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Annaly reported earnings last night.

http://investor.annaly.com/file.aspx?IID=113558&FID=1687...

The modest rise in interest rates last quarter (since reversed) allowed for a good headline number that includes unrealized swap gains.

nnaly Capital Management, Inc. (NYSE: NLY) today reported GAAP net income for the quarter ended March 31, 2013 of $870.3 million or $0.90 per average common share as compared to GAAP net income of $901.8 million or $0.92 per average common share for the quarter ended March 31, 2012, and GAAP net income of $700.5 million or $0.70 per average common share for the quarter ended December 31, 2012.

But also decreases book value of the portfolio

At March 31, 2013, March 31, 2012, and December 31, 2012, the Company had a common stock book value per share of $15.19, $16.18 and $15.85.

Better to focus on the core earnings.

Without the effect of the unrealized gains or losses on interest rate swaps and Agency interest-only mortgage-backed securities and the net loss on extinguishment of the 4% Convertible Senior Notes due 2015 (the “4% Convertible Notes”), net income for the quarter ended March 31, 2013 was $464.4 million or $0.47 per average common share as compared to $529.3 million or $0.54 per average common share for the quarter ended March 31, 2012, and $465.1 million or $0.46 per average common share for the quarter ended December 31, 2012.

The $0.47 is in line with the recent dividend payout. There were a lot of what look like 'trading gains' in the quarter.

Agency mortgage-backed securities, Agency debentures, and corporate debt are considered Investment Securities. During the quarter ended March 31, 2013, the Company disposed of $17.2 billion of Investment Securities, resulting in a realized gain of $182.8 million. During the quarter ended March 31, 2012, the Company disposed of $5.3 billion of Investment Securities, resulting in a realized gain of $80.3 million. 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.

Not sure how long these sustain, as the portfolio was of a pretty short duration to begin with.

Leverage is up modestly at 6.6:1. Interest rate spread held from the prior quarter at 1.21% (downtick in average yield and borrowing cost).

Interestingly, the company also put out a press release indicating it would indeed look more to the commercial space post the Crexus fold-in.

http://investor.annaly.com/file.aspx?IID=113558&FID=1687...

I have been skeptical that this would happen, assuming they would just own the Crexus assets but not actually seek additional commercial MBS. How much of the port will go to commercial remains to be seen. As I recall, up to 25% is allowed, but always has been.

Ralph
Helical Investor
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