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What changed in ANNALY CAPITAL MANAGEMENT INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ANNALY CAPITAL MANAGEMENT INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+661 added−523 removedSource: 10-K (2025-02-13) vs 10-K (2024-02-15)

Top changes in ANNALY CAPITAL MANAGEMENT INC's 2024 10-K

661 paragraphs added · 523 removed · 407 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

70 edited+120 added−1 removed100 unchanged
Biggest changeOur application of GAAP may produce financial results that fluctuate from one period to another. • New laws may be passed affecting the relationship between Fannie Mae, Freddie Mac and the federal government. • We may be subject to liability for potential violations of truth-in-lending or other similar consumer protection laws and regulations. • We may not be able to maintain compliance with laws and regulations applicable to our Residential Credit and MSR businesses, including through the manner in which we oversee the compliance obligations of our third party service providers. • Changes in laws or regulations governing our operations or our failure to comply with those laws or regulations may adversely affect our business. • The increased focus on ESG and climate change issues by investors, governmental bodies and other stakeholders, as well as existing and proposed laws and regulations related to these topics, may adversely affect our business and financial results and damage our reputation. • We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and security, which could increase the cost of doing business, compliance risks and potential liability. • We are subject to risks and liabilities in connection with sponsoring, investing in and managing new funds and other investment accounts, including potential regulatory risks. • Loss of our Investment Company Act exemption from registration would adversely affect us.
Biggest changeOur application of GAAP produces financial results that fluctuate from one period to another. • Any new laws modifying the relationship between Fannie Mae, Freddie Mac and the federal government could affect our business model or business operations. • The Truth in Lending Act or other similar consumer protection laws and regulations expose an owner of whole mortgage loans and mortgage servicing rights to potential civil and administrative liability. • Our Residential Credit and MSR businesses are subject to complex and evolving legal and regulatory requirements, including how we oversee and are responsible for the actions of our third-party service providers, which exposes us to increased compliance, legal, and regulatory risk. • Changes in laws or regulations governing our operations or our failure to comply with those laws or regulations affects our business. • The focus on environmental, social, and governance and climate change issues by some investors, governmental bodies and other stakeholders, as well as existing and proposed laws and regulations related to these topics, and any divergence in the approach to these subjects by investors, governmental bodies and other stakeholders, affects our business, financial results and reputation. • We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and security, which increases the cost of doing business, compliance risks and potential liability. • We are subject to risks and liabilities in connection with sponsoring, investing in and managing new funds and other investment accounts, including potential regulatory risks. • Loss of our Investment Company Act exemption from registration would adversely affect us.
Risks of Ownership of Our Common Stock • Our charter does not permit ownership of over 9.8% in number of shares or value of our common stock or any class of our preferred stock. • Provisions contained in Maryland law may have anti-takeover effects, potentially preventing investors from receiving a “control premium” for their shares. • We have not established a minimum dividend payment level and cannot assure stockholders of our ability to pay dividends in the future. • Our reported GAAP financial results may not be an accurate indicator of future taxable income and dividend distributions.
Risks of Ownership of Our Common Stock • Our charter does not permit ownership of over 9.8% in number of shares or value of our common stock or any class of our preferred stock. • Provisions contained in Maryland law have anti-takeover effects, potentially preventing investors from receiving a “control premium” for their shares. • We have not established a minimum dividend payment level and cannot assure stockholders of our ability to pay dividends in the future. • Our reported GAAP financial results may not be an accurate indicator of future taxable income and dividend distributions.
This means that their interest rates may vary over time based upon changes in an objective index, such as: • Treasury Rate. A monthly or weekly average yield of benchmark U.S. Treasury securities, as published by the Federal Reserve Board. • Secured Overnight Financing Rate. A measure of the cost of borrowing cash overnight collateralized by U.S.
This means that their interest rates may vary over time based upon changes in an objective index, such as: • Treasury Rate. A monthly or weekly average yield of benchmark U.S. Treasury securities, as published by the Federal Reserve Board. • Secured Overnight Financing Rate (“SOFR”). A measure of the cost of borrowing cash overnight collateralized by U.S.
The Maryland Control Share Acquisition Act provides that, subject to certain exceptions, holders of “control shares” (defined as voting shares that, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding 20 ANNALY CAPITAL MANAGEMENT, INC.
The Maryland Control Share Acquisition Act provides that, subject to certain exceptions, holders of “control shares” (defined as voting shares that, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding 19 ANNALY CAPITAL MANAGEMENT, INC.
Furthermore, if any of our potential lenders or existing lenders is unwilling or unable to provide us with financing or if we are not able to renew or replace maturing borrowings, we could be forced to sell our assets at an inopportune time when prices are depressed.
Furthermore, if any of our potential lenders or existing lenders are unwilling or unable to provide us with financing or if we are not able to renew or replace maturing borrowings, we could be forced to sell our assets at an inopportune time when prices are depressed.
Our Insider Trading Policy prohibits our directors, officers and employees, from (1) holding our stock in a margin account as eligible collateral, or otherwise pledging our stock as collateral for a loan, or (2) engaging in any hedging transactions with respect to our equity securities held by them. • Our executive officers are subject to two clawback policies, one that covers financial restatements and a second for misconduct. • Our executive officers are subject to stock ownership guidelines and holding restrictions. • Stockholders holding 25% of our common stock have the right to call a special meeting.
Our Insider Trading Policy prohibits our directors, officers and employees, from (1) holding our stock in a margin account as eligible collateral, or otherwise pledging our stock as collateral for a loan, or (2) engaging in any hedging transactions with respect to our equity securities held by them. • Our executive officers are subject to two clawback policies, one that covers financial restatements and another that covers misconduct. • Our executive officers and directors are subject to stock ownership guidelines and holding restrictions. • Stockholders holding 25% of our common stock have the right to call a special meeting.
Investment and Market Related Risks • We may experience declines in the market value of our assets. • Investments in MSR may expose us to additional risks. • A prolonged economic slowdown or declining real estate values could impair the assets we may own. • An increase in interest rates may adversely affect the market value of our interest earning assets and, therefore, also our book value. • Actions by the Federal Reserve may affect the price and returns of our assets. • We invest in securities that are subject to mortgage credit risk. • Our investments in real estate and other securities are subject to changes in credit spreads as well as available market liquidity, which could adversely affect our ability to realize gains on the sale of such investments. • Geographic concentration exposes investors to greater risk of default and loss. • Inadequate property insurance coverage could have an adverse impact on our operating results. • Our assets may become non-performing or sub-performing assets in the future. • We may be required to repurchase residential mortgage loans or indemnify investors if we breach representations and warranties. • Our and our third party service providers’ and servicers’ due diligence of potential assets may not reveal all of the weaknesses in such assets. • When we foreclose on an asset, we may come to own the property securing the loan. • Proposals to acquire mortgage loans by eminent domain may adversely affect the value of our assets. • Subordinated tranches of non-Agency mortgage-backed securities are subordinate in right of payment to more senior securities. • Our hedging strategies may be costly, and may not hedge our risks as intended. • We are subject to risks of loss from weather conditions, man-made or natural disasters and the direct and indirect effects of climate change.
Investment and Market Related Risks • We may experience declines in the market value of our assets. • Investments in MSR expose us to additional risks. • A prolonged economic slowdown or declining real estate values could impair the assets we may own. • An increase in interest rates adversely affects the market value of our interest earning assets and, therefore, also our book value. • Actions by the Federal Reserve may affect the price and returns of our assets. • We invest in securities that are subject to mortgage credit risk. • Our investments in real estate and other securities are subject to changes in credit spreads as well as available market liquidity, which affect our ability to realize gains on the sale of such investments. • Geographic concentration exposes investors to greater risk of default and loss. • Inadequate property insurance coverage impacts on our operating results. • Our assets may become non-performing or sub-performing assets in the future. • We may be required to repurchase residential mortgage loans or indemnify investors if we breach representations and warranties. • Our and our third party service providers’ and servicers’ due diligence of potential assets may not reveal all of the weaknesses in such assets. • When we foreclose on an asset, we may come to own the property securing the loan. • Proposals to acquire mortgage loans by eminent domain affect the value of our assets. • Subordinated tranches of non-Agency mortgage-backed securities are subordinate in right of payment to more senior securities. • Our hedging strategies may be costly, and may not hedge our risks as intended. • We are subject to risks of loss from weather conditions, man-made or natural disasters and the direct and indirect effects of climate change.
We also have a subsidiary that operates as a licensed mortgage aggregator and master servicer, which subjects it to individual state licensing laws and to supervision and examination by federal authorities, including the Consumer Financial Protection Bureau ("CFPB"), the U.S. Department of Housing and Urban Development (“HUD”), the SEC as well as various state licensing, supervisory and administrative agencies.
We also have a subsidiary that operates as a licensed mortgage aggregator and master servicer, which subjects it to individual state licensing laws and to supervision and examination by federal authorities, including the Consumer Financial Protection Bureau (“CFPB”), the U.S. Department of Housing and Urban Development (“HUD”), the SEC as well as various state licensing, supervisory and administrative agencies.
Our Investor Relations Department can be contacted at: Annaly Capital Management, Inc. 1211 Avenue of the Americas New York, New York 10036 Attn: Investor Relations Telephone: 888-8ANNALY E-mail: investor@annaly.com The SEC also maintains a website that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov . 11 ANNALY CAPITAL MANAGEMENT, INC.
Our Investor Relations Department can be contacted at: Annaly Capital Management, Inc. 1211 Avenue of the Americas New York, New York 10036 Attn: Investor Relations Telephone: 888-8ANNALY E-mail: investor@annaly.com The SEC also maintains a website that contains reports, proxy and information statements and other information we file with the SEC at www.sec.gov . 10 ANNALY CAPITAL MANAGEMENT, INC.
To the extent that we are not able to profitably execute future securitizations of residential mortgage loans or other assets, including for the reasons described above or for other reasons, it could have a material adverse impact on our business and financial results. 19 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
To the extent that we are not able to profitably execute future securitizations of residential mortgage loans or other assets, including for the reasons described above or for other reasons, it could have a material adverse impact on our business and financial results. 18 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
Bankruptcy Code. This special treatment would allow the lenders under these agreements to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to liquidate the collateral under these agreements without delay. We may exceed our target leverage ratios. We generally expect to maintain an economic leverage ratio of less than 10:1.
Bankruptcy Code. This special treatment would allow the lenders under these agreements to avoid the automatic stay provisions of the U.S. Bankruptcy Code and to liquidate the collateral under these agreements without delay. We may exceed our overall Company target leverage ratios. We generally expect to maintain an overall Company economic leverage ratio of less than 10:1.
We regularly monitor our investments and the income from these investments and, to the extent we enter into hedging transactions, we monitor income from our hedging transactions as well, so as to ensure at all times that we maintain our qualification as a REIT, our exemption from registration under the Investment Company Act and our exemption from registration as a commodity pool operator ("CPO") with the U.S.
We regularly monitor our investments and the income from these investments and, to the extent we enter into hedging transactions, we monitor income from our hedging transactions as well, so as to ensure at all times that we maintain our qualification as a REIT, our exemption from registration under the Investment Company Act and our exemption from registration as a commodity pool operator (“CPO”) with the U.S.
Commodity Futures Trading Commission ("CFTC"). Arcola is a member of FINRA, an SEC registered broker-dealer and is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees.
Commodity Futures Trading Commission (“CFTC”). Arcola is a member of FINRA, an SEC registered broker-dealer and is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees.
Periods of rising interest rates or a relatively flat or inverted yield curve could decrease or eliminate the spread between the interest payments we earn on our interest earning assets and the interest payments we must make on our borrowings. 16 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
Periods of rising interest rates or a relatively flat or inverted yield curve could decrease or eliminate the spread between the interest payments we earn on our interest earning assets and the interest payments we must make on our borrowings. 15 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
This illiquidity negatively affected both the terms and availability of financing for all mortgage-related assets. Further increased volatility and deterioration in the markets for mortgages and mortgage-related assets as well as the broader financial markets may adversely affect the performance and market value of our Agency mortgage-backed securities.
This illiquidity negatively affected both the terms and availability of financing for all mortgage-related assets. Volatility and deterioration in the markets for mortgages and mortgage-related assets as well as the broader financial markets may adversely affect the performance and market value of our Agency mortgage-backed securities.
If we roll our TBA dollar roll positions when they have a negative carry, the positions would decrease net income and amounts available for distributions to shareholders. There may be situations in which we are unable or unwilling to roll our TBA dollar roll positions.
If we roll our TBA dollar roll positions when they have a negative carry, the positions would decrease net income and amounts available for distributions to shareholders. There have in the past and may in the future be situations in which we are unable or unwilling to roll our TBA dollar roll positions.
Counterparty Risks • The soundness of our counterparties and other financial institutions could adversely affect us. • We are subject to counterparty risk and may be unable to seek indemnity or require counterparties to repurchase residential whole loans if they breach representations and warranties, which could cause us to suffer losses. • Our rights under our repurchase and derivative agreements are subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders.
Counterparty Risks • The soundness of our counterparties and other financial institutions affects us. • We are subject to counterparty risk and may be unable to seek indemnity or require counterparties to repurchase residential whole loans if they breach representations and warranties, which could cause us to suffer losses. • Our rights under our repurchase and derivative agreements are subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders.
Risk Factors • The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to remain qualified as a REIT. • Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities. • Qualifying as a REIT involves highly technical and complex provisions of the Code. • The tax on prohibited transactions limits our ability to engage in certain transactions. • Certain financing activities may subject us to U.S. federal income tax and could have negative tax consequences for our stockholders. • Uncertainty exists with respect to the treatment of our TBAs for purposes of the REIT asset and income tests. • Dividends payable by REITs generally receive different tax treatment than dividend income from regular corporations. • New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to remain qualified as a REIT.
Risk Factors • Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us. • The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to remain qualified as a REIT. • Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities. • Qualifying as a REIT involves highly technical and complex provisions of the Code. • The tax on prohibited transactions limits our ability to engage in certain transactions. • Certain financing activities may subject us to U.S. federal income tax and could have negative tax consequences for our stockholders. • Uncertainty exists with respect to the treatment of our TBAs for purposes of the REIT asset and income tests. • Dividends payable by REITs generally receive different tax treatment than dividend income from regular corporations. • New legislation or administrative or judicial action, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to remain qualified as a REIT.
Risk Factors Differences in timing of interest rate adjustments on our interest earning assets and our borrowings may adversely affect our profitability. We rely primarily on short-term borrowings to acquire interest earning assets with long-term maturities. Some of the interest earning assets we acquire are adjustable-rate interest earning assets.
Risk Factors Differences in timing of interest rate adjustments on our interest earning assets and our borrowings affect our profitability. We rely primarily on short-term borrowings to acquire interest earning assets with long-term maturities. Some of the interest earning assets we acquire are adjustable-rate interest earning assets.
Other Risks • The market price and trading volume of our shares of common stock may be volatile. • We may change our policies without stockholder approv al. 14 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
Other Risks • The market price and trading volume of our shares of common stock may be volatile. • We may change our policies without stockholder approv al. 13 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
Moreover, we cannot assure you that we will be able to access the securitization market or be able to do so at favorable rates. The inability to securitize our portfolio could adversely affect our performance and our ability to grow our business. Our use of non-recourse securitizations may expose us to risks which could result in losses to us.
Moreover, we cannot assure you that we will be able to access the securitization market or be able to do so at favorable rates. The inability to securitize our portfolio could adversely affect our performance and our ability to grow our business. Our use of non-recourse securitizations exposes us to risks which could result in losses to us.
Our use of derivatives may expose us to counterparty and liquidity risks. Most swaps that we enter into must be executed on a Swap Extension Facility and/or be cleared by a Derivatives Clearing Organization (“DCO”), both of which are regulated by the CFTC.
Our use of derivatives exposes us to counterparty and liquidity risks. Most swaps that we enter into must be executed on a Swap Extension Facility and/or be cleared by a Derivatives Clearing Organization (“DCO”), both of which are regulated by the CFTC.
AND SUBSIDIARIES ITEM 1. BUSINESS Competition We operate in a highly competitive market for investment opportunities. Competition may limit our ability to acquire desirable investments in our target assets and could also affect the pricing of these investments. In acquiring our target assets, we will compete with financial institutions, institutional investors, other lenders, government entities and certain other REITs.
Competition We operate in a highly competitive market for investment opportunities. Competition may limit our ability to acquire desirable investments in our target assets and could also affect the pricing of these investments. In acquiring our target assets, we will compete with financial institutions, institutional investors, other lenders, government entities and certain other REITs.
DCOs are subject to regulatory oversight and use extensive risk management processes, which result in additional expenses and collateral requirements for our swaps relative to uncleared swaps. We access the DCO through several Futures Commission Merchants (“FCMs”).
DCOs are subject to regulatory oversight and use extensive risk management processes, which result in expenses and collateral requirements for our swaps. We access the DCO through several Futures Commission Merchants (“FCMs”).
Risk Factors Summary of Risk Factors Risks Related to Our Liquidity and Funding • Our strategy involves the use of leverage, which increases the risk that we may incur substantial losses. • Our use of leverage may result in margin calls and defaults and force us to sell assets under adverse market conditions. • We may exceed our target leverage ratios. • We may not be able to achieve our optimal leverage. • Failure to procure or renew funding on favorable terms, or at all, would adversely affect our results and financial condition. • Failure to effectively manage our liquidity would adversely affect our results and financial condition. • Volatile market conditions for our assets can result in contraction in liquidity for those assets and the related financing. • An increase in the interest payments on our borrowings relative to the interest we earn on our interest earning assets may adversely affect our profitability. • Differences in timing of interest rate adjustments on our interest earning assets and our borrowings may adversely affect our profitability. • It may be uneconomical to “roll” our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts. • Our use of derivatives may expose us to counterparty and liquidity risks. • Securitizations expose us to additional risks. • Our use of non-recourse securitizations may expose us to risks which could result in losses to us. • Counterparties may require us to enter into covenants that restrict our investment strategy. • We may be unable to profitably execute or participate in future securitization transactions.
Risk Factors Summary of Risk Factors Risks Related to Our Liquidity and Funding • Our strategy involves the use of leverage, which increases the risk that we may incur substantial losses. • Our use of leverage may result in margin calls and defaults and force us to sell assets under adverse market conditions. • We may exceed our overall Company target leverage ratios. • We may not be able to consistently achieve our optimal leverage. • Failure to procure or renew funding on favorable terms, or at all, affects our results and financial condition. • Effectively managing our liquidity affects our results and financial condition. • Volatile market conditions for our assets can result in contraction in liquidity for those assets and the related financing. • An increase in the interest payments on our borrowings relative to the interest we earn on our interest earning assets adversely affects our profitability. • Differences in timing of interest rate adjustments on our interest earning assets and our borrowings affect our profitability. • It may be uneconomical to “roll” our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts. • Our use of derivatives exposes us to counterparty and liquidity risks. • Securitizations expose us to additional risks. • Our use of non-recourse securitizations exposes us to risks which could result in losses to us. • Counterparties may require us to enter into restrictive covenants. • We may be unable to profitably execute or participate in future securitization transactions.
Our use of leverage may result in margin calls and defaults and force us to sell assets under adverse market conditions. Because of our leverage, a decline in the value of our interest earning assets may result in our lenders initiating margin calls.
Our use of leverage may result in margin calls and defaults and force us to sell assets under adverse market conditions. Because of our leverage, a decline in the value of our interest earning assets has in the past and may in the future result in our lenders initiating margin calls.
Risks Related to Our Taxation as a REIT • Our failure to maintain our qualification as a REIT would have adverse tax consequences. • Our distribution requirements could adversely affect our ability to execute our business plan. • Distributions to tax-exempt investors may be classified as unrelated business taxable income. • We may choose to pay dividends in our own stock. • Our TRSs cannot constitute more than 20% of our total assets. • TRSs are subject to tax at the regular corporate rates, are not required to distribute dividends, and the amount of dividends a TRS can pay to its parent REIT may be limited by REIT gross income tests. • If transactions between a REIT and a TRS are entered into on other than arm’s-length terms, the REIT may be subject to a penalty tax. • Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow. • Complying with REIT requirements may cause us to forgo otherwise attractive opportunities and may force us to liquidate otherwise attractive investments. • Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us. 13 ANNALY CAPITAL MANAGEMENT, INC.
Risks Related to Our Taxation as a REIT • Our failure to maintain our qualification as a REIT would have adverse tax consequences. • Our distribution requirements could adversely affect our ability to execute our business plan. • Distributions to tax-exempt investors may be classified as unrelated business taxable income. • We have flexibility to pay dividends in our own stock. • Our TRSs cannot constitute more than 20% of our total assets. • TRSs are subject to tax at the regular corporate rates, are not required to distribute dividends, and the amount of dividends a TRS can pay to its parent REIT may be limited by REIT gross income tests. • If transactions between a REIT and a TRS are entered into on other than arm’s-length terms, the REIT may be subject to a penalty tax. • Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flow. • Complying with REIT requirements may cause us to forgo otherwise attractive opportunities and may force us to liquidate otherwise attractive investments. 12 ANNALY CAPITAL MANAGEMENT, INC.
For example, if we increase the amount of borrowings under our master repurchase agreements with our existing or new counterparties or the market value of our portfolio declines, our economic leverage ratio would increase.
For example, if we increase the amount of borrowings under our master repurchase agreements or other borrowing arrangements with our existing or new counterparties or the market value of our portfolio declines, our economic leverage ratio would increase.
Provisions contained in our charter and bylaws, as well as the Maryland General Corporation Law (the “MGCL”), may have anti-takeover effects that delay, defer or prevent a takeover attempt, which may prevent stockholders from receiving a “control premium” for their shares.
Provisions contained in Maryland law have anti-takeover effects, potentially preventing investors from receiving a “control premium” for their shares. Provisions contained in our charter and bylaws, as well as the Maryland General Corporation Law (the “MGCL”), have anti-takeover effects that could delay, defer or prevent a takeover attempt, which may prevent stockholders from receiving a “control premium” for their shares.
An increase in the interest payments on our borrowings relative to the interest we earn on our interest earning assets may adversely affect our profitability. We generally earn money based upon the spread between the interest payments we earn on our interest earning assets and the interest payments we must make on our borrowings.
An increase in the interest payments on our borrowings relative to the interest we earn on our interest earning assets adversely affects our profitability. We generally earn money based upon the spread between the interest payments we earn on our interest earning assets and the interest payments we must make on our borrowings.
Because the standardized swaps available on Swap Execution Facilities and cleared through DCOs are not as customizable as uncleared swaps, we may bear additional basis risk from hedge positions that do not exactly reflect the interest rate risk on the asset being hedged.
Because the standardized swaps available on Swap Execution Facilities and cleared through DCOs are not fully customizable, we may bear basis risk from hedge positions that do not exactly reflect the interest rate risk on the asset being hedged.
We have submitted a claim for the relief set forth in the no-action relief entitled “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts” and believe we meet the criteria for such relief set forth therein. 9 ANNALY CAPITAL MANAGEMENT, INC.
We have submitted a claim for the relief set forth in the no-action relief entitled “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts” and believe we meet the criteria for such relief set forth therein.
If the interest payments on our borrowings increase relative to the interest we earn on our interest earning assets, our profitability may be adversely affected. A significant portion of our assets are longer-term, fixed-rate interest earning assets, and a significant portion of our borrowings are shorter-term, floating-rate borrowings.
Our profitability is affected if the interest payments on our borrowings increase relative to the interest we earn on our interest earning assets. A significant portion of our assets are longer-term, fixed-rate interest earning assets, and a significant portion of our borrowings are shorter-term, floating-rate borrowings.
Changes in accounting interpretations or assumptions could impact our financial statements and our ability to prepare our financial statements in a timely fashion. Our inability to prepare our financial statements in a timely fashion in the future would likely adversely affect our share price significantly.
Changes in accounting interpretations or assumptions have in the past and may in the future impact our financial statements and our ability to prepare our financial statements in a timely fashion. Our inability to prepare our financial statements in a timely fashion in the future would likely adversely affect our share price significantly.
Concerns over economic recession, pandemic diseases, geopolitical issues including events such as the war in Ukraine, trade wars, unemployment, inflation, government actions to combat inflation, rising interest rates, the availability and cost of financing, the mortgage market, the repurchase agreement market and a declining real estate market or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets.
Concerns over economic recession, pandemic diseases, geopolitical issues, trade wars, unemployment, inflation, government actions to combat inflation, rising interest rates, the availability and cost of financing, the mortgage market, the repurchase agreement market, a declining real estate market or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets.
These conditions could force us to sell our assets at inopportune times or otherwise cause us to potentially revise our strategic business initiatives. Volatile market conditions for our assets can result in contraction in liquidity for those assets and the related financing.
These conditions have in the past and may in the future force us to sell our assets at inopportune times or otherwise cause us to potentially revise our strategic business initiatives. Volatile market conditions for our assets can result in contraction in liquidity for those assets and the related financing.
We utilize non-recourse securitizations of our assets in mortgage loans, especially loans that we originate, when they are available. Prior to any such financing, we may seek to finance assets with relatively short-term facilities until a sufficient portfolio is accumulated.
We utilize non-recourse securitizations of our assets in mortgage loans, especially loans that we originate, when they are available. Prior to any such financing, we have in the past sought and may in the future seek to finance assets with relatively short-term facilities until a sufficient portfolio is accumulated.
In addition, the underwriter(s) or placement agent(s) we select for securitization transactions, and the terms of their engagement, can also impact the profitability of our securitization transactions.
In addition, the underwriter(s) or placement agent(s) we select for securitization transactions, and the terms of their engagement, impacts the profitability of our securitization transactions.
Moreover, our ability to grow will be dependent on our ability to procure additional funding. To the extent we are not able to raise additional funds through the issuance of additional equity or borrowings, our growth will be constrained. Failure to effectively manage our liquidity would adversely affect our results and financial condition.
Moreover, our ability to grow will be dependent on our ability to procure additional funding. To the extent we are not able to raise additional funds through the issuance of additional equity or borrowings, our growth will be constrained. Effectively managing our liquidity affects our results and financial condition.
We may be unable to profitably execute or participate in future securitization transactions. There are a number of factors that can have a significant impact on whether we are able to execute or participate in a securitization transaction, and whether such a transaction is profitable to us or results in a loss.
There are a number of factors that can have a significant impact on whether we are able to execute or participate in a securitization transaction, and whether such a transaction is profitable to us or results in a loss.
If we are unable to obtain and renew short-term facilities or to consummate securitizations to finance our assets on a long-term basis, we may be required to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price. To the extent that we are unable to obtain 18 ANNALY CAPITAL MANAGEMENT, INC.
If we are unable to obtain and renew short-term facilities or to consummate securitizations to finance our assets on a long-term basis, we may be required to seek other forms of potentially less attractive financing or to liquidate assets at an inopportune time or price.
Subject to the limitations of applicable securities and state corporation laws, we can return capital by making purchases of our own capital stock or through payment of dividends. 10 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES ITEM 1. BUSINESS Available Information Our website is www.annaly.com .
Subject to the limitations of applicable securities and state corporation laws, we can return capital by making purchases of our own capital stock or through payment of dividends. Available Information Our website is www.annaly.com .
Additionally, such valuations may fluctuate over short periods of time. We have made certain accounting elections which may result in volatility in our periodic net income, as computed in accordance with GAAP. For example, changes in fair value of certain instruments are reflected in GAAP net income (loss) while others are reflected in Other comprehensive income (loss).
We have made certain accounting elections which may result in volatility in our periodic net income, as computed in accordance with GAAP. For example, changes in fair value of certain instruments are reflected in GAAP net income (loss) while others are reflected in Other comprehensive income (loss).
In the event of a default by the DCO or FCM, we also bear market risk, if the asset or liability being hedged is no longer effectively hedged. We also bear fees for use of the DCO and Swap Execution Facility, as well as risks associated with trade errors.
In the event of a default by the DCO or FCM, we also bear market risk, if the asset or liability being hedged is no longer effectively hedged. 16 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors We also bear fees for use of the DCO and Swap Execution Facility, as well as risks associated with trade errors.
Our business, results of operations and financial condition may be materially adversely affected by disruptions in the financial markets. We cannot assure you that, under such extreme conditions, these markets will remain an efficient source of financing for our assets.
Our business, results of operations and financial condition have in the past and may in the future be materially affected by disruptions in the financial markets. We cannot assure you that these markets will remain an efficient source of financing for our assets.
For any cleared swap, we bear the credit risk of both the DCO and the relevant FCM, in the form of potential late or unrecoverable payments, potential difficulty 17 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors or delay in accessing collateral that we have posted, and potential loss of any positive market value of the swap position.
For any cleared swap, we bear the credit risk of both the DCO and the relevant FCM, in the form of potential late or unrecoverable payments, potential difficulty or delay in accessing collateral that we have posted, and potential loss of any positive market value of the swap position.
Operational and Cybersecurity Risks • Inaccurate models or the data used by models may expose us to risk. • We are highly dependent on information systems and networks, many of which are operated by third parties, and any failure of these systems or networks could materially and adversely affect our business. • Cyberattacks or other information security breaches could adversely affect our business, reputation and financial condition. • We depend on third party service providers, including mortgage loan servicers and sub-servicers, for a variety of services related to our business. • Our investments in residential whole loans subject us to servicing-related risks. • The performance of loans underlying our MSR related assets may be adversely affected by the performance of the related mortgage servicer. • An increase or decrease in prepayment rates may adversely affect our profitability. • We are subject to reinvestment risk. • Competition may affect availability and pricing of our target assets. • We may enter into new lines of business, acquire other companies or engage in other strategic initiatives. • Some of our investments, including those related to non-prime loans, involve credit risk. • If we are unable to attract, motivate and retain qualified talent, including our key personnel, it could materially and adversely affect us.
Operational and Cybersecurity Risks • Reliance on inaccurate models or the data used by models exposes us to risk. • We are highly dependent on information systems and networks, many of which are operated by third parties. • Cyberattacks or other information security breaches of our Company’s, service providers’ or counterparties’ systems or networks affect our business, reputation and financial condition. • We may utilize artificial intelligence, which could expose us to liability and affect our business. • We depend on third party service providers, including mortgage loan servicers and sub-servicers, for a variety of services related to our business. • Our investments in residential whole loans subject us to servicing-related risks. • The performance of loans underlying our MSR related assets is affected by the performance of the related mortgage servicer. • We are subject to prepayment rate risk. • We are subject to reinvestment risk. • Competition may affect availability and pricing of our target assets. • We may enter into new lines of business, acquire other companies or engage in other strategic initiatives. • Some of our investments, including those related to non-prime loans, involve credit risk. • Any inability to attract, motivate and retain qualified talent, including our key personnel, affects us.
However, we may not be able to achieve our desired leverage if we determine that the leverage would expose us to excessive risk; our lenders do not make funding available to us at acceptable rates; or our lenders require that we provide additional collateral to cover our borrowings. 15 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
However, we may not be able to consistently achieve our desired leverage if we determine that the leverage would expose us to excessive risk, our lenders do not make funding available to us at acceptable rates, or our lenders require that we provide additional collateral to cover our borrowings.
AND SUBSIDIARIES Item 1A. Risk Factors financing for our assets, to the extent that we retain such assets in our portfolio, our returns on investment and earnings will be negatively impacted. Counterparties may require us to enter into covenants that restrict our investment strategy.
To the extent that we are unable to obtain financing for our assets, and to the extent that we retain such assets in our portfolio, our returns on investment and earnings will be negatively impacted. 17 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors Counterparties may require us to enter into restrictive covenants.
In September 2008, Fannie Mae and Freddie Mac were placed into the conservatorship of the FHFA, their federal regulator, pursuant to its powers under The Federal Housing Finance Regulatory Reform Act of 2008, a part of the Housing and 21 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Risk Factors In September 2008, Fannie Mae and Freddie Mac were placed into the conservatorship of the FHFA, their federal regulator, pursuant to its powers under The Federal Housing Finance Regulatory Reform Act of 2008, a part of the Housing and Economic Recovery Act of 2008.
RISK FACTORS Page Summary of Risk Factors 13 Risks Related to Our Liquidity and Funding 15 Risks of Ownership of Our Common Stock 20 Compliance, Regulatory & Legal Risks 21 Risks Related to Our Taxation as a REIT 26 Counterparty Risks 31 Investment and Market Related Risks 32 Operational and Cybersecurity Risks 36 Other Risks 41 12 ANNALY CAPITAL MANAGEMENT, INC.
RISK FACTORS Page Summary of Risk Factors 12 Risks Related to Our Liquidity and Funding 14 Risks of Ownership of Our Common Stock 19 Compliance, Regulatory & Legal Risks 20 Risks Related to Our Taxation as a REIT 25 Counterparty Risks 31 Investment and Market Related Risks 31 Operational and Cybersecurity Risks 37 Other Risks 43 11 ANNALY CAPITAL MANAGEMENT, INC.
We continue to assess our business, risk management and compliance practices to conform to developments in the regulatory environment. We have elected, organized and operated in a manner that qualifies us to be taxed as a REIT under the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder (the “Code”).
We have elected, organized and operated in a manner that qualifies us to be taxed as a REIT under the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder (the “Code”).
Compliance, Regulatory & Legal Risks Accounting rules related to certain of our transactions are highly complex and involve significant judgment and assumptions. Our application of GAAP may produce financial results that fluctuate from one period to another.
Due to these differences, our reported GAAP financial results could materially differ from our determination of taxable income. Compliance, Regulatory & Legal Risks Accounting rules related to certain of our transactions are highly complex and involve significant judgment and assumptions. Our application of GAAP produces financial results that fluctuate from one period to another.
Risk Factors Failure to procure or renew funding on favorable terms, or at all, would adversely affect our results and financial condition. One or more of our lenders could be unwilling or unable to provide us with financing. This could potentially increase our financing costs and reduce our liquidity.
Failure to procure or renew funding on favorable terms, or at all, affects our results and financial condition. 14 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors One or more of our lenders could be unwilling or unable to provide us with financing. This potentially increases our financing costs and reduces our liquidity.
This code is applicable to our directors, officers and employees. • We have adopted Corporate Governance Guidelines which, in conjunction with the charters of our Board committees, provide the framework for the governance of our company. • We have procedures by which any of our employees, officers or directors may raise concerns confidentially about our company’s conduct, accounting, internal controls or auditing matters with the Chair of the Board, the independent directors, or the Chair of the Audit Committee or through our whistleblower phone hotline or e-mail inbox. • We have adopted an Insider Trading Policy that prohibits our directors, officers and employees, as well as those of our subsidiaries from buying or selling our securities on the basis of material nonpublic information and prohibits communicating material nonpublic information about our company to others.
BUSINESS accounting, internal controls or auditing matters with the Chair of the Board, the independent directors, or the Chair of the Audit Committee or through our whistleblower phone hotline or e-mail inbox. • We have adopted an Insider Trading Policy that prohibits our directors, officers and employees, as well as those of our subsidiaries from buying or selling our securities on the basis of material nonpublic information and prohibits communicating material nonpublic information about our company to others.
New laws may be passed affecting the relationship between Fannie Mae, Freddie Mac and the federal government. The interest and principal payments we expect to receive on the Agency mortgage-backed securities in which we invest are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae. Principal and interest payments on Ginnie Mae certificates are directly guaranteed by the U.S. government.
Any new laws modifying the relationship between Fannie Mae, Freddie Mac and the federal government could affect our business model or business operations. The interest and principal payments we expect to receive on the Agency mortgage-backed securities in which we invest are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
If we fail to meet or satisfy any of these covenants, we would be in default under these agreements, and our lenders could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral.
Failing to meet or satisfy any of these covenants is a default under these agreements, and our lenders or counterparties could elect to declare outstanding amounts due and payable, terminate their commitments, require the posting of additional collateral and enforce their interests against existing collateral. A default under one agreement can trigger cross-default rights under other agreements.
Differences exist in the accounting for GAAP net income and REIT taxable income that can lead to significant variances in the amount and timing of when income and losses are recognized under these two measures. Due to these differences, our reported GAAP financial results could materially differ from our determination of taxable income.
Differences exist in the accounting for GAAP net income and REIT taxable income that have in the past and may in the future lead to significant variances in the amount and timing of when income and losses are recognized under these two measures.
If or when we obtain debt financing, lenders (especially in the case of credit facilities) may impose restrictions on us that would affect our ability to incur additional debt, make certain allocations or acquisitions, reduce liquidity below certain levels, make distributions to our stockholders, or redeem debt or equity securities, and may impact our flexibility to determine our operating policies and strategies.
Certain lenders and counterparties impose restrictions on us that would affect our ability to incur additional debt, make certain allocations or acquisitions, allow liquidity or stockholders’ equity to fall below certain levels, increase leverage, make distributions to our stockholders, or redeem debt or equity securities, and may impact our flexibility to determine our operating policies and strategies.
Leverage, which is fundamental to our investment strategy, creates significant risks. The risks associated with leverage are more acute during periods of economic slowdown or recession. Because of our leverage, we may incur substantial losses if our borrowing costs increase, and we may be unable to execute our investment strategy if leverage is unavailable or is unavailable on attractive terms.
Because of our leverage, we have in the past and may in the future incur substantial losses if our borrowing costs increase, and we may be unable to execute our investment strategy if leverage is unavailable or is unavailable on attractive terms.
The economic leverage ratio on Agency mortgage-backed securities may exceed the target ratio for the portfolio as a whole. Because credit assets are generally less levered than Agency mortgage-backed securities, at a given economic leverage ratio an increased allocation to credit assets generally means an increase in economic leverage on Agency mortgage-backed securities.
Because credit assets are generally less levered than Agency mortgage-backed securities, at a given economic leverage ratio an increased allocation to credit assets generally means an increase in economic leverage on Agency mortgage-backed securities. The economic leverage on our Agency mortgage-backed securities is the primary driver of the risk of being unable to meet margin calls discussed above.
Principal and interest payments relating to the securities issued by Fannie Mae and Freddie Mac are only guaranteed by each respective Agency.
Principal and interest payments on Ginnie Mae certificates are directly guaranteed by the U.S. government. Principal and interest payments relating to the securities issued by Fannie Mae and Freddie Mac are only guaranteed by each respective Agency. 20 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
If we were to liquidate a particular asset, the realized value may be more than or less than the amount at which such asset was recorded. Accordingly, the value of our common shares could be adversely affected by our determinations regarding the fair value of our investments, whether in the applicable period or in the future.
If we were to liquidate a particular asset, the realized value may be more than or less than the amount at which such asset was recorded.
ITEM 1. BUSINESS partnering with well-established non-profit organizations and through Annaly’s corporate giving, employee volunteerism and our employee charity match program. Regulatory Requirements The financial services industry is subject to extensive regulation and supervision, and changes to regulations and supervisory practices are continuously being considered by regulators and policy makers worldwide.
Regulatory Requirements The financial services industry is subject to extensive regulation and supervision, and changes to regulations and supervisory practices are continuously being considered by regulators and policy makers worldwide. We continue to assess our business, risk management and compliance practices to conform to developments in the regulatory environment.
The economic leverage on our Agency mortgage-backed securities is the primary driver of the risk of being unable to meet margin calls discussed above. We may not be able to achieve our optimal leverage. We use leverage as a strategy to increase the return to our investors.
We may not be able to consistently achieve our optimal leverage. We use leverage as a strategy to increase the return to our investors.
This could also significantly harm our business, financial condition, results of operations and ability to make distributions, which could cause our share price to decline. A default could also significantly limit our financing alternatives such that we would be unable to pursue our leverage strategy, which could adversely affect our returns.
A default could also significantly limit our financing alternatives such that we would be unable to pursue our leverage strategy, which could adversely affect our returns. We may be unable to profitably execute or participate in future securitization transactions.
These additional requirements relate to, among other things, maintaining an effective and comprehensive compliance program, recordkeeping and reporting requirements and disclosure requirements.
Our registered investment adviser subsidiary is subject to periodic SEC examinations and other requirements under the Investment Advisers Act and related regulations primarily intended to benefit advisory clients. These additional requirements relate to, among other things, maintaining an effective and comprehensive compliance program, recordkeeping and reporting requirements and disclosure requirements.
These provisions and duties impose restrictions and obligations on us with respect to our dealings with our subsidiary’s clients, including, for example, restrictions on agency, cross and principal transactions. Our registered investment adviser subsidiary is subject to periodic SEC examinations and other requirements under the Investment Advisers Act and related regulations primarily intended to benefit advisory clients.
These provisions and duties impose restrictions and obligations on us with respect to our dealings with our subsidiary’s clients, including, for example, restrictions on agency, cross and principal 8 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES ITEM 1. BUSINESS transactions.
We may also be subject to cross-default and acceleration rights and, with respect to collateralized debt, the posting of additional collateral and foreclosure rights upon default. A default and resulting repayment acceleration could significantly reduce our liquidity, which could require us to sell our assets to repay amounts due and outstanding.
A default and resulting repayment acceleration could significantly reduce our liquidity, which could require us to sell our assets to repay amounts due and outstanding. This could also significantly harm our business, financial condition, results of operations and ability to make distributions, which could cause our share price to decline.
We may sell assets or reduce leverage at an inopportune time to avoid breaching these restrictions.
In some situations, these restrictions could be breached due to changes in the market value of our assets or liabilities. One way to avoid breaching certain of these restrictions is to sell assets or reduce leverage at an inopportune time.
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Provisions contained in Maryland law may have anti-takeover effects, potentially preventing investors from receiving a “control premium” for their shares.
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BUSINESS – Annaly Residential Credit Group has established relationships with key mortgage loan originators and aggregators including well-known money center banks, allowing us to efficiently source proprietary originations suited to our risk parameters. – We have partnered with GIC Private Limited (“GIC”), a leading sovereign wealth fund, through the creation of a joint venture with the purpose of investing in residential credit assets, including newly-originated residential loans and securities issued by our subsidiaries. – We have partnered with Fifth Wall Ventures, the largest venture capital firm focused on technology for the real estate industry, through a commitment to invest in their funds that target investments in North American early- and late-stage real estate software and marketplace companies.
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The partnership aims to identify innovative platforms and services that provide efficiencies across our core investment strategies. Our Portfolio and Capital Allocation Policy Under our capital allocation policy and subject to oversight by our Board of Directors (“Board”), we may allocate our investments within our target asset classes as we determine to be appropriate from time to time.
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Our Board may adopt changes to our capital allocation policy and targeted assets at its discretion. The nature of our assets and our operations are intended to meet our REIT qualification requirements and our exemption from registration as an investment company under the Investment Company Act of 1940, as amended (“Investment Company Act”).
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Our portfolio composition and capital allocation at December 31, 2024 and 2023 were as follows: December 31, 2024 December 31, 2023 Asset Classes Percentage of Portfolio Capital Allocation (2) Percentage of Portfolio Capital Allocation (2) Agency (1)(2) 87% 59% 88% 61% Residential Credit (2) 9% 22% 9% 21% MSR (2) 4% 19% 3% 18% (1) Includes to-be-announced forward contracts (“TBAs”).
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(2) Assets exclude assets transferred or pledged to securitization vehicles, include TBA purchase contracts (market value), unsettled MSR commitments, CMBX derivatives (market value), and retained securities that are eliminated in consolidation and are shown net of participations issued.
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Risk Appetite We maintain a firm-wide risk appetite statement which defines the types and levels of risk we are willing to take in order to achieve our business objectives, and reflects our risk management philosophy. We engage in risk activities based on our core expertise that aim to enhance value for our stockholders.
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Our activities focus on income generation and capital preservation through proactive portfolio management, supported by a conservative liquidity and leverage posture.
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The risk appetite statement asserts the following key risk parameters to guide our investment management activities: Risk Parameter Description Portfolio Composition We will maintain a portfolio comprised of target assets approved by our Board and in accordance with our capital allocation policy.
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Leverage We generally expect to maintain an economic leverage ratio no greater than 10:1 considerate of our overall capital allocation framework. Liquidity Risk We will seek to maintain an unencumbered asset portfolio sufficient to meet our liquidity needs under adverse market conditions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn particular: • part of the income and gain recognized by certain qualified employee pension trusts with respect to our stock may be treated as unrelated business taxable income if shares of our stock are predominantly held by qualified employee pension trusts, and we are required to rely on a special look-through rule for purposes of meeting one of the REIT ownership tests, and we are not operated in a manner to avoid treatment of such income or gain as unrelated business taxable income; • part of the income and gain recognized by a tax-exempt investor with respect to our stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the stock; • part or all of the income or gain recognized with respect to our stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from U.S. federal income taxation under the Code may be treated as unrelated business taxable income; • to the extent that we (or a part of us, or a disregarded subsidiary of ours) are a “taxable mortgage pool,” or if we hold residual interests in a real estate mortgage investment conduit or a CLO; • a portion of the distributions paid to a tax-exempt stockholder that is allocable to excess inclusion income may be treated as unrelated business taxable income.
Biggest changeRisk Factors • part of the income and gain recognized by a tax-exempt investor with respect to our stock would constitute unrelated business taxable income if the investor incurs debt in order to acquire the stock; • part or all of the income or gain recognized with respect to our stock by social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans which are exempt from U.S. federal income taxation under the Code may be treated as unrelated business taxable income; • to the extent that we (or a part of us, or a disregarded subsidiary of ours) are a “taxable mortgage pool,” or if we hold residual interests in a real estate mortgage investment conduit or a CLO; • a portion of the distributions paid to a tax-exempt stockholder that is allocable to excess inclusion income may be treated as unrelated business taxable income.
While we will scrutinize all of our transactions with our TRSs in an effort to ensure that we do not become subject to these taxes, there is no assurance that we will be successful. We may not be able to avoid application of these taxes.
While we scrutinize all of our transactions with our TRSs in an effort to ensure that we do not become subject to these taxes, there is no assurance that we will be successful. We may not be able to avoid application of these taxes.
In light of the current regulatory environment, such exposure could be significant even though we might have contractual claims against our servicers for any failure to service the loans to the required standard.
In light of the current regulatory environment, such exposure could be significant even though we might have contractual claims against our servicers for any failure to service the loans to the required standard.
Mortgage servicers are subject to extensive federal, state and local laws, regulations and administrative decisions and failure to comply with such regulations can expose the servicer to fines, damages and losses.
Mortgage servicers are subject to extensive federal, state and local laws, regulations and administrative decisions and failure to comply with such regulations can expose the servicer to fines, damages and losses.
Risk Factors the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our shares of common stock include those set forth under “Special Note Regarding Forward-Looking Statements” as well as: • actual or anticipated variations in our quarterly operating results or business prospects; • changes in our earnings estimates or publication of research reports about us or the real estate industry; • an inability to meet or exceed securities analysts’ estimates or expectations; • increases in market interest rates; • hedging or arbitrage trading activity in our shares of common stock; • capital commitments; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of management personnel; • actions by institutional stockholders or activist investors; • speculation in the press or investment community; • changes in our distribution policy; • government action or regulation; • general market and economic conditions; and • future sales of our shares of common stock or securities convertible into, or exchangeable or exercisable for, our shares of common stock.
Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our shares of common stock include those set forth under “Special Note Regarding Forward-Looking Statements” as well as: • actual or anticipated variations in our quarterly operating results or business prospects; • changes in our earnings estimates or publication of research reports about us or the real estate industry; • an inability to meet or exceed securities analysts’ estimates or expectations; • increases in market interest rates; • hedging or arbitrage trading activity in our shares of common stock; • capital commitments; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we incur in the future; • additions or departures of management personnel; • actions by institutional stockholders or activist investors; • speculation in the press or investment community; • changes in our distribution policy; • government action or regulation; • general market and economic conditions; and • future sales of our shares of common stock or securities convertible into, or exchangeable or exercisable for, our shares of common stock.
To the extent we pursue strategic investments or acquisitions, undertake other strategic initiatives or consider new lines of business, we will face numerous risks and uncertainties, including risks associated with: • the availability of suitable opportunities; • the level of competition from other companies that may have greater financial resources; • our ability to assess the value, strengths, weaknesses, liabilities and potential profitability of potential acquisition opportunities accurately and negotiate acceptable terms for those opportunities; • the required investment of capital and other resources; • the lack of availability of financing and, if available, the terms of any financings; • the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk; • the diversion of management’s attention from our core businesses; • the potential loss of key personnel of an acquired business; • assumption of liabilities in any acquired business; • the disruption of our ongoing businesses; • the increasing demands on or issues related to the combining or integrating operational and management systems and controls; • compliance with additional regulatory requirements; • costs associated with integrating and overseeing the operations of the new businesses; • failure to realize the full benefits of an acquisition, including expected synergies, cost savings, or growth opportunities, within the anticipated timeframe or at all; and • post-acquisition deterioration in an acquired business that could result in lower or negative earnings contribution and/or goodwill impairment charges. 40 ANNALY CAPITAL MANAGEMENT, INC.
To the extent we pursue strategic investments or acquisitions, undertake other strategic initiatives or consider new lines of business, we will face numerous risks and uncertainties, including risks associated with: • the availability of suitable opportunities; • the level of competition from other companies that may have greater financial resources; • our ability to assess the value, strengths, weaknesses, liabilities and potential profitability of potential acquisition opportunities accurately and negotiate acceptable terms for those opportunities; • the required investment of capital and other resources; • the lack of availability of financing and, if available, the terms of any financings; • the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk; • the diversion of management’s attention from our core businesses; • the potential loss of key personnel of an acquired business; • assumption of liabilities in any acquired business; • the disruption of our ongoing businesses; • the increasing demands on or issues related to the combining or integrating operational and management systems and controls; • compliance with additional regulatory requirements; • costs associated with integrating and overseeing the operations of the new businesses; • failure to realize the full benefits of an acquisition, including expected synergies, cost savings, or growth opportunities, within the anticipated timeframe or at all; and • post-acquisition deterioration in an acquired business that could result in lower or negative earnings contribution and/or goodwill impairment charges.
Moreover, even if the “protective” elections were to be effective, the Subsidiary REITs would be subject to regular corporate income tax, and we cannot assure you that we would not fail to satisfy the requirement that not more than 20% of the value of our total assets may be represented by the securities of one or more TRSs.
Moreover, even if the “protective” TRS elections were to be effective, the Subsidiary REITs would be subject to regular corporate income tax, and we cannot assure you that we would not fail to satisfy the requirement that not more than 20% of the value of our total assets may be represented by the securities of one or more TRSs.
Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received.
Taxable stockholders receiving such dividends will be required to include the full amount of such dividends as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, stockholders may be required to pay income taxes with respect to such dividends in excess of the cash dividends received.
Assets in certain regional areas may be more susceptible to certain hazards (such as earthquakes, widespread fires, floods or hurricanes) than properties in other parts of the country and collateral properties located in coastal states may be more susceptible to hurricanes than properties in other parts of the country.
Assets in certain regional areas are more susceptible to certain hazards (such as earthquakes, widespread fires, floods or hurricanes) than properties in other parts of the country and collateral properties located in coastal states may be more susceptible to hurricanes than properties in other parts of the country.
Risk Factors We are subject to reinvestment risk. We are subject to reinvestment risk as a result of changes in interest rates. Declines in interest rates are generally accompanied by increased prepayments of mortgage loans, which in turn results in a prepayment of the related mortgage-backed securities.
We are subject to reinvestment risk as a result of changes in interest rates. Declines in interest rates are generally accompanied by increased prepayments of mortgage loans, which in turn results in a prepayment of the related mortgage-backed securities.
We have certain investments in non-Agency mortgage-backed securities backed by collateral pools containing mortgage loans that were originated under underwriting standards that were less strict than those used in underwriting “prime mortgage loans.” These lower standards permitted mortgage loans, often with LTV ratios in excess of 80%, to be made to borrowers having impaired credit histories, lower credit scores, higher debt-to-income ratios and/or unverified income.
Risk Factors We have certain investments in non-Agency mortgage-backed securities backed by collateral pools containing mortgage loans that were originated under underwriting standards that were less strict than those used in underwriting “prime mortgage loans.” These lower standards permitted mortgage loans, often with LTV ratios in excess of 80%, to be made to borrowers having impaired credit histories, lower credit scores, higher debt-to-income ratios and/or unverified income.
Although we endeavor to comply with our privacy policies and to ensure our service providers do the same, occurrence of noncompliance or allegations of noncompliance are possible and could subject us to potential government or legal action, including action based on argument that the publication of these policies were deceptive, unfair, or misrepresentative of our actual practices.
Although we endeavor to comply with our privacy policies and to ensure our service providers do the same, occurrence or allegations of noncompliance are possible and could subject us to potential government or legal action, including action based on arguments that the publication of these policies were deceptive, unfair, or misrepresentative of our actual practices.
Some of the analytical models used by us, such as mortgage prepayment models or mortgage default models, are predictive in nature. The use of predictive models has inherent risks. For example, such models may incorrectly forecast future behavior, leading to potential losses on a cash flow and/or a mark-to-market basis.
Some of the analytical models used by us, such as mortgage prepayment models or mortgage default models, are predictive in nature. The use of predictive models has inherent risks. For example, such models have in the past and may in the future incorrectly forecast future behavior, leading to potential losses on a cash flow and/or a mark-to-market basis.
Owners of Agency mortgage-backed securities are protected from the risk of default on the underlying mortgages by guarantees from Fannie Mae, Freddie Mac or, in the case of the Ginnie Mae, the U.S. Government. A default on those underlying mortgages exposes us to prepayment risk described above, but not a credit loss.
Owners of Agency mortgage-backed securities are protected from the risk of default on the underlying mortgages by guarantees from Fannie Mae, Freddie Mac or, in the case of the Ginnie Mae, the U.S. Government. A default on those underlying mortgages exposes us to prepayment risk described below, but not a credit loss.
In addition, we may end up owning a property that we would not otherwise have decided to acquire directly at the price of our original investment or at all. If we foreclose on and come to own property, our financial performance and returns to investors could suffer.
In addition, we have in the past and may in the future end up owning a property that we would not otherwise have decided to acquire directly at the price of our original investment or at all. If we foreclose on and come to own property, our financial performance and returns to investors could suffer.
Risk Factors It is difficult to determine what, if any, negative impact may directly result from any specific interruption or cyberattacks or other information security breaches of our networks or systems (or the networks or systems of third parties that facilitate our business activities), but any cyberattack or other information security breach may negatively affect our operations.
It is difficult to determine what, if any, negative impact may directly result from any specific interruption or cyberattacks or other information security breaches of our networks or systems (or the networks or systems of third parties that facilitate our business activities), but any cyberattack or other information security breach may negatively affect our operations.
Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires us to invest at least 55% of our assets in “mortgages and other liens on and interest in real estate” (“Qualifying Real Estate Assets”) and at least 80% of our assets in Qualifying Real Estate Assets plus our interests in MSR and other real estate related assets.
Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires us to invest at least 55% of our assets in “mortgages and other liens on and interest in real estate” (“Qualifying Real Estate Assets”) and at least 80% of our assets in Qualifying Real Estate Assets plus our other real estate related assets.
In that case, we could reduce distributions to such stockholders by the amount of tax paid by us that is attributable to such stockholder's ownership. If we were to realize excess inclusion income, IRS guidance indicates that the excess inclusion income would be allocated among our stockholders in proportion to the dividends paid.
In that case, we could reduce distributions to such stockholders by the amount of tax paid by us that is attributable to such stockholders’ ownership. If we were to realize excess inclusion income, IRS guidance indicates that the excess inclusion income would be allocated among our stockholders in proportion to the dividends paid.
Risk Factors In the event of our insolvency or bankruptcy, certain repurchase and derivative agreements may qualify for special treatment under the U.S. Bankruptcy Code, the effect of which, among other things, would be to allow the lender to avoid the automatic stay provisions of the U.S.
In the event of our insolvency or bankruptcy, certain repurchase and derivative agreements may qualify for special treatment under the U.S. Bankruptcy Code, the effect of which, among other things, would be to allow the lender to avoid the automatic stay provisions of the U.S.
When we foreclose on a residential real estate asset, we may take title to the property securing that asset, and if we do not or cannot sell the property, we would then come to own and operate it as “real estate owned.” Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a debt instrument secured by that property.
When we foreclose on a residential real estate asset, we have in the past and may in the future take title to the property securing that asset, and if we do not or cannot sell the property, we would then come to own and operate it as “real estate owned.” Owning and operating real property involves risks that are different (and in many ways more significant) than the risks faced in owning a debt instrument secured by that property.
In addition, our ability to satisfy the REIT qualification requirements depends in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
In addition, our ability to satisfy the REIT qualification requirements depends in part on the actions of third parties over which we have no control or limited influence, if any, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. federal income tax purposes.
In addition, claims may be assessed against us on account of our position as mortgage holder or property owner, as applicable, including responsibility for tax payments, environmental hazards and other liabilities, which could have a material adverse effect on our results of operations, financial condition and our ability to make distributions to our stockholders.
In addition, claims have in the past and may in the future be assessed against us on account of our position as mortgage holder or property owner, as applicable, including responsibility for tax payments, environmental hazards and other liabilities, which could have a material adverse effect on our results of operations, financial condition and our ability to make distributions to our stockholders.
Similarly to the way in which we service residential whole loans, we have also contracted, and will continue to contract, with unaffiliated servicing companies to carry out the actual servicing activities (including all direct interface with the borrowers).
Similar to the way in which we service residential whole loans, we have also contracted, and will continue to contract, with unaffiliated servicing companies to carry out the actual servicing activities (including all direct interface with the borrowers).
Mortgage servicers may be required or otherwise incentivized by the Federal or state governments to pursue actions designed to assist mortgagors, such as loan modifications, forbearance plans and other actions intended to prevent foreclosure even if such loan modifications and other actions are not in the best interests of the beneficial owners of the mortgage loans.
Mortgage servicers have in the past and may in the future be required or otherwise incentivized by the Federal or state governments to pursue actions designed to assist mortgagors, such as loan modifications, forbearance plans and other actions intended to prevent foreclosure even if such loan modifications and other actions are not in the best interests of the beneficial owners of the mortgage loans.
A cyberattack or other information security breach of such systems could lead to unauthorized access to and release, misuse, loss or destruction of our confidential information or personal or confidential information of our clients, employees or third parties, which could lead to regulatory fines, costs of remediating the breach, reputational harm, financial losses, litigation and increased difficulty doing business with third parties that rely on us to meet their own data protection requirements.
A cyberattack or other information security breach of such systems could lead to unauthorized access to and release, misuse, alteration, exfiltration, theft, loss, damage or destruction of our confidential information or personal or confidential information of our clients, employees or third parties, which could lead to regulatory fines, costs of remediating the breach, reputational harm, financial losses, litigation and increased difficulty doing business with third parties that rely on us to meet their own data protection requirements.
Difficult economic conditions, including increased interest rates and lower home prices, can result in non-prime and subprime mortgage loans having increased rates of delinquency, foreclosure, bankruptcy and loss (including such as during the credit crisis of 2007-2008 and the housing crisis that followed), and are likely to otherwise experience delinquency, foreclosure, bankruptcy and loss rates that are higher, and that may be substantially higher, than those experienced by mortgage loans underwritten in a more traditional manner.
Difficult economic conditions, including increased interest rates and lower home prices, have in the past and may in the future result in non-prime and subprime mortgage loans having increased rates of delinquency, foreclosure, bankruptcy and loss (including such as during the credit crisis of 2007-2008 and the housing crisis that followed), and are likely to otherwise experience delinquency, foreclosure, bankruptcy and loss rates that are higher, and that may be substantially higher, than those experienced by mortgage loans underwritten in a more traditional manner.
Residential mortgage loans may become non-performing or sub-performing for a variety of reasons that result in the borrower being unable to meet its debt service and/or repayment obligations, such as the underlying property being too highly leveraged or the financial distress of the borrower.
Residential mortgage loans have in the past and may in the future become non-performing or sub-performing for a variety of reasons that result in the borrower being unable to meet its debt service and/or repayment obligations, such as the underlying property being too highly leveraged or the financial distress of the borrower.
Our distribution requirements could adversely affect our ability to execute our business plan. As a REIT, we must distribute at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and by excluding any net capital gain).
Our distribution requirements limit our flexibility and could affect our ability to execute our business plan. As a REIT, we must distribute at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and by excluding any net capital gain).
There can be no assurance that the economies in such impacted areas will recover sufficiently to support income producing real estate at pre-event levels or that the costs of the related clean-up will not have a material adverse effect on the local or national economy. Inadequate property insurance coverage could have an adverse impact on our operating results.
There can be no assurance that the economies in such impacted areas will recover sufficiently to support income producing real estate at pre-event levels or that the costs of the related clean-up will not have a material adverse effect on the local or national economy. Inadequate property insurance coverage impacts on our operating results.
If transactions between a REIT and a TRS are entered into on other than arm’s-length terms, the REIT may be subject to a penalty tax.
Risk Factors If transactions between a REIT and a TRS are entered into on other than arm’s-length terms, the REIT may be subject to a penalty tax.
In addition, in order to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold some of our assets through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates. 28 ANNALY CAPITAL MANAGEMENT, INC.
In addition, in order to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory, we may hold some of our assets through our TRSs or other subsidiary corporations that will be subject to corporate level income tax at regular rates.
Assets in which we hold a direct or indirect interest could experience severe weather, including hurricanes, severe winter storms, and flooding (including as a result of sea level rise), all of which may become more severe as a result of climate change, which among other effects could impact house prices and housing-related costs and/or disrupt borrowers’ ability to pay their mortgage and or loan.
Assets in which we hold a direct or indirect interest have in the past and may in the future experience severe weather, including hurricanes, severe winter storms, wildfires and flooding (including as a result of sea level rise), all of which may become more severe as a result of climate change, which among other effects could impact house prices and housing-related costs and/or disrupt borrowers’ ability to pay their mortgage and or loan.
Any of the foregoing could harm our reputation, distract our management and technical personnel, increase our costs of doing business, adversely affect the demand for our products and services, and ultimately result in the imposition of liability, any of which could have a material adverse effect on our business, financial condition and results of operations. 24 ANNALY CAPITAL MANAGEMENT, INC.
Any of the foregoing could harm our reputation, distract our management and technical personnel, increase our costs of doing business, adversely affect the demand for our products and services, and ultimately result in the imposition of liability, any of which could have a material adverse effect on our business, financial condition and results of operations.
We may in the future be required to register one or more entities as a commodity pool operator or commodity trading adviser, subjecting those entities to the regulations and oversight of the Commodity Futures Trading Commission and the National Futures Association. We may also become subject to various international regulations on the asset management industry.
We may in the future be required to register one or more entities as a commodity pool operator or commodity trading adviser, subjecting those entities to the regulations and oversight of the Commodity Futures Trading Commission and the National Futures Association. We may also become subject to various international regulations on the asset management industry. 24 ANNALY CAPITAL MANAGEMENT, INC.
We receive payments, generally, from the payments that are made on the underlying mortgage loans. We often purchase mortgage-backed securities that have a higher coupon rate than the prevailing market interest rates. In exchange for a higher coupon rate, we typically pay a premium over par value to acquire these mortgage-backed securities.
We receive payments, generally, from the payments that are made on the underlying mortgage loans. We often purchase mortgage-backed securities that have a higher coupon rate than the prevailing market interest rates. In exchange for a higher coupon rate, we typically pay a premium over par value to acquire these mortgage-backed securities. In accordance with U.S.
We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and security, which could increase the cost of doing business, compliance risks and potential liability.
We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and security, which increases the cost of doing business, compliance risks and potential liability.
Interest rate hedging may fail to protect or could adversely affect us because, among other things: interest rate hedging can be expensive, particularly during periods of volatile interest rates; available hedges may not correspond directly with the risk for which protection is sought; and the duration of the hedge may not match the duration of the related asset or liability.
Interest rate hedging may fail to protect or could adversely affect us because, among other things: interest rate hedging can be expensive, particularly during periods of volatile interest rates; available hedges may not correspond directly with the risk for which protection is sought; and the duration of the hedge may not match the duration of the related asset or liability. 35 ANNALY CAPITAL MANAGEMENT, INC.
The market price of our shares of common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our shares of common stock may fluctuate and cause significant price variations to occur.
The market price of our shares of common stock has in the past and may in the future be highly volatile and could be subject to wide fluctuations. In addition, the trading volume in our shares of common stock may fluctuate and cause significant price variations to occur.
The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to avoid the prohibited transaction tax.
The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to avoid the prohibited transaction tax. 29 ANNALY CAPITAL MANAGEMENT, INC.
Our policies permit us to enter into interest rate swaps, caps and floors, interest rate swaptions, interest rate futures, and other derivative transactions to help us mitigate our interest rate and prepayment risks described above subject to maintaining our qualification as a REIT and our Investment Company Act exemption.
Our policies permit us to enter into interest rate swaps, caps and floors, interest rate swaptions, interest rate futures, and other derivative transactions to help us mitigate our interest rate and prepayment risks described in other risk factors subject to maintaining our qualification as a REIT and our Investment Company Act exemption.
Certain financing activities may subject us to U.S. federal income tax and could have negative tax consequences for our stockholders. We may enter into securitization transactions and other financing transactions that could result in us, or a portion of our assets, being treated as a taxable mortgage pool for U.S. federal income tax purposes.
AND SUBSIDIARIES Item 1A. Risk Factors Certain financing activities may subject us to U.S. federal income tax and could have negative tax consequences for our stockholders. We may enter into securitization transactions and other financing transactions that could result in us, or a portion of our assets, being treated as a taxable mortgage pool for U.S. federal income tax purposes.
If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.
If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory. 28 ANNALY CAPITAL MANAGEMENT, INC.
Compliance with any such new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we conduct our business and adversely affect our profitability and returns to our investors.
Compliance with any such new laws or regulations, and any diverging approaches to such laws and regulations in different jurisdictions, increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we conduct our business and adversely affect our profitability and returns to our investors.
Any failure or interruption of our systems or networks or cyberattacks or other information security breaches of our networks or systems could cause delays or other problems in our securities trading activities, including mortgage-backed securities trading activities.
Any failure or interruption of our or our counterparties’ systems or networks or cyberattacks or other information security breaches of our networks or systems may cause delays or other problems in our securities trading activities, including mortgage-backed securities trading activities.
The performance of loans underlying our MSR related assets may be adversely affected by the performance of the related mortgage servicer. The performance of the loans underlying our MSR related assets is subject to risks associated with inadequate or untimely servicing.
The performance of loans underlying our MSR related assets is affected by the performance of the related mortgage servicer. The performance of the loans underlying our MSR related assets is subject to risks associated with inadequate or untimely servicing.
Mortgage servicers and other service providers, such as trustees, bond insurance providers, due diligence vendors and document custodians, may fail to perform or otherwise not perform in a manner that promotes our interests.
Mortgage servicers and other service providers, such as trustees, bond insurance providers, due diligence vendors and document custodians, have in the past and may in the future fail to perform or otherwise not perform in a manner that promotes our interests.
We may enter into new lines of business, acquire other companies or engage in other strategic initiatives, each of which may result in additional risks and uncertainties in our businesses. We may pursue growth through acquisitions of other companies or other strategic initiatives.
We may enter into new lines of business, acquire other companies or engage in other strategic initiatives, each of which may result in additional risks and uncertainties in our businesses. We have in the past and may in the future pursue growth through acquisitions of other companies or other strategic initiatives.
AND SUBSIDIARIES Item 1A. Risk Factors We are subject to risks and liabilities in connection with sponsoring, investing in and managing new funds and other investment accounts, including potential regulatory risks. We have, and may in the future, sponsor, manage and serve as general partner and/or manager of new funds or investment accounts.
We are subject to risks and liabilities in connection with sponsoring, investing in and managing new funds and other investment accounts, including potential regulatory risks. We have, and may in the future, sponsor, manage and serve as general partner and/or manager of new funds or investment accounts.
Investments in securities in the CRT sector could cause us to incur losses of income from, and/or losses in market value relating to, these assets if there are defaults of principal and/or interest on the pool of mortgages referenced in the transaction.
Investments in securities in the CRT sector have in the past and may in the future cause us to incur losses of income from, and/or losses in market value relating to, these assets if there are defaults of principal and/or interest on the pool of mortgages referenced in the transaction.
We invest in securities that are subject to mortgage credit risk. We invest in securities in the credit risk transfer CRT sector. The CRT sector is comprised of the risk sharing transactions issued by Fannie Mae (“CAS”) and Freddie Mac (“STACR”), and similarly structured transactions arranged by third party market participants.
We invest in securities in the credit risk transfer CRT sector. The CRT sector is comprised of the risk sharing transactions issued by Fannie Mae (“CAS”) and Freddie Mac (“STACR”), and similarly structured transactions arranged by third party market participants.
Loss of our Investment Company Act exemption from registration would adversely affect us. We intend to conduct our business so as not to become regulated as an investment company under the Investment Company Act. We currently rely on the exemption from registration provided by Section 3(c)(5)(C) of the Investment Company Act.
AND SUBSIDIARIES Item 1A. Risk Factors Loss of our Investment Company Act exemption from registration would adversely affect us. We intend to conduct our business so as not to become regulated as an investment company under the Investment Company Act. We currently rely on the exemption from registration provided by Section 3(c)(5)(C) of the Investment Company Act.
Any failure by servicers to service these mortgages and related real estate owned (“REO”) properties could negatively impact the value of these investments and our financial performance.
Any failure by servicers to service these mortgages and related real estate owned (“REO”) properties impacts the value of these investments and our financial performance.
A default by the mortgage servicer in its capacity as servicer and/or failure of the mortgage servicer to perform its obligations related to any MSR could result in a loss of value of servicing fees and/or excess servicing spread.
A default by the mortgage servicer in its capacity as servicer and/or failure of the mortgage servicer to perform its obligations related to any MSR have in the past and may in the future result in a loss of value of servicing fees and/or excess servicing spread.
Other regional factors – e.g., rising sea levels, earthquakes, floods, forest fires, hurricanes or changes in governmental rules or fiscal policies – also may adversely affect the mortgaged properties.
Other regional factors – e.g., rising sea levels, earthquakes, floods, forest fires, hurricanes or changes in governmental rules or fiscal policies – have in the past and may in the future adversely affect the mortgaged properties.
The limitations imposed by the REIT gross income tests may impede our ability to distribute assets from our TRSs to us in the form of dividends. Certain asset transfers may, therefore, have to be structured as purchase and sale transactions upon which our TRSs recognize a taxable gain.
The limitations imposed by the REIT gross income tests may impede our ability to distribute assets from our TRSs to us in the form of dividends. Certain asset transfers may, therefore, have to be structured as purchase and sale transactions upon which our TRSs recognize a taxable gain. 27 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
Investments in MSR may expose us to additional risks. We invest in MSR and financial instruments whose cash flows are considered to be largely dependent on underlying MSR that either directly or indirectly act as collateral for the investment. We expect to increase our exposure to MSR-related investments in 2024.
We invest in MSR and financial instruments whose cash flows are considered to be largely dependent on underlying MSR that either directly or indirectly act as collateral for the investment. We expect to increase our exposure to MSR-related investments in 2025.
They may amend or revise these policies at any time without a vote of our stockholders, or otherwise initiate a change in asset allocation. Policy changes could adversely affect our financial condition, results of operations, the market price of our common stock or our ability to pay dividends or distributions. 42 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES ITEM 1B.
They have in the past and may in the future amend or revise these policies at any time without a vote of our stockholders, or otherwise initiate a change in asset allocation. Policy changes could adversely affect our financial condition, results of operations, the market price of our common stock or our ability to pay dividends or distributions. ITEM 1B.
We may choose to pay dividends in our own stock. We may in the future distribute taxable dividends that are payable in cash or shares of our stock at the election of each stockholder.
We have flexibility to pay dividends in our own stock. We have in the past and may in the future distribute taxable dividends that are payable in cash or shares of our stock at the election of each stockholder.
Our non-Agency mortgage-backed securities, mortgage loans, and MSR may be susceptible to economic slowdowns or recessions, which could lead to financial losses in our assets and a decrease in revenues, net income and asset values.
Our non-Agency mortgage-backed securities, mortgage loans, and MSR are affected by economic slowdowns or recessions, which could lead to financial losses in our assets and a decrease in revenues, net income and asset values.
Our current investment strategy includes seeking growth in our residential credit business. The holder of a mortgage or mortgage-backed securities assumes the risk that the related borrowers may default on their obligations to make full and timely payments of principal and interest.
Some of our investments, including those related to non-prime loans, involve credit risk. Our current investment strategy includes seeking growth in our residential credit business. The holder of a mortgage or mortgage-backed securities assumes the risk that the related borrowers may default on their obligations to make full and timely payments of principal and interest.
Models and data are used to value assets or potential asset purchases and also in connection with hedging our assets. When models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks.
Models and data are used to value assets or potential asset purchases and also in connection with hedging our assets. Some of these models may use artificial intelligence. When models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks.
We are subject to risks of loss from weather conditions, man-made or natural disasters and the direct and indirect effects of climate change.
AND SUBSIDIARIES Item 1A. Risk Factors We are subject to risks of loss from weather conditions, man-made or natural disasters and the direct and indirect effects of climate change.
In addition, the SEC has established a climate and ESG task force to develop initiatives to identify ESG-related misconduct consistent with increased investor reliance on climate and ESG-related disclosure and investment. As a result, the SEC has started to bring enforcement actions based on ESG disclosures not matching actual investment processes.
In addition, the SEC has established a climate and environmental, social, and governance task force to develop initiatives to identify related misconduct consistent with increased investor reliance on climate and environmental, social, and governance related disclosure and investment. As a result, the SEC has brought enforcement actions based on such disclosures not matching actual investment processes.
Actions by the Federal Reserve may affect the price and returns of our assets. The Federal Reserve (the “Fed”) owns approximately $2.4 trillion of Agency mortgage-backed securities as of December 31, 2023. Certain actions taken by the U.S. government, including the Fed, may have a negative a impact on our results.
Actions by the Federal Reserve may affect the price and returns of our assets. The Federal Reserve (the “Fed”) owns approximately $2.3 trillion of Agency mortgage-backed securities as of December 31, 2024. Certain actions taken by the U.S. government, including the Fed, may impact our results.
Such threats may be difficult to detect for long periods of time and also may be further enhanced in frequency or effectiveness through threat actors’ use of artificial intelligence. We rely heavily on our financial, accounting and other data processing systems.
Such threats may be difficult to detect for long periods of time and also may be further enhanced in frequency or effectiveness through threat actors’ use of artificial intelligence. Further, cybersecurity risks may be heightened as a result of ongoing global conflicts. We rely heavily on our financial, accounting and other data processing systems.
There is also no certainty as to whether any such action without the consent of investors would face legal challenge, and, if so, the outcome of any such challenge. 35 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors Subordinated tranches of non-Agency mortgage-backed securities are subordinate in right of payment to more senior securities.
There is also no certainty as to whether any such action without the consent of investors would face legal challenge, and, if so, the outcome of any such challenge. Subordinated tranches of non-Agency mortgage-backed securities are subordinate in right of payment to more senior securities.
Moreover, if reconstruction or major repairs are required following a casualty, changes in laws that have occurred since the time of original construction may materially impair the borrower’s ability to effect such reconstruction or major repairs or may materially increase the cost thereof.
Moreover, if reconstruction or major repairs are required following a casualty, changes in laws that have occurred since the time of original construction may materially impair the borrower’s ability to effect such reconstruction or major repairs or may materially increase the cost thereof. 33 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A.
In addition, losses in our TRSs generally will not provide any tax benefit, except for being carried forward potentially to offset taxable income in the TRSs for future periods. 29 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors Qualifying as a REIT involves highly technical and complex provisions of the Code.
In addition, losses in our TRSs generally will not provide any tax benefit, except for being carried forward potentially to offset taxable income in the TRSs for future periods. Qualifying as a REIT involves highly technical and complex provisions of the Code.
Any such limitations are likely to cause delayed or reduced collections from mortgagors and generally increase servicing costs. As a consequence of the foregoing matters, our business, financial condition and results of operations may be adversely affected. Our investments in residential whole loans subject us to servicing-related risks.
Any such limitations are likely to cause delayed or reduced collections from mortgagors and generally increase servicing costs. As a consequence of the foregoing matters, our business, financial condition and results of operations could be adversely affected. 39 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors Our investments in residential whole loans subject us to servicing-related risks.
We depend on third party service providers, including mortgage loan servicers and sub-servicers, for a variety of services related to our business. We depend on a variety of services provided by third party service providers related to our investments in MSR as well as for general operating purposes.
We depend on a variety of services provided by third party service providers related to our investments in MSR as well as for general operating purposes.
We intend to make distributions to our stockholders to comply with the REIT qualification requirements of the Code. From time to time, we may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur.
From time to time, we may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP, or differences in timing between the recognition of taxable income and the actual receipt of cash may occur.
If we fail to maintain our qualification as a REIT, we would have to pay significant income taxes and would therefore have less money available for investments or for distributions to our stockholders. This would likely have a significant adverse effect on the value of our equity.
If we fail to maintain our qualification as a REIT, we would have to 25 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors pay significant income taxes and would therefore have less money available for investments or for distributions to our stockholders. This would likely have a significant adverse effect on the value of our equity.
The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to remain qualified as a REIT.
AND SUBSIDIARIES Item 1A. Risk Factors The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to remain qualified as a REIT.
Additionally, given the magnitude of the 2008-2009 housing crisis, and in response to the well-publicized failures of many servicers to follow proper foreclosure procedures, mortgage servicers are being held to much higher foreclosure-related 38 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors documentation standards than they previously were.
Additionally, given the magnitude of the 2008-2009 housing crisis, and in response to the well-publicized failures of many servicers to follow proper foreclosure procedures, mortgage servicers are being held to much higher foreclosure-related documentation standards than they previously were.
Accordingly, defaults in the payment of principal and/or interest on our non-Agency mortgage-backed securities, residential whole loan investments, MSR and other investment assets of lower credit quality would likely result in our incurring losses of income from, and/or losses in market value relating to, these assets.
Accordingly, defaults in the payment of principal and/or interest on our non-Agency mortgage-backed securities, residential whole loan investments, MSR and other investment assets of lower credit quality have in the past and may in the future result in our incurring losses of income from, and/or losses in market value relating to, these assets. 42 ANNALY CAPITAL MANAGEMENT, INC.
The U.S. federal income tax rules dealing with REITs constantly are under review by persons involved in the legislative process, the IRS and the U.S. Treasury, which results in statutory changes as well as frequent revisions to regulations and interpretations.
The U.S. federal income tax rules dealing with REITs are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury, which results in statutory changes as well as frequent revisions to regulations and 30 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 1A. Risk Factors interpretations.
Credit spreads can be highly volatile and may fluctuate due to changes in economic conditions, liquidity, investor demand and other factors. Credit spreads typically widen in times of increased market uncertainty or when economic conditions have or are expected to deteriorate. Credit spreads may also widen due to actual or anticipated rating downgrades on the securities or similar securities.
Credit spreads can be highly volatile and have in the past and may in the future fluctuate due to changes in economic conditions, liquidity, investor demand and other factors. Credit spreads typically widen in times of increased market uncertainty or when economic conditions have or are expected to deteriorate.
Also, as a result of this competition, desirable investments in our target assets may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.
Risk Factors may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.
Further, we could be exposed to litigation, regulatory enforcement, investigations or other legal action as a result of an incident, carrying the potential for damages, fines, sanctions or other penalties, injunctive relief requiring costly compliance measures, and reputational damage.
Further, we could be exposed to litigation, regulatory enforcement, investigations or other legal action as a result of an incident, carrying the potential for damages, fines, sanctions or other penalties, injunctive relief requiring costly compliance measures, and reputational damage. We may utilize artificial intelligence, which exposes us to liability and affects our business.
In accordance with U.S. generally accepted accounting principles (“GAAP”), we amortize the premiums on our mortgage-backed securities over the expected life of the related mortgage-backed securities. If the mortgage loans securing these mortgage-backed securities prepay at a more rapid rate than anticipated, we will have to amortize our premiums on an accelerated basis that may adversely affect our profitability.
GAAP, we amortize the premiums on our mortgage-backed securities over the expected life of the related mortgage-backed securities. If the mortgage loans securing these mortgage-backed securities prepay at a more rapid rate than anticipated, we will have to amortize our premiums on an accelerated basis that may adversely affect our profitability.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeMINE SAFETY DISCLOSURES None. 43 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities PART II ITEM 5.
Biggest changeMINE SAFETY DISCLOSURES None. 44 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities PART II
ITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2023, we were not party to any pending material legal proceedings and we are not aware of any contemplated material proceedings by governmental authorities. ITEM 4.
ITEM 3. LEGAL PROCEEDINGS From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. As of December 31, 2024, we were not party to any pending material legal proceedings and we are not aware of any contemplated material proceedings by governmental authorities. ITEM 4.
Removed
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock began trading publicly on October 8, 1997 and is traded on the New York Stock Exchange under the trading symbol “NLY.” As of January 31, 2024, we had 500,080,287 shares of common stock issued and outstanding which were held by approxima tely 480,324 beneficial holders.
Removed
The equity compensation plan information called for by Item 201(d) of Regulation S-K is set forth in Item 12 of Part III of this Form 10-K under the heading “Equity Compensation Plan Information.” Dividends We intend to pay quarterly dividends and to distribute to our stockholders all or substantially all of our taxable income in each year (subject to certain adjustments) consistent with the distribution requirements applicable to REITs.
Removed
This will enable us to qualify for the tax benefits accorded to a REIT under the Code. We have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by factors beyond our control. In addition, unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on dividends.
Removed
All distributions will be made at the discretion of our Board and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board may deem relevant from time to time. See also Item 1A.
Removed
“Risk Factors.” No dividends can be paid on our common stock unless we have paid full cumulative dividends on our preferred stock. From the date of issuance of our preferred stock through December 31, 2023, we have paid full cumulative dividends on our preferred stock.
Removed
Share Performance Graph The following graph and table set forth certain information comparing the yearly percentage change in cumulative total return on our common stock to the cumulative total return of the Standard & Poor’s Composite 500 stock Index or S&P 500 Index, and the Bloomberg Mortgage REIT Index, or BBG REIT index, an industry index of mortgage REITs.
Removed
The comparison is for the five-year period ended December 31, 2023 and assumes the reinvestment of dividends. The graph and table assume that $100 was invested in our common stock and the two other indices on the last trading day of the initial year shown in the graph.
Removed
Upon written request we will provide stockholders with a list of the REITs included in the BBG REIT Index. Five-Year Share Performance 44 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 4. Mine Safety Disclosures 43 PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 44 Item 6. Reserved 46 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 88 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 44 PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45 Item 6. Reserved 48 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 49 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 91 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+17 added−1 removed4 unchanged
Biggest changeNo shares were repurchased with respect to this share repurchase program during the year ended December 31, 2023. As of December 31, 2023, the maximum dollar value of shares that may yet be purchased under this program was $1.5 billion.
Biggest changeThe Current Common Stock Repurchase Program replaces our previous $1.5 billion share repurchase program, which expired on December 31, 2024 (the “Prior Common Stock Repurchase Program”). No shares were repurchased with respect to the Prior Common Stock Repurchase Program during the year ended December 31, 2024.
The authorization does not obligate us to acquire any particular amount of Preferred Stock and the program may be suspended or discontinued at our discretion without prior notice. 45 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 6. Selected Financial Data
The authorization does not obligate us to acquire any particular amount of Preferred Stock and the program may be suspended or discontinued at our discretion without prior notice. 47 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 6. Selected Financial Data
Purchases made pursuant to the Preferred Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.
Purchases made pursuant to the Current Common Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.
The aggregate liquidation value of the Preferred Stock that may be repurchased by us pursuant to the Preferred Stock Repurchase Program, as of November 3, 2022, was approximately $1.6 billion. The Preferred Stock Repurchase Program became effective on November 3, 2022, and shall expire on December 31, 2024.
The aggregate liquidation value of the Current Preferred Stock that may be repurchased by us pursuant to the Current Preferred Stock Repurchase Program, as of December 31, 2024, was approximately $1.6 billion.
Share Repurchase In January 2022, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding common shares through December 31, 2024. The new share repurchase program replaces our previous $1.5 billion share repurchase program, which expired on December 31, 2021.
Share Repurchase In January 2025, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2029 (the “Current Common Stock Repurchase Program”).
Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Annaly Capital Management, Inc. 100 107 110 113 89 93 S&P 500 Index 100 131 156 200 164 207 BBG REIT Index 100 124 96 113 86 98 The information in the share performance graph and table has been obtained from sources believed to be reliable, but neither the accuracy nor completeness can be guaranteed.
Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities Five-Year Share Performance 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 Annaly Capital Management, Inc. 100 102 105 83 87 94 S&P 500 Index 100 118 152 125 157 197 Performance Peer Group 100 68 79 57 67 71 The information in the share performance graph and table has been obtained from sources believed to be reliable, but neither the accuracy nor completeness can be guaranteed.
In November 2022, we announced that our Board authorized a repurchase plan for all of our existing outstanding Preferred Stock (as defined below, the “Preferred Stock Repurchase Program”).
Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities In January 2025, we announced that our Board authorized a repurchase plan for all of our existing outstanding Preferred Stock (as defined below, the “Current Preferred Stock Repurchase Program”).
Removed
No shares were repurchased to with respect to the Preferred Stock Repurchase Program during the year ended December 31, 2023. As of December 31, 2023, the maximum dollar value of shares that may yet be purchased under this plan was $1.6 billion.
Added
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock began trading publicly on October 8, 1997 and is traded on the New York Stock Exchange under the trading symbol “NLY.” As of January 31, 2025, we had 578,357,904 shares of common stock issued and outstanding which were held by approxima tely 464,395 beneficial holders.
Added
The equity compensation plan information called for by Item 201(d) of Regulation S-K is set forth in Item 12 of Part III of this Form 10-K under the heading “Equity Compensation Plan Information.” Dividends We intend to pay quarterly dividends and to distribute to our stockholders all or substantially all of our taxable income in each year (subject to certain adjustments) consistent with the distribution requirements applicable to REITs.
Added
This will enable us to qualify for the tax benefits accorded to a REIT under the Code. We have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by factors beyond our control. In addition, unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on dividends.
Added
All distributions will be made at the discretion of our Board and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board may deem relevant from time to time. See also Item 1A.
Added
“Risk Factors.” No dividends can be paid on our common stock unless we have paid full cumulative dividends on our preferred stock. From the date of issuance of our preferred stock through December 31, 2024, we have paid full cumulative dividends on our preferred stock.
Added
Share Performance Graph The following graph and table set forth certain information comparing the yearly percentage change in cumulative total return on our common stock to the cumulative total return of the Standard & Poor’s Composite 500 stock Index or S&P 500 Index, and a select group of peers operating within the mortgage REIT industry, or Performance Peer Group.
Added
The comparison is for the five-year period ended December 31, 2024and assumes the reinvestment of dividends. The graph and table assume that $100 was invested in our common stock, the S&P 500 Index and the Performance Peer Group on the last trading day of the initial year shown in the graph.
Added
In previous filings, we included the Bloomberg Mortgage REIT Index, or BBG REIT Index, in the share performance graph and table. As a result of the discontinuation of the BBG REIT Index in 2024, we have replaced the BBG REIT Index with the Performance Peer Group.
Added
The Performance Peer Group represents a group of mortgage REIT peers used by the Management Development and Compensation Committee of our Board of Directors to evaluate our performance and to inform certain elements of our executive compensation program.
Added
We believe that companies included in the Performance Peer Group have portfolios and investment strategies that most closely resemble our focus on residential mortgage assets.
Added
Companies comprising the Performance Peer Group include AGNC Investment Corp., ARMOUR Residential REIT, Inc., Chimera Investment Corporation, Dynex Capital, Inc., Ellington Financial Inc., Invesco Mortgage Capital, Inc., MFA Financial, Inc., New York Mortgage Trust, Orchid Island Capital, Inc., Redwood Trust, Inc., Rithm Capital Corp., and Two Harbors Investment Corp.
Added
The cumulative total return of the Performance Peer Group was weighted according to the respective issuer's stock market capitalization at the beginning of the performance period.
Added
For the five-year period ended December 31, 2023, an investment of $100 at the beginning of the period would have resulted in a value of $93 in our common stock, $98 in the BBG REIT Index, and $85 in the Performance Peer Group. 45 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 5.
Added
The authorization does not obligate us to acquire any particular amount of common stock and the program may be suspended or discontinued at our discretion without prior notice. 46 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 5.
Added
The Current Preferred Stock Repurchase Program replaces our previous repurchase plan for all of our existing outstanding Preferred Stock, which expired on December 31, 2024 (the “Prior Preferred Stock Repurchase Program”). The Current Preferred Stock Repurchase Program became effective on January 1, 2025, and will expire on December 31, 2029.
Added
No shares were repurchased with respect to the Prior Preferred Stock Repurchase Program during the year ended December 31, 2024. Purchases made pursuant to the Current Preferred Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.
Added
The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

17 edited+33 added−40 removed5 unchanged
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page Overview 49 Reverse Stock Split 49 Business Environment 49 Economic Environment 50 London Interbank Offered Rate (“LIBOR”) Transition 51 Results of Operations 51 Net Income (Loss) Summary 52 Non-GAAP Financial Measures 53 Earnings Available for Distribution, Earnings Available for Distribution Attributable to Common Stockholders, Earnings Available for Distribution P er Average Common Share and Annualized EAD Return on Average Equity 53 Premium Amortization Expense 55 Economic Leverage and Economic Capital Ratios 55 Interest Income (excluding PAA), Economic Interest Expense and Economic Net Interest Income (excluding PAA) 56 Experienced and Projected Long-term CPR 57 Average Yield on Interest Earning Assets (excluding PAA), Net Interest Spread (excluding PAA), Net Interest Margin (excluding PAA) , and Average Economic Cost of Interest Bearing Liabilities 57 Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities 58 Other Income (Loss) 59 General and Administrative Expenses 60 Return on Average Equity 61 Unrealized Gains and Losses - Available-for-Sale Investments 61 Financial Condition 62 Residential Securities 62 Contractual Obligations 64 Commitments and Contractual Obligations with Unconsolidated Entities 65 Capital Management 65 Stockholders’ Equity 65 Capital Stock 65 Leverage and Capital 66 Risk Management 66 Risk Appetite 67 Governance 67 Description of Risks 68 Liquidity and Funding Risk Management 69 Funding 69 Excess Liquidity 70 Maturity Profile 71 Stress Testing 72 Liquidity Management Policies 73 Investment/Market Risk Management 73 Credit Risk Management 74 Counterparty Risk Management 74 Operational Risk Management 75 Compliance, Regulatory and Legal Risk Management 76 Critical Accounting Estimates 77 Valuation of Financial Instruments 77 Residential Securities 77 Residential Mortgage Loans 77 MSR 77 Interest Rate Swaps 78 Revenue Recognition 78 Consolidation of Variable Interest Entities 78 Use of Estimates 78 Glossary of Terms 79 48 ANNALY CAPITAL MANAGEMENT, INC.
Biggest changeMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Page Overview 51 Business Environment 51 Economic Environment 52 Results of Operations 53 Net Income (Loss) Summary 54 Non-GAAP Financial Measures 55 Earnings Available for Distribution, Earnings Available for Distribution Attributable to Common Stockholders, Earnings Available for Distribution Per Average Common Share and Annualized EAD Return on Average Equity 55 Premium Amortization Expense 57 Economic Leverage and Economic Capital Ratios 57 Interest Income (excluding PAA), Economic Interest Expense and Economic Net Interest Income (excluding PAA) 58 Experienced and Projected Long-term CPR 59 Average Yield on Interest Earning Assets (excluding PAA), Net Interest Spread (excluding PAA), Net Interest Margin (excluding PAA), and Average Economic Cost of Interest Bearing Liabilities 60 Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities 61 Other Income (Loss) 62 General and Administrative Expenses 62 Return on Average Equity 63 Unrealized Gains and Losses - Available-for-Sale Investments 63 Financial Condition 64 Residential Securities 64 Contractual Obligations 66 Commitments and Contractual Obligations with Unconsolidated Entities 67 Capital Management 67 Stockholders’ Equity 67 Capital Stock 67 Leverage and Capital 68 Risk Management 69 Risk Appetite 69 Governance 69 Description of Risks 71 Liquidity and Funding Risk Management 71 Funding 71 Excess Liquidity 73 Maturity Profile 74 Stress Testing 75 Liquidity Management Policies 75 Investment/Market Risk Management 75 Credit Risk Management 76 Counterparty Risk Management 77 Operational Risk Management 78 Compliance, Regulatory and Legal Risk Management 79 Critical Accounting Estimates 79 Valuation of Financial Instruments 79 Residential Securities 79 Residential Mortgage Loans 80 MSR 80 Interest Rate Swaps 80 Revenue Recognition 81 Consolidation of Variable Interest Entities 81 Use of Estimates 81 Glossary of Terms 82 50 ANNALY CAPITAL MANAGEMENT, INC.
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide non-GAAP financial measures to enhance investor understanding of our period-over-period operating performance and business trends, as well as for assessing our performance versus that of industry peers. Refer to the “Non-GAAP Financial Measures” section for additional information. 51 ANNALY CAPITAL MANAGEMENT, INC.
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide non-GAAP financial measures to enhance investor understanding of our period-over-period operating performance and business trends, as well as for assessing our performance versus that of industry peers. Refer to the “Non-GAAP Financial Measures” section for additional information. 53 ANNALY CAPITAL MANAGEMENT, INC.
Refer to the section titled “Glossary of Terms” located at the end of this Item 7 for definitions of commonly used terms in this annual report on Form 10-K. This section of our Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Refer to the section titled “Glossary of Terms” located at the end of this Item 7 for definitions of commonly used terms in this annual report on Form 10-K. This section of our Form 10-K generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2022. 47 ANNALY CAPITAL MANAGEMENT, INC.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Form 10-K can be found in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2023. 49 ANNALY CAPITAL MANAGEMENT, INC.
ITEM 6. [Reserved] 46 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis ITEM 7.
ITEM 6. [Reserved] 48 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis ITEM 7.
Treasury rate, tightened slightly, ending the year 12 basis points tighter than December 2022. The following table below presents interest rates and spreads at each date presented: As of December 31, 2023 2022 2021 30-Year mortgage current coupon 5.25% 5.39% 2.07% Mortgage basis 137 bps 152 bps 56 bps 10-Year U.S.
Treasury rate, widened slightly, ending the year 11 bps tighter than in December 2023. The following table below presents interest rates and spreads at each date presented: As of December 31, 2024 2023 2022 30-Year mortgage current coupon 5.83% 5.25% 5.39% Mortgage basis 126 bps 137 bps 152 bps 10-Year U.S.
The business growth continued to be driven by our residential whole loan acquisition strategy, through which our Residential Credit business acquired $4.7 billion in loans, with a vast majority coming through our correspondent channel, which allows us to control all aspects of the loan making process, including asset selection, counterparties and loss mitigation.
Our Residential Credit business portfolio continued to grow strongly driven by Annaly’s residential whole loan acquisition strategy, through which the business acquired $13 billion in loans, predominantly through our correspondent channel. The strategy continued to allow us to control all aspects of the loan making process, including asset selection, counterparties and loss mitigation.
A part of the reduced leverage is driven by further diversification into our Residential Credit and MSR businesses, which are less levered than Agency MBS. Of note, the combined capital allocation to the two businesses increased by five percentage points to 38% at the end of 2023.
Similar to 2023, a portion of the reduced leverage is driven by further diversification into the Residential Credit and mortgage servicing rights (“MSR”) businesses, which now represent 2 percentage points more of our capital than at year end 2023. Both businesses are less levered than Agency MBS.
Finally, given attractive relative value opportunities with respect to Agency MBS, we increased our portfolio of Agency CMBS to $3.5 billion market value, as the asset class offered an attractive stable cash flow in volatile interest rate markets.
Finally, Annaly modestly increased our portfolio of Agency commercial mortgage-backed securities to $3.3 billion market value as the asset class continues to offer an attractive stable cash flow in volatile interest rate markets.
The 10-year Treasury Inflation Protected Security (“TIPS”), which subtracts the expected inflation rate from the bond’s nominal yield, fell 13 basis points, as market participants have started to price in an easing cycle for the Fed. Meanwhile, the mortgage basis, or the spread between the 30-year Agency MBS coupon and 10-year U.S.
The 10-year Treasury Inflation Protected Security (“TIPS”), which subtracts the expected inflation rate from the bond’s nominal yield, rose 52 bps as market participants revised upward their estimate of the Fed’s neutral rate in light of the resilient macroeconomy. Meanwhile, the mortgage basis, or the spread between the 30-year Agency MBS coupon and 10-year U.S.
Certain of such risks and uncertainties are described herein (see “Special Note Regarding Forward-Looking Statements” above) and in Part I, Item 1A. “Risk Factors”. This Management Discussion and Analysis section contains analysis and discussion of financial results computed in accordance with U.S. generally accepted accounting principles (“GAAP”) and non-GAAP measurements.
This Management Discussion and Analysis section contains analysis and discussion of financial results computed in accordance with U.S. generally accepted accounting principles (“GAAP”) and non-GAAP measurements.
Finally, we also continued to grow our MSR portfolio, further increasing assets through purchases predominantly of low-coupon bulk MSR packages, in turn growing the portfolio by 50% throughout 2023, to $2.7 billion market value.
Finally, Annaly also continued to grow its MSR strategy, further increasing assets through purchases predominantly of low-coupon bulk MSR packages, growing the portfolio to $3.3 billion market value. Annaly continued to opportunistically buy MSR bulk packages, which generally saw healthy demand into somewhat lower trading volumes than in 2023.Our strategy continued to focus on predominantly low coupon, high quality MSR.
In light of the volatile environment, we continued to proactively manage our leverage profile throughout the year, in turn reducing our economic leverage from 6.3x at the end of the 2022 to 5.7x at the end of 2023.
In this environment, Annaly generated an 11.9% economic return in 2024, underscoring the efficacy of our diversified housing finance model and our disciplined portfolio and risk management. We proactively managed our leverage profile throughout the year, reducing aggregate leverage modestly from 5.7x at the end of 2023 to 5.5x at the end of 2024.
Management’s Discussion and Analysis Price pressures remained at elevated levels throughout the year although they have shown notable signs of progress toward the Fed’s 2% target. The headline Personal Consumption Expenditure Chain Price Index (“PCE”), the Fed’s preferred inflation gauge, measured 2.6% in December 2023, after peaking at 7.0% on a year-over-year basis in June 2022.
Price pressures moderated throughout 2024, but progress has been slow and inflation is still at levels above the Fed’s 2% target. The headline Personal Consumption Expenditure Chain Price Index (“PCE”), the Fed’s preferred inflation gauge, measured 2.6% in December 2024, modestly slower than the 2.7% pace in December 2023. Notably, energy prices saw a decline, 52 ANNALY CAPITAL MANAGEMENT, INC.
The unemployment rate ended the year at 3.7%, increasing 0.2 percentage points from the historic low of 3.5% reported in December 2022. Total nonfarm payroll employment expanded at a slower pace in 2023, totaling 3.1 million added jobs, relative to 4.5 million added jobs seen in 2022.
Monthly employment growth slowed but remained in healthy territory, with the economy adding 186,000 in total nonfarm payroll jobs per month in 2024, compared to 251,000 per month in 2023. The unemployment rate ended the year at 4.1%, increasing only 0.3 percentage points relative to a year earlier, and has remained below 4.3% since November 2021.
For a full discussion of our business, refer to the section titled “Business Overview” of Part I, Item 1. “Business.” Reverse Stock Split On September 8, 2022, we announced that our Board had unanimously approved a reverse stock split of our common stock at a ratio of 1-for-4 (the “Reverse Stock Split”).
For a full discussion of our business, refer to the section titled “Business Overview” of Part I, Item 1. “Business” and see the Note titled "Segments" in the Notes to the Consolidated Financial Statements included in Item 15.
Home prices have continued to benefit from existing homeowners’ inability to move homes absent a meaningful increase in housing costs (the so called “lock in effect”), resulting in low availability of inventory for sale as borrowers locked into below-market mortgage rates are less willing to move or trade up.
Historically low affordability for prospective homeowners, as mortgage rates remained above 51 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis 6.0% for nearly the entire year and existing homeowners’ inability to move homes without a meaningful increase in housing costs (the so called “lock in effect”), have supported home prices at low levels of sales turnover.
Removed
The Reverse Stock Split was effective following the close of business on September 23, 2022 (the “Effective Time”). Accordingly, at the Effective Time, every four issued and outstanding shares of our common stock were converted into one share of our common stock. No fractional shares were issued in connection with the Reverse Stock Split.
Added
Our three investment groups are primarily comprised of the following: Investment Groups Description Annaly Agency Group Invests in Agency mortgage-backed securities (“MBS”) collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae and complementary investments within the Agency market, including Agency commercial MBS.
Removed
Instead, each stockholder that would have held fractional shares as a result of the Reverse Stock Split received cash in lieu of such fractional shares. The par value per share of our common stock remained unchanged at $0.01 per share after the Reverse Stock Split.
Added
Annaly Residential Credit Group Invests primarily in non-Agency residential whole loans and securitized products within the residential and commercial markets. Annaly Mortgage Servicing Rights Group Invests in mortgage servicing rights (“MSR”), which provide the right to service residential mortgage loans in exchange for a portion of the interest payments made on the loans.
Removed
Accordingly, for all historical periods presented, an amount equal to the par value of the reduced number of shares resulting from the Reverse Stock Split was reclassified from Common stock to Additional paid in capital in our Consolidated Statements of Financial Condition.
Added
"Exhibits, Financial Statement Schedules." Business Environment U.S. real economic growth remained at its above-trend pace in 2024, marking a second consecutive year of strong U.S. economic growth despite continued elevated interest rates. The strength of the U.S. economy was primarily driven by consumption, as individuals benefitted from robust wage growth and a moderation of inflation pressures.
Removed
All references made to share or per share amounts in the accompanying consolidated financial statements and disclosures have been retroactively adjusted, where applicable, to reflect the effects of the Reverse Stock Split.
Added
Government spending also supported economic growth, while investment activity contributed somewhat less than in 2023. Separately, the U.S. economy broadly appears to have benefitted from recent strong immigration flows, which helped balance labor market supply and demand, and improved productivity gains.
Removed
Business Environment Financial markets saw meaningful volatility in 2023, marking a second consecutive year in which fixed income markets were more broadly impacted by elevated uncertainty around the outlook for the economy and the macroeconomic landscape.
Added
Financial markets observed a constructive 2024, with equities recording strong returns given the healthy economic picture, best seen in the 25.0% total return for the S&P 500 Index. Interest rates, however, remained volatile throughout the year, though were generally more rangebound than in 2023.
Removed
The volatility was driven by a combination of factors, including bank earnings and liquidity pressures that emerged in March 2023 following the sudden failure of Silicon Valley Bank. Fears over the health of the broader banking system ultimately proved disproportionate, evidenced by a normalization in interest rates as the economy remained robust.
Added
Ten-year Treasury yields traded in a range between 3.6% and 4.7%, generally narrower than in 2023, when the range was 3.3% to 5.0%.
Removed
However, interest rates then rose sharply between August and October with the ten-year Treasury note reaching the 5% yield mark as market participants appeared increasingly concerned about the outlook for the fiscal trajectory. The total deficit reached $1.78 trillion for the full calendar year, representing another year of large fiscal deficits despite healthy economic growth.
Added
Nonetheless, interest rates generally remained elevated relative to the period between the 2008 financial crisis and the 2020 pandemic, which has led to increased speculation that the lower interest rates in that period were more of an outlier than a new normal.
Removed
The broader economy continued to expand, labor markets remained robust and inflation moderated throughout the year.
Added
For now, the U.S. economy remains strong, which in turn suggests healthy economic growth can occur even at these higher interest rate levels. The Federal Reserve (“the Fed”) lowered the Federal Funds Target Rate (“Fed Funds Rate”) in the second half of 2024.
Removed
While many observers had expected the economy to enter into a recession in 2023, data thus far has suggested that inflation moderated without a meaningful deterioration in economic activity, setting up a scenario in which parts of the economy moved into better balances without a sharp contraction in economic output or a significantly weaker labor market (a so-called “soft landing”).
Added
As inflation rates fell from their peak in the summer of 2022 and hiring slowed over the summer months, the risk that a Fed Funds Rate at a peak of 5.25-5.50% would unduly constrain economic growth and the labor market rose.
Removed
The increased likelihood of a soft landing appears to have been driven by numerous factors, including fewer price pressures on the supply side of the economy as shipping of goods normalized following earlier disruptions from the pandemic and the Russian invasion of the Ukraine.
Added
Consequently, the Fed lowered the Fed Funds Rate by 1% over the course of three meetings between September and December, even though inflation remained above 2% annual rates. Given continued strength in both inflation and economic activity, Fed officials have signaled a more gradual approach going forward, waiting for further inflation progress to lower the rate further.
Removed
In addition, U.S. consumers continue to find employment and enjoy healthy balance sheets, while growing wages afford them the ability to continue to spend on goods and services, thereby supporting broader economic growth. Private sector investment activity rebounded somewhat in 2023 relative to 2022, while government spending and investment incentives created by federal legislation supported economic growth as well.
Added
Regarding their balance sheet policy, the Fed slowed the decline in their securities portfolio mid-year by reducing the cap on Treasury securities runoff from $60 billion per month to $25 billion. Combined with the decline in their mortgage-backed securities portfolio, the Fed’s security portfolio declined $668 billion in 2024 and continues to decline at a $60 billion per month pace.
Removed
Following the rapid tightening in monetary policy in 2022, the Federal Reserve (the “Fed”) raised interest rates an additional one percentage point in 2023 and ultimately kept the Federal Funds Target Rate at 5.25% – 5.50% since late July.
Added
Of note, given the lower Fed Funds Rate and relatively less movement in long-term Treasury rates, the yield curve steepened, with the 2-year 10-year Treasury spread, the difference between yields of those maturities, turning positive for the first time in over two years.
Removed
Meanwhile, the Fed maintained the pace it set in 2022 in the reduction of its balance sheet throughout the year, effectively letting up to $60 billion in Treasury and up to $35 billion in Agency MBS runoff per month in 2023.
Added
In addition, long-term Treasuries appeared increasingly driven by investors’ increased demand for compensation to hold longer maturity securities, with rising term premia driving much of the increase in long-term Treasury yields seen in 2024.
Removed
Driven by the continued maturities, the Federal Reserve’s balance sheet declined by $838 billion to $7.7 trillion over the course of the year. In this environment, home prices outperformed the market’s expectations despite mortgage rates reaching 20-year highs, resulting in historically low affordability for prospective homeowners.
Added
Additionally, the U.S. presidential election outcome amplified the rise in term premia, as expectations for a permanent extension of the 2017 “Tax Cuts and Jobs Act” was estimated to further increase the U.S. budget deficit according to estimates by the Congressional Budget Office.
Removed
Housing activity remains depressed, although we have seen modest signs of an uptick in demand following the recent decline in mortgage rates. Ultimately, we are constructive on the housing market outlook should the labor market and consumers remain resilient in line with a “soft landing” economic scenario. 49 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
Added
Meanwhile, residential investment slowed as high mortgage rates curbed demand for housing and housing construction, particularly in the second half of the year. In this economic environment, the housing market saw limited changes in aggregate as inventories and activity remain subdued relative to the pre-pandemic averages, which supported home prices. National home prices rose roughly 3.0% in 2024.
Removed
Management’s Discussion and Analysis Over the course of the year, we generated a +6.0% economic return, which demonstrates the efficacy of our diversified housing finance model, as well as our disciplined portfolio and risk management.
Added
However, there has been increased regional differentiation, with larger growth in supply in states and cities in the Southern and Western United States, which in turn saw price changes below the national average.
Removed
Turning to the Agency MBS portfolio, our aggregate portfolio declined modestly, falling from $72.9 billion in assets at the end of 2022 to $65.7 billion at the end of 2023.
Added
Areas of home price weakness generally correspond to areas with easier zoning restrictions and greater ability to build new homes, though many of them also saw more notable price increases following the pandemic driven by housing shortages and outsized population growth.
Removed
The lower portfolio balance is largely driven by asset sales throughout the year to accommodate the shift in capital allocation, as well as a somewhat lower leverage in the strategy as interest rate markets and mortgage spreads remained very volatile throughout most of the year.
Added
Finally, as a result of constructive financial markets, we were able to raise $1.6 billion in accretive equity capital over the course of the year. Given the increased capital base, Annaly’s aggregate portfolio grew to $80.9 billion as of December 31, 2024, up roughly $6.5 billion relative to the same date a year earlier.
Removed
In addition to somewhat lower aggregate holdings, we focused on shifting the coupon distribution higher throughout the year, bringing the share of 5.0% coupons or higher to 48%, up 17 percentage points from the 2022 year-end levels.
Added
Of note, we grew assets and capital in each of our three businesses. The Agency MBS portfolio grew its assets to $70.6 billion as we added a modest amount of assets across the major asset classes in the portfolio.
Removed
In addition, we rotated out of “to be announced” (“TBA”) security holdings, in turn reducing our holdings from $10.6 billion at the end of 2022 to ($0.6) billion at the end of 2023.
Added
The increases were focused on our continued purchases of prepayment protected Agency MBS specified pools in production coupons, which added attractive cash flows that also offered prepayment protection.
Removed
This reduction was driven by the combination of reduced advantageous financing of TBA securities relative to specified pool ownership and the desire to add prepayment protection in higher coupon purchases.
Added
In addition, Annaly began to hold a larger balance of “to be announced” (“TBA”) securities after holding a modestly negative balance at the end of 2023, though at $3.1 billion, our TBA position remains small relative to recent years.
Removed
The residential credit sector benefited from the strong economic environment and the resilience of the housing market, enabling us to continue to achieve progress in building out the business. Our Residential Credit portfolio ended the year at $5.7 billion market value, having grown 14% year over year, and representing 20% of the firm’s capital.
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This smaller share is largely a function of the continued unattractive financing conditions in the TBA market relative to repurchase agreement (“repo”) funding of specified pools. In addition, larger loan sizes have left TBAs with elevated prepayment risks.
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Similar to 2022, bulk trading activity of MSR packages remained at historically elevated levels as mortgage originators looked to monetize MSR holdings to offset low profit margins in their mortgage origination businesses.
Added
Extracting favorable economics and long-term non-recourse financing, our Residential Credit business issued a record 21 securitizations under Annaly’s Onslow Bay (“OBX”) shelf in 2024, worth a total of $11.0 billion. Given the stable housing market, a strong network of counterparties and robust demand for residential credit assets, we expect to continue to grow the strategy in 2025.
Removed
Meanwhile, demand for MSR also remained strong, as a broad investor base sought MSR as purely financial investments or to acquire escrow deposits and customers that can later be refinanced. We opportunistically bought MSR packages as a strategic partner to originators given our complementary business strategy as a financial investor.
Added
The current weighted average note rate of the MSR portfolio is 3.20%, up only slightly from a year ago and well below prevailing mortgage rates at the end of 2024. Economic Environment In 2024, the U.S. economy performed strongly, with the gross domestic product (“GDP”) rising by 2.8% on a year-over-year (“yoy”) basis.
Removed
Our MSR portfolio continued to consist predominantly of low coupon, high quality conventional MSR, which at the weighted average coupon of 3.06% at the end of 2023, remained far from having a refinancing incentive considering prevailing mortgage rates. Economic leverage is a non-GAAP financial measure.
Added
This marks the second consecutive year of robust growth, following a 2.9% increase in real GDP in 2023, despite elevated interest rates. This economic resilience was driven by a strong income growth and sound financial market performance, which generated wealth gains across households. Consequently, consumer spending made up a majority of U.S. aggregate demand in 2024.
Removed
Refer to the “Non-GAAP Financial Measures” section for additional information, including reconciliations to its most directly comparable GAAP results. Economic Environment U.S. real economic growth accelerated in 2023, with U.S. gross domestic product (“GDP”) rising 2.5% on a year-over-year basis, above the 1.9% recorded for 2022. Economic activity continued to strengthen throughout the year, led by sizeable increases in consumption.
Added
Personal consumption expenditures rose at a 5.3% annual rate per month in 2024, down from 6.4% in 2024, though slower price gains resulted in stronger inflation-adjusted consumption than in 2023.
Removed
Consumer balance sheets remained healthy and benefited from further income growth, leading retail sales data to notably increase in the fourth quarter. Increased government spending spread across state, local and federal levels, as well as higher exports, also boosted the GDP.
Added
The labor force benefited from stable employment and sustained wage growth throughout 2024, with the supply and demand of the labor market now in better balance compared to the end of 2023.
Removed
Meanwhile, fixed business investment was more muted throughout the year, while residential housing started to move sideways and home sales continued to fall in light of higher mortgage rates.
Added
Job openings trended lower but remained elevated relative to pre-pandemic averages, while layoffs stayed low. As a result of the more balanced labor market, wage growth – as measured by the Employment Cost Index - decelerated from a pace of 4.3% yoy at the end of 2023 to a still healthy 3.8% yoy at the end of 2024.
Removed
Heading into 2024, recession risks appear relatively low given the upbeat picture of consumer and business spending, although the impact of the Fed’s monetary policy tightening continues to flow through to the real economy and credit conditions have tightened. Meanwhile, the supply and demand for labor moved into better balance by the end of 2023.
Added
AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis particularly in gasoline and fuel. The core measure, which does not include price changes in food and energy sectors, measured 2.8% year-over year, also slightly slower than at the end of 2023.
Removed
Strong job creation was accompanied by an increase in the supply of workers, as the labor force participation rate increased gradually throughout the year and the employment-to-population ratio rose slightly. At the same time, job openings trended lower, although they remained elevated relative to pre-pandemic averages.
Added
Measures of inflation have shown uneven progress in the services sector, with shelter inflation slowing at a very gradual pace and remaining above pre-pandemic averages. Additionally, survey measures of short-run inflation expectations continued to decline in 2024, while longer-term inflation expectations appear well anchored.
Removed
As a result of the more balanced labor market, wage growth slowed as the Employment Cost Index wages rose 4.3% over the 12 months ending in December, well below the 5.1% shown by the same metric a year earlier. 50 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
Added
The inflation outlook for 2025 is uncertain, as many policy proposals from President Donald Trump’s new administration – such as expansionary fiscal policy, immigration restrictions, and tariffs – indicate potential inflationary pressures. U.S Treasury yields moved higher given the resilience of the U.S. economy and elevated supply of Treasury debt hitting the market during the year.
Removed
The core measure, which does not include price changes in food and energy sectors, measured 2.9% year-over year, the first time that the core PCE has been below 3.0% on a year-over-year basis since March 2021. Additionally, recent survey measures of short-run inflation expectations have declined meaningfully and longer-term inflation expectations appear well anchored.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

170 edited+44 added−24 removed244 unchanged
Biggest changeAs of and for the Years Ended December 31, 2023 2022 2021 (dollars in thousands, except per share data) Interest income $ 3,731,581 $ 2,778,887 $ 1,983,036 Interest expense 3,842,965 1,309,735 249,243 Net interest income (111,384) 1,469,152 1,733,793 Servicing and related income 364,157 246,926 69,018 Servicing and related expense 37,652 25,145 12,202 Net servicing income 326,505 221,781 56,816 Other income (loss) (1,651,591) 243,787 796,360 Less: Total general and administrative expenses 162,553 162,729 186,014 Income (loss) before income taxes (1,599,023) 1,771,991 2,400,955 Income taxes 39,434 45,571 4,675 Net income (loss) (1,638,457) 1,726,420 2,396,280 Less: Net income (loss) attributable to noncontrolling interests 4,714 1,095 6,384 Net income (loss) attributable to Annaly (1,643,171) 1,725,325 2,389,896 Less: Dividends on preferred stock 141,676 110,623 107,532 Net income (loss) available (related) to common stockholders $ (1,784,847) $ 1,614,702 $ 2,282,364 Net income (loss) per share available (related) to common stockholders Basic $ (3.61) $ 3.93 $ 6.40 Diluted $ (3.61) $ 3.92 $ 6.39 Weighted average number of common shares outstanding Basic 494,541,323 411,348,484 356,856,520 Diluted 494,541,323 411,621,758 357,142,251 Other information Investment portfolio at period-end $ 87,396,467 $ 78,469,860 $ 74,792,041 Average total assets $ 88,177,773 $ 78,768,785 $ 81,925,499 Average equity $ 11,437,590 $ 11,616,995 $ 13,728,352 GAAP leverage at period-end (1) 6.8:1 6.0:1 4.7:1 GAAP capital ratio at period-end (2) 12.2 % 13.9 % 17.2 % Annualized return on average total assets (1.86) % 2.19 % 2.92 % Annualized return on average equity (14.33) % 14.86 % 17.45 % Net interest margin (3) (0.13) % 1.92 % 2.28 % Average yield on interest earning assets (4) 4.32 % 3.64 % 2.61 % Average GAAP cost of interest bearing liabilities (5) 5.13 % 2.03 % 0.37 % Net interest spread (0.81) % 1.61 % 2.24 % Weighted average experienced CPR for the period 6.5 % 12.2 % 23.7 % Weighted average projected long-term CPR at period-end 9.4 % 7.8 % 12.7 % Common stock book value per share $ 19.44 $ 20.79 $ 31.88 Non-GAAP metrics * Interest income (excluding PAA) $ 3,733,235 $ 2,418,300 $ 2,040,194 Economic interest expense (5) $ 2,257,912 $ 943,574 $ 525,385 Economic net interest income (excluding PAA) $ 1,475,323 $ 1,474,726 $ 1,514,809 Premium amortization adjustment cost (benefit) $ 1,654 $ (360,587) $ 57,158 Earnings available for distribution (6) $ 1,554,014 $ 1,850,138 $ 1,768,391 Earnings available for distribution per average common share $ 2.86 $ 4.23 $ 4.65 Annualized EAD return on average equity (excluding PAA) 13.71 % 16.02 % 12.90 % Economic leverage at period-end (1) 5.7:1 6.3:1 5.7:1 Economic capital ratio at period-end (2) 14.0 % 13.4 % 14.4 % Net interest margin (excluding PAA) (3) 1.62 % 2.03 % 2.02 % Average yield on interest earning assets (excluding PAA) (4) 4.33 % 3.16 % 2.68 % Average economic cost of interest bearing liabilities (5) 3.01 % 1.46 % 0.79 % Net interest spread (excluding PAA) 1.32 % 1.70 % 1.89 % * Represents a non-GAAP financial measure.
Biggest changeAs of and for the Years Ended December 31, 2024 2023 2022 (dollars in thousands, except per share data) Interest income $ 4,840,034 $ 3,731,581 $ 2,778,887 Interest expense 4,592,238 3,842,965 1,309,735 Net interest income 247,796 (111,384) 1,469,152 Servicing and related income 485,406 364,157 246,926 Servicing and related expense 49,469 37,652 25,145 Net servicing income 435,937 326,505 221,781 Other income (loss) 514,651 (1,651,591) 243,787 Less: Total general and administrative expenses 171,356 162,553 162,729 Income (loss) before income taxes 1,027,028 (1,599,023) 1,771,991 Income taxes 15,260 39,434 45,571 Net income (loss) 1,011,768 (1,638,457) 1,726,420 Less: Net income (loss) attributable to noncontrolling interests 9,862 4,714 1,095 Net income (loss) attributable to Annaly 1,001,906 (1,643,171) 1,725,325 Less: Dividends on preferred stock 154,551 141,676 110,623 Net income (loss) available (related) to common stockholders $ 847,355 $ (1,784,847) $ 1,614,702 Net income (loss) per share available (related) to common stockholders Basic $ 1.62 $ (3.61) $ 3.93 Diluted $ 1.62 $ (3.61) $ 3.92 Weighted average number of common shares outstanding Basic 521,737,554 494,541,323 411,348,484 Diluted 522,747,610 494,541,323 411,621,758 Other information Investment portfolio at period-end $ 98,185,671 $ 87,396,467 $ 78,469,860 Average total assets $ 96,690,348 $ 88,177,773 $ 78,768,785 Average equity $ 11,868,202 $ 11,437,590 $ 11,616,995 GAAP leverage at period-end (1) 7.1:1 6.8:1 6.0:1 GAAP capital ratio at period-end (2) 12.3 % 12.2 % 13.9 % Annualized return (loss) on average total assets 1.05 % (1.86 %) 2.19 % Annualized return (loss) on average equity 8.53 % (14.33 %) 14.86 % Net interest margin (3) 0.26 % (0.13 %) 1.92 % Average yield on interest earning assets (4) 5.15 % 4.32 % 3.64 % Average GAAP cost of interest bearing liabilities (5) 5.38 % 5.13 % 2.03 % Net interest spread (0.23 %) (0.81 %) 1.61 % Weighted average experienced CPR for the period 7.4 % 6.5 % 12.2 % Weighted average projected long-term CPR at period-end 8.6 % 9.4 % 7.8 % Common stock book value per share $ 19.15 $ 19.44 $ 20.79 Non-GAAP metrics * Interest income (excluding PAA) $ 4,825,793 $ 3,733,235 $ 2,418,300 Economic interest expense (5) $ 3,338,791 $ 2,257,912 $ 943,574 Economic net interest income (excluding PAA) $ 1,487,002 $ 1,475,323 $ 1,474,726 Premium amortization adjustment cost (benefit) $ (14,241) $ 1,654 $ (360,587) Earnings available for distribution (6) $ 1,564,625 $ 1,554,014 $ 1,850,138 Earnings available for distribution per average common share $ 2.70 $ 2.86 $ 4.23 Annualized EAD return on average equity (excluding PAA) 13.28 % 13.71 % 16.02 % Economic leverage at period-end (1) 5.5:1 5.7:1 6.3:1 Economic capital ratio at period-end (2) 14.6 % 14.0 % 13.4 % Net interest margin (excluding PAA) (3) 1.57 % 1.62 % 2.03 % Average yield on interest earning assets (excluding PAA) (4) 5.13 % 4.33 % 3.16 % Average economic cost of interest bearing liabilities (5) 3.91 % 3.01 % 1.46 % Net interest spread (excluding PAA) 1.22 % 1.32 % 1.70 % * Represents a non-GAAP financial measure.
The Cybersecurity Committee regularly discusses cybersecurity risk management and best practices with the ERC and with the Audit and Risk Committees of our Board. The Audit and Risk Committees jointly oversee processes, practices and policies related to cybersecurity and receive joint and individual presentations from management and external experts on cyber and technology-related risks.
The Cybersecurity Committee regularly discusses cybersecurity risk management and best practices with the ERC and with the Audit and Risk Committees of our Board. The Audit and Risk Committees jointly oversee processes, practices and policies related to cybersecurity and receive joint and individual presentations from management and external experts on cyber technology-related risks.
Pass-Through Security A securitization structure where a GSE or other entity “passes” the amount collected from the borrowers every month to the investor, after deducting fees and expenses. 84 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Pool A collection of mortgage loans assembled by an originator or master servicer as the basis for a security.
Pass-Through Security A securitization structure where a GSE or other entity “passes” the amount collected from the borrowers every month to the investor, after deducting fees and expenses. 87 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Pool A collection of mortgage loans assembled by an originator or master servicer as the basis for a security.
Actual results could differ materially from those estimates. 78 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Glossary of Terms A Adjustable-Rate Loan / Security A loan / security on which interest rates are adjusted at regular intervals according to predetermined criteria. The adjustable interest rate is tied to an objective, published interest rate index.
Actual results could differ materially from those estimates. 81 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Glossary of Terms A Adjustable-Rate Loan / Security A loan / security on which interest rates are adjusted at regular intervals according to predetermined criteria. The adjustable interest rate is tied to an objective, published interest rate index.
Capital Ratio (GAAP Capital Ratio) Calculated as total stockholders’ equity divided by total assets. 79 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Carry The amount an asset earns over its hedging and financing costs. A positive carry happens when the rate on the securities being financed is greater than the rate on the funds borrowed.
Capital Ratio (GAAP Capital Ratio) Calculated as total stockholders’ equity divided by total assets. 82 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Carry The amount an asset earns over its hedging and financing costs. A positive carry happens when the rate on the securities being financed is greater than the rate on the funds borrowed.
Y Yield-to-Maturity The expected rate of return of a bond if it is held to its maturity date; calculated by taking into account the current market price, stated redemption value, coupon payments and time to maturity and assuming all coupons are reinvested at the same rate; equivalent to the internal rate of return. 87 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Y Yield-to-Maturity The expected rate of return of a bond if it is held to its maturity date; calculated by taking into account the current market price, stated redemption value, coupon payments and time to maturity and assuming all coupons are reinvested at the same rate; equivalent to the internal rate of return. 90 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Similarly, if mortgage principal prepayment rates were to decrease over the life of our mortgage-backed securities, all other factors being equal, our net interest income would increase during the life of these mortgage-backed securities as we would amortize our net premium balance over a longer time period. 62 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
Similarly, if mortgage principal prepayment rates were to decrease over the life of our mortgage-backed securities, all other factors being equal, our net interest income would increase during the life of these mortgage-backed securities as we would amortize our net premium balance over a longer time period. 64 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
For purposes of calculating this ratio total debt includes repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued and mortgages payable are non-recourse to us. LIBOR (London Interbank Offered Rate) A rate previously used as a benchmark for financial transactions.
For purposes of calculating this ratio total debt includes repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us. LIBOR (London Interbank Offered Rate) A rate previously used as a benchmark for financial transactions.
In addition, EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends. Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders’ equity, provides investors with additional detail on the earnings available for distribution generated by our invested equity capital. 53 ANNALY CAPITAL MANAGEMENT, INC.
In addition, EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends. Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders’ equity, provides investors with additional detail on the earnings available for distribution generated by our invested equity capital. 55 ANNALY CAPITAL MANAGEMENT, INC.
Our mortgage-backed securities were largely Fannie Mae, Freddie Mac or Ginnie Mae pass through certificates or CMOs, which have an actual or implied credit rating that is the same as that of the U.S. government. We carry all of our Agency MBS at fair value on the Consolidated Statements of Financial Condition.
Our mortgage-backed securities were largely Fannie Mae, Freddie Mac or Ginnie Mae pass through certificates or CMOs, which have an actual or implied credit rating that is the same as that of the U.S. government. We carry all of our Agency MBS at fair value in the Consolidated Statements of Financial Condition.
Variable Interest Entity (“VIE”) An entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. 86 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
Variable Interest Entity (“VIE”) An entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. 89 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
The quality and character of the Residential Securities that we pledge as collateral under the repurchase agreements and interest rate swaps did not materially change at December 31, 2023 compared to the same period in 2022, and our counterparties did not materially alter any requirements, including required haircuts, related to the collateral we pledge under repurchase agreements and interest rate swaps during the year ended December 31, 2023.
The quality and character of the Residential Securities that we pledge as collateral under the repurchase agreements and interest rate swaps did not materially change at December 31, 2024 compared to the same period in 2023, and our counterparties did not materially alter any requirements, including required haircuts, related to the collateral we pledge under repurchase agreements and interest rate swaps during the year ended December 31, 2024.
Risk Appetite Statement Defines the types and levels of risk we are willing to take in order to achieve our business objectives, and reflects our risk management philosophy. 85 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis S Secondary Market Ongoing market for bonds previously offered or sold in the primary market.
Risk Appetite Statement Defines the types and levels of risk we are willing to take in order to achieve our business objectives, and reflects our risk management philosophy. 88 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis S Secondary Market Ongoing market for bonds previously offered or sold in the primary market.
The fair value of these securities being less than amortized cost at December 31, 2023 is solely due to market conditions and not the quality of the assets. Substantially all of the Agency MBS have an actual or implied credit rating that is the same as that of the U.S. government.
The fair value of these securities being less than amortized cost at December 31, 2024 is solely due to market conditions and not the quality of the assets. Substantially all of the Agency MBS have an actual or implied credit rating that is the same as that of the U.S. government.
Monetary Policy Action taken by the Federal Open Market Committee of the Federal Reserve System to influence the money supply or interest rates. 83 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Mortgage-Backed Security (“MBS”) A security representing a direct interest in a pool of mortgage loans.
Monetary Policy Action taken by the Federal Open Market Committee of the Federal Reserve System to influence the money supply or interest rates. 86 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Mortgage-Backed Security (“MBS”) A security representing a direct interest in a pool of mortgage loans.
We record TBA derivatives at fair value on our Consolidated Statements of Financial Condition and recognize periodic changes in fair value in Net gains (losses) on derivatives in our Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives. 54 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
We record TBA derivatives at fair value in our Consolidated Statements of Financial Condition and recognize periodic changes in fair value in Net gains (losses) on derivatives in our Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives. 56 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
The Cybersecurity Committee includes representatives from Operational Risk Management, Information Technology, Legal, Mortgage Operations and Internal Control. Certain members of the Cybersecurity Committee have relevant qualifications such as extensive work experience implementing data security measures, developing cybersecurity policies and procedures, and assessing, managing and reporting cybersecurity risk.
The Cybersecurity Committee includes representatives from Operational Risk Management, Information Technology, Legal, Mortgage Operations and Internal Controls. Certain members of the Cybersecurity Committee have relevant qualifications such as extensive work experience implementing data security measures, developing cybersecurity policies and procedures and assessing, managing and reporting cybersecurity risk.
Refer to the disclosure within this section above for additional information on non-GAAP financial measures. (1) Includes write-downs or recoveries which are reported in Other, net in the Company's Consolidated Statement of Comprehensive Income (Loss).
Refer to the disclosure within this section above for additional information on non-GAAP financial measures. (1) Includes write-downs or recoveries which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss).
Under the terms of the plan, we are authorized to repurchase up to an aggregate of 63,500,000 shares of Preferred Stock, comprised of up to (i) 28,800,000 shares of our 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series F Preferred Stock”), (ii) 17,000,000 shares of our 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series G Preferred Stock”), and (iii) 17,700,000 shares of our 6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series I Preferred Stock”, and together with Series F Preferred Stock and Series G Preferred Stock, the “Preferred Stock”).
Under the terms of the Prior Preferred Stock Repurchase Program, we are authorized to repurchase up to an aggregate of 63,500,000 shares of Preferred Stock, comprised of up to (i) 28,800,000 shares of our 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series F Preferred Stock”), (ii) 17,000,000 shares of our 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series G Preferred Stock”), and (iii) 17,700,000 shares of our 6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series I Preferred Stock”, and together with Series F Preferred Stock and Series G Preferred Stock, the “Preferred Stock”).
Item 7. Management’s Discussion and Analysis Net Income (Loss) Summary The following table presents financial information related to our results of operations as of and for the years ended December 31, 2023, 2022 and 2021.
Item 7. Management’s Discussion and Analysis Net Income (Loss) Summary The following table presents financial information related to our results of operations as of and for the years ended December 31, 2024, 2023 and 2022.
Residential Securities Substantially all of our Agency MBS at December 31, 2023 and December 31, 2022 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties.
Residential Securities Substantially all of our Agency MBS at December 31, 2024 and December 31, 2023 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties.
On August 6, 2020, we entered into separate Amended and Restated Distribution Agency Agreements (as amended by Amendment No. 1 to the Amended and Restated Distribution Agency Agreements on August 6, 2021, and Amendment No. 2 to the Amended and Restated Distribution Agency Agreements on November 3, 2022, collectively, the “Sales Agreements”) with each of Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co.
On August 6, 2020, we entered into separate Amended and Restated Distribution Agency Agreements (as amended by Amendment No. 1 to the Amended and Restated Distribution Agency Agreements on August 6, 2021, and Amendment No. 2 to the Amended and Restated Distribution Agency Agreements on November 3, 2022, collectively, the “Prior Sales Agreements”) with each of Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co.
(2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $1.6 billion, $366.2 million and ($276.1) million for the years ended December 31, 2023, 2022 and 2021, respectively.
(2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $1.2 billion, $1.6 billion and $366.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
(2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported on the Consolidated Statements of Financial Condition. (3) Excludes securitized residential mortgage loans transferred or pledged to consolidated VIEs carried at fair value of $13.3 billion.
(2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported in the Consolidated Statements of Financial Condition. (3) Excludes securitized residential mortgage loans transferred or pledged to consolidated VIEs carried at fair value of $22.0 billion.
Management’s Discussion and Analysis Change in Interest Rate (1) Estimated Percentage Change in Portfolio Value (2) Estimated Change as a % on NAV (2)(3) Projected Percentage Change in Economic Net Interest Income (4) -75 Basis points (0.3%) (2.2%) 8.1% -50 Basis points (0.1)% (0.9)% 5.7% -25 Basis points —% (0.2)% 3.0% +25 Basis points —% (0.4%) (3.2%) +50 Basis points (0.1%) (1.2%) (6.7%) +75 Basis points (0.3%) (2.4%) (10.5%) MBS Spread Shock (1) Estimated Change in Portfolio Market Value (2) Estimated Change as a % on NAV (2)(3) -25 Basis points 1.3% 10.1% -15 Basis points 0.8% 6.0% -5 Basis points 0.3% 2.0% +5 Basis points (0.3%) (2.0%) +15 Basis points (0.7%) (6.0%) +25 Basis points (1.2%) (9.9%) (1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction with inputs from our internal investment professionals.
Change in Interest Rate (1) Estimated Percentage Change in Portfolio Value (2) Estimated Change as a % on NAV (2)(3) Projected Percentage Change in Economic Net Interest Income (4) -75 Basis points 0.1% 0.5% 0.1% -50 Basis points 0.1% 1.0% 0.3% -25 Basis points 0.1% 0.8% 0.3% +25 Basis points (0.2%) (1.3%) (0.8%) +50 Basis points (0.4%) (2.9%) (2.1%) +75 Basis points (0.7%) (4.8%) (3.6%) MBS Spread Shock (1) Estimated Change in Portfolio Market Value (2) Estimated Change as a % on NAV (2)(3) -25 Basis points 1.3% 9.8% -15 Basis points 0.8% 5.9% -5 Basis points 0.3% 1.9% +5 Basis points (0.3%) (1.9%) +15 Basis points (0.8%) (5.8%) +25 Basis points (1.3%) (9.6%) (1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction with inputs from our internal investment professionals.
Management’s Discussion and Analysis We also have processes in place to oversee and identify material risks from cybersecurity threats associated with our use of third party service providers, including mortgage loan servicers and sub-servicers, upon which we depend on to perform various business processes related to our operations.
We also have processes in place to oversee and identify material risks from cybersecurity threats associated with our use of third party service providers upon which we depend on to perform various business processes related to our operations, including mortgage loan servicers and sub-servicers.
(2) Derivatives include TBA contracts under Agency MBS. (3) Represents the debt/net equity ratio as determined using amounts on the Consolidated Statements of Financial Condition.
(2) Derivatives include TBA contracts under Agency MBS. (3) Represents the debt/net equity ratio as determined using amounts in the Consolidated Statements of Financial Condition.
Default Risk Possibility that a bond issuer will fail to pay principal or interest when due. 80 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
Default Risk Possibility that a bond issuer will fail to pay principal or interest when due. 83 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
This was partially offset by the change in the net interest component of interest rate swaps, which was $1.6 billion for the year ended December 31, 2023 compared to $366.2 million for the same period in 2022. We do not manage our portfolio to have a pre-designated amount of borrowings at quarter or year end.
This was partially offset by the change in the net interest component of interest rate swaps, which was $1.2 billion for the year ended December 31, 2024 compared to $1.6 billion for the same period in 2023. We do not manage our portfolio to have a pre-designated amount of borrowings at quarter or year end.
(2) Excludes non-Agency MBS and CRT securities. (3) Excludes non-Agency MBS and CRT securities as this attribute is not applicable to these asset classes. NM Not meaningful. 63 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis The following tables summarize certain characteristics of our Residential Credit portfolio at December 31, 2023.
(2) Excludes non-Agency MBS and CRT securities. (3) Excludes non-Agency MBS and CRT securities as this attribute is not applicable to these asset classes. NM Not meaningful. 65 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis The following tables summarize certain characteristics of our Residential Credit portfolio at December 31, 2024.
(3) Includes $0.0 million, ($2.3) million, and $(3.6) million of loss provision (reversal) on unfunded loan commitments for the years ended December 31, 2023, 2022 and 2021, respectively, which is reported in Other, net in the Consolidated Statements of Comprehensive Income (Loss).
(3) Includes $0.0 million, $0.0 million, and ($2.3) million of loss provision (reversal) on unfunded loan commitments for the years ended December 31, 2024, 2023 and 2022, respectively, which is reported in Other, net in the Consolidated Statements of Comprehensive Income (Loss).
Members also participate in cybersecurity-related professional organizations that discuss industry threats, challenges and solutions to cybersecurity issues. Our Head of IT Infrastructure has completed the "Cybersecurity: Managing Risk in the Information Age" certificate program from Harvard University.
Members also participate in cybersecurity-related professional organizations that discuss industry threats, challenges and solutions to cybersecurity issues. Our Head of IT Infrastructure has completed the “Cybersecurity: Managing Risk in the Information Age” certificate program from Harvard University.
Management’s Discussion and Analysis Critical Accounting Estimates The preparation of our consolidated financial statement in accordance with generally accepted accounting principles in the United States requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Critical Accounting Estimates The preparation of our consolidated financial statement in accordance with generally accepted accounting principles in the United States requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Our GAAP leverage ratio at December 31, 2023 and 2022 was 6.8:1 and 6.0:1, respectively. Our economic leverage ratio, which is computed as the sum of Recourse Debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity was 5.7:1 and 6.3:1, at December 31, 2023 and 2022, respectively.
Our GAAP leverage ratio at December 31, 2024 and 2023 was 7.1:1 and 6.8:1, respectively. Our economic leverage ratio, which is computed as the sum of Recourse Debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity was 5.5:1 and 5.7:1, at December 31, 2024 and 2023, respectively.
Refer to the “Non-GAAP Financial Measures” section for additional information. (1) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives. CMBX coupon income totaled $1.5 million, $4.4 million and $5.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Refer to the “Non-GAAP Financial Measures” section for additional information. (1) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives. CMBX coupon income totaled $0.0 million, $1.5 million and $4.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Management’s Discussion and Analysis The following table presents our Residential Securities that were carried at fair value at December 31, 2023 and December 31, 2022.
Management’s Discussion and Analysis The following table presents our Residential Securities that were carried at fair value at December 31, 2024 and December 31, 2023.
(6) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). CMBX coupon income totaled $1.5 million, $4.4 million and $5.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
(6) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). CMBX coupon income totaled $0.0 million, $1.5 million and $4.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Management’s Discussion and Analysis Liquidity and Funding Risk Management Our liquidity and funding risk management strategy is designed to ensure the availability of sufficient resources to support our business and meet our financial obligations under both normal and adverse market and business environments.
Liquidity and Funding Risk Management Our liquidity and funding risk management strategy is designed to ensure the availability of sufficient resources to support our business and meet our financial obligations under both normal and adverse market and business environments.
Net interest margin (excluding PAA) is a non-GAAP financial measure that represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.
Net interest margin (excluding PAA) is a non-GAAP financial measure that represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.
Our economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing (excluding certain non-recourse credit facilities), and U.S. Treasury securities sold, not yet purchased.
Our economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing and U.S Treasury securities sold, not yet purchased.
The aggregate liquidation value of the Preferred Stock that may be repurchased by us pursuant to the Preferred Stock Repurchase Program, as of November 3, 2022, was approximately $1.6 billion. The Preferred Stock Repurchase Program became effective on November 3, 2022, and shall expire on December 31, 2024.
The aggregate liquidation value of the Preferred Stock that may be repurchased by us pursuant to the Prior Preferred Stock Repurchase Program, as of November 3, 2022, was approximately $1.6 billion. The Prior Preferred Stock Repurchase Program became effective on November 3, 2022, and expired on December 31, 2024.
The weighted average experienced prepayment speed on our Agency MBS portfolio for the years ended December 31, 2023 and 2022 was 6.5% and 12.2%, respectively. The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of December 31, 2023 and 2022 was 9.4% and 7.8%, respectively.
The weighted average experienced prepayment speed on our Agency MBS portfolio for the years ended December 31, 2024 and 2023 was 7.4% and 6.5%, respectively. The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of December 31, 2024 and 2023 was 8.6% and 9.4%, respectively.
The assets listed in this table include $67.5 billion of assets that have been pledged as collateral against existing liabilities at December 31, 2023. Please refer to the Encumbered and Unencumbered Assets table for related information.
The assets listed in this table include $70.5 billion of assets that have been pledged as collateral against existing liabilities at December 31, 2024. Please refer to the Encumbered and Unencumbered Assets table for related information.
Net interest margin (excluding PAA) represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.
Net interest margin (excluding PAA) represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.
A negative gap increases our liquidity risk as we must enter into future liabilities. Our interest rate sensitivity gap is the difference between interest earning assets and interest bearing liabilities maturing or re-pricing within a given time period. Unlike the calculation of maturity gap, interest rate sensitivity gap includes the effect of our 71 ANNALY CAPITAL MANAGEMENT, INC.
A negative gap increases our liquidity risk as we must enter into future liabilities. Our interest rate sensitivity gap is the difference between interest earning assets and interest bearing liabilities maturing or re-pricing within a given time period. Unlike the calculation of maturity gap, interest rate sensitivity gap includes the effect of our interest rate swaps.
GAAP Net income (loss) was ($1.6) billion, which includes $4.7 million attributable to noncontrolling interests, or $(3.61) per average basic common share, for the year ended December 31, 2023 compared to $1.7 billion, which includes $1.1 million attributable to noncontrolling interests, or $3.93 per average basic common share, for the same period in 2022.
GAAP Net income (loss) was $1.0 billion, which includes $9.9 million attributable to noncontrolling interests, or $1.62 per average basic common share, for the year ended December 31, 2024 compared to ($1.6) billion, which includes $4.7 million attributable to noncontrolling interests, or ($3.61) per average basic common share, for the same period in 2023.
Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities Typically, our largest expense is the cost of interest bearing liabilities and the net interest component of interest rate swaps.
Management’s Discussion and Analysis Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities Typically, our largest expense is the cost of interest bearing liabilities and the net interest component of interest rate swaps.
Actual results could differ materially from these estimates. (2) Scenarios include securities, residential mortgage loans, MSR and derivative instruments. (3) NAV represents book value of equity. (4) Scenarios include securities, residential mortgage loans, repurchase agreements, other secured financing and interest rate swaps. Economic net interest income includes the net interest component of interest rate swaps.
Actual results could differ materially from these estimates. (2) Scenarios include securities, residential mortgage loans, MSR and derivative instruments. (3) NAV represents book value of equity. (4) Scenarios include securities, residential mortgage loans, repurchase agreements, other secured financing and interest rate swaps.
In January 2022, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2024 (the “Current Share Repurchase Program”). The Current Share Repurchase Program replaced the Prior Share Repurchase Program.
In January 2025, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2029 (the “Current Common Stock Repurchase Program”). The Current Common Stock Repurchase Program replaced the Prior Common Stock Repurchase Program.
(4) Denominator is computed based on the carrying amount of encumbered and unencumbered financial assets, excluding assets transferred or pledged to securitization vehicles, of $13.3 billion.
(4) Denominator is computed based on the carrying amount of encumbered and unencumbered financial assets, excluding assets transferred or pledged to securitization vehicles, of $22.0 billion.
At December 31, 2023 and December 31, 2022 we had on our Consolidated Statements of Financial Condition a total of $1.4 billion and $1.1 billion, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities acquired at a price below principal value) and a total of $2.4 billion and $2.9 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities acquired at a price above principal value).
At December 31, 2024 and December 31, 2023 we had in our Consolidated Statements of Financial Condition a total of $1.3 billion and $1.4 billion, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities acquired at a price below principal value) and a total of $2.5 billion and $2.4 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities acquired at a price above principal value).
Freddie Mac Federal Home Loan Mortgage Corporation. Futures Contract A legally binding agreement to buy or sell a commodity or financial instrument in a designated future month at a price agreed upon at the initiation of the contract by the buyer and seller. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity.
Futures Contract A legally binding agreement to buy or sell a commodity or financial instrument in a designated future month at a price agreed upon at the initiation of the contract by the buyer and seller. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity.
I In-the-Money Description for an option that has intrinsic value and can be sold or exercised for a profit; a call option is in-the-money when the strike price (execution price) is below the market price of the underlying security. Interest Bearing Liabilities Refers to repurchase agreements, debt issued by securitization vehicles, U.S.
In-the-Money Description for an option that has intrinsic value and can be sold or exercised for a profit; a call option is in-the-money when the strike price (execution price) is below the market price of the underlying security. Interest Bearing Liabilities Refers to repurchase agreements, debt issued by securitization vehicles, U.S. Treasury securities sold, not yet purchased and credit facilities.
The following table illustrates the impact of the PAA on premium amortization expense for our Residential Securities portfolio for the periods presented: For the Years Ended December 31, 2023 2022 2021 (dollars in thousands) Premium amortization expense $ 165,158 $ 48,013 $ 760,818 Less: PAA cost (benefit) 1,654 (360,587) 57,158 Premium amortization expense (excluding PAA) $ 163,504 $ 408,600 $ 703,660 Economic Leverage and Economic Capital Ratios We use capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities.
The following table illustrates the impact of the PAA on premium amortization expense for our Residential Securities portfolio for the periods presented: For the Years Ended December 31, 2024 2023 2022 (dollars in thousands) Premium amortization expense $ 98,813 $ 165,158 $ 48,013 Less: PAA cost (benefit) (14,241) 1,654 (360,587) Premium amortization expense (excluding PAA) $ 113,054 $ 163,504 $ 408,600 Economic Leverage and Economic Capital Ratios We use capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities.
Compliance, Regulatory and Legal Risk Risk to earnings, capital, reputation or conduct of business arising from violations of, or nonconformance with internal and external applicable rules and regulations, losses resulting from lawsuits or adverse judgments, or from changes in the regulatory environment that may impact our business model. 68 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
Compliance, Regulatory and Legal Risk Risk to earnings, capital, reputation or conduct of business arising from violations of, or nonconformance with internal and external applicable rules and regulations, losses resulting from lawsuits or adverse judgments, or from changes in the regulatory environment that may impact our business model.
The table does not include the effect of net interest rate payments on our interest rate swap agreements. The net swap payments will fluctuate based on monthly changes in the receive rate. At December 31, 2023, the interest rate swaps had a net fair value of ($56.7) million.
The table does not include the effect of net interest rate payments on our interest rate swap agreements. The net swap payments will fluctuate based on monthly changes in the receive rate. At December 31, 2024, the interest rate swaps had a net fair value of $14.0 million.
Our vendor management policy establishes procedures for engaging, onboarding and monitoring the performance of third party vendors. For mortgage loan servicers and sub-servicers, these procedures include assessing a vendor’s financial health as well as oversight of its compliance with applicable laws and regulations, cybersecurity and business continuity programs and security of personally identifiable information.
Our vendor management and IT policies establish procedures for engaging, onboarding and monitoring the performance of third party vendors. For mortgage loan servicers and sub-servicers, these procedures include assessing a vendor’s financial health as well as oversight of its compliance with applicable laws and regulations, cybersecurity and business continuity programs and security of personal information.
Also, we are guaranteed payment of the principal and interest amounts of the securities by the respective issuing Agency. 61 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Financial Condition Total assets were $93.2 billion and $81.9 billion at December 31, 2023 and 2022, respectively.
Also, we are guaranteed payment of the principal and interest amounts of the securities by the respective issuing Agency. 63 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Financial Condition Total assets were $103.6 billion and $93.2 billion at December 31, 2024 and 2023, respectively.
Our portfolio composition, based on balance sheet values, at December 31, 2023 and 2022 was as follows: December 31, 2023 December 31, 2022 Category Agency mortgage-backed securities 75.9 % 79.4 % Credit risk transfer securities 1.1 % 1.3 % Non-agency mortgage-backed securities 2.4 % 2.5 % Residential mortgage loans (1) 17.9 % 13.9 % Mortgage servicing rights 2.4 % 2.2 % Commercial real estate (1) 0.3 % 0.7 % (1) Includes assets transferred or pledged to securitization vehicles.
Our portfolio composition, based on balance sheet values, at December 31, 2024 and 2023 was as follows: December 31, 2024 December 31, 2023 Category Agency mortgage-backed securities 68.6 % 75.9 % Credit risk transfer securities 0.8 % 1.1 % Non-agency mortgage-backed securities 1.5 % 2.4 % Residential mortgage loans (1) 26.0 % 17.9 % Commercial mortgage-backed securities 0.1 % 0.3 % Mortgage servicing rights 3.0 % 2.4 % (1) Includes assets transferred or pledged to securitization vehicles.
Realized gains (losses) on termination or maturity of interest rate swaps was ($74.8) million resulting from the termination or maturity of interest rate swaps with a notional amount of $12.7 billion for the year ended December 31, 2023 compared to ($266.4) million resulting from the termination or maturity of interest rate swaps with a notional amount of $21.3 billion for the same period in 2022.
Realized gains (losses) on termination or maturity of interest rate swaps was ($60.5) million resulting from the termination or maturity of interest rate swaps with a notional amount of $13.7 billion for the year ended December 31, 2024 compared to ($74.8) million resulting from the termination of interest rate swaps with a notional amount of $12.7 billion for the same period in 2023.
There is an active market for the residential whole loans in which we invest. Judgments and Uncertainties: Since we primarily invest in residential loans that can be valued using actively quoted prices for similar assets, there are observable inputs in measuring fair value.
Judgments and Uncertainties: Since we primarily invest in residential loans that can be valued using actively quoted prices for similar assets, there are observable inputs in measuring fair value.
December 31, 2023 December 31, 2022 (dollars in thousands) Unrealized gain $ 5,051 $ 5,910 Unrealized loss (1,340,451) (3,714,806) Accumulated other comprehensive income (loss) $ (1,335,400) $ (3,708,896) Unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on our potential earnings and dividends: positive changes will increase our equity base and allow us to increase our borrowing capacity while negative changes tend to reduce borrowing capacity.
December 31, 2024 December 31, 2023 (dollars in thousands) Unrealized gain $ 4,221 $ 5,051 Unrealized loss (1,021,903) (1,340,451) Accumulated other comprehensive income (loss) $ (1,017,682) $ (1,335,400) Unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on our potential earnings and dividends: positive changes will increase our equity base and allow us to increase our borrowing capacity while negative changes tend to reduce borrowing capacity.
No shares were repurchased with respect to the Preferred Stock Repurchase Program during the year ended December 31, 2023. Purchases made pursuant to the Preferred Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.
During the years ended December 31, 2024 and 2023, no shares were repurchased under the Prior Common Stock Repurchase Program. Purchases made pursuant to the Current Common Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.
Management’s Discussion and Analysis Return on Average Equity The following table shows the components of our annualized return on average equity for the periods presented.
Return on Average Equity The following table shows the components of our annualized return on average equity for the periods presented.
A series of management committees has oversight or decision-making responsibilities for risk management activities. Membership of these committees is reviewed regularly to ensure the appropriate personnel are engaged in the risk management process. Three primary management committees have been established to provide a comprehensive framework for risk management.
Membership of these committees is reviewed regularly to ensure the appropriate personnel are engaged in the risk management process. Three primary management committees have been established to provide a comprehensive framework for risk management.
Audit Services is an independent function with reporting lines to the Audit Committee. Audit Services is responsible for performing our internal audit activities, which includes independently assessing and validating key controls within the risk management framework. 67 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Our compliance group is responsible for oversight of our regulatory compliance.
Audit Services is an independent function with reporting lines to the Audit Committee. Audit Services is responsible for performing our internal audit activities, which includes independently assessing and validating key controls within the risk management framework. Our compliance group is responsible for oversight of our regulatory compliance.
(2) Represents the amount of cash and/or securities pledged as collateral to each counterparty less the aggregate of repurchase agreement and other secured financing and derivatives for each counterparty. Operational Risk Management We are subject to operational risk in each of our business and support functions.
(2) Represents the amount of cash and/or securities pledged as collateral to each counterparty less the aggregate of repurchase agreement and other secured financing and derivatives for each counterparty. 77 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis Operational Risk Management We are subject to operational risk in each of our business and support functions.
Other Income (Loss) 2023 Compared with 2022 Net Gains (Losses) on Investments and Other Net gains (losses) on disposal of investments and other was ($2.9) billion for the year ended December 31, 2023 compared with ($3.5) billion for the same period in 2022.
Management’s Discussion and Analysis Other Income (Loss) 2024 Compared with 2023 Net Gains (Losses) on Investments and Other Net gains (losses) on disposal of investments and other was ($1.1) billion for the year ended December 31, 2024 compared with ($2.9) billion for the same period in 2023.
The following tables present a reconciliation of GAAP interest income and GAAP interest expense to non-GAAP interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA), respectively, for the periods presented: Interest Income (excluding PAA) GAAP Interest Income PAA Cost (Benefit) Interest Income (excluding PAA) * For the years ended (dollars in thousands) December 31, 2023 $ 3,731,581 $ 1,654 $ 3,733,235 December 31, 2022 $ 2,778,887 $ (360,587) $ 2,418,300 December 31, 2021 $ 1,983,036 $ 57,158 $ 2,040,194 * Represents a non-GAAP financial measure.
The following tables present a reconciliation of GAAP interest income and GAAP interest expense to non-GAAP interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA), respectively, for the periods presented: Interest Income (excluding PAA) GAAP Interest Income PAA Cost (Benefit) Interest Income (excluding PAA) * For the years ended (dollars in thousands) December 31, 2024 $ 4,840,034 $ (14,241) $ 4,825,793 December 31, 2023 $ 3,731,581 $ 1,654 $ 3,733,235 December 31, 2022 $ 2,778,887 $ (360,587) $ 2,418,300 * Represents a non-GAAP financial measure.
For the year ended December 31, 2023, we disposed of Residential Securities with a carrying value of $36.4 billion for an aggregate net loss of ($2.9) billion.
For the year ended December 31, 2024, we disposed of Residential Securities with a carrying value of $21.4 billion for an aggregate net loss of ($886.0) million. For the same period in 2023, we disposed of Residential Securities with a carrying value of $36.4 billion for an aggregate net loss of ($2.9) billion.
Net Gains (Losses) on Derivatives Net gains (losses) on interest rate swaps for the year ended December 31, 2023 was $0.7 billion compared to $3.6 billion for the same period in 2022, attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, partially offset by the changes in net interest component of interest rate swaps and realized gains (losses) on termination or maturity of interest rate swaps.
Net Gains (Losses) on Derivatives Net gains (losses) on interest rate swaps for the year ended December 31, 2024 was $2.1 billion compared to $694.7 million for the same period in 2023, attributable to favorable changes in unrealized gains (losses) on interest rate swaps and realized gains (losses) on termination or maturity of interest rate swaps, partially offset by the change in the net interest component of interest rate swaps.
Pursuant to the Sales Agreements, we may offer and sell shares of common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Sales Agents (the “at-the-market sales program”).
Pursuant to the Prior Sales Agreements, we offered and sold shares of common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Prior Sales Agents (the “Prior At-the-Market Sales Program”).
Management’s Discussion and Analysis The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented: For the Years Ended December 31, 2023 2022 2021 (dollars in thousands, except per share data) GAAP net income (loss) $ (1,638,457) $ 1,726,420 $ 2,396,280 Adjustments to exclude reported realized and unrealized (gains) losses Net (gains) losses on investments and other (1) 2,137,538 4,602,456 (120,958) Net (gains) losses on derivatives (2) 1,184,961 (4,493,013) (1,083,872) Loan loss provision (reversal) (3) (219) (22,923) (148,632) Business divestiture-related (gains) losses — 40,258 278,559 Other adjustments Amortization of intangibles 4,573 3,948 15,225 Non-EAD (income) loss allocated to equity method investments (4) 354 (15,499) (10,930) Transaction expenses and non-recurring items (5) 8,209 7,620 5,579 Income tax effect of non-EAD income (loss) items 31,570 46,070 13,325 TBA dollar roll income and CMBX coupon income (6) 20,621 431,475 445,768 MSR amortization (7) (182,151) (114,992) (72,727) EAD attributable to noncontrolling interests (14,639) (1,095) (6,384) Premium amortization adjustment cost (benefit) 1,654 (360,587) 57,158 Earnings available for distribution * 1,554,014 1,850,138 1,768,391 Dividends on preferred stock 141,676 110,623 107,532 Earnings available for distribution attributable to common stockholders * $ 1,412,338 $ 1,739,515 $ 1,660,859 GAAP net income (loss) per average common share $ (3.61) $ 3.93 $ 6.40 Earnings available for distribution per average common share * $ 2.86 $ 4.23 $ 4.65 GAAP return (loss) on average equity (14.33) % 14.86 % 17.45 % EAD return on average equity (excluding PAA) * 13.71 % 16.02 % 12.90 % * Represents a non-GAAP financial measure.
Management’s Discussion and Analysis The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented: For the Years Ended December 31, 2024 2023 2022 (dollars in thousands, except per share data) GAAP net income (loss) $ 1,011,768 $ (1,638,457) $ 1,726,420 Adjustments to exclude reported realized and unrealized (gains) losses Net (gains) losses on investments and other (1) 1,849,607 2,137,538 4,602,456 Net (gains) losses on derivatives (2) (1,066,394) 1,184,961 (4,493,013) Loan loss provision (reversal) (3) — (219) (22,923) Business divestiture-related (gains) losses — — 40,258 Other adjustments Amortization of intangibles 2,690 4,573 3,948 Non-EAD (income) loss allocated to equity method investments (4) 506 354 (15,499) Transaction expenses and non-recurring items (5) 20,283 8,209 7,620 Income tax effect of non-EAD income (loss) items 3,444 31,570 46,070 TBA dollar roll income and CMBX coupon income (6) 2,815 20,621 431,475 MSR amortization (7) (233,698) (182,151) (114,992) EAD attributable to noncontrolling interests (12,155) (14,639) (1,095) Premium amortization adjustment cost (benefit) (14,241) 1,654 (360,587) Earnings available for distribution * 1,564,625 1,554,014 1,850,138 Dividends on preferred stock 154,551 141,676 110,623 Earnings available for distribution attributable to common stockholders * $ 1,410,074 $ 1,412,338 $ 1,739,515 GAAP net income (loss) per average common share $ 1.62 $ (3.61) $ 3.93 Earnings available for distribution per average common share * $ 2.70 $ 2.86 $ 4.23 GAAP return (loss) on average equity 8.53 % (14.33 %) 14.86 % EAD return on average equity (excluding PAA) * 13.28 % 13.71 % 16.02 % * Represents a non-GAAP financial measure.
Sensitivity of Estimates to Change: Changes in the OIS curve will impact the carrying value of our interest rate swap assets and liabilities. Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds. See the interest rate sensitivity and interest rate shock analysis and discussions within this Item 7. for further information.
Sensitivity of Estimates to Change: Changes in the OIS curve will impact the carrying value of our interest rate swap assets and liabilities. Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds.
Net gains (losses) on investments and other for the year ended December 31, 2023 was ($2.1) billion compared to ($4.6) billion for the same period in 2022. Net servicing income for the year ended December 31, 2023 was $326.5 million compared to $221.8 million for the same period in 2022.
Net interest income for the year ended December 31, 2024 was $247.8 million compared to ($111.4) million for the same period in 2023. Net gains (losses) on investments and other for the year ended December 31, 2024 was ($1.8) billion compared to ($2.1) billion for the same period in 2023.
Refer to disclosures within this section above for additional information on non-GAAP financial measures. Experienced and Projected Long-Term CPR Prepayment speeds, as reflected by the CPR and interest rates vary according to the type of investment, conditions in financial markets, competition and other factors, none of which can be predicted with any certainty.
Experienced and Projected Long-Term CPR Prepayment speeds, as reflected by the CPR and interest rates vary according to the type of investment, conditions in financial markets, competition and other factors, none of which can be predicted with any certainty.
Our GAAP capital ratio at December 31, 2023 and 2022 was 12.2% and 13.9%, respectively. Our economic capital ratio, which represents our ratio of stockholders’ equity to total economic assets (inclusive of the implied market value of TBA derivatives and net of debt issued by securitization vehicles), was 14.0% and 13.4% at December 31, 2023 and 2022, respectively.
Our economic capital ratio, which represents our ratio of stockholders’ equity to total economic assets (inclusive of the implied market value of TBA derivatives and net of debt issued by securitization vehicles), was 14.6% and 14.0% at December 31, 2024 and 2023, respectively. Economic leverage ratio and economic capital ratio are non-GAAP financial measures.
We conduct tabletop exercises to test our Response Plan and our reaction to various business disruption events, and the results of these tabletop exercises are reported to the Cybersecurity Committee and the ERC. 75 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
We conduct periodic tabletop exercises to test our Response Plan and our reaction to various business disruption events, and the results of these tabletop exercises are reported to the Cybersecurity Committee and the ERC.
During the year ended December 31, 2023, we received $6.2 billion from principal repayments and $31.3 billion in cash from disposal of Securities. During the year ended December 31, 2022, we received $9.5 billion from principal repayments and $25.0 billion in cash from disposal of Securities. 64 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
During the year ended December 31, 2024, we received $6.8 billion from principal repayments and $21.1 billion in cash from disposal of Securities. During the year ended December 31, 2023, we received $6.2 billion from principal repayments and $31.3 billion in cash from disposal of Securities. 66 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.
The Nominating/Corporate Governance Committee assists the Board in its oversight of our corporate governance framework and the annual self-evaluation of the Board, and the Corporate Responsibility Committee assists the Board in its oversight of any matters that may present reputational or ESG risk to us.
The Nominating/Corporate Governance Committee assists the Board in its oversight of our corporate governance framework and the annual self-evaluation of the Board, and the Corporate Responsibility Committee assists the Board in its oversight of any matters that may present reputational or ESG risk to us. The full Board has overall 69 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7.

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