Annaly Capital Management (NYL) reported first-quarter net income of $901.8 million, or 92 cents a share, rising 29% from year-ago levels when earnings equaled $699.9 million, or 92 cents a share.
The unchanged status of the company's earnings per share is a result of stock issuance. Annaly has 971.7 million common shares outstanding at the end of the first quarter; a year ago at that time, it had 752.4 million shares outstanding.
However, without the effect of the unrealized gains or losses on interest rate swaps and agency interest-only mortgage-backed securities, net income for the quarter totaled $529.3 million, or 54 cents a share, nearly even with the $530.6 million, or 70 cents a share, earned a year earlier. Analysts polled by Thomson Reuters had a consensus estimate of 48 cents a share.
Annaly, which invests in MBS, disposed of $5.3 billion of agency MBS and debentures, resulting in a realized gain of $80.3 million. During the same period in 2011, it disposed of $4.2 billion of agency MBS and debentures, resulting in a realized gain of $27.2 million.
The company provided an annualized return on average equity of 22.73%, down from the 24.56% offered a year ago. Without the effect of the unrealized gains or losses on interest rate swaps and agency interest-only MBS, it provided an annualized return on average equity of 13.34%, also down from 18.62% in the year-ago period.
Fixed-rate mortgage-backed securities and agency debentures comprised 91% of the company’s portfolio at the end of the quarter. The balance of the mortgage-backed securities and agency debentures was comprised of 8% adjustable-rate MBS and agency debentures and 1% LIBOR floating-rate collateralized mortgage obligations.
“Although prepayment speeds remained muted relative to the level of interest rates and the efforts of government-mandated refinancing programs, we are closely monitoring activity and believe our portfolio is prepared for a range of outcomes,” said Wellington Denahan-Norris, Annaly’s CIO and COO.
“After taking into account the effect of interest rate swaps, our portfolio of mortgage-backed securities and agency debentures was comprised of 41% floating-rate, 8% adjustable-rate and 51% fixed-rate assets,” Denahan-Norris said.