Annaly Mortgage Management, Inc. Reports Results for 1997
NEW YORK, Feb. 3 /PRNewswire/ -- Annaly Mortgage Management, Inc. (NYSE: NLY) today reported earnings for the period ended December 31, 1997 of $4,919,000. For the period from February 18, 1997 to June 30, 1997, earnings per average share outstanding totaled $0.36. Third and fourth quarter earnings per average share outstanding were $0.32 and $0.21, respectively.
For the quarter ended December 31, 1997 net income totaled $2,380,000, or $0.21 per average share outstanding. During the fourth quarter, the net interest margin on an annualized basis increased to 1.22% from 1.16% in the third quarter. The Constant Prepayment Rate, "CPR," for the fourth quarter was 18%, which is a slight increase over the previous quarter's rate of 17%. In an attempt to reduce the effect of prepayments on interest income, the Company reduced the overall dollar price of the portfolio. For the fourth quarter, a gain from the disposition of an asset contributed $76,000, which is 3% of net income for the quarter. Additional costs incurred after the initial public offering for the fourth quarter did not increase general and administrative expense as a percentage of average assets, when compared to the third quarter. General and administrative expenses as a percentage of average assets for the third and fourth quarter were 0.24% and 0.20%, respectively. The Company expects that this ratio will continue to improve as it continues to prudently deploy its capital and expand its balance sheet.
The Company acquired mortgage-backed securities for its portfolio during the quarter, growing its asset size to $1.2 billion at December 31, 1997, with 12,713,900 common shares outstanding. All acquisitions are either FNMA, GNMA or FHLMC securities, which have an implied "AAA" rating.
In reviewing the results for the fourth quarter, Michael A.J. Farrell, Chairman and CEO of Annaly Mortgage Management, Inc., said, "Management is proud of the accomplishments during 1997. The Company began operations in mid- to late-February with its successful offering, raising $36 million in a private placement. Although it now seems so long ago, last winter and spring's interest rate climate was very different than the one that exists today. When we first began our acquisition program in February 1997, we were in a rising interest rate environment and there were projections of multiple interest rate increases. During the course of 1997, we recognized the changes taking place overseas and in credit spreads generally, and shared this information with investors on our two road shows in February and September. We incorporated these thoughts into our investment decisions, and we are pleased with the overall results. Investors who participated in our initial private placement in February and held on through December 31, had a total rate of return of 18% for 1997. This included $0.73 in dividends generated in a year when we were rarely at our optimal investment leverage, and those private shares were diluted into what is today a significant, NYSE-listed real estate investment trust. At our current equity level, we have dividend and earnings growth potential as we increase our investment activities."
At December 31, 1997, Annaly Mortgage Management was leveraged 7:1. The Company's optimal leverage level is between 10:1 and 12:1. "We obtained these earnings in the fourth quarter without reaching our desired minimum operating leverage," said Timothy J. Guba, President and Chief Operating Officer of Annaly Mortgage Management, Inc. "As the fourth quarter progressed, we made a strategic decision to slow down our acquisition pace, consistent with our emphasis on long-term earnings growth and stability. We currently plan to increase our growth in earnings per share by deploying capital using our core business strategies and avoiding the introduction of credit risk to our portfolio. We believe that the liquidity and favorable borrowing terms that the Company currently enjoys is a result of a well-thought-out capital investment policy, which is the product of years of experience in dealing in these markets. We are grateful to our shareholders for their confidence in our plan and we feel that their confidence is justified."
Mr. Farrell also noted some challenges for the future, saying, "Many of the concerns we expressed to investors in September, during our pricing in October and in our conference call in November have ultimately evidenced themselves. The dramatic flattening of the yield curve in the fourth quarter has produced an unprecedented opportunity for many borrowers to refinance their mortgage debt. By identifying this condition early in the cycle, we adjusted our investment patterns and hedging activities to reflect the changes. As a result, the Company is well positioned to produce corresponding returns. We do not think that the current dynamics in the mortgage market will be a short-term phenomenon. We continue to work hard to identify assets and prepare the Company to continue to perform well during this unique interest rate environment." |
