Annaly Capital Management, Inc.'s third-quarter results diverged sharply: its distribution measure inched higher, but the mortgage investor reported a $1.001 billion accounting loss and an approximately 11% decline in book value.
At Sept. 30, Annaly's book value was $17.86 per common share, $2.29 below its June 30 level of $20.15. Annaly reported a 7.6% economic loss for the quarter.
Under generally accepted accounting principles (GAAP), Annaly lost $1.36 per average common share. The previous quarter brought $827.8 million in earnings, equal to $1.06 per average common share.
Earnings available for distribution (EAD) stood at $0.80 per average common share, compared with $0.79 in the previous quarter. The latest figure was 5 cents above Annaly's declared quarterly common dividend of $0.75 per share.
Annaly says EAD adjusts for certain fair-value changes, unrealized results and items that are noncash or episodic. The company uses it as another view of portfolio performance and its capacity to pay dividends. That per-share dividend comparison does not change the GAAP loss or the decline in book value.
In its reconciliation of GAAP results to EAD, Annaly listed $4.73 billion in net losses on investments and other items and $2.98 billion in net gains on derivatives. Those are reconciliation figures. Its GAAP income statement reported $4.72 billion in investment-and-other losses and $3.07 billion in derivative gains.
Annaly's GAAP leverage rose to 8.0 times at Sept. 30 from 7.4 times at June 30. At quarter-end, Annaly held a $106.5 billion investment portfolio; Agency investments accounted for $91.8 billion of it.
Annaly Chief Executive Officer and Co-Chief Investment Officer David Finkelstein called the quarter “a challenging period for fixed income markets.” The company said it added Treasury futures to address market-driven extension.
