Annaly Capital Management Inc.’s latest numbers look relatively good on a GAAP basis, and even though when adjusted they are down a little from the previous and year-ago quarters, investors seem to think they’re not doing too bad, especially considering that its mortgage investments—as its CEO describes them—can be “a pain in the ”
“Mortgages are somewhat of a pain in the to deal with,” said Wellington Denahan, who also is the company’s chairman, during its earnings call as she discussed how the company has dealt with challenging real estate finance investment conditions.
Denahan said the company is working on some diversification away from investments in agency mortgage-backed securities sector. She also said the company has plans to securitize. “We expect to affect our first [commercial] securitization in the fourth quarter,” Denahan said. “We will securitize and retain the bottom part.”
At deadline at the end of the trading day, Yahoo Finance showed the company’s stock was up on the day in the wake of its earnings call Aug. 8, trading at more than $12 per share as compared to on average roughly $11.65 per share the day before.
Annaly generated GAAP net income for the quarter ended June 30 of $1.6 billion or $1.71 per average common share as compared to GAAP net income of $870.3 million or 90 cents per average common share for the quarter ended March 31, and GAAP net loss of $91.2 million or 10 cents per average common share for the quarter ended June 30, 2012.
But without the effect of the unrealized gains or losses on interest rate swaps and agency interest-only mortgage-backed securities, net loss on extinguishment of the 4% convertible senior notes due, impairment of goodwill and loss on previously held equity interest
Common dividends declared for the quarters ended June 30, 2013, March 31, 2013 and June 30, 2012 were $0.40, $0.45 and $0.55 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 June 30, 2013, based on the June 30, 2013 closing price of $12.57, was 12.73%, as compared to 11.33% for the quarter ended March 31, 2013, and 13.11% for the quarter ended June 30, 2012.
During the quarter ended June 30, 2013, the company disposed of $14.8 billion of investment securities—a category that includes agency MBS, agency debentures, and corporate debt—resulting in a realized gain of $148 million.
Denahan said in the company’s earnings release, “While the resulting sell-off in the bond market put pressure on asset values during the second quarter, I believe that our focus on prudent risk management and the evolution of our capital allocation strategy has helped protect our portfolio and positions Annaly to take advantage of current market opportunities. We are prepared to be opportunistic given our low leverage, strong liquidity and sizeable capital position.”
