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Annaly Capital Management, Inc. Reports Results for the 4th Quarter 2012



  Annaly Capital Management, Inc. Reports Results for the 4th Quarter 2012

Business Wire

NEW YORK -- February 6, 2013

Annaly Capital Management, Inc. (NYSE: NLY) today reported GAAP net income for
the quarter ended December 31, 2012 of $700.5 million or $0.70 per average
common share as compared to GAAP net income of $445.6 million or $0.46 per
average common share for the quarter ended December 31, 2011, and GAAP net
income of $224.8 million or $0.22 per average common share for the quarter
ended September 30, 2012.

GAAP net income was $1.7 billion or $1.74 per average common share and $344.5
million or $0.37 per average common share for the years ended December 31,
2012 and 2011, respectively.

Without the effect of the unrealized gains or losses on interest rate swaps
and Agency interest-only mortgage-backed securities and net loss on
extinguishment of 4% Convertible Senior Notes due 2015 (the “4% Convertible
Notes”), net income for the quarter ended December 31, 2012, was $465.1
million or $0.46 per average common share as compared to $525.3 million or
$0.54 per average common share for the quarter ended December 31, 2011, and
$449.8 million or $0.45 per average common share for the quarter ended
September 30, 2012.

Without the effect of the unrealized gains or losses on interest rate swaps
and Agency interest-only mortgage-backed securities and net loss on
extinguishment of 4% Convertible Notes, net income for the years ended
December 31, 2012 and 2011, was $2.0 billion or $2.01 per average common share
and $2.3 billion or $2.57 per average common share, respectively.

Agency mortgage-backed securities, Agency debentures, and corporate debt are
considered Investment Securities. During the quarter ended December 31, 2012,
the Company disposed of $13.2 billion of Investment Securities, resulting in a
realized gain of $122.4 million. During the quarter ended December 31, 2011,
the Company disposed of $10.3 billion of Investment Securities, resulting in a
realized gain of $80.7 million. During the quarter ended September 30, 2012,
the Company disposed of $7.3 billion of Investment Securities, resulting in a
realized gain of $142.2 million.

During the year ended December 31, 2012, the Company disposed of $32.3 billion
of Investment Securities, resulting in a realized gain of $439.7 million.
During the year ended December 31, 2011, the Company disposed of $20.1 billion
of Investment Securities, resulting in a realized gain of $206.8 million.

Common dividends declared for the quarters ended December 31, 2012, December
31, 2011, and September 30, 2012 were $0.45, $0.57, and $0.50 per common
share, respectively. Common dividends declared for the years ended December
31, 2012 and 2011 were $2.05 and $2.44 per common share, respectively. The
Company distributes dividends based on its current estimate of taxable
earnings per common share, not GAAP earnings. Taxable and GAAP earnings will
typically differ due to items such as non-taxable unrealized and realized
gains and losses, differences in premium amortization and discount accretion,
and non-deductible general and administrative expenses.

The annualized dividend yield on the Company’s common stock for the quarter
ended December 31, 2012, based on the December 31, 2012, closing price of
$14.04, was 12.82%, as compared to 14.29% for the quarter ended December 31,
2011, and 11.88% for the quarter ended September 30, 2012. The dividend yield
on the Company’s common stock for the year ended December 31, 2012, based on
the December 31, 2012 closing price of $14.04 was 14.60%, as compared to
15.29% for the year ended December 31, 2011.

During the quarter and year ended December 31, 2012, the Company repurchased
approximately $211.8 million and $492.5 million of the outstanding 4%
Convertible Notes for $260.3 million and $617.5 million, respectively. The 4%
Convertible Notes are convertible into shares of common stock at a conversion
rate that increases as the Company pays dividends. As a result, these
repurchases will reduce future dilution to common shareholders.

During the quarter and year ended December 31, 2012, the Company repurchased
approximately 27.8 million shares of its outstanding common stock for $397.1
million.

On a GAAP basis, the Company produced an annualized return on average equity
for the quarters ended December 31, 2012, December 31, 2011, and September 30,
2012 of 16.97%, 11.23% and 5.39%, respectively. Without the effect of the
unrealized gains or losses on interest rate swaps and Agency interest-only
mortgage-backed securities and net loss on extinguishment of 4% Convertible
Notes, the Company provided an annualized return on average equity for the
quarters ended December 31, 2012, December 31, 2011, and September 30, 2012,
of 11.27%, 13.24% and 10.78%, respectively. On a GAAP basis, the Company
provided a return on average equity for the years ended December 31, 2012 and
2011 of 10.71% and 2.51%, respectively. Without the effect of the unrealized
gains or losses on interest rate swaps and Agency interest-only
mortgage-backed securities and net loss on extinguishment of 4% Convertible
Notes, the Company provided a return on average equity for the years ended
December 31, 2012 and 2011 of 12.28% and 16.54%, respectively.

Wellington J. Denahan, Chairman and Chief Executive Officer of Annaly,
commented on the Company’s results. “In our market, indeed every market,
decisions made by policymakers continue to have exceptional influence on
pricing and behavior. Nevertheless, as our results demonstrate, we continue to
navigate through these uncertain waters to identify attractive relative value
opportunities on both sides of our balance sheet. These market conditions are
likely to persist, however, as structural imbalances here and abroad continue
to affect economic activity. In this environment, we believe that remaining
conservative in our management approach is in the best long-term interests of
shareholders.”

For the quarter ended December 31, 2012, the annualized yield on average
interest-earning assets was 2.45% and the annualized cost of funds on average
interest-bearing liabilities, including the net interest payments on interest
rate swaps, was 1.50%, which resulted in an average interest rate spread of
0.95%. This was a 76 basis point decrease from the 1.71% annualized interest
rate spread for the quarter ended December 31, 2011, and a 7 basis point
decrease from the 1.02% average interest rate spread for the quarter ended
September 30, 2012. At December 31, 2012, the weighted average yield on
investment securities was 2.75% and the weighted average cost of funds on
borrowings, including the net interest payments on interest rate swaps, was
1.55%, which resulted in an interest rate spread of 1.20%. Leverage at
December 31, 2012, December 31, 2011, and September 30, 2012 was 6.5:1, 5.4:1
and 6.0:1, respectively.

Fixed-rate Agency mortgage-backed securities and debentures comprised 93% of
the Company’s portfolio at December 31, 2012. Adjustable-rate Agency
mortgage-backed securities and debentures comprised 7% of the Company’s
portfolio. At December 31, 2012, the Company had entered into interest rate
swaps with a notional amount of $46.9 billion, or 40% of the Company’s Agency
mortgage-backed securities and debentures. Changes in the unrealized gains or
losses on the interest rate swaps are reflected in the Company’s consolidated
statements of comprehensive income. The purpose of the interest rate swaps is
to mitigate the risk of rising interest rates that affect the Company’s cost
of funds. Since the Company receives a floating rate on the notional amount of
the swaps, the intended effect of the swaps is to lock in a spread relative to
the cost of financing. As of December 31, 2012, the swap portfolio had a
weighted average pay rate of 2.21%, a weighted average receive rate of 0.24%
and weighted average years to maturity of 4.77 years. As of December 31, 2012,
substantially all of the Company’s Investment Securities were Fannie Mae,
Freddie Mac and Ginnie Mae mortgage-backed securities and debentures.

The following table summarizes portfolio information for the Company:

                                   December 31,   December 31,   September 30,
                                   2012           2011           2012
Leverage at period-end             6.5:1          5.4:1          6.0:1
Fixed-rate Agency mortgage-backed
securities and
                                   93%            90%            93%
debentures as a percentage of
portfolio
Adjustable-rate Agency
mortgage-backed securities and
                                   7%             9%             7%
debentures as a percentage of
portfolio
Floating-rate Agency
mortgage-backed securities and
                                   -              1%             -
debentures as a percentage of
portfolio
Notional amount of interest rate
swaps as a percentage of           40%            41%            38%

Investment Securities
Annualized yield on average
interest-earning assets during     2.45%          3.31%          2.54%

the quarter
Annualized cost of funds on
average interest-bearing           1.50%          1.60%          1.52%

liabilities during the quarter
Annualized interest rate spread    0.95%          1.71%          1.02%
during the quarter
Weighted average yield on
investment securities at           2.75%          3.22%          2.79%

period-end
Weighted average cost of funds on
interest-bearing liabilities at    1.55%          1.60%          1.55%

period-end
Interest rate spread at period-end 1.20%          1.62%          1.24%
Weighted average days to maturity
on interest-bearing liabilities at 197            110            220

period-end
Weighted average receive rate on   0.24%          0.33%          0.27%
interest rate swaps at period-end
Weighted average pay rate on       2.21%          2.55%          2.23%
interest rate swaps at period-end
                                                                  

The following table summarizes certain characteristics of the Company’s
interest rate swaps at December 31, 2012:

                                             Weighted   
                                 Weighted    Average     Weighted Average
                                 Average     Receive     Years to
Maturity          Current        Pay Rate    Rate        Maturity
                  Notional
                  (dollars in thousands)
0 - 3 years       $18,165,800    2.23%       0.24%       1.80
3 - 6 years       19,609,500     1.84%       0.23%       3.74
6 - 10 years      5,300,000      2.66%       0.25%       7.76
Greater than      3,836,500      3.45%       0.24%       19.90
10 years
Total /
Weighted          $46,911,800    2.21%       0.24%       4.77
Average
                                                          

The following table presents the maturities of repurchase agreements at
December 31, 2012:

                                          Weighted Average
Maturity              Principal Balance   Rate
(dollars in thousands)
Within 30 days        $33,191,448         0.50%
30 to 59 days         28,383,851          0.45%
60 to 89 days         8,602,680           0.42%
90 to 119 days        4,804,671           0.57%
Over 120 days^(1)     27,803,047          1.03%
Total                 $102,785,697        0.63%

  (1)   Of the total repurchase agreements, approximately 11% have a remaining
        maturity over 1 year.
         

The Constant Prepayment Rate for the quarters ended December 31, 2012,
December 31, 2011, and September 30, 2012 was 19%, 22% and 20%, respectively.
The weighted average purchase price of the Company’s Agency mortgage-backed
securities and debentures at December 31, 2012, December 31, 2011 and
September 30, 2012 was 103.8%, 102.7% and 103.7%, respectively. The net
amortization of premiums and accretion of discounts on Agency mortgage-backed
securities and debentures for the quarters ended December 31, 2012, December
31, 2011 and September 30, 2012 was $433.3 million, $292.1 million, and $455.8
million, respectively. The total net premium and discount balance at December
31, 2012, December 31, 2011, and September 30, 2012, was $5.8 billion, $3.3
billion, and $5.4 billion, respectively.

General and administrative expenses as a percentage of average assets was
0.12%, 0.23% and 0.19% for the quarters ended December 31, 2012, December 31,
2011, and September 30, 2012, respectively. General and administrative
expenses declined in the fourth quarter of 2012 due to Management’s
recommendation and our compensation committee’s determination to award total
compensation levels for 2012 below the target amounts for certain of our
executive officers. In addition, for the quarter ended December 31, 2012, the
Company had an income tax benefit relating to the change in reporting officers
under IRC section 162(m). At December 31, 2012, December 31, 2011, and
September 30, 2012, the Company had a common stock book value per share of
$15.85, $16.06 and $16.60, respectively.

At December 31, 2012, December 31, 2011, and September 30, 2012, the Company’s
wholly-owned registered investment advisors had under management approximately
$11.9 billion, $12.2 billion and $12.8 billion in net assets, respectively,
and $18.8 billion, $19.9 billion and $20.0 billion in gross assets,
respectively. For the quarters ended December 31, 2012, December 31, 2011, and
September 30, 2012, investment advisory and other fee income was $18.9
million, $20.5 million and $21.0 million, respectively.

Annaly’s principal business objective is to generate net income for
distribution to its shareholders from its Investment Securities and from
dividends it receives from its subsidiaries.

The Company prepares a supplement to provide additional quarterly information
for the benefit of its shareholders. The supplement can be found at the
Company’s website in the Investor Relations section under “Quarterly
Supplemental Information”.

The Company will hold the 2012 fourth quarter earnings conference call on
February 7, 2013 at 9:00 a.m. EST. The number to call is 888-317-6003 for
domestic calls and 412-317-6061 for international calls. The conference
passcode is 4628173. The replay number is 877-344-7529 for domestic calls and
412-317-0088 for international calls and the conference passcode is 10024273.
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 Investor
Relations, then select Email Alerts and complete the email notification form.

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, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. 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 the yield curve,
changes in prepayment rates, the availability of mortgage-backed securities
and other 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, our ability to
consummate any contemplated investment opportunities, our ability to integrate
the commercial mortgage business, changes in government regulations affecting
our business, our ability to maintain our qualification as a REIT for federal
income tax purposes, our ability to maintain our exemption from registration
under the Investment Company Act of 1940, as amended, and risks associated
with the broker-dealer business of our subsidiary, and risks associated with
the investment advisory business of our subsidiaries, including the removal by
clients of assets they manage, their regulatory requirements and competition
in the investment advisory business. 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 most recent
Annual Report on Form 10-K and any 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, except share and per share data)
                 
                  December 31,     September 30,  June 30,        March 31,
                    2012            2012            2012            2012          December 31,
                  (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)     2011^(1)
ASSETS
                                                                                   
Cash and cash     $ 615,789       $ 2,264,854     $ 924,374       $ 932,761       $ 994,198
equivalents
Reverse
repurchase          1,811,095       1,612,384       2,025,471       2,540,601       860,866
agreements
Investments, at
fair value:
U.S. Treasury       752,076         2,242,039       1,998,363       2,622,714       928,547
Securities
Securities          2,160,942       1,602,692       1,465,327       1,122,453       928,732
borrowed
Agency
mortgage-backed     123,963,207     129,597,714     118,500,649     110,291,712     104,251,055
securities
Agency              3,009,568       2,935,538       1,250,506       1,499,127       889,580
debentures
Investments in      234,120         224,899         203,057         225,818         211,970
affiliates
Equity              -               -               -               4,470           3,891
securities
Corporate debt,
held for            63,944          64,928          60,638          50,806          52,073
investment
Receivable for
investments         290,722         470,266         1,320,996       454,278         -
sold
Accrued
interest and        419,259         434,026         420,390         418,489         409,023
dividends
receivable
Receivable from     -               3,272           3,272           3,272           3,272
Prime Broker
Receivable for
advisory and        17,730          20,271          20,743          19,608          19,550
service fees
Intangible for
customer            6,989           9,146           9,714           10,281          10,807
relationships
Goodwill            55,417          55,417          55,417          55,417          42,030
Other
derivative          9,830           559             3,717           321             113
contracts, at
fair value
Other assets        41,607          38,595          41,937          29,412          24,295       
                                                                                   
Total assets      $ 133,452,295   $ 141,576,600   $ 128,304,571   $ 120,281,540   $ 109,630,002  
                                                                                   
LIABILITIES AND
STOCKHOLDERS’
EQUITY
                                                                                   
Liabilities:
U.S. Treasury
Securities
sold, not yet     $ 495,437       $ 1,418,750     $ 1,884,922     $ 2,577,905     $ 826,912
purchased, at
fair value
Repurchase          102,785,697     101,033,146     96,760,797      91,720,865      84,097,885
agreements
Securities
loaned, at fair     1,808,315       1,248,968       1,113,107       876,849         804,901
value
Payable for
investments         8,256,957       16,107,038      7,387,410       5,708,412       4,315,796
purchased
Payable for
share buyback       141,149         -               -               -               -
program
Convertible         825,541         999,749         1,245,915       524,420         539,913
Senior Notes
Accrued
interest            186,896         181,502         174,819         129,108         138,965
payable
Dividends           432,154         487,237         535,898         534,401         552,806
payable
Interest rate
swaps, at fair      2,584,907       2,926,461       2,822,264       2,211,048       2,552,687
value
Accounts
payable and         10,798          83,086          94,853          57,927          7,223        
other
liabilities
                                                                                   
Total               117,527,851     124,485,937     112,019,985     104,340,935     93,837,088   
liabilities
                                                                                   
6.00% Series B
Cumulative
Convertible
Preferred
Stock:
4,600,000                                                                            
shares                                                                                           
authorized, 0,      -               -               -               -               32,272
0, 0, 0, and
1,331,849,
shares issued
and
outstanding,
respectively
                                                                                   
Stockholders’
Equity:
7.875% Series A
Cumulative
Redeemable
Preferred
Stock:              177,088         177,088         177,088         177,088         177,088
7,412,500
authorized,
issued and
outstanding
7.625% Series C
Cumulative
Redeemable
Preferred
Stock:
12,650,000,
12,650,000,
12,650,000, 0,
and 0               290,514         290,514         290,514         -               -
authorized,
respectively,
12,000,000,
12,000,000,
12,000,000, 0,
and 0 issued
and
outstanding,
respectively
7.50% Series D
Cumulative
Redeemable
Preferred
Stock:
18,400,000,         445,457         445,457         -               -               -
18,400,000, 0,
0, and 0
authorized,
issued and
outstanding,
respectively
Common stock,
par value $0.01
per share,
1,956,937,500,
1,956,937,500,
1,975,337,500,
1,956,937,500,
and
1,987,987,500
authorized,         9,472           9,748           9,747           9,743           9,702
respectively,
947,213,204,
974,799,779,
974,684,401,
974,325,338,
and 970,161,647
issued and
outstanding,
respectively
Additional          14,740,774      15,144,200      15,168,020      15,127,882      15,068,870
paid-in capital
Accumulated
other               3,053,242       4,069,607       3,413,320       2,766,430       3,008,988
comprehensive
income
Accumulated         (2,792,103  )   (3,045,951  )   (2,774,103  )   (2,140,538  )   (2,504,006  )
deficit
                                                                                   
Total
stockholders’       15,924,444      17,090,663      16,284,586      15,940,605      15,760,642   
equity
Total
liabilities,
Series B
Cumulative
Convertible       $ 133,452,295   $ 141,576,600   $ 128,304,571   $ 120,281,540   $ 109,630,002  
Preferred Stock
and
stockholders’
equity
 

  (1)   Derived from the audited consolidated financial statements at December
        31, 2011.
         

 
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands, except share and per share data)
                    
                     For the quarters ended
                     December 31,       September 30,  June 30,        March 31,         December 31,
                       2012              2012            2012            2012              2011           
Interest income:
Investments          $ 750,736         $ 754,096       $ 876,229       $ 850,959         $ 844,874
U.S. Treasury          3,819             4,588           7,397           1,418             1,082
Securities
Securities loaned      2,106             2,581           2,698           2,518             1,744          
Total interest         756,661           761,265         886,324         854,895           847,700        
income
                                                                                          
Interest expense:
Repurchase             165,600           158,150         139,579         113,914           114,989
agreements
Convertible Senior     15,503            18,026          18,965          14,727            12,552
Notes
U.S. Treasury
Securities sold,       2,930             3,739           5,801           2,644             1,214
not yet purchased
Securities             1,458             1,978           2,098           2,060             1,378          
borrowed
Total interest         185,491           181,893         166,443         133,345           130,133        
expense
                                                                                          
Net interest           571,170           579,372         719,881         721,550           717,567        
income
                                                                                          
Other income
(loss):
Investment
advisory and other     18,934            21,034          21,929          20,766            20,460
fee income
Net gains (losses)
on disposal of         114,831           142,172         94,837          80,299            80,657
investments
Net loss on
extinguishment of      (75,012       )   (87,328     )   -               -                 -
4% Convertible
Senior Notes
Dividend income        7,097             7,097           6,621           7,521             8,283
from affiliates
Net gains (losses)     15,181            1,368           1,105           5,256             6,356
on trading assets
Net unrealized
gains (losses) on
interest-only          (31,148       )   (33,563     )   (26,103     )   30,877            (67,612       )
Agency
mortgage-backed
securities
Income from            -                 -               -               -                 19             
underwriting
Subtotal               49,883            50,780          98,389          144,719           48,163         
Realized gains
(losses) on            (228,155      )   (224,272    )   (222,002    )   (219,340      )   (227,638      )
interest rate
swaps^(1)
Realized gains
(losses) on
termination of         -                 -               -               (2,385        )   -
interest rate
swaps
Unrealized gains
(losses) on            341,554           (104,197    )   (611,215    )   341,639           (12,139       )
interest rate
swaps
Subtotal               113,399           (328,469    )   (833,217    )   119,914           (239,777      )
Total other income     163,282           (277,689    )   (734,828    )   264,633           (191,614      )
(loss)
                                                                                          
Expenses:
Compensation           25,842            52,310          53,536          59,014            54,340
expense
Other general and
administrative         14,242            10,694          11,020          8,901             8,754          
expenses
Total general and
administrative         40,084            63,004          64,556          67,915            63,094         
expenses
                                                                                          
Income before          694,368           238,679         (79,503     )   918,268           462,859
income taxes
                                                                                          
Income taxes           6,127             (13,921     )   (11,656     )   (16,462       )   (17,297       )
                                                                                          
Net income (loss)      700,495           224,758         (91,159     )   901,806           445,562
                                                                                          
Dividends on           19,717            9,367           6,508           3,938             4,148          
preferred stock
                                                                                          
Net income (loss)
available
(related) to         $ 680,778         $ 215,391         ($97,667    ) $ 897,868         $ 441,414        
common
shareholders
                                                                                          
Net income (loss)
per share
available
(related) to
common
shareholders:
Basic                $ 0.70            $ 0.22            ($0.10      ) $ 0.92            $ 0.46           
Diluted              $ 0.68            $ 0.22            ($0.10      ) $ 0.89            $ 0.44           
                                                                                          
Weighted average
number of common
shares
outstanding:
Basic                  970,602,863       974,729,078     974,555,392     971,727,701       970,056,491    
Diluted                1,017,925,849     997,007,829     974,555,392     1,010,588,609     1,011,495,682  
                                                                                          
Net income (loss)    $ 700,495         $ 224,758         ($91,159    ) $ 901,806         $ 445,562        
Other
comprehensive
income (loss):
Unrealized gains
(losses) on            (894,972      )   798,269         741,727         (162,259      )   16,157
available-for-sale
securities
Reclassification
adjustment for net
(gains) losses         (121,393      )   (141,982    )   (94,837     )   (80,299       )   (80,657       )
included in net
income (loss)
Other
comprehensive          (1,016,365    )   656,287         646,890         (242,558      )   (64,500       )
income (loss)
Comprehensive          ($315,870     ) $ 881,045       $ 555,731       $ 659,248         $ 381,062        
income (loss)
 

        Interest expense related to the Company’s interest rate swaps is
  (1)   recorded in Realized gains (losses) on interest rate swaps on the
        Consolidated Statements of Comprehensive Income.
         

 
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands, except share and per share data)
                                      
                                     For the years ended
                                     December 31, 2012   December 31, 2011 (1)
Interest income:                                        
Investments                          $ 3,232,020         $   3,558,015
U.S. Treasury Securities               17,222                14,706
Securities loaned                      9,903                 6,897          
Total interest income                  3,259,145             3,579,618      
                                                          
Interest expense:
Repurchase agreements                  577,243               426,769
Convertible Senior Notes               67,221                35,017
U.S. Treasury Securities sold, not     15,114                13,081
yet purchased
Securities borrowed                    7,594                 5,459          
Total interest expense                 667,172               480,326        
                                                          
Net interest income                    2,591,973             3,099,292      
                                                          
Other income (loss):
Investment advisory and other fee      82,663                79,205
income
Net gains (losses) on disposal of      432,139               206,846
investments
Net loss on extinguishment of 4%       (162,340      )       -
Convertible Senior Notes
Dividend income from affiliates        28,336                31,516
Net gains (losses) on trading assets   22,910                21,398
Net unrealized gains (losses) on
interest-only Agency mortgage-backed   (59,937       )       (106,657      )
securities
Income from underwriting               -                     5,618          
Subtotal                               343,771               237,926        
Realized gains (losses) on interest    (893,769      )       (882,395      )
rate swaps^(2)
Realized gain (loss) on termination    (2,385        )       -
of interest rate swaps
Unrealized gains (losses) on           (32,219       )       (1,815,107    )
interest rate swaps
Subtotal                               (928,373      )       (2,697,502    )
Total other income (loss)              (584,602      )       (2,459,576    )
                                                          
Expenses:
Compensation expense                   190,702               206,251
Other general and administrative       44,857                31,093         
expenses
Total general and administrative       235,559               237,344        
expenses
Income before income taxes and
income from equity                     1,771,812             402,372

method investment in affiliate
                                                          
Income taxes                           (35,912       )       (59,051       )
                                                          
Income (loss) from equity method       -                     1,140          
investment in affiliate
                                                          
Net income (loss)                      1,735,900             344,461
                                                          
Dividends on preferred stock           39,530                16,854         
                                                          
Net income (loss) available          $ 1,696,370         $   327,607        
(related) to common shareholders
                                                          
Net income (loss) per share
available (related) to common

shareholders:
Basic                                $ 1.74              $   0.37           
Diluted                              $ 1.71              $   0.37           
                                                          
Weighted average number of common
shares outstanding:
Basic                                  972,902,459           874,212,039    
Diluted                                1,005,755,057         874,518,938    
                                                          
Net income (loss)                    $ 1,735,900         $   344,461        
Other comprehensive income (loss):
Unrealized gains (losses) on         $ 482,765           $   2,036,894
available-for-sale securities
Unrealized losses on interest rate     -                     14,298
swaps
Reclassification adjustment for net
(gains) losses included in net         (438,511      )       (206,846      )
income (loss)
Other comprehensive income (loss)      44,254                1,844,346      
Comprehensive income (loss)          $ 1,780,154         $   2,188,807      
 

(1)   Derived from the audited consolidated financial statements at December
      31, 2011.
      Interest expense related to the Company’s interest rate swaps is
(2)   recorded in Realized gains (losses) on interest rate swaps on the
      Consolidated Statements of Comprehensive Income.

Contact:

Annaly Capital Management, Inc.
Investor Relations
1-888-8Annaly
www.annaly.com
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