Management’s Discussion and Analysis
−Removed: environment, our OBX platform had its most active quarter to date, with $2.5 billion of whole loans securitized across six transactions.
−Removed: Being a programmatic issuer has allowed us to lock in financing on 87% of our whole loan portfolio at an average cost of funds of 2.30%, approximately 240 basis points below the current market cost of funds.
−Removed: The recent selloff has incentivized originators to expand product offerings beyond Agency mortgages into alternative credit products, and we expect this to have a positive impact on the development of the non-QM market over time.
−Removed: We continue to dedicate resources to the growth of our correspondent loan channel, while also expanding our securitization partners.
−Removed: Housing fundamentals generally remain strong with healthy consumer balance sheets, a systematic shortage of single-family housing, low available for sale inventory and a robust labor market.
−Removed: While there are increasing headwinds, namely around higher mortgage rates and affordability, we maintain a constructive outlook on the residential credit sector.
−Removed: Finally, subsequent to quarter end, we announced the sale of our MML Portfolio to Ares.
−Removed: The approximately $2.4 billion transaction, which includes assets managed for third parties, is expected to be accretive to book value and validates the quality of our differentiated corporate credit portfolio.
−Removed: Business Continuity
−Removed: Our well-established Business Continuity Plan (“BCP”) has been designed to ensure continued, effective operations through a variety of scenarios including natural disasters and disease pandemics.
−Removed: It identifies critical systems, processes, roles and third parties, and can be adjusted on a real-time basis to address situations as they arise.
−Removed: The BCP is regularly updated and tested.
−Removed: Annual testing includes extensive, remote Disaster Recovery testing and tabletop exercise scenarios with management.
−Removed: Key tenets of the planning include active communication between our Crisis Response Team, which is comprised of senior leaders across a number of functions, and our internal and external stakeholders to afford efficient, thoughtful, effective responses to evolving emergency situations.
−Removed: Historical tabletop exercises have included use of CDC Influenza Pandemic exercise materials.
−Removed: Business activities continued to be performed in a hybrid model in the first quarter of 2022, with employees returning to the office on a periodic basis.
−Removed: At the present, following guidance from federal, state and local authorities, the majority of our employees are returning to the office more regularly as we transition back to an in-office work model.
−Removed: Economic Environment
−Removed: The pace of economic growth slowed in the first quarter of 2022 relative to the quarterly pace seen in 2021, with U.S.
−Removed: GDP declined 1.4 percent on a seasonally adjusted annualized rate.
−Removed: However, the decline was largely attributable to fluctuations in volatile components of the economy, such as trade and inventory changes, while the core components of goods consumption and services spending showed positive economic momentum.
−Removed: According to the Bureau of Labor Statistics, seasonally adjusted total non-farm payroll employment rose by an average 562 thousand workers during the first quarter, slightly below the 637 thousand workers added during the fourth quarter 2021.
−Removed: Overall, employment gains remain very strong, as the unemployment rate has fallen 1.1 percentage points in the last six months to 3.6% in March.
−Removed: Meanwhile, U.S.
−Removed: job openings remain near all-time record levels.
−Removed: Driven in part by continued strong labor demand, wage growth, as measured by the year-over-year change in private sector average hourly earnings, accelerated during the quarter, reading 5.6% in March compared to 4.9% in December 2021.
−Removed: Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditure Chain Price Index (“PCE”), remained meaningfully above the Fed’s 2% inflation target during the first quarter.
−Removed: The headline PCE measure increased by 6.6% year-over-year in March 2022, while the more stable core PCE measure, which excludes volatile food and energy prices, registered a 5.2% year-over-year increase.
−Removed: Prices remain meaningfully elevated, which is driven by strong demand for goods and services, though the Russian invasion of Ukraine and related Western economic sanctions have led to a sharp increase in food and commodity prices.
−Removed: Absent a major deterioration in the geopolitical situation, it appears that inflation pressures are close to peaking and inflation should slow going forward, though the degree of the moderation remains uncertain at best.
−Removed: The Federal Open Market Committee (“FOMC”) conducts monetary policy with a dual mandate:
−Removed: to ensure full employment and stable prices.
−Removed: Given economic developments in 2021 and the first quarter, the FOMC will have to tighten monetary policy in order to assure meeting its mandate.
−Removed: Looking at the strong labor market and the elevated inflation readings, risks are emerging that further wage growth could boost inflation, thereby undermining the Federal Reserve’s stable price mandate.
−Removed: The FOMC has therefore begun to take steps to tighten policy and signaled additional tightening steps in the near future.
−Removed: As such, the FOMC raised the Federal Funds Target Rate to the 0.25% - 0.50% range during the first quarter and signaled that additional rate increases of greater magnitude will be necessary in the near-term future.
−Removed: In regard to its balance sheet, the FOMC ended its quantitative easing program at the beginning of March and has suggested that it will let assets mature at an aggregate pace of $95 billion per month across U.S.
−Removed: Treasuries and Agency MBS starting in either May or June 2022.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: During the first quarter of 2022, the 10-year U.S.
−Removed: Treasury rate rose meaningfully from 1.51% on December 31, 2021 to 2.34% on March 31, 2022.
−Removed: The mortgage basis, or the spread between the 30-year Agency MBS coupon and 10-year U.S.
−Removed: Treasury rate, widened meaningfully over the course of the quarter to 115 basis points (bps) on March 31, 2022 as the shift in monetary policy and the anticipated elevated supply in Agency MBS weighed on the sector.
−Removed: The following table below presents interest rates and spreads at each date presented:
−Removed: March 31, 2022 December 31, 2021 March 31, 2021
−Removed: 30-Year mortgage current coupon 3.49% 2.07% 2.04%
−Removed: Mortgage basis 115 bps 56 bps 30 bps
−Removed: Treasury rate 2.34% 1.51% 1.74%
−Removed: 1-Month 0.45% 0.10% 0.11%
−Removed: 6-Month 1.47% 0.34% 0.21%
−Removed: London Interbank Offered Rate (“LIBOR”) Transition Working Group
−Removed: The United Kingdom Financial Conduct Authority (“FCA”), which regulates LIBOR, announced that all LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023.
−Removed: The FCA's announcement coincided with the announcement of LIBOR's administrator, the ICE Benchmark Administration Limited (“IBA”), indicating that, as a result of not having access to input data necessary to calculate LIBOR tenors relevant to us on a representative basis after June 30, 2023, IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023.
−Removed: These announcements mean that any of our LIBOR-based borrowings that extend beyond June 30, 2023 will need to be converted to a replacement rate.
−Removed: We have established a cross-functional LIBOR transition committee to determine our transition plan and facilitate an orderly transition to alternative reference rates.
−Removed: Our plan includes steps to evaluate exposure;
−Removed: review contracts;
−Removed: assess impact to our business;
−Removed: process and technology and define a communication strategy with shareholders;
−Removed: regulators and other stakeholders.
−Removed: The committee also continues to engage with industry working groups and other market participants regarding the transition.
−Removed: We continue to remain on track with our LIBOR transition plan, which requires different solutions depending on the underlying asset or liability.
−Removed: federal government enacted a legislative solution for certain “tough legacy” contracts, which in some cases inserts fallback language into the contract or provides a determining party with a safe harbor from litigation.
−Removed: We are considering all available options with respect to our preferred stock, which include liability management actions such as tenders, calls, exchange offers, language amendments, changing the calculation agent, and/or allowing fallbacks to trigger.
−Removed: Some of these options fall within the safe harbor of the federal legislation.
−Removed: As of March 31, 2022, we had $1.5 billion of USD LIBOR-linked preferred stock that may remain outstanding beyond the June 30, 2023 cessation date.
−Removed: Results of Operations
−Removed: The results of our operations are affected by various factors, many of which are beyond our control.
−Removed: Certain of such risks and uncertainties are described herein (see “Special Note Regarding Forward-Looking Statements” above) and in Part I, Item 1A.
−Removed: “Risk Factors” of our most recent Annual Report on Form 10-K and in Part II, Item 1A.
−Removed: “Risk Factors” in this Quarterly Report on Form 10-Q.
−Removed: This Management Discussion and Analysis section contains analysis and discussion of financial results computed in accordance with U.S.
−Removed: generally accepted accounting principles (“GAAP”) and non-GAAP measurements.
−Removed: 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.
−Removed: Refer to the “Non-GAAP Financial Measures” section for additional information.
−Removed: Beginning with the quarter ended March 31, 2022, in light of the continued growth of our mortgage servicing rights portfolio, we enhanced its financial disclosures by separately reporting servicing income and servicing expense in our Consolidated Statements of Comprehensive Income (Loss).
−Removed: Servicing income and servicing expense were previously included within Other income (loss).
−Removed: As a result of this change, prior periods have been adjusted to conform to the current presentation.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: In addition, we consolidated certain line items in our Consolidated Statements of Comprehensive Income (Loss) in an effort to streamline and simplify its financial presentation.
−Removed: Amounts previously reported under Net interest component of interest rate swaps, Realized gains (losses) on termination or maturity of interest rate swaps, Unrealized gains (losses) on interest rate swaps and Net gains (losses) on other derivatives are combined into a single line item titled Net gains (losses) on derivatives.
−Removed: Similarly, amounts previously reported under Net gains (losses) on disposal of investments and other and Net unrealized gains (losses) on instruments measured at fair value through earnings are combined into a single line item titled Net gains (losses) on investments and other.
−Removed: As a result of these changes, prior periods have been adjusted to conform to the current presentation.
−Removed: Commencing with our financial results for the quarter ended June 30, 2021 and for subsequent reporting periods, we relabeled “Core Earnings (excluding PAA)” as “Earnings Available for Distribution” (“EAD”).
−Removed: Earnings Available for Distribution, which is a non-GAAP financial measure intended to supplement our financial results computed in accordance with GAAP, has replaced our prior presentation of Core Earnings (excluding PAA).
−Removed: In addition, Core Earnings (excluding PAA) results from prior reporting periods have been relabeled Earnings Available for Distribution.
−Removed: In line with evolving industry practices, we believe the term Earnings Available for Distribution more accurately reflects the principal purpose of the measure than the term Core Earnings (excluding PAA) and will serve as a useful indicator for investors in evaluating our performance and our ability to pay dividends.
−Removed: The definition of Earnings Available for Distribution is identical to the definition of Core Earnings (excluding PAA) from prior reporting periods.
−Removed: As such, Earnings Available for Distribution is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding depreciation expense related to commercial real estate and amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items) and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items) and excludes (g) the premium amortization adjustment (“PAA”) representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to our Agency mortgage-backed securities.
−Removed: Earnings Available for Distribution should not be considered a substitute for, or superior to, GAAP net income.
−Removed: Please refer to the “Non-GAAP Financial Measures” section for a detailed discussion of Earnings Available for Distribution.
−Removed: Beginning with the quarter ended June 30, 2021, we began classifying certain portfolio activity-related or volume-related expenses as Other income (loss) rather than Other general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss) to better reflect the nature of the items.
−Removed: As such, prior periods have been conformed to the current presentation.
−Removed: Refer to the “General and Administrative Expenses” section for additional information.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: Net Income (Loss) Summary
−Removed: The following table presents financial information related to our results of operations as of and for the three months ended March 31, 2022 and 2021.
−Removed: As of and for the Three Months Ended March 31,
−Removed: (dollars in thousands, except per share data)
−Removed: Interest income $ 655,850 $ 763,378
−Removed: Interest expense 74,922 75,973
−Removed: Net interest income 580,928 687,405
−Removed: Servicing and related income 34,715 9,229
−Removed: Servicing and related expense 3,757 2,297
−Removed: Net servicing income 30,958 6,932
−Removed: Other income (loss) 1,484,320 1,104,381
−Removed: Total general and administrative expenses 45,764 47,905
−Removed: Income (loss) before income taxes 2,050,442 1,750,813
−Removed: Income taxes 26,548 (321)
−Removed: Net income (loss) 2,023,894 1,751,134
−Removed: Net income (loss) attributable to noncontrolling interests 1,639 321
−Removed: Net income (loss) attributable to Annaly 2,022,255 1,750,813
−Removed: Dividends on preferred stock 26,883 26,883
−Removed: Net income (loss) available (related) to common stockholders $ 1,995,372 $ 1,723,930
−Removed: Net income (loss) per share available (related) to common stockholders
−Removed: Basic $ 1.37 $ 1.23
−Removed: Diluted $ 1.36 $ 1.23
−Removed: Weighted average number of common shares outstanding
−Removed: Basic 1,461,363,637 1,399,210,925
−Removed: Diluted 1,462,451,965 1,400,000,727
−Removed: Other information
−Removed: Investment portfolio at period-end $ 73,349,352 $ 82,735,505
−Removed: Average total assets $ 76,474,599 $ 86,912,346
−Removed: Average equity $ 12,337,048 $ 14,044,696
−Removed: GAAP leverage at period-end (1)
−Removed: GAAP capital ratio at period-end (2)
−Removed: 15.1 % 16.5 %
−Removed: Annualized return on average total assets 10.59 % 8.06 %
−Removed: Annualized return on average equity 65.62 % 49.87 %
−Removed: Net interest margin (3)
−Removed: 3.20 % 3.39 %
−Removed: Average yield on interest earning assets (4)
−Removed: 3.61 % 3.76 %
−Removed: Average GAAP cost of interest bearing liabilities (5)
−Removed: 0.48 % 0.42 %
−Removed: Net interest spread 3.13 % 3.34 %
−Removed: Weighted average experienced CPR for the period 16.7 % 23.9 %
−Removed: Weighted average projected long-term CPR at period-end 9.5 % 11.8 %
−Removed: Common stock book value per share $ 6.77 $ 8.95
−Removed: Non-GAAP metrics *
−Removed: Interest income (excluding PAA) $ 476,334 $ 548,808
−Removed: Economic interest expense (5)
−Removed: $ 137,463 $ 155,720
−Removed: Economic net interest income (excluding PAA) $ 338,871 $ 393,088
−Removed: Premium amortization adjustment cost (benefit) $ (179,516) $ (214,570)
−Removed: Earnings available for distribution (6)
−Removed: $ 430,631 $ 439,519
−Removed: Earnings available for distribution per average common share $ 0.28 $ 0.29
−Removed: Annualized EAD return on average equity (excluding PAA) 14.01 % 12.53 %
−Removed: Economic leverage at period-end (1)
−Removed: Economic capital ratio at period-end (2)
−Removed: 13.1 % 13.7 %
−Removed: Net interest margin (excluding PAA) (3)
−Removed: 2.04 % 1.91 %
−Removed: Average yield on interest earning assets (excluding PAA) (4)
−Removed: 2.62 % 2.71 %
−Removed: Average economic cost of interest bearing liabilities (5)
−Removed: 0.89 % 0.87 %
−Removed: Net interest spread (excluding PAA) 1.73 % 1.84 %
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
* Represents a non-GAAP financial measure.
17 unchanged sentences
(6) Excludes dividends on preferred stock.
−Removed: Net income (loss) was $2.0 billion, which includes $1.6 million attributable to noncontrolling interests, or $1.37 per average basic common share, for the three months ended March 31, 2022 compared to $1.8 billion, which includes $0.3 million attributable to noncontrolling interests, or $1.23 per average basic common share, for the same period in 2021.
−Removed: We attribute the majority of the change in net income (loss) to higher net gains on derivatives and lower business divestiture-related losses, partially offset by unfavorable changes in net gains (losses) on investments and other, loan loss (provisions) reversals and interest income.
−Removed: Net gains on derivatives was $1.6 billion for the three months ended March 31, 2022 compared to $1.2 billion for the same period in 2021.
−Removed: Business divestiture-related losses was ($0.4) million for the three months ended March 31, 2022 compared to ($249.6) million for the same period in 2021.
−Removed: Net gains (losses) on investments and other was ($159.8) million for the three months ended March 31, 2022 compared to $38.4 million for the same period in 2021.
−Removed: Loan loss (provision) reversal was ($0.6) million for the three months ended March 31, 2022 compared to $139.6 million for the same period in 2021.
−Removed: Interest income for the three months ended March 31, 2022 was $655.9 million compared to $763.4 million for the same period in 2021.
+Added: Net income (loss) was $863.3 million, which includes ($3.4) million attributable to noncontrolling interests, or $0.55 per average basic common share, for the three months ended June 30, 2022 compared to ($294.8) million, which includes $0.8 million attributable to noncontrolling interests, or ($0.23) per average basic common share, for the same period in 2021.
+Added: We attribute the majority of the change in net income (loss) to favorable changes net gains (losses) on derivatives and net interest income, partially offset by an unfavorable change in net gains (losses) on investments and other.
+Added: Net gains (losses) on derivatives was $1.0 billion for the three months ended June 30, 2022 compared to ($0.6) billion for the same period in 2021.
+Added: Net interest income for the three months ended June 30, 2022 was $475.1 million compared to $322.9 million for the same period in 2021.
+Added: Net gains (losses) on investments and other was ($615.2) million for the three months ended June 30, 2022 compared to $20.2 million for the same period in 2021.
Refer to the section titled “Other income (loss)” located within this Item 2 for additional information related to these changes.
−Removed: Earnings available for distribution were $430.6 million, or $0.28 per average common share, for the three months ended March 31, 2022, compared to $439.5 million, or $0.29 per average common share, for the same period in 2021.
−Removed: The change in earnings available for distribution during the three months ended March 31, 2022 compared to the same period in 2021 was primarily due to lower coupon income resulting from the reduction in average interest earning assets, partially offset by higher TBA dollar roll income and net servicing income, and a favorable change in the net interest component of interest rate swaps.
+Added: Net income (loss) was $2.9 billion, which includes ($1.7) million attributable to noncontrolling interests, or $1.90 per average basic common share, for the six months ended June 30, 2022 compared to $1.5 billion which includes $1.1 million attributable to noncontrolling interests, or $1.00 per average basic common share, for the same period in 2021.
+Added: We attribute the majority of the change in net income (loss) to higher net gains on derivatives and lower business divestiture-related losses, partially offset by an unfavorable change in net gains (losses) on investments and other.
+Added: Net gains on derivatives was for the six months ended June 30, 2022 was $2.7 billion compared to $587.4 million for the same period in 2021.
+Added: Business divestiture-related (losses) was ($24.3) million for the six months ended June 30, 2022 compared to ($248.0) million for the same period in 2021.
+Added: Net gains (losses) on investments and other was ($775.0) million for the six months ended June 30, 2022 compared to $58.6 million for the same period in 2021.
+Added: Refer to the section titled “Other income (loss)” located within this Item 2 for additional information related to these changes.
+Added: Earnings available for distribution were $490.8 million, or $0.30 per average common share, for the three months ended June 30, 2022, compared to $451.4 million, or $0.30 per average common share, for the same period in 2021.
+Added: The change in earnings available for distribution during the three months ended June 30, 2022 compared to the same period in 2021 was primarily due to lower amortization expense, excluding PAA, resulting from lower prepayment speed projections, a favorable change in the net interest component of interest rate swaps, higher TBA dollar roll income and higher net servicing income, partially offset by higher interest expense from an increase in borrowing rates.
+Added: Earnings available for distribution were $921.4 million, or $0.58 per average common share, for the six months ended June 30, 2022, compared to $890.9 million, or $0.59 per average common share, for the same period in 2021.
+Added: The change in earnings available for distribution during the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to lower amortization expense, excluding PAA, resulting from lower prepayment speed projections, a favorable change in the net interest component of interest rate swaps, higher TBA dollar roll income and higher net servicing income, partially offset by higher interest expense from an increase in borrowing rates.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Non-GAAP Financial Measures
13 unchanged sentences
• net interest spread (excluding PAA).
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP.
13 unchanged sentences
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.
−Removed: The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented:
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Management’s Discussion and Analysis
−Removed: For the Three Months Ended March 31,
+Added: The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented:
+Added: For the Three Months Ended June 30,
+Added: For the Six Months Ended June 30,
+Added: 2022 2021 2022 2021
(dollars in thousands, except per share data)
11 unchanged sentences
Depreciation expense related to commercial real estate and amortization of intangibles (3)
+Added: 1,302 5,635 2,432 12,959
Non-EAD (income) loss allocated to equity method investments (4)
1 unchanged sentence
Transaction expenses and non-recurring items (5)
+Added: 1,751 1,150 5,101 1,845
Income tax effect of non-EAD income (loss) items 28,841 7,147 55,932 11,481
18 unchanged sentences
(1) 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.
−Removed: The net interest component of interest rate swaps totaled ($62.5) million and ($79.7) million for the three months ended March 31, 2022 and March 31, 2021, respectively.
−Removed: (2) Includes $0.2 million and ($5.3) million for the three months ended March 31, 2022 and 2021, respectively, of loss provision (reversal) on unfunded loan commitments which is reported in Other, net in the Consolidated Statements of Comprehensive Income (Loss).
+Added: The net interest component of interest rate swaps totaled $1.0 million and ($83.1) million for the three months ended June 30, 2022 and June 30, 2021, respectively and ($61.5) million and ($162.8) million for the six months ended June 30, 2022 and June 30, 2021, respectively.
+Added: (2) Includes ($2.5) million and $0.6 million for the three months ended June 30, 2022 and 2021, respectively, and ($2.3) million and ($4.7) million for the six months ended June 30, 2022 and 2021, respectively, of loss provision (reversal) on unfunded loan commitments which is reported in Other, net in the Consolidated Statements of Comprehensive Income (Loss).
(3) Includes depreciation and amortization expense related to equity method investments.
(4) Represents unrealized (gains) losses allocated to equity interests in a portfolio of MSR which is a component of Other, net in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: (5) The three months ended March 31, 2022 and 2021 includes costs incurred in connection with securitizations of residential whole loans.
+Added: (5) The three and six months ended June 30, 2022 and 2021 includes costs incurred in connection with securitizations of residential whole loans.
(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).
−Removed: CMBX coupon income totaled $1.1 million and $1.5 million for the three months ended March 31, 2022 and 2021, respectively.
+Added: CMBX coupon income totaled $1.1 million and $1.4 million for the three months ended June 30, 2022 and 2021, respectively and $2.1 million and $2.9 million for the six months ended June 30, 2022 and 2021, respectively.
(7) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period.
6 unchanged sentences
Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency MBS less an implied financing cost.
−Removed: TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions.
−Removed: The fair value of TBA derivatives is based on methods similar to those used to value Agency MBS.
−Removed: We record TBA derivatives at fair value on our
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Management’s Discussion and Analysis
−Removed: Consolidated Statements of Financial Condition and recognize periodic changes in fair value in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives (excluding interest rate swaps).
+Added: TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions.
+Added: The fair value of TBA derivatives is based on methods similar to those used to value Agency MBS.
+Added: 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 the Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives (excluding interest rate swaps).
TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract.
16 unchanged sentences
The following table illustrates the impact of the PAA on premium amortization expense for our Residential Securities portfolio and residential securities transferred or pledged to securitization vehicles, for the periods presented:
−Removed: For the Three Months Ended March 31,
+Added: For the Three Months Ended June 30,
+Added: For the Six Months Ended June 30,
+Added: 2022 2021 2022 2021
(dollars in thousands)
8 unchanged sentences
Equity capital primarily consists of common and preferred stock.
−Removed: 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.
−Removed: Recourse debt consists of repurchase agreements and
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Management’s Discussion and Analysis
−Removed: other secured financing (excluding certain non-recourse credit facilities).
+Added: 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.
+Added: Recourse debt consists of repurchase agreements and other secured financing (excluding certain non-recourse credit facilities).
Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, participations issued, and mortgages payable are non-recourse to us and are excluded from economic leverage.
The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating our economic leverage ratio for the periods presented:
−Removed: March 31, 2022 March 31, 2021
+Added: June 30, 2022 June 30, 2021
Economic leverage ratio reconciliation
3 unchanged sentences
Other secured financing
−Removed: 914,255 922,605
Debt issued by securitization vehicles
7 unchanged sentences
Credit facilities (1)
−Removed: (914,255) (922,605)
Debt issued by securitization vehicles
17 unchanged sentences
The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating our economic capital ratio for the periods presented:
−Removed: March 31, 2022 March 31, 2021
+Added: June 30, 2022 June 30, 2021
Economic capital ratio reconciliation
28 unchanged sentences
In accordance with GAAP, upfront payments associated with MAC interest rate swaps are not reflected in the net interest component of interest rate swaps, which is presented in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: We did not enter into any MAC interest rate swaps during the three months ended March 31, 2022.
+Added: We did not enter into any MAC interest rate swaps during the three and six months ended June 30, 2022.
Similarly, economic net interest income (excluding PAA), as computed below, provides investors with additional information to enhance their understanding of the net economics of our primary business operations.
4 unchanged sentences
For the three months ended (dollars in thousands)
−Removed: March 31, 2022 $ 655,850 $ (179,516) $ 476,334
−Removed: March 31, 2021 $ 763,378 $ (214,570) $ 548,808
+Added: June 30, 2022 $ 645,615 $ (127,521) $ 518,094
+Added: June 30, 2021 $ 383,906 $ 153,607 $ 537,513
+Added: For the six months ended
+Added: June 30, 2022 $ 1,301,465 $ (307,037) $ 994,428
+Added: June 30, 2021 $ 1,147,284 $ (60,963) $ 1,086,321
* Represents a non-GAAP financial measure.
6 unchanged sentences
For the three months ended (dollars in thousands)
−Removed: March 31, 2022 $ 74,922 $ 62,541 $ 137,463 $ 580,928 $ 62,541 $ 518,387 $ (179,516) $ 338,871
−Removed: March 31, 2021 $ 75,973 $ 79,747 $ 155,720 $ 687,405 $ 79,747 $ 607,658 $ (214,570) $ 393,088
+Added: June 30, 2022 $ 170,475 $ (992) $ 169,483 $ 475,140 $ (992) $ 476,132 $ (127,521) $ 348,611
+Added: June 30, 2021 $ 61,047 $ 83,087 $ 144,134 $ 322,859 $ 83,087 $ 239,772 $ 153,607 $ 393,379
+Added: For the six months ended
+Added: June 30, 2022 $ 245,397 $ 61,549 $ 306,946 $ 1,056,068 $ 61,549 $ 994,519 $ (307,037) $ 687,482
+Added: June 30, 2021 $ 137,020 $ 162,834 $ 299,854 $ 1,010,264 $ 162,834 $ 847,430 $ (60,963) $ 786,467
* Represents a non-GAAP financial measure.
2 unchanged sentences
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.
−Removed: In general, as prepayment speeds and expectations of prepayment speeds on our Agency MBS portfolio increase, related purchase premium amortization increases, thereby reducing the yield on such assets.
−Removed: The following table presents the weighted average experienced CPR and weighted average projected long-term CPR on our Agency MBS portfolio as of and for the periods presented.
+Added: In general, as prepayment speeds and
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Management’s Discussion and Analysis
+Added: expectations of prepayment speeds on our Agency MBS portfolio increase, related purchase premium amortization increases, thereby reducing the yield on such assets.
+Added: The following table presents the weighted average experienced CPR and weighted average projected long-term CPR on our Agency MBS portfolio as of and for the periods presented.
Experienced CPR (1)
1 unchanged sentence
For the three months ended
−Removed: March 31, 2022 16.7 % 9.5 %
−Removed: March 31, 2021 23.9 % 11.8 %
−Removed: (1) For the three months ended March 31, 2022 and 2021, respectively.
−Removed: (2) At March 31, 2022 and 2021, respectively.
+Added: June 30, 2022 14.9 % 7.7 %
+Added: June 30, 2021 26.4 % 12.9 %
+Added: For the six months ended
+Added: June 30, 2022 15.8 % 7.7 %
+Added: June 30, 2021 25.2 % 12.9 %
+Added: (1) For the three and six months ended June 30, 2022 and 2021, respectively.
+Added: (2) At June 30, 2022 and 2021, respectively.
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
10 unchanged sentences
For the three months ended (dollars in thousands)
−Removed: March 31, 2022 $ 72,590,876 $ 476,334 2.62 % $ 61,865,292 $ 137,463 0.89 % 338,871 1.73 %
−Removed: March 31, 2021 $ 81,121,340 $ 548,808 2.71 % $ 72,002,031 155,720 0.87 % 393,088 1.84 %
+Added: June 30, 2022 $ 72,123,055 $ 518,094 2.87 % $ 60,446,528 $ 169,483 1.11 % 348,611 1.76 %
+Added: June 30, 2021 $ 77,916,766 $ 537,513 2.76 % $ 68,469,413 144,134 0.83 % 393,379 1.93 %
+Added: For the six months ended
+Added: June 30, 2022 $ 72,356,966 $ 994,428 2.75 % $ 61,155,910 $ 306,946 1.00 % 687,482 1.75 %
+Added: June 30, 2021 $ 79,519,053 $ 1,086,321 2.73 % $ 70,235,722 $ 299,854 0.85 % 786,467 1.88 %
* Represents a non-GAAP financial measure.
4 unchanged sentences
Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Net Interest Margin (excluding PAA)
3 unchanged sentences
For the three months ended (dollars in thousands)
−Removed: March 31, 2022 $ 476,334 129,492 (137,463) $ 468,363 $ 72,590,876 19,229,537 $ 91,820,413 2.04 %
−Removed: March 31, 2021 $ 548,808 98,933 (155,720) $ 492,021 $ 81,121,340 21,865,969 $ 102,987,309 1.91 %
+Added: June 30, 2022 $ 518,094 161,673 (169,483) $ 510,284 $ 72,123,055 20,566,553 $ 92,689,608 2.20 %
+Added: June 30, 2021 $ 537,513 111,592 (144,134) $ 504,971 $ 77,916,766 18,761,062 $ 96,677,828 2.09 %
+Added: For the six months ended
+Added: June 30, 2022 $ 994,428 291,165 (306,946) $ 978,647 $ 72,356,966 19,898,046 $ 92,255,012 2.12 %
+Added: June 30, 2021 $ 1,086,321 210,525 (299,854) $ 996,992 $ 79,519,053 20,313,516 $ 99,832,569 2.00 %
* Represents a non-GAAP financial measure.
1 unchanged sentence
(1) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives.
−Removed: CMBX coupon income totaled $1.1 million and $1.5 million for the three months ended March 31, 2022 and 2021, respectively.
+Added: CMBX coupon income totaled $1.1 million and $1.4 million for the three months ended June 30, 2022 and 2021, respectively and $2.1 million and $2.9 million for the six months ended June 30, 2022 and 2021, respectively.
Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities
1 unchanged sentence
The table below shows our average interest bearing liabilities and average economic cost of interest bearing liabilities as compared to average one-month and average six-month LIBOR for the periods presented.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
Average Economic Cost of Interest Bearing Liabilities
12 unchanged sentences
For the three months ended
−Removed: March 31, 2022 $ 61,865,292 $ 61,028,143 $ 137,463 0.89 % 0.23 % 0.80 % (0.57 %) 0.66 % 0.09 %
−Removed: March 31, 2021 $ 72,002,031 $ 65,350,334 $ 155,720 0.87 % 0.12 % 0.22 % (0.10 %) 0.75 % 0.65 %
+Added: June 30, 2022 $ 60,446,528 $ 59,563,524 $ 169,483 1.11 % 1.02 % 2.11 % (1.09 %) 0.09 % (1.00 %)
+Added: June 30, 2021 $ 68,469,413 $ 66,642,378 $ 144,134 0.83 % 0.10 % 0.19 % (0.09 %) 0.73 % 0.64 %
+Added: For the six months ended
+Added: June 30, 2022 $ 61,155,910 $ 59,563,524 $ 306,946 1.00 % 0.61 % 1.44 % (0.83 %) 0.39 % (0.44 %)
+Added: June 30, 2021 $ 70,235,722 $ 66,642,378 $ 299,854 0.85 % 0.11 % 0.20 % (0.09 %) 0.74 % 0.65 %
* Represents a non-GAAP financial measure.
1 unchanged sentence
(1) Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.
−Removed: Economic interest expense decreased by $18.3 million for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to the change in the net interest component of interest rate swaps, which was ($62.5) million for the three months ended March 31, 2022 compared to ($79.7) million for the same period in 2021, and a decrease in average interest bearing liabilities.
+Added: Economic interest expense increased by $25.3 million for the three months ended June 30, 2022 compared to the same period in 2021, primarily due to higher interest expense on repurchase agreements reflecting higher borrowing rates, partially offset by lower average interest bearing liabilities and the change in the net interest component of interest rate swaps, which was $1.0 million for the three months ended June 30, 2022 compared to ($83.1) million for the same period in 2021.
+Added: Economic interest expense increased by $7.1 million for the six months ended June 30, 2022 compared to the same period in 2021, primarily due to higher interest expense on repurchase agreements reflecting higher borrowing rates, partially offset by lower average interest bearing liabilities and the change in the net interest component of interest rate swaps, which was ($61.5) million for the six months ended June 30, 2022 compared to ($162.8) million for the same period in 2021.
We do not manage our portfolio to have a pre-designated amount of borrowings at quarter or year end.
2 unchanged sentences
As a result, depending on the amount of mortgage-backed securities we have committed to purchase, we may retain the principal and interest we receive in the prior month, or we may use it to pay down our borrowings.
−Removed: Moreover, we generally use interest rate swaps, swaptions and other derivative instruments to hedge our portfolio, and as we pledge or receive collateral under these agreements, our borrowings on any given day may be increased or decreased.
+Added: Moreover, we generally use interest rate swaps, swaptions
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
+Added: and other derivative instruments to hedge our portfolio, and as we pledge or receive collateral under these agreements, our borrowings on any given day may be increased or decreased.
Our average borrowings during a quarter may differ from period end borrowings as we implement our portfolio management strategies and risk management strategies over changing market conditions by increasing or decreasing leverage.
1 unchanged sentence
Since our average borrowings and period end borrowings can be expected to differ, we believe our average borrowings during a period provide a more accurate representation of our exposure to the risks associated with leverage than our period end borrowings.
−Removed: At March 31, 2022 and December 31, 2021, the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and corporate loans.
+Added: At June 30, 2022 and December 31, 2021, the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and corporate loans.
All of our Residential Securities are currently accepted as collateral for these borrowings.
2 unchanged sentences
Other income (loss) is comprised of net gains (losses) on investments and other, net gains (losses) on derivatives, loan loss (provision) reversal, business divestiture-related gains (losses) and other, net.
−Removed: These components of realized and unrealized gains (losses) for the three months ended March 31, 2022 and 2021 were as follows:
−Removed: For the Three Months Ended March 31,
+Added: These components of realized and unrealized gains (losses) for the three and six months ended June 30, 2022 and 2021 were as follows:
+Added: For the Three Months Ended June 30,
+Added: For the Six Months Ended June 30,
+Added: 2022 2021 2022 2021
(dollars in thousands)
6 unchanged sentences
Total $ 397,899 $ (566,963) $ 1,882,219 $ 537,418
+Added: For the Three Months Ended June 30, 2022 and 2021
+Added: Net Gains (Losses) on Investments and Other
+Added: Net gains (losses) on disposal of investments was ($646.2) million for the three months ended June 30, 2022 compared to $16.2 million for the same period in 2021.
+Added: For the three months ended June 30, 2022, we disposed of Residential Securities with a carrying value of $6.6 billion for an aggregate net loss of ($657.3) million.
+Added: For the same period in 2021, we disposed of Residential Securities with a carrying value of $3.3 billion for an aggregate net gain of $34.8 million.
+Added: Net unrealized gains (losses) on instruments measured at fair value through earnings was $31.0 million for the three months ended June 30, 2022 compared to $4.0 million for the same period in 2021, primarily due to favorable changes in unrealized gains (losses) on residential securitized debt of consolidated VIEs of $386.8 million, MSR, including interests in MSR, of $73.9 million and Agency interest-only securities of $28.3 million, partially offset by unfavorable changes on securitized residential whole loans of consolidated VIEs of ($340.7) million, non-Agency MBS of ($65.9) million and credit risk transfer securities of ($52.4) million.
+Added: Net Gains (Losses) on Derivatives
+Added: Net gains (losses) on interest rate swaps for the three months ended June 30, 2022 was $898.5 million compared to ($224.2) million for the same period in 2021, primarily attributable to a favorable change in unrealized gains (losses) on interest rate swaps.
+Added: Unrealized gains (losses) on interest rate swaps was $897.5 million for the three months ended June 30, 2022, reflecting a rise in forward interest rates during the period, compared to ($141.1) million for the same period in 2021, reflecting a decline in forward interest rates during the period.
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Management’s Discussion and Analysis
−Removed: For the Three Months Ended March 31, 2022 and 2021
−Removed: Net Gains (Losses) on Investments and Other
−Removed: Net gains (losses) on disposal of investments was ($144.2) million for the three months ended March 31, 2022 compared to ($65.8) million for the same period in 2021.
−Removed: For the three months ended March 31, 2022, we disposed of Residential Securities with a carrying value of $2.8 billion for an aggregate net loss of ($144.5) million.
−Removed: For the same period in 2021, we disposed of Residential Securities with a carrying value of $3.0 billion for an aggregate net loss of ($61.0) million.
−Removed: Net unrealized gains (losses) on instruments measured at fair value through earnings was ($15.6) million for the three months ended March 31, 2022 compared to $104.2 million for the same period in 2021, primarily due to unfavorable changes in unrealized gains (losses) on securitized residential whole loans of consolidated VIEs of ($376.5) million, securitized commercial loans of ($96.5) million, residential whole loans of ($60.3) million and non-Agency mortgage-backed securities of ($60.0) million, partially offset by favorable changes in residential securitized debt of consolidated VIEs of $285.2 million, MSR, including interests in MSR, of $151.6 million and commercial securitized debt of consolidated VIEs of $81.1 million for the three months ended March 31, 2022 compared to the same period in 2021.
−Removed: Net Gains (Losses) on Derivatives
−Removed: Net gains (losses) on interest rate swaps for the three months ended March 31, 2022 was $1.3 billion compared to $692.5 million for the same period in 2021, primarily attributable to a favorable change in unrealized gains (losses) on interest rate swaps.
−Removed: Unrealized gains (losses) on interest rate swaps was $1.3 billion for the three months ended March 31, 2022, reflecting a sharper rise in forward interest rates during the period, compared to $772.3 million for the same period in 2021.
−Removed: Net gains (losses) on other derivatives was $381.1 million for the three months ended March 31, 2022 compared to $476.9 million for the same period in 2021.
−Removed: The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on TBA derivatives, which was ($1.1) billion for the three months ended March 31, 2022 compared to ($630.1) million for the same period in 2021, and interest rate swaptions, which was $108.2 million for the three months ended March 31, 2022 compared to $283.8 million for the same period in 2021, partially offset by a favorable change in net gains (losses) on futures, which was $1.4 billion for the three months ended March 31, 2022 compared to $813.3 million for the same period in 2021.
+Added: Net gains (losses) on other derivatives was $117.1 million for the three months ended June 30, 2022 compared to ($357.8) million for the same period in 2021.
+Added: The change in net gains (losses) on other derivatives was primarily due to favorable changes in net gains (losses) on futures, which was $787.1 million for the three months ended June 30, 2022 compared to ($394.5) million for the same period in 2021, and interest rate swaptions, which was $119.4 million for the three months ended June 30, 2022 compared to ($255.6) million for the same period in 2021, partially offset by an unfavorable change in net gains (losses) on TBA derivatives, which was ($783.3) million for the three months ended June 30, 2022 compared to $285.3 million for the same period in 2021.
Loan Loss (Provision) Reversal
−Removed: For the three months ended March 31, 2022 and 2021, net loan loss (provisions) reversals were ($0.6) million on corporate loans and $139.6 million on commercial mortgage and corporate loans, respectively.
+Added: For the three months ended June 30, 2022 and 2021, net loan loss (provision) reversal were $26.9 million and ($0.5) million on corporate loans, respectively.
Refer to the “Loans” Note located within Item 1 for additional information related to the loan loss (provisions) reversals.
Business Divestiture-Related Gains (Losses)
−Removed: The majority of business divestiture-related gains (losses) was recorded during the three months ended March 31, 2021 when the sale of our commercial real estate business was announced.
+Added: For the three months ended June 30, 2022, the majority of business divestiture-related gains (losses) was associated with the sale of our corporate loan interests, in connection with the announcement of the sale of our MML Portfolio.
+Added: Refer to the “Sale of Middle Market Lending Portfolio” Note and the “Loans” Note located within Item 1 for additional information related to the transaction.
+Added: For the three months ended June 30, 2021, business divestiture-related gains (losses) was associated with the sale of our commercial real estate business.
Refer to the “Sale of Commercial Real Estate Business” Note located within Item 1 for additional information related to the transaction.
2 unchanged sentences
Given the nature of certain components of this line item, balances may fluctuate from period to period.
−Removed: General and Administrative Expenses
−Removed: General and administrative (“G&A”) expenses consist of compensation and other expenses.
−Removed: Beginning with the quarter ended June 30, 2021, we began classifying certain portfolio activity- or volume-related expenses (including but not limited to brokerage and commission fees, due diligence costs and securitization expenses) as Other income (loss) rather than Other
+Added: For the Six Months Ended June 30, 2022 and 2021
+Added: Net Gains (Losses) on Investments and Other
+Added: Net gains (losses) on disposal of investments and other was ($790.4) million for the six months ended June 30, 2022 compared to ($49.6) million for the same period in 2021.
+Added: For the six months ended June 30, 2022, we disposed of Residential Securities with a carrying value of $9.4 billion for an aggregate net loss of ($801.8) million.
+Added: For the same period in 2021, we disposed of Residential Securities with a carrying value of $6.2 billion for an aggregate net loss of ($25.9) million.
+Added: Net unrealized gains (losses) on instruments measured at fair value through earnings was $15.4 million for the six months ended June 30, 2022 compared to $108.2 million for the same period in 2021, primarily due to unfavorable changes in unrealized gains (losses) on securitized residential whole loans of consolidated VIEs of ($717.2) million, securitized commercial loans of ($129.8) million and non-Agency MBS of ($125.9) million, partially offset by favorable changes on residential securitized debt of consolidated VIEs of $672.0 million and MSR, including Interests in MSR, of $225.4 million.
+Added: Net Gains (Losses) on Derivatives
+Added: Net gains (losses) on interest rate swaps for the six months ended June 30, 2022 was $2.2 billion compared to $468.4 million for the same period in 2021, primarily attributable to favorable changes in unrealized gains (losses) on interest rate swaps.
+Added: Unrealized gains (losses) on interest rate swaps was $2.2 billion for the six months ended June 30, 2022 compared to $631.2 million for the same period in 2021, reflecting a sharper rise in forward interest rates during the current period.
+Added: Net gains (losses) on other derivatives was $498.3 million for the six months ended June 30, 2022 compared to $119.1 million for the same period in 2021.
+Added: The change in net gains (losses) on other derivatives was primarily due to the favorable changes in net gains (losses) on futures derivatives, which was $2.2 billion for the six months ended June 30, 2022 compared to $418.8 million for the same period in 2021, and interest rate swaptions, which was $227.6 million for the six months ended
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Management’s Discussion and Analysis
−Removed: general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss) to better reflect the nature of the items.
−Removed: As such, the prior period has been conformed to the current presentation with Other general and administrative expenses for the three months ended March 31, 2021 adjusted downward by $1.8 million.
+Added: June 30, 2022 compared to $28.1 million for the same period in 2021, partially offset by an unfavorable change in TBA derivatives, which was ($1.9) billion for the six months ended June 30, 2022 compared to ($344.8) million for the same period in 2021.
+Added: Loan Loss (Provision) Reversal
+Added: For the six months ended June 30, 2022 and 2021, net loan loss reversals of $26.3 million on corporate loans and $139.1 million on commercial mortgage and corporate loans, respectively.
+Added: Refer to the “Loans” Note located within Item 1 for additional information related to these loan loss provisions.
+Added: Business Divestiture-Related Gains (Losses)
+Added: For the six months ended June 30, 2022, the majority of business divestiture-related gains (losses) was associated with the sale of our corporate loan interests.
+Added: Refer to the “Sale of Middle Market Lending Portfolio” Note and located within Item 1 for additional information related to the transaction.
+Added: For the six months ended June 30, 2021, business divestiture-related gains (losses) was associated with the sale of our commercial real estate business.
+Added: Refer to the “Sale of Commercial Real Estate Business” Note located within Item 1 for additional information related to the transaction.
+Added: General and Administrative Expenses
+Added: General and administrative (“G&A”) expenses consist of compensation and other expenses.
The following table shows our total G&A expenses as compared to average total assets and average equity for the periods presented.
2 unchanged sentences
For the three months ended (dollars in thousands)
−Removed: March 31, 2022 $ 45,764 0.24 % 1.48 %
−Removed: March 31, 2021 $ 47,905 0.22 % 1.36 %
−Removed: G&A expenses were $45.8 million for the three months ended March 31, 2022, a decrease of $2.1 million compared to the same period in 2021.
−Removed: The change was primarily due to lower expenses on commercial related investments during the three months ended March 31, 2022 as a result of the sale of the commercial real estate business, which was announced in the first quarter of 2021, compared with the same period in 2021.
+Added: June 30, 2022 $ 36,038 0.19 % 1.28 %
+Added: June 30, 2021 $ 53,526 0.26 % 1.55 %
+Added: For the six months ended
+Added: June 30, 2022 $ 81,802 0.22 % 1.37 %
+Added: June 30, 2021 $ 101,431 0.24 % 1.46 %
+Added: G&A expenses were $36.0 million for the three months ended June 30, 2022, a decrease of $17.5 million compared to the same period in 2021.
+Added: G&A expenses were $81.8 million for the six months ended June 30, 2022, a decrease of $19.6 million compared to the same period in 2021.
+Added: The change in each period was primarily due to lower expenses on our commercial portfolio during the three and six months ended June 30, 2022 as a result of the sale of the commercial real estate business, which was announced in the first quarter of 2021, compared with the same periods in 2021.
Return on Average Equity
7 unchanged sentences
For the three months ended
−Removed: March 31, 2022 16.81 % 1.00 % 50.15 % (1.48 %) (0.86 %) 65.62 %
−Removed: March 31, 2021 17.31 % 0.20 % 33.71 % (1.36 %) 0.01 % 49.87 %
+Added: June 30, 2022 16.88 % 1.76 % 14.07 % (1.28 %) (0.83 %) 30.60 %
+Added: June 30, 2021 6.92 % 0.23 % (13.96 %) (1.55 %) (0.15 %) (8.51 %)
+Added: For the six months ended
+Added: June 30, 2022 16.68 % 1.35 % 32.62 % (1.37 %) (0.84 %) 48.44 %
+Added: June 30, 2021 12.18 % 0.21 % 10.08 % (1.46 %) (0.07 %) 20.94 %
(1) Economic net interest income includes the net interest component of interest rate swaps.
(2) Other income (loss) excludes the net interest component of interest rate swaps.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Unrealized Gains and Losses - Available-for-Sale Investments
3 unchanged sentences
The table below shows cumulative unrealized gains and losses on our available-for-sale investments reflected in the Consolidated Statements of Financial Condition.
−Removed: March 31, 2022 December 31, 2021
+Added: June 30, 2022 December 31, 2021
(dollars in thousands)
5 unchanged sentences
A very large negative change in the net fair value of our available-for-sale Residential Securities might impair our liquidity position, requiring us to sell assets with the potential result of realized losses upon sale.
−Removed: The fair value of these securities being less than amortized cost at March 31, 2022 is solely due to market conditions and not the quality of the assets.
−Removed: Substantially all of the Agency MBS have an actual or implied credit rating that is the same as that of the
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
+Added: The fair value of these securities being less than amortized cost at June 30, 2022 is solely due to market conditions and not the quality of the assets.
+Added: Substantially all of the Agency MBS have an actual or implied credit rating that is the same as that of the U.S.
The investments do not require an allowance for credit losses because we currently have the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that we will be required to sell the investments before recovery of the amortized cost bases, which may be maturity.
1 unchanged sentence
Financial Condition
−Removed: Total assets were $76.2 billion and $76.8 billion at March 31, 2022 and December 31, 2021, respectively.
−Removed: The change was primarily due to a decrease in Agency MBS, of $2.7 billion, partially offset by increases in residential mortgage loans, including assets transferred or pledged to securitization vehicles, of $1.1 billion, derivative assets of $0.8 billion and MSR of $0.6 billion.
−Removed: Our portfolio composition, net equity allocation and debt-to-net equity ratio by asset class were as follows at March 31, 2022:
+Added: Total assets were $73.6 billion and $76.8 billion at June 30, 2022 and December 31, 2021, respectively.
+Added: The change was primarily due to decreases in Agency MBS of $4.9 billion and corporate loans of $2.0 billion, partially offset by increases in residential mortgage loans, including assets transferred or pledged to securitization vehicles, of $2.1 billion, MSR of $0.9 billion and derivative assets of $0.6 billion.
+Added: Our portfolio composition, net equity allocation and debt-to-net equity ratio by asset class were as follows at June 30, 2022:
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Residential Commercial
8 unchanged sentences
19,313,442 — — 409,884 — 19,723,326
−Removed: Other secured financing — — — — 914,255 914,255
Debt issued by securitization vehicles 421,939 — 7,080,544 — — 7,502,483
5 unchanged sentences
Net equity allocated (%) 70 % 15 % 14 % 1 % — % 100 %
−Removed: Debt/net equity ratio 7.1:1 NM 4.4:1 7:1 0.8:1 5.3:1 (4)
+Added: Debt/net equity ratio 6.2:1 NM 7.6:1 3.4:1 NM 5.4:1 (4)
(1) Fair value/carrying includes residential loans held for sale.
4 unchanged sentences
Residential Securities
−Removed: Substantially all of our Agency MBS at March 31, 2022 and December 31, 2021 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties.
+Added: Substantially all of our Agency MBS at June 30, 2022 and December 31, 2021 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties.
Our mortgage-backed securities were largely Freddie Mac, Fannie Mae 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.
1 unchanged sentence
We accrete discount balances as an increase to interest income over the expected life of the related interest earning assets and we amortize premium balances as a decrease to interest income over the expected life of the related interest earning assets.
−Removed: At March 31, 2022 and December 31, 2021 we had on our Consolidated Statements of Financial Condition a total of $151.2 million and $77.7 million, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities, excluding securities transferred or pledged to securitization vehicles, acquired at a price below principal value) and a total of $3.8 billion and $3.8 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities, excluding securities transferred or pledged to securitization vehicles, acquired at a price above principal value).
−Removed: The weighted average experienced prepayment speed on our Agency MBS portfolio for the three months ended March 31, 2022 and 2021 was 16.7% and 23.9%, respectively.
−Removed: The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of March 31, 2022 and 2021 was 9.5% and 11.8%, respectively.
−Removed: Given our current portfolio composition, if mortgage principal prepayment rates were to increase over the life of our mortgage-
+Added: At June 30, 2022 and December 31, 2021 we had on our Consolidated Statements of Financial Condition a total of $380.1 million and $77.7 million, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities, excluding securities transferred or pledged to securitization vehicles, acquired at a price below principal value) and a total of $3.7 billion and $3.8 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities, excluding securities transferred or pledged to securitization vehicles, acquired at a price above principal value).
+Added: The weighted average experienced prepayment speed on our Agency MBS portfolio for the three months ended June 30, 2022 and 2021 was 14.9% and 26.4%, respectively.
+Added: The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of June 30, 2022 and 2021 was 7.7% and 12.9%, respectively.
+Added: Given our current portfolio composition, if mortgage principal prepayment rates were to increase over the life of our mortgage-backed securities, all other factors being equal, our net interest income would decrease during the life of these mortgage-backed securities as we would be required to amortize our net premium balance into income over a shorter time period.
+Added: 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.
+Added: The following tables present our Residential Securities, excluding securities transferred or pledged to securitization vehicles, that were carried at fair value at June 30, 2022 and December 31, 2021.
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Management’s Discussion and Analysis
−Removed: backed securities, all other factors being equal, our net interest income would decrease during the life of these mortgage-backed securities as we would be required to amortize our net premium balance into income over a shorter time period.
−Removed: 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.
−Removed: The following tables present our Residential Securities, excluding securities transferred or pledged to securitization vehicles, that were carried at fair value at March 31, 2022 and December 31, 2021.
−Removed: March 31, 2022 December 31, 2021
+Added: June 30, 2022 December 31, 2021
Estimated Fair Value
15 unchanged sentences
Total Residential Securities $ 58,585,708 $ 63,125,169
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: The following table summarizes certain characteristics of our Residential Securities (excluding interest-only mortgage-backed securities) and interest-only mortgage-backed securities, excluding securities transferred or pledged to securitization vehicles, at March 31, 2022 and December 31, 2021.
−Removed: March 31, 2022 December 31, 2021
+Added: The following table summarizes certain characteristics of our Residential Securities (excluding interest-only mortgage-backed securities) and interest-only mortgage-backed securities, excluding securities transferred or pledged to securitization vehicles, at June 30, 2022 and December 31, 2021.
+Added: June 30, 2022 December 31, 2021
Residential Securities (1)
35 unchanged sentences
NM Not meaningful.
−Removed: The following tables summarize certain characteristics of our Residential Credit portfolio at March 31, 2022.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
+Added: The following tables summarize certain characteristics of our Residential Credit portfolio at June 30, 2022.
Payment Structure Investment Characteristics
11 unchanged sentences
$ 2,992,372 $ 1,034,578 $ 1,957,794 4.37 % 15.37 % 19.80 % 14.33 %
−Removed: (1) Represents the 3 month voluntary prepayment rate (“VPR”).
+Added: (1) Represents the 3 month voluntary prepayment rate (“VPR”) and excludes the impact of interest-only securities.
(2) Total investment characteristics exclude the impact of interest-only securities.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
Product ARM Fixed Floater Interest-Only Estimated Fair Value
9 unchanged sentences
Contractual Obligations
−Removed: The following table summarizes the effect on our liquidity and cash flows from contractual obligations at March 31, 2022.
+Added: The following table summarizes the effect on our liquidity and cash flows from contractual obligations at June 30, 2022.
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.
−Removed: At March 31, 2022, the interest rate swaps had a net fair value of ($0.5) billion.
+Added: At June 30, 2022, the interest rate swaps had a net fair value of ($0.3) billion.
Year One to Three
6 unchanged sentences
115,099 — — — 115,099
−Removed: Other secured financing — 224,550 689,705 — 914,255
−Removed: Interest expense on other secured financing (1)
−Removed: 30,807 61,698 23,482 — 115,987
Debt issued by securitization vehicles (principal) — — — 8,286,317 8,286,317
4 unchanged sentences
Total $ 51,753,014 $ 547,637 $ 540,878 $ 16,617,478 $ 69,459,007
−Removed: (1) Interest expense on repurchase agreements and other secured financing calculated based on rates at March 31, 2022.
+Added: (1) Interest expense on repurchase agreements calculated based on rates at June 30, 2022.
In the coming periods, we expect to continue to finance our Residential Securities in a manner that is largely consistent with our current operations via repurchase agreements.
We may use securitization structures, credit facilities, or other term financing structures to finance certain of our assets.
−Removed: During the three months ended March 31, 2022, we received $3.0 billion from principal repayments and $2.4 billion in cash from disposal of Residential securities.
−Removed: During the three months ended March 31, 2021, we received $5.0 billion from principal repayments and $2.8 billion in cash from disposal of Residential Securities.
+Added: During the six months ended June 30, 2022, we received $5.7 billion from principal repayments and $8.4 billion in cash from disposal of Residential securities.
+Added: During the six months ended June 30, 2021, we received $10.2 billion from principal repayments and $6.4 billion in cash from disposal of Residential Securities.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Off-Balance Sheet Arrangements
2 unchanged sentences
In addition, we have provided customary non-recourse carve-out and environmental guarantees (or underlying indemnities with respect thereto) with respect to mortgage loans held by subsidiaries of these unconsolidated joint ventures.
−Removed: We believe that the likelihood of making any payments under these guarantees is remote, and have not accrued a related liability at March 31, 2022.
+Added: We believe that the likelihood of making any payments under these guarantees is remote, and have not accrued a related liability at June 30, 2022.
Capital Management
1 unchanged sentence
A strong and robust capital position is essential to executing our investment strategy.
−Removed: Our capital strategy is predicated on a strong capital position, which enables us to execute our investment strategy
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: regardless of the market environment.
+Added: Our capital strategy is predicated on a strong capital position, which enables us to execute our investment strategy regardless of the market environment.
Our capital policy defines the parameters and principles supporting a comprehensive capital management practice.
6 unchanged sentences
Stockholders’ Equity
−Removed: The following table provides a summary of total stockholders’ equity at March 31, 2022 and December 31, 2021:
−Removed: March 31, 2022 December 31, 2021
+Added: The following table provides a summary of total stockholders’ equity at June 30, 2022 and December 31, 2021:
+Added: June 30, 2022 December 31, 2021
Stockholders’ equity (dollars in thousands)
11 unchanged sentences
The Current Share Repurchase Program replaced the Prior Share Repurchase Program.
−Removed: During the three months ended March 31, 2022 and 2021, no shares were purchased under the Current Share Repurchase Program or Prior Share Repurchase Program.
+Added: During the three and six months ended June 30, 2022 and 2021, no shares were purchased under the Current Share Repurchase Program or Prior Share Repurchase Program.
+Added: During the three and six months ended June 30, 2022, we closed the public offering of an original issuance of 100.0 million shares of common stock for proceeds of $645.0 million before deducting offering expenses.
+Added: In connection with the offering, we granted the underwriters a thirty-day option to purchase up to an additional 15.0 million shares of common stock, which the underwriters exercised in full resulting in an additional $96.8 million in proceeds before deducting offering expenses.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
In January 2018, we entered into separate Distribution Agency Agreements (as amended and restated on August 6, 2021 and August 6, 2020, collectively, the “Sales Agreements”) with each of Wells Fargo Securities, LLC, BofA Securities, Inc.
2 unchanged sentences
We may offer and sell shares of our common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Sales Agents.
−Removed: During the three months ended March 31, 2022, we issued 0.8 million shares for proceeds of $6.2 million, net of commissions and fees, under the at-the-market sales program.
−Removed: No shares were issued under the at-the-market sales program during the three months ended March 31, 2021.
+Added: During the three and six months ended June 30, 2022, we issued issued 33.0 million shares for proceeds of $214.9 million, net of commissions and fees, and 33.8 million shares for proceeds of $221.1 million, net of commissions and fees, respectively, under the at-the-market sales program.
+Added: During the three and six months ended June 30, 2021, we issued 45.5 million shares for proceeds of $420.4 million, net of commissions and fees, under the at-the-market sales program.
Refer to the “Capital Stock” Note located within Item 1 for additional information related to the at-the-market sales program.
3 unchanged sentences
Based on the guidelines, we generally expect to maintain an economic leverage ratio of less than 10:1.
−Removed: Our actual economic leverage ratio varies from time to time based upon various factors, including our management’s opinion of the level
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: of risk of our assets and liabilities, our liquidity position, our level of unused borrowing capacity, the availability of credit, over-collateralization levels required by lenders when we pledge assets to secure borrowings and our assessment of domestic and international market conditions.
−Removed: Our GAAP leverage ratio at March 31, 2022 and December 31, 2021 was 5.3:1 and 4.7:1, respectively.
−Removed: 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 6.4:1 and 5.7:1, at March 31, 2022 and December 31, 2021, respectively.
−Removed: Our GAAP capital ratio at March 31, 2022 and December 31, 2021 was 15.1% and 17.2%, respectively.
−Removed: 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 13.1% and 14.4% at March 31, 2022 and December 31, 2021, respectively.
+Added: Our actual economic leverage ratio varies from time to time based upon various factors, including our management’s opinion of the level of risk of our assets and liabilities, our liquidity position, our level of unused borrowing capacity, the availability of credit, over-collateralization levels required by lenders when we pledge assets to secure borrowings and our assessment of domestic and international market conditions.
+Added: Our GAAP leverage ratio at June 30, 2022 and December 31, 2021 was 5.4:1 and 4.7:1, respectively.
+Added: 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 6.6:1 and 5.7:1, at June 30, 2022 and December 31, 2021, respectively.
+Added: Our GAAP capital ratio at June 30, 2022 and December 31, 2021 was 15.1% and 17.2%, respectively.
+Added: 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 13.0% and 14.4% at June 30, 2022 and December 31, 2021, respectively.
Economic leverage ratio and economic capital ratio are non-GAAP financial measures.
12 unchanged sentences
The risk appetite statement asserts the following key risk parameters to guide our investment management activities:
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Risk Parameter Description
10 unchanged sentences
The Board exercises its oversight of risk management primarily through the Board Risk Committee (“BRC”) and Board Audit Committee (“BAC”) with support from the other Board Committees.
−Removed: The BRC is responsible for oversight of our risk governance structure,
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: risk management (operational and market risk) and risk assessment guidelines and policies and our risk appetite.
+Added: The BRC is responsible for oversight of our risk governance structure, risk management (operational and market risk) and risk assessment guidelines and policies and our risk appetite.
The BAC is responsible for oversight of the quality and integrity of our accounting, internal controls and financial reporting practices, including independent auditor selection, evaluation and review, and oversight of the internal audit function.
15 unchanged sentences
We have identified the following primary categories that we utilize to identify, assess, measure and monitor risk.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Risk Description
8 unchanged sentences
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.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
Capital, Liquidity and Funding Risk Management
14 unchanged sentences
To reduce our liquidity risk we maintain a laddered approach to our repurchase agreements.
−Removed: At March 31, 2022 and December 31, 2021, the weighted average days to maturity was 68 days and 52 days, respectively.
+Added: At June 30, 2022 and December 31, 2021, the weighted average days to maturity was 47 days and 52 days, respectively.
Our repurchase agreements generally provide that in the event of a margin call we must provide additional securities or cash on the same business day that a margin call is made.
Should prepayment speeds on the mortgages underlying our Agency and Residential mortgage-backed securities and/or market interest rates or other factors move suddenly and cause declines in the market value of assets posted as collateral, resulting margin calls may cause an adverse change in our liquidity position.
−Removed: At March 31, 2022, we had total financial assets and cash pledged against existing liabilities of $58.4 billion.
−Removed: The weighted average haircut was approximately 3% on repurchase agreements.
−Removed: 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 March 31, 2022 compared to the same period in 2021, and our counterparties did not materially alter any requirements, including required haircuts, related to the col lateral we pledge under repurchase agreements and interest rate swaps during the three months ended March 31, 2022.
+Added: At June 30, 2022, we had total financial assets and cash pledged against existing liabilities of $55.5 billion.
+Added: The weighted average haircut was approximately 3% on repurchase agreements, primarily attributable to Agency MBS.
+Added: The quality and character of the Residential Securities that we pledge as collateral under the repurchase agreements and interest rate swaps did
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
+Added: not materially change at June 30, 2022 compared to the same period in 2021, and our counterparties did not materially alter any requirements, including required haircuts, related to the col lateral we pledge under repurchase agreements and interest rate swaps during the three months ended June 30, 2022.
The following table presents our quarterly average and quarter-end repurchase agreement and reverse repurchase agreement balances outstanding for the periods presented:
4 unchanged sentences
For the three months ended (dollars in thousands)
+Added: June 30, 2022 $ 51,606,720 $ 51,364,097 $ 117,903 $ —
March 31, 2022 53,961,689 52,626,503 39,535 —
6 unchanged sentences
June 30, 2020 68,468,813 67,163,598 183,423 —
−Removed: March 31, 2020 96,756,341 72,580,183 461,123 —
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: The following table provides information on our repurchase agreements and other secured financing by maturity date at March 31, 2022.
−Removed: The weighted average remaining maturity on our repurchase agreements and other secured financing was 90 days at March 31, 2022:
−Removed: March 31, 2022
+Added: The following table provides information on our repurchase agreements by maturity date at June 30, 2022.
+Added: The weighted average remaining maturity on our repurchase agreements was 47 days at June 30, 2022:
+Added: June 30, 2022
Balance Weighted
9 unchanged sentences
Total $ 51,364,097 1.60 % 100.0 %
−Removed: (1) Approximately 2% of the total repurchase agreements and other secured financing had a remaining maturity over 1 year.
−Removed: The table below presents our outstanding debt balances and associated weighted average rates and days to maturity at March 31, 2022:
+Added: (1) Approximately 0% of the total repurchase agreements had a remaining maturity over 1 year.
+Added: The table below presents our outstanding debt balances and associated weighted average rates and days to maturity at June 30, 2022:
Weighted Average Rate
13 unchanged sentences
(3) Non-recourse to Annaly.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
Excess Liquidity
2 unchanged sentences
The following table illustrates our asset portfolio available to support potential collateral obligations and funding needs.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Assets are considered encumbered if pledged as collateral against an existing liability, and therefore are no longer available to support additional funding.
An asset is considered unencumbered if it has not been pledged or securitized.
−Removed: The following table also provides the carrying amount of our encumbered and unencumbered financial assets at March 31, 2022:
+Added: The following table also provides the carrying amount of our encumbered and unencumbered financial assets at June 30, 2022:
Encumbered Assets Unencumbered Assets Total
11 unchanged sentences
Interests in MSR — 83,622 83,622
−Removed: Corporate debt, held for investment 1,475,429 492,238 1,967,667
+Added: Assets of disposal group held for sale (3)
+Added: 97,414 — 97,414
Other assets (4)
3 unchanged sentences
(2) Includes assets transferred or pledged to securitization vehicles.
−Removed: (3) Includes commercial real estate investments held for sale and interests in certain joint ventures.
+Added: (3) Comprised of corporate loans held for sale
+Added: (4) Includes corporate loans, commercial real estate investments and interests in certain joint ventures.
We maintain liquid assets in order to satisfy our current and future obligations in normal and stressed operating environments.
4 unchanged sentences
Our balance sheet also generates liquidity on an on-going basis through mortgage principal and interest repayments and net earnings held prior to payment of dividends.
−Removed: The following table presents our liquid assets as a percentage of total assets at March 31, 2022:
+Added: The following table presents our liquid assets as a percentage of total assets at June 30, 2022:
Carrying Value (1)
4 unchanged sentences
Residential mortgage loans (4)
−Removed: Corporate debt, held for investment (5)
Total liquid assets $ 59,989,170
1 unchanged sentence
(1) Carrying value approximates the market value of assets.
−Removed: The assets listed in this table include $58.4 billion of assets that have been pledged as collateral against existing liabilities at March 31, 2022.
+Added: The assets listed in this table include $55.5 billion of assets that have been pledged as collateral against existing liabilities at June 30, 2022.
Please refer to the Encumbered and Unencumbered Assets table for related information.
2 unchanged sentences
(4) Excludes securitized residential mortgage loans transferred or pledged to consolidated VIEs carried at fair value of $8.4 billion.
−Removed: (5) Excludes unpledged second lien loans.
(5) Denominator is computed based on the carrying amount of encumbered and unencumbered financial assets, excluding assets transferred or pledged to securitization vehicles, of $8.9 billion.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
Maturity Profile
4 unchanged sentences
The table is based on a static portfolio and assumes no reinvestment of asset cash flows and no future liabilities are entered into.
−Removed: In assessing the maturity of our assets, liabilities and off balance sheet obligations, we use the stated maturities, or our prepayment expectations for assets and liabilities that exhibit prepayment characteristics.
+Added: In assessing the maturity of our assets, liabilities and off balance sheet obligations, we use the stated maturities, or our prepayment
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
+Added: expectations for assets and liabilities that exhibit prepayment characteristics.
Cash and cash equivalents are included in the ‘Less than 3 Months’ maturity bucket, as they are typically held for a short period of time.
10 unchanged sentences
The effects of interest rate swaps, whereby we generally pay a fixed rate and receive a floating rate and effectively lock in our financing costs for a longer term, are also reflected in our interest rate sensitivity gap.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: The interest rate sensitivity of our assets and liabilities in the following table at March 31, 2022 could vary substantially based on actual prepayment experience.
+Added: The interest rate sensitivity of our assets and liabilities in the following table at June 30, 2022 could vary substantially based on actual prepayment experience.
Months More than 1 Year to 3 Years 3 Years and Over Total
7 unchanged sentences
Residential mortgage loans (principal) — 1,678 — 1,525,779 1,527,457
−Removed: Corporate debt (principal) — — 302,665 1,717,816 2,020,481
Total loans — 1,678 — 1,525,779 1,527,457
6 unchanged sentences
Repurchase agreements $ 43,790,881 $ 7,573,216 $ — $ — $ 51,364,097
−Removed: Other secured financing
−Removed: — — 224,550 689,705 914,255
Debt issued by securitization vehicles (principal)
11 unchanged sentences
(2) Includes effect of interest rate swaps.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
The methodologies we employ for evaluating interest rate risk include an analysis of our interest rate “gap,” measurement of the duration and convexity of our portfolio and sensitivities to interest rates and spreads.
9 unchanged sentences
Investment/Market Risk Management
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
One of the primary risks we are subject to is investment/market risk.
14 unchanged sentences
The results assume no management actions in response to the rate or spread changes.
−Removed: The following table presents estimates at March 31, 2022.
+Added: The following table presents estimates at June 30, 2022.
Actual results could differ materially from these estimates.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Change in Interest Rate (1)
21 unchanged sentences
Actual results could differ materially from these estimates.
−Removed: (2) Scenarios include securities, residential mortgage loans, corporate debt, repurchase agreements, other secured financing and interest rate swaps.
+Added: (2) Scenarios include securities, residential mortgage loans, repurchase agreements, and interest rate swaps.
Economic net interest income includes the net interest component of interest rate swaps.
1 unchanged sentence
(4) NAV represents book value of equity.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
Credit Risk Management
2 unchanged sentences
While we do not expect to encounter credit risk in our Agency mortgage-backed securities, we face credit risk on the non-Agency mortgage-backed securities and CRT securities in our portfolio.
−Removed: In addition, we are also exposed to credit risk on residential mortgage loans, commercial real estate investments and corporate debt.
+Added: In addition, we are also exposed to credit risk on residential mortgage loans and commercial real estate investments.
MSR values may also be impacted through reduced servicing fees and higher costs to service the underlying mortgage loans due to borrower performance.
7 unchanged sentences
Additionally, ALCO has oversight of our credit risk exposure.
−Removed: Our portfolio composition, based on balance sheet values, at March 31, 2022 and December 31, 2021 was as follows:
−Removed: March 31, 2022 December 31, 2021
+Added: Our portfolio composition, based on balance sheet values, at June 30, 2022 and December 31, 2021 was as follows:
+Added: June 30, 2022 December 31, 2021
Agency mortgage-backed securities (1)
10 unchanged sentences
(2) Excludes commercial real estate assets held for sale as of December 31, 2021.
+Added: (3) Excludes corporate loans held for sale as of June 30, 2022.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Counterparty Risk Management
10 unchanged sentences
We monitor our exposure to counterparties across several dimensions including by type of arrangement, collateral type, counterparty type, ratings and geography.
−Removed: Additionally, ALCO has oversight of our counterparty exposure.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: The following table summarizes our exposure to counterparties by geography at March 31, 2022:
+Added: Additionally, ALCO has oversight of our counterparty exposure.The following table summarizes our exposure to counterparties by geography at June 30, 2022:
Number of Counterparties Secured Financing (1)
5 unchanged sentences
Total 35 $ 51,364,097 $ (262,647) $ 6,560,386
−Removed: (1) Includes repurchase agreements and other secured financing.
+Added: (1) Represents repurchase agreements.
(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.
18 unchanged sentences
Our vendor management policy establishes procedures for engaging, onboarding and monitoring the performance of third party vendors.
−Removed: 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.
+Added: These procedures include assessing a vendor’s financial health as well as
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
+Added: oversight of its compliance with applicable laws and regulations, cybersecurity and business continuity programs and security of personally identifiable information.
Compliance, Regulatory and Legal Risk Management
8 unchanged sentences
Our risk management framework is designed to identify, measure and monitor these risks under the oversight of the ERC.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
We currently rely on the exemption from registration provided by Section 3(c)(5)(C) of the Investment Company Act, and we seek to continue to meet the requirements for this exemption from registration.
15 unchanged sentences
“Financial Statements.”
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Valuation of Financial Instruments
15 unchanged sentences
Residential Mortgage Loans
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
We elected to account for Residential Mortgage Loans at fair value.
22 unchanged sentences
“Financial Statements.”
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Management’s Discussion and Analysis
Interest Rate Swaps
17 unchanged sentences
To aid in determining projected lives of the securities, we use third party model and market information to project prepayment speeds.
−Removed: Our prepayment speed projections incorporate underlying loan characteristics (i.e., coupon, term, original loan size, original loan-to-value ratio, etc.) and market data, including interest rate and home price index
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Management’s Discussion and Analysis
−Removed: forecasts and expert judgment.
+Added: Our prepayment speed projections incorporate underlying loan characteristics (i.e., coupon, term, original loan size, original loan-to-value ratio, etc.) and market data, including interest rate and home price index forecasts and expert judgment.
Prepayment speeds vary according to the type of investment, conditions in the financial markets and other factors and cannot be predicted with any certainty.
34 unchanged sentences
Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA).
−Removed: Basis Point (“bp”)
+Added: Basis Point (“bp” or “bps”)
One hundredth of one percent, used in expressing differences in interest rates.
294 unchanged sentences
Target Assets
−Removed: Includes Agency mortgage-backed securities, to-be-announced forward contracts, CRT securities, MSR, non-Agency mortgage-backed securities, residential mortgage loans, commercial real estate investments, and corporate debt.
+Added: Includes Agency mortgage-backed securities, to-be-announced forward contracts, CRT securities, MSR, non-Agency mortgage-backed securities, residential mortgage loans, and commercial real estate investments.
Tangible Economic Return
51 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.