Annaly Lifts Earnings as Interest Margin Widens
Net interest income climbed to $488.2 million as funding costs eased from a year earlier.
Annaly Capital Management (NLY), the mortgage-finance company, lifted GAAP net income to $1.06 per average common share in the second quarter from $0.33 in the first quarter and $0.03 a year earlier.
The improvement reflected wider interest spreads and a swing in other income as Annaly expanded its investment portfolio. Annualized GAAP return on average equity rose to 19.88% from 7.15% sequentially, while the return based on earnings available for distribution increased more modestly to 15.12% from 14.58%.
Earnings available for distribution rose to $0.79 per average common share from $0.76 in the prior quarter and $0.73 a year earlier. The result marked the ninth consecutive quarter in which that measure exceeded the dividend.
Net interest income climbed to $488.2 million from $452.7 million in the first quarter, extending its increase from $273.2 million a year earlier. GAAP net interest margin widened to 1.47% from 1.41% sequentially and 1.04% a year earlier, as average asset yield increased and GAAP funding cost edged lower.
Other income swung to a $247.4 million gain from a $253.7 million loss in the first quarter. Derivative gains increased to $552.4 million, while investment and other losses narrowed to $318.5 million. Net servicing income also rose to $157.2 million from $142.6 million sequentially and $127.1 million a year earlier.
Annaly's investment portfolio grew to $139.25 billion from $134.06 billion at the end of March, led by $87.77 billion of Agency mortgage-backed securities. Its Residential Credit business issued a record 13 securitizations totaling $6.8 billion and expanded financing capacity by $740 million.
Book value increased to $20.15 a common share from $19.82 at March 31 and $18.45 a year earlier. Annaly raised its quarterly common dividend to $0.75 a share, leaving earnings available for distribution above the payout by four cents.
The company also raised $447 million through its at-the-market stock program, increasing common shares outstanding to 750.6 million from 730.3 million at the end of March. Economic leverage declined to 5.6 times from 5.7 times sequentially even as total assets grew to $143.74 billion.