,028 | 39,277 | 38,521 | |||||||||||||||
Other general and administrative expenses
|
12,309 | 19,720 | 12,289 | 12,912 | 8,857 | |||||||||||||||
Total general and administrative expenses
|
50,938 | 58,454 | 51,317 | 52,189 | 47,378 | |||||||||||||||
Income (loss) before income taxes
|
(476,485 | ) | (658,481 | ) | 357,241 | (336,364 | ) | (199,350 | ) | |||||||||||
Income taxes
|
14 | (209 | ) | 2,385 | (852 | ) | 4,001 | |||||||||||||
Net income (loss)
|
(476,499 | ) | (658,272 | ) | 354,856 | (335,512 | ) | (203,351 | ) | |||||||||||
Net income (loss) attributable to noncontrolling interest
|
(90 | ) | (196 | ) | - | - | - | |||||||||||||
Net income (loss) attributable to Annaly
|
(476,409 | ) | (658,076 | ) | 354,856 | (335,512 | ) | (203,351 | ) | |||||||||||
Dividends on preferred stock
|
17,992 | 17,992 | 17,992 | 17,992 | 17,992 | |||||||||||||||
Net income (loss) available (related) to common stockholders
|
$ | (494,401 | ) | $ | (676,068 | ) | $ | 336,864 | $ | (353,504 | ) | $ | (221,343 | ) | ||||||
Net income (loss) per share available (related) to common stockholders:
|
||||||||||||||||||||
Basic
|
$ | (0.52 | ) | $ | (0.71 | ) | $ | 0.36 | $ | (0.37 | ) | $ | (0.23 | ) | ||||||
Diluted
|
$ | (0.52 | ) | $ | (0.71 | ) | $ | 0.35 | $ | (0.37 | ) | $ | (0.23 | ) | ||||||
Weighted average number of common shares outstanding:
|
||||||||||||||||||||
Basic
|
947,669,831 | 947,615,793 | 947,565,432 | 947,515,127 | 947,458,813 | |||||||||||||||
Diluted
|
947,669,831 | 947,615,793 | 987,315,527 | 947,515,127 | 947,458,813 | |||||||||||||||
Net income (loss)
|
$ | (476,499 | ) | $ | (658,272 | ) | $ | 354,856 | $ | (335,512 | ) | $ | (203,351 | ) | ||||||
Other comprehensive income (loss):
|
||||||||||||||||||||
Unrealized gains (losses) on available-for-sale securities
|
631,472 | 1,175,864 | (390,871 | ) | 1,522,126 | 741,172 | ||||||||||||||
Reclassification adjustment for net (gains) losses included in net income (loss)
|
(62,356 | ) | (3,161 | ) | (4,693 | ) | (5,903 | ) | (80,718 | ) | ||||||||||
Other comprehensive income (loss)
|
569,116 | 1,172,703 | (395,564 | ) | 1,516,223 | 660,454 | ||||||||||||||
Comprehensive income (loss)
|
92,617 | 514,431 | (40,708 | ) | 1,180,711 | 457,103 | ||||||||||||||
Comprehensive income (loss) attributable to noncontrolling interest
|
(90 | ) | (196 | ) | - | - | - | |||||||||||||
Comprehensive income (loss) attributable to Annaly
|
$ | 92,707 | $ | 514,627 | $ | (40,708 | ) | $ | 1,180,711 | $ | 457,103 |
(1) |
Interest expense related to the Company’s interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss).
|
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