30 unchanged sentences
and Subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.
−Removed: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial condition of the Company as of December 31, 2021 and 2020, the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 17, 2022 expressed an unqualified opinion thereon.
+Added: We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial condition as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and our report dated February 16, 2023 expressed an unqualified opinion thereon.
Basis for Opinion
19 unchanged sentences
OTHER INFORMATION
−Removed: DISCLOSE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
+Added: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
48 unchanged sentences
Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed May 23, 2019).
−Removed: Form of Articles Supplementary designating the Registrant’s 7.875% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.3 to the Registrant’s Registration Statement on Form 8-A filed April 1, 2004).
−Removed: Articles Supplementary of the Registrant’s designating an additional 2,750,000 shares of the Company’s 7.875% Series A Cumulative Redeemable Preferred Stock, as filed with the State Department of Assessments and Taxation of Maryland on October 15, 2004 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed October 18, 2004).
+Added: Articles of Amendment to the Articles of Incorporation of the Registration (incorporated by reference to Exhibit 3.1 of the Registrant's Current Report on Form 8-K filed September 23, 2022).
+Added: Articles of Amendment to the Articles of Incorporation of the Registration (incorporated by reference to Exhibit 3.2 of the Registrant's Current Report on Form 8-K filed September 23, 2022).
Articles Supplementary designating the Registrant’s 6% Series B Cumulative Convertible Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on 8-K filed April 10, 2006).
17 unchanged sentences
Articles Supplementary filed with the State Department of Assessments and Taxation of Maryland effective on January 4, 2021 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed January 5, 2021).
−Removed: Amended and Restated Bylaws of the Registrant, February 9 , 20 22 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed Febr uary 1 0 , 20 22 ).
+Added: Amended and Restated Bylaws of the Registrant, December 8 , 2022 (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed December 9 , 2022).
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No.
3 unchanged sentences
333-74618) filed on December 5, 2001).
−Removed: Specimen Series E Preferred Stock Certificate (incorporated by reference to Exhibit 4.7 to the Registrant’s Registration Statement (Registration No.
−Removed: 333-211140) on Form S-4/A filed May 27, 2016).
+Added: Specimen Series F Preferred Stock Certificate (incorporated by reference to Exhibit 4.8 to the Registrant’s Registration Statement on Form 8-A filed July 27, 2017).
Specimen Series G Preferred Stock Certificate (incorporated by reference to Exhibit 4.9 to the Registrant’s Registration Statement on Form 8-A filed January 10, 2018).
18 unchanged sentences
Form of 2020 Restricted Stock Unit Award (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed July 1, 2020).*
−Removed: Form of 202 2 Performance Stock Unit Awar d .
−Removed: Form of 2022 Restricted Stock Unit Award.
+Added: Form of 2022 Performance Stock Unit Award (incorporated by reference to Exhibit 10.10 to the Registrant’s Annual Report on Form 10-K filed February 18, 2022.*
+Added: Form of 2022 Restricted Stock Unit Award (inc or porated by reference to Ex hibit 10.11 to the Registrant ’ s Annual R eport on Form 10-K filed Febr uary 18, 2022.
+Added: Form of 2023 Performance Stock Unit Award.*†
+Added: Form of 2023 Restrictive Stock Unit Award.*†
Subsidiaries of Registrant.
1 unchanged sentence
Certification of David L.
−Removed: Finkelstein, Chief Executive Officer and P resident (Principal Executive Officer) of the Registrant, pursuant to 18 U.S.C.
+Added: Finkelstein, Chief Executive Officer and President (Principal Executive Officer) of the Registrant, pursuant to 18 U.S.C.
Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
19 unchanged sentences
104 The cover page for the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2022 (formatted in Inline XBRL and contained in Exhibit 101).
−Removed: * Exhibit Numbers 10.2, 10.3, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11 are management contracts or compensatory plans required to be filed as Exhibits to this Form 10-K.
+Added: * Exhibit Numbers 10.2, 10.3, 10.5, 10.6, 10.7,
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: 10.8, 10.9, 10.10, 10.11 are management contracts or compensatory plans required to be filed as Exhibits to this Form 10-K.
† Submitted electronically herewith.
19 unchanged sentences
S ale of Commercial Real Estate Business
+Added: Sale of Middle Market Lending Portfolio
Derivative Instruments
9 unchanged sentences
Lease Commitments and Con tingencies
−Removed: Arcola Regulatory Requirements
Subsequent Events
21 unchanged sentences
We believe that our audits provide a reasonable basis for our opinion.
−Removed: Critical Audit Matters
−Removed: The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:
−Removed: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
−Removed: The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
−Removed: Amortization of net premiums on Agency mortgage-backed securities
−Removed: Description of
−Removed: the Matter Amortization of net premiums on Agency securities totaled $761.8 million for the year ended December 31, 2021.
−Removed: As disclosed in Note 3 to the consolidated financial statements, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities.
−Removed: Amortization or accretion is derived taking into account estimates of future principal prepayments, which are derived using third-party models and market information, in the calculation of the effective yield.
−Removed: Auditing the amortization of net premiums on Agency mortgage-backed securities is complex due to the high degree of judgment in management’s assumptions used in the measurement process including prepayment rates which are uncertain in nature.
−Removed: These assumptions have a significant effect on the amortization of net premiums on Agency mortgage-backed securities.
+Added: Critical Audit Matter
+Added: The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:
+Added: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.
+Added: The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: Addressed the
−Removed: Matter in Our
−Removed: Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s processes to calculate amortization of net premiums on its Agency mortgage-backed securities, including management’s review of third-party models and assumptions (i.e., prepayment rates) and the completeness and accuracy of data used in the Company’s cash flow models and the calculation of projected cash flows.
−Removed: To test the amortization of net premiums, our audit procedures included, among others, evaluating the Company's methodology and utilizing the support of internal specialists to independently develop ranges of prepayment rates for a sample of securities based on current industry, market and economic data.
−Removed: We compared management’s prepayment rates to the ranges developed by the internal specialists to assess management’s estimate.
−Removed: We also recalculated management’s projected cash flows and the amortization of premiums or accretion of discounts for a sample of securities.
Valuation of mortgage servicing rights
Description of
−Removed: the Matter The Company invests in servicing related assets comprised of mortgage servicing rights and interests in mortgage servicing rights (collectively “MSR”) totaling $544.6 million and $69.3 million, respectively, as of December 31, 2021 as included in Note 7 to the consolidated financial statements.
+Added: the Matter The Company invests in servicing related assets comprised of mortgage servicing rights (“MSR”) totaling $1.7 billion as of December 31, 2022 as included in Note 7 to the consolidated financial statements.
The Company records MSR at fair value on a recurring basis with changes in fair value recognized in the statement of comprehensive income (loss).
8 unchanged sentences
and management’s evaluation of the internal fair value mark to third-party independent valuation firms’ ranges, as well as their evaluation of the competence and objectivity of those third-party independent valuation firms, to assess the reasonableness of the fair values developed by the Company.
−Removed: To test the valuation of MSR, our audit procedures included, among others, evaluating the Company’s valuation techniques used to estimate future cash flows, validating the accuracy and completeness of model objective inputs by agreeing these inputs to the Company’s underlying records and third-party data, and testing the assumptions used by management by comparing them to current industry, market and economic trends.
−Removed: We involved our valuation specialists to assist in our evaluation of the Company’s model, valuation methodology and the assumptions used by management, and to independently develop a range of fair values for the MSR.
+Added: To test the valuation of MSR, our audit procedures included, among others, evaluating the Company’s valuation techniques used to estimate future cash flows, validating the accuracy and completeness of model objective inputs by agreeing these inputs to the Company’s underlying records and third-party data, evaluating the Company’s model, and testing the assumptions used by management by comparing them to current industry, market and economic trends.
+Added: We involved our valuation specialists to assist in our evaluation of the Company’s valuation techniques and the assumptions used by management, and to independently develop a range of fair values for the MSR.
We compared the assumptions made by management and management’s estimate of fair value to the assumptions and fair value ranges developed by management’s valuation specialists and our independent ranges to assess management’s estimates of fair value.
21 unchanged sentences
Assets transferred or pledged to securitization vehicles 9,121,912 6,086,308
−Removed: Real estate, net — 656,314
Assets of disposal group held for sale — 194,138
10 unchanged sentences
Participations issued 800,849 1,049,066
−Removed: Mortgages payable — 426,256
Liabilities of disposal group held for sale — 154,956
6 unchanged sentences
Stockholders’ equity
−Removed: Preferred stock, par value $ 0.01 per share, 63,500,000 and 85,150,000 authorized, respectively, 63,500,000 issued and outstanding
+Added: Preferred stock, par value $ 0.01 per share, 63,500,000 authorized, issued and outstanding, respectively
1,536,569 1,536,569
Common stock, par value $ 0.01 per share, 2,936,500,000 and 2,936,500,000 authorized, respectively, 468,309,810 and 364,934,065 issued and outstanding, respectively
−Removed: 14,597 13,982
Additional paid-in capital 22,981,320 20,324,780
6 unchanged sentences
(1) Includes cash of consolidated Variable Interest Entities (“VIEs”) of $ 2.2 million and $ 16.2 million at December 31, 2022 and 2021, respectively.
−Removed: (2) Excludes $ 44.2 million and $ 81.5 million at December 31, 2021 and 2020, respectively, of agency mortgage-backed securities, $ 350.4 million and $ 576.6 million at December 31, 2021 and 2020, respectively, of non-Agency mortgage-backed securities and $ 0.0 million and $ 391.0 million at December 31, 2021 and 2020, respectively, of commercial mortgage-backed securities in consolidated VIEs pledged as collateral and eliminated from the Company’s Consolidated Statements of Financial Condition.
+Added: (2) Excludes $ 0.0 million and $ 44.2 million at December 31, 2022 and 2021, respectively, of agency mortgage-backed securities, $ 1.0 billion and $ 350.4 million at December 31, 2022 and 2021, respectively, of non-Agency mortgage-backed securities in consolidated VIEs pledged as collateral and eliminated from the Company’s Consolidated Statements of Financial Condition.
(3) Includes $ 1.3 million and $ 2.3 million of residential mortgage loans held for sale at December 31, 2022 and 2021, respectively.
13 unchanged sentences
Net interest income 1,469,152 1,733,793 1,330,513
−Removed: Realized and unrealized gains (losses)
−Removed: Net interest component of interest rate swaps ( 276,142 ) ( 207,877 ) 351,375
−Removed: Realized gains (losses) on termination or maturity of interest rate swaps ( 1,236,349 ) ( 1,917,628 ) ( 1,442,964 )
−Removed: Unrealized gains (losses) on interest rate swaps 2,198,486 ( 904,532 ) ( 1,210,276 )
−Removed: Subtotal 685,995 ( 3,030,037 ) ( 2,301,865 )
−Removed: Net gains (losses) on disposal of investments and other ( 62,705 ) 661,513 ( 47,944 )
−Removed: Net gains (losses) on other derivatives and financial instruments 121,735 756,305 ( 680,770 )
−Removed: Net unrealized gains (losses) on instruments measured at fair value through earnings 183,663 ( 303,024 ) 36,021
+Added: Net servicing income
+Added: Servicing and related income 246,926 69,018 94,190
+Added: Servicing and related expense 25,145 12,202 26,437
+Added: Net servicing income 221,781 56,816 67,753
+Added: Other income (loss)
+Added: Net gains (losses) on investments and other ( 4,602,456 ) 120,958 358,489
+Added: Net gains (losses) on derivatives 4,859,174 807,730 ( 2,273,732 )
Loan loss (provision) reversal 20,660 145,066 ( 147,581 )
Business divestiture-related gains (losses) ( 40,258 ) ( 278,559 ) —
−Removed: Subtotal 109,200 967,213 ( 709,262 )
−Removed: Total realized and unrealized gains (losses) 795,195 ( 2,062,824 ) ( 3,011,127 )
−Removed: Other income (loss) 57,981 36,311 106,547
+Added: Other, net 6,667 1,165 ( 31,442 )
+Added: Total other income (loss) 243,787 796,360 ( 2,094,266 )
General and administrative expenses
43 unchanged sentences
Buyback of common stock
−Removed: — ( 324 ) ( 261 )
Stock-based award activity 3 1 —
11 unchanged sentences
Direct purchase and dividend reinvestment
−Removed: — 1,173 1,793
End of period $ 22,981,320 $ 20,324,780 $ 19,761,304
45 unchanged sentences
Depreciation, amortization and other noncash expenses 20,506 24,636 41,357
−Removed: Net (gains) losses on disposals of investments and other 62,705 ( 661,513 ) 47,944
Net (gains) losses on investments and derivatives 109,443 ( 1,204,830 ) 1,707,366
−Removed: Net (gains) losses on business divestitures 278,559 — —
−Removed: Income from unconsolidated joint ventures 12,181 7,072 6,893
+Added: Business divestiture-related (gains) losses 40,258 278,559 —
+Added: Income (loss) from unconsolidated joint ventures ( 11,454 ) 12,181 7,072
Loan loss provision (reversal) ( 20,660 ) ( 145,066 ) 147,581
13 unchanged sentences
Payments on purchases and origination of loans ( 6,137,067 ) ( 7,715,200 ) ( 2,257,314 )
−Removed: Proceeds from sales and maturities of loans 1,213,745 624,026 365,787
+Added: Proceeds from sales of loans 1,930,367 1,213,745 624,026
Principal payments on loans 1,562,308 2,610,912 2,222,500
16 unchanged sentences
Principal payments on securitized debt ( 1,234,090 ) ( 1,716,196 ) ( 1,238,962 )
+Added: Payments on purchases of securitized debt ( 8,495 ) — —
Payment of deferred financing cost — ( 9,279 ) ( 553 )
39 unchanged sentences
(the “Company” or “Annaly”) is a Maryland corporation that commenced operations on February 18, 1997.
−Removed: The Company is a leading diversified capital manager with investment strategies across mortgage finance and corporate middle market lending.
−Removed: The Company owns a portfolio of real estate related investments, including mortgage pass-through certificates, collateralized mortgage obligations, credit risk transfer (“CRT”) securities, other securities representing interests in or obligations backed by pools of mortgage loans, residential mortgage loans, mortgage servicing rights (“MSR”) and corporate debt.
+Added: The Company is a leading diversified capital manager with investment strategies across mortgage finance.
+Added: The Company owns a portfolio of real estate related investments, including mortgage pass-through certificates, collateralized mortgage obligations, credit risk transfer (“CRT”) securities, other securities representing interests in or obligations backed by pools of mortgage loans, residential mortgage loans and mortgage servicing rights (“MSR”).
The Company’s principal business objective is to generate net income for distribution to its stockholders and optimize its returns through prudent management of its diversified investment strategies.
3 unchanged sentences
Investment Groups Description
−Removed: Annaly Agency Group Invests in Agency mortgage-backed securities (“MBS”) collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae and complementary investments within the Agency market, including MSR and Agency commercial mortgage-backed securities.
+Added: Annaly Agency Group Invests in Agency mortgage-backed securities (“MBS”) collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae and complementary investments within the Agency market, including Agency commercial mortgage-backed securities.
Annaly Residential Credit Group Invests primarily in non-Agency residential whole loans and securitized products within the residential and commercial markets.
−Removed: Annaly Middle Market Lending Group Provides financing to private equity-backed middle market businesses, focusing primarily on senior debt within select industries.
+Added: Annaly Mortgage Servicing Rights Group Invests in MSR, which provide the right to service residential mortgage loans in exchange for a portion of the interest payments made on the loans.
+Added: In April 2022, the Company announced that it had entered into a definitive agreement to sell substantially all of the assets that comprise the Annaly Middle Market Lending (“MML”) portfolio, including assets held on balance sheet as well as assets managed for third parties.
+Added: The vast majority of these assets were legally transferred at the end of the third quarter of 2022 and the remaining assets were transferred by the end of the fourth quarter of 2022.
+Added: Refer to the “Sale of Middle Market Lending Portfolio” Note for additional information on the transaction.
In March 2021, the Company announced that it had entered into a definitive agreement to sell and exit its Commercial Real Estate (“CRE”) business.
−Removed: During the year ended December 31, 2021, the platform and the significant majority of the assets were transferred with remaining assets expected to be transferred by the end of the first quarter of 2022 subject to regulatory approvals.
+Added: During the year ended December 31, 2021, the platform and the significant majority of the assets were transferred with the remaining assets transferred by the end of the year ended December 31, 2022.
Refer to the “Sale of Commercial Real Estate Business” Note for additional information.
6 unchanged sentences
Prior periods have been adjusted to conform to the current presentation.
−Removed: Beginning with the quarter ended June 30, 2021, the Company 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 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: Other general and administrative expenses for the three months ended March 31, 2021 decreased by $ 1.8 million and for the years ended December 31, 2020 and 2019 decreased by $ 17.0 million and $ 29.9 million, respectively, and Other income (loss) decreased by the same amounts for the three months ended March 31, 2021 and the years ended December 31, 2020 and 2019, respectively.
+Added: Beginning with the quarter ended March 31, 2022, in light of the continued growth of its mortgage servicing rights portfolio the Company enhanced its financial disclosures by separately reporting servicing income and servicing expense in its Consolidated Statements of Comprehensive Income (Loss).
+Added: Servicing income and servicing expense were previously included within Other income (loss).
+Added: As a result of this change, prior periods have been adjusted to conform to the current presentation.
+Added: In addition, beginning with the quarter ended March 31, 2022, the Company consolidated certain line items in its Consolidated Statements of Comprehensive Income (Loss) in an effort to streamline and simplify its financial presentation.
+Added: 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
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
+Added: into a single line item titled Net gains (losses) on derivatives.
+Added: 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.
+Added: As a result of these changes, prior periods have been adjusted to conform to the current presentation.
+Added: Reverse Stock Split
+Added: On September 8, 2022, the Company announced that its Board had unanimously approved a reverse stock split of the Company’s common stock at a ratio of 1-for-4 (the “Reverse Stock Split”).
+Added: The Reverse Stock Split was effective following the close of business on September 23, 2022 (the “Effective Time”).
+Added: Accordingly, at the Effective Time, every four issued and outstanding shares of the Company’s common stock were converted into one share of the Company’s common stock.
+Added: No fractional shares were issued in connection with the Reverse Stock Split.
+Added: Instead, each stockholder that would have held fractional shares as a result of the Reverse Stock Split received cash in lieu of such fractional shares.
+Added: The par value per share of the Company’s common stock remained unchanged at $ 0.01 per share after the Reverse Stock Split.
+Added: Accordingly, for all historical periods presented, an amount equal to the par value of the reduced number of shares resulting from the Reverse Stock Split was reclassified from Common stock to Additional paid in capital in the Company’s Consolidated Statements of Financial Condition.
+Added: All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the Reverse Stock Split.
SIGNIFICANT ACCOUNTING POLICIES
12 unchanged sentences
The Company also considers whether there are any indicators of other-than-temporary impairment of joint ventures accounted for under the equity method.
−Removed: These investments are included in real estate, net and Other assets with income or loss included in Other income (loss).
+Added: These investments are included in Other assets with income or loss included in Other, net.
Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, cash held in money market funds on an overnight basis and cash pledged as collateral with counterparties.
3 unchanged sentences
The Company chooses to elect the FVO in order to simplify the accounting treatment for certain financial instruments.
−Removed: Items for which the FVO has been elected are presented at fair value in the Consolidated Statements of Financial Condition and any change in fair value is recorded in Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: For additional information regarding financial instruments for which the Company has elected the FVO see the table in the “Financial Instruments” Note.
+Added: Items for which the FVO has been elected are presented at fair value in the Consolidated Statements of Financial Condition and any change in fair value is recorded in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
+Added: additional information regarding financial instruments for which the Company has elected the FVO see the table in the “Financial Instruments” Note.
Refer to the “Fair Value Measurements” Note for a complete discussion on the methodology utilized by the Company to estimate the fair value of certain financial instruments.
3 unchanged sentences
Derivative Instruments – Derivatives are recognized as either assets or liabilities at fair value in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: The changes in the estimated fair value are presented within Net gains (losses) on other derivatives and financial instruments with the exception of interest rate swaps which are separately presented.
+Added: The changes in the estimated fair value are presented within Net gains (losses) on derivatives.
None of the Company’s derivative transactions have been designated as hedging instruments for accounting purposes.
3 unchanged sentences
Stock-based awards that contain market-based conditions are valued using a model.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
Compensation expense for awards with performance conditions is recognized based on the probable outcome of the performance condition at each reporting date.
4 unchanged sentences
Interest Income - The Company recognizes interest income primarily on Residential Securities (as defined in the “Securities” Note), residential mortgage loans, commercial investments and reverse repurchase agreements.
−Removed: Interest accrued but not paid is recognized as Interest receivable on the Consolidated Statements of Financial Condition.
+Added: Interest accrued but not received is recognized as Interest receivable on the Consolidated Statements of Financial Condition.
Interest income is presented as a separate line item on the Consolidated Statements of Comprehensive Income (Loss).
17 unchanged sentences
Refer to the “Interest Income and Interest Expense” Note for further discussion on interest.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
The Company has made an accounting policy election not to measure an allowance for loans losses for accrued interest receivable.
7 unchanged sentences
Refer to the “Income Taxes” Note for further discussion on income taxes.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”).
−Removed: ASUs not listed below were not applicable, not expected to have a significant impact on the Company’s consolidated financial statements when adopted or did not have a significant impact on the Company’s consolidated financial statements upon adoption.
−Removed: Standard Description Effective Date Effect on the Financial Statements or Other Significant Matters
−Removed: Standards that have been adopted
−Removed: ASU 2016-13 Financial instruments - Credit losses (Topic 326):
−Removed: Measurement of credit losses on financial instruments (“ASU 2016-13”)
−Removed: This ASU updates the existing incurred loss model to a current expected credit loss (“CECL”) model for financial assets and net investments in leases that are not accounted for at fair value through earnings.
−Removed: The amendments affect cash and cash equivalents, reverse repurchase agreements, certain loans, held-to-maturity debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures and any other financial assets not excluded from the scope.
−Removed: There are also limited amendments to the impairment model for available-for-sale debt securities.
−Removed: January 1, 2020 The Company adopted ASU 2016-13 using the modified retrospective method for all financial assets and off-balance-sheet credit exposures in scope.
−Removed: The modified retrospective approach requires an adjustment to beginning retained earnings for the cumulative effect of adopting the standard.
−Removed: Results for reporting periods beginning after January 1, 2020 are presented in accordance with ASU 2016-13, while prior periods continue to be reported in accordance with previously applicable GAAP.
−Removed: As a result of the adoption, the Company recorded an increase to the loan loss allowance of $ 37.4 million and a liability of $ 2.2 million for unfunded loan commitments, which reduced beginning retained earnings by $ 39.6 million as of January 1, 2020.
−Removed: Reference Rate Reform (Topic 848):
−Removed: Facilitation of the Effects of Reference Rate Reform on Financial Reporting
−Removed: This ASU provides optional, temporary relief to accounting for contract modifications resulting from reference rate reform.
−Removed: January 1, 2020 The Company has elected to retrospectively apply the practical expedients to modifications of qualifying contracts as continuation of the existing contract rather than as a new contract.
−Removed: The adoption had no immediate impact and is not expected to have a material impact on the Company’s consolidated financial statements as the guidance continues to be applied to contract modifications until the ASU’s termination date.
+Added: There were no recent ASUs that are expected to have a significant impact on the Company's consolidated financial statements when adopted or had a significant impact on the Company's consolidated financial statements upon adoption.
ANNALY CAPITAL MANAGEMENT, INC.
12 unchanged sentences
Securities Non-agency mortgage-backed securities Fair value, with unrealized gains (losses) through earnings 1,991,146 1,663,336
−Removed: Securities Commercial real estate debt investments - CMBS (4)
−Removed: Fair value, with unrealized gains (losses) through other comprehensive income — 31,603
−Removed: Securities Commercial real estate debt investments - CMBS (4)
−Removed: Fair value, with unrealized gains (losses) through earnings 521,440 45,254
+Added: Securities Commercial real estate debt investments - CMBS Fair value, with unrealized gains (losses) through earnings 508,406 521,440
Securities Commercial real estate debt investments - credit risk transfer securities Fair value, with unrealized gains (losses) through earnings 17,903 9,065
2 unchanged sentences
Loans, net Residential mortgage loan warehouse facility Fair value, with unrealized gains (losses) through earnings — 980
−Removed: Loans, net Commercial real estate debt and preferred equity, held for investment (4)
−Removed: Amortized cost — 498,081
Loans, net Corporate debt, held for investment Amortized cost — 1,968,991
3 unchanged sentences
Assets transferred or pledged to securitization vehicles Residential mortgage loans Fair value, with unrealized gains (losses) through earnings 9,121,912 5,496,435
−Removed: Assets transferred or pledged to securitization vehicles Commercial mortgage loans Fair value, with unrealized gains (losses) through earnings — 2,166,073
−Removed: Assets transferred or pledged to securitization vehicles Commercial mortgage loans Amortized cost — 874,349
Total assets transferred or pledged to securitization vehicles 9,121,912 6,086,308
3 unchanged sentences
Participations issued Participations issued Fair value, with unrealized gains (losses) through earnings 800,849 1,049,066
−Removed: Mortgages payable Loans (5)
−Removed: Amortized cost — 426,256
(1) Receivable for unsettled trades, Principal and interest receivable, Payable for unsettled trades, Interest payable and Dividends payable are accounted for at cost.
Interests in MSR are considered financial assets whereas directly held MSR are servicing assets or obligations.
−Removed: (2) Includes Agency pass-through, collateralized mortgage obligation (“CMO”) and multifamily securities.
−Removed: (3) Includes interest-only securities and reverse mortgages.
−Removed: (4) Excludes Assets of disposal group held for sale at December 31, 2021.
−Removed: (5) Excludes Liabilities of disposal group held for sale at December 31, 2021.
+Added: (2) Includes Agency pass-through, collateralized mortgage obligation (“CMO”) and multifamily securities purchased prior to July 1, 2022.
+Added: (3) Includes interest-only securities and reverse mortgages and, effective July 1, 2022, newly purchased Agency pass-through, collateralized mortgage obligation (“CMO”) and multifamily securities.
+Added: The Company’s investments in securities include agency, credit risk transfer, non-agency and commercial mortgage-backed securities.
+Added: All of the debt securities are classified as available-for-sale.
+Added: Available-for-sale debt securities are carried at fair value, with changes in fair value recognized in other comprehensive income, unless the fair value option is elected in which case changes in fair value are recognized in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
+Added: Effective July 1, 2022, the Company elected the fair value option for any newly purchased Agency mortgage-backed securities in order to simplify the accounting for these securities.
+Added: Agency mortgage-backed securities purchased prior to July 1, 2022, are still classified as available-for-sale with changes in fair value recognized in other comprehensive income.
+Added: During the year ended December 31, 2022, ($665.6) million of unrealized gains (losses) on Agency mortgage-backed securities purchased on or after July 1, 2022, were reported in Net gains (losses) on investments and other in the Company’s Consolidated Statements of Comprehensive Income (Loss).
+Added: Transactions for regular-way securities are recorded on trade date, including to-be-announced (“TBA”) securities that meet the regular-way securities scope exception from
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: The Company’s investments in securities include agency, credit risk transfer, non-agency and commercial mortgage-backed securities.
−Removed: All of the debt securities are classified as available-for-sale.
−Removed: Available-for-sale debt securities are carried at fair value, with changes in fair value recognized in other comprehensive income, unless the fair value option is elected in which case changes in fair value are recognized in Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: Transactions for regular-way securities are recorded on trade date, including TBA securities that meet the regular-way securities scope exception from derivative accounting.
+Added: derivative accounting.
Gains and losses on disposals of securities are recorded on trade date based on the specific identification method.
−Removed: Impairment – Management evaluates available-for-sale securities and held-to-maturity debt securities for impairment at least quarterly, and more frequently when economic or market conditions warrant such evaluation.
+Added: Impairment – Management evaluates available-for-sale securities where the fair value option has not been elected and held-to-maturity debt securities for impairment at least quarterly, and more frequently when economic or market conditions warrant such evaluation.
When the fair value of an available-for-sale security is less than its amortized cost, the security is considered impaired.
2 unchanged sentences
The credit loss, if any, will then be recognized in the Consolidated Statements of Comprehensive Income (Loss) as a securities loss provision and reflected as an allowance for credit losses on securities on the Consolidated Statements of Financial Condition, while the balance of losses related to other factors will be recognized as a component of Other comprehensive income (loss).
−Removed: When the fair value of a held-to-maturity security is less than the cost, the Company performs an analysis to determine whether it expects to recover the entire cost basis of the security.
For the year ended December 31, 2021, the Company recognized a $ 0.4 million impairment on a commercial mortgage-backed security that it intended to sell.
There was no impairment recognized for the years ended December 31, 2022 and 2020.
+Added: When the fair value of a held-to-maturity security is less than the cost, the Company performs an analysis to determine whether it expects to recover the entire cost basis of the security.
Agency Mortgage-Backed Securities - The Company invests in mortgage pass-through certificates, collateralized mortgage obligations and other MBS representing interests in or obligations backed by pools of residential or multifamily mortgage loans and certificates.
4 unchanged sentences
CRT securities are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.
−Removed: Non-Agency Mortgage-Backed Securities - The Company invests in non-Agency mortgage-backed securities such as those issued in prime loan, Alt-A loan, subprime loan, non-performing loan (“NPL”) and re-performing loan (“RPL”) securitizations.
+Added: Non-Agency Mortgage-Backed Securities - The Company invests in non-Agency mortgage-backed securities such as those issued in prime loan, prime jumbo loan, Alt-A loan, subprime loan, non-performing loan (“NPL”) and re-performing loan (“RPL”) securitizations.
Agency mortgage-backed securities, non-Agency mortgage-backed securities and residential CRT securities are referred to herein as “Residential Securities.” Although the Company generally intends to hold most of its Residential Securities until maturity, it may, from time to time, sell any of its Residential Securities as part of the overall management of its portfolio.
−Removed: Commercial Mortgage-Backed Securities (“Commercial Securities”) - Certain commercial mortgage-backed securities (“CMBS”) are classified as available-for-sale and reported at fair value with any credit loss recognized through an allowance for credit losses and any other unrealized gains and losses reported as a component of Other comprehensive income (loss).
−Removed: Management evaluates its Commercial Securities for impairment at least quarterly.
−Removed: The Company elected the fair value option for all other Commercial Securities, including conduit and credit CMBS, to simplify the accounting where the unrealized gains and losses on these financial instruments are recorded through earnings.
−Removed: As of December 31, 2021, CMBS included in the announced sale of the Company’s CRE business have been sold.
−Removed: Prior to their sale, the securities were reported in Assets of disposal group held for sale and Securities, respectively, in the Consolidated Statements of Financial Condition.
−Removed: Refer to the “Sale of Commercial Real Estate Business” Note for additional information on the transaction.
+Added: Commercial Mortgage-Backed Securities (“Commercial Securities”) - The Company invests in Commercial Securities such as conduit, credit CMBS, single-asset single borrower and collateralized loan obligations.
The following represents a rollforward of the activity for the Company’s securities, excluding securities transferred or pledged to securitization vehicles, for the year ended December 31, 2022:
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
Agency Securities Residential Credit Securities Commercial Securities Total
4 unchanged sentences
Sales and transfers ( 28,360,527 ) ( 573,571 ) ( 247,935 ) ( 29,182,033 )
−Removed: ( 11,392,003 ) ( 156,130 ) ( 83,775 ) ( 11,631,908 )
Principal paydowns ( 8,942,437 ) ( 520,743 ) ( 4,375 ) ( 9,467,555 )
3 unchanged sentences
$ 62,274,895 $ 2,988,703 $ 526,309 $ 65,789,907
−Removed: (1) Includes transfers to assets of disposal group held for sale.
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: The following tables present the Company’s securities portfolio, excluding securities transferred or pledged to securitization vehicles, that was carried at their fair value at December 31, 2021 and 2020:
+Added: The following tables present the Company’s securities portfolio, excluding securities transferred or pledged to securitization vehicles, that were carried at their fair value at December 31, 2022 and 2021:
December 31, 2022
52 unchanged sentences
Total securities $ 65,793,672 $ 3,771,429 $ ( 77,850 ) $ 62,903,483 $ 1,425,965 $ ( 673,774 ) $ 63,655,674
−Removed: (1) Principal/Notional amount includes $ 4.5 billion and $ 354.6 million of Agency Multifamly interest-only security as of December 31, 2021 and December 31, 2020, respectively.
+Added: (1) Principal/Notional amount includes $ 8.4 billion and $ 4.5 billion of Agency Multifamly interest-only securities as of December 31, 2022 and December 31, 2021, respectively.
(2) Principal/Notional amount includes $ 0.0 million and $ 4.1 million of a CRT interest-only security as of December 31, 2022 and December 31, 2021, respectively.
−Removed: (3) Principal/Notional amount includes $ 50.0 million and $ 194.7 million of Prime interest-only securities as of December 31, 2021 and December 31, 2020, respectively.
−Removed: (4) Principal/Notional amount includes $ 126.5 million and $ 291.6 million of Prime Jumbo interest-only securities as of December 31, 2021 and December 31, 2020, respectively.
+Added: (3) Principal/Notional amount includes $ 1.7 billion and $ 50.0 million of Prime interest-only securities as of December 31, 2022 and December 31, 2021, respectively.
+Added: (4) Principal/Notional amount includes $ 5.5 billion and $ 126.5 million of Prime Jumbo interest-only securities as of December 31, 2022 and December 31, 2021, respectively.
ANNALY CAPITAL MANAGEMENT, INC.
33 unchanged sentences
Total $ 34,321,645 $ ( 3,714,806 ) 2,610 $ 23,211,971 $ ( 486,024 ) 590
−Removed: (1) Excludes interest-only mortgage-backed securities and reverse mortgages.
+Added: (1) Excludes interest-only mortgage-backed securities and reverse mortgages and, effective July 1, 2022, newly purchased Agency pass-through, collateralized mortgage obligation (“CMO”) and multifamily securities.
The decline in value of these securities is solely due to market conditions and not the quality of the assets.
Substantially all of the Agency mortgage-backed securities have an actual or implied credit rating that is the same as that of the U.S.
−Removed: The investments are not considered to be impaired because the Company currently has 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 the Company will be required to sell the investments before recovery of the amortized cost bases, which may be maturity.
+Added: An impairment has not been recognized in earnings related to these investments because the decline in value is not related to credit quality, the Company currently has not made a decision to sell the securities nor is it more likely than not that the securities will be required to be sold before recovery.
During the years ended December 31, 2022 and 2021, the Company disposed of $ 28.9 billion and $ 11.5 billion, respectively, of Residential Securities.
−Removed: The following table presents the Company’s net gains (losses) from the disposal of Residential Securities for the years ended December 31, 2021 and 2020.
+Added: The following table presents the Company’s net gains (losses) from the disposal of Residential Securities for the years ended December 31, 2022 and 2021, which is included in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
Gross Realized Gains Gross Realized Losses Net Realized Gains (Losses)
7 unchanged sentences
Financial Statements
−Removed: The Company invests in residential and corporate loans.
+Added: The Company invests in residential loans.
Loans are classified as either held for investment or held for sale.
2 unchanged sentences
Otherwise, loans held for investment are carried at cost less impairment and loans held for sale are accounted for at the lower of cost or fair value.
−Removed: Excluding loans transferred or pledged to securitization vehicles and loan warehouse facilities, as of December 31, 2021 and 2020, the Company reported $ 2.3 billion and $ 345.8 million, respectively, of loans for which the fair value option was elected.
+Added: Excluding loans transferred or pledged to securitization vehicles and loan warehouse facilities, as of December 31, 2022 and 2021, the Company reported $ 1.8 billion and $ 2.3 billion, respectively, of loans for which the fair value option was elected.
If the Company intends to sell or securitize the loans and the securitization vehicle is not expected to be consolidated, the loans are classified as held for sale.
3 unchanged sentences
The carrying value of the Company’s residential loans held for sale was $ 1.3 million and $ 2.3 million at December 31, 2022 and 2021, respectively.
−Removed: Allowance for Losses – The Company evaluates the need for a loss reserve on each of its loans classified as held-for-investment, which primarily include corporate debt and commercial loans, where the fair value option is not elected.
−Removed: Allowance for loan losses are written off in the period the loans are deemed uncollectible.
−Removed: Given the unique nature of each underlying borrower and any collateral, the Company assesses an allowance for each individual loan held for investment.
−Removed: An allowance is established at origination or acquisition that reflects management’s estimate of the total expected credit loss over the expected life of the loan.
−Removed: In estimating the lifetime expected credit losses, management utilizes a probability of default and loss given default methodology (“Loss Given Default methodology”), which considers projected economic conditions over the reasonable and supportable forecast period.
−Removed: The forecast incorporates primarily market-based assumptions including, but not limited to, forward interest rate curves, unemployment rate estimates and certain indexes sourced from third party vendors.
−Removed: For any remaining period of the expected life of the loan after the reasonable and supportable period, the Company reverts to historical losses on a straight-line basis.
−Removed: Management uses third party vendors’ loan pool data for loans with similar risk characteristics to estimate historical losses given the limited loss history of the Company’s loan portfolio.
−Removed: Changes in the lifetime expected credit loss are reflected in Loan loss (provision) reversal in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: For loans experiencing credit deterioration, the Company may use a different methodology to determine the expected credit losses such as a discounted cash flow analysis.
−Removed: For collateral-dependent loans, if foreclosure is probable, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any selling costs, if applicable.
−Removed: Additionally, the Company may elect the practical expedient for a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty by measuring the allowance as the difference between the fair value of the collateral, less costs to sell, if applicable, and the amortized cost basis of the financial asset at the reporting date.
−Removed: The Company’s commercial loans were collateralized by commercial real estate including, but not limited to, multifamily real estate, office and retail space, hotels and industrial space.
−Removed: At origination, the fair value of the collateral generally exceeded the principal loan balance.
−Removed: Management assesses the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary.
−Removed: Significant judgment is required in this analysis.
−Removed: Depending on the expected recovery of its investment, the Company considers the estimated net recoverable value of the loans as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive landscape where the borrower conducts business.
−Removed: To determine if loan loss allowances are required on investments in corporate debt, the Company reviews the monthly and/or quarterly financial statements of the borrowers, verifies loan compliance packages, if applicable, and analyzes current results relative to budgets and sensitivities performed at inception of the investment.
−Removed: Because these determinations are based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date.
−Removed: The Company may be exposed to various levels of credit risk depending on the nature of its investments and credit enhancements, if any, supporting its assets.
−Removed: The Company’s core investment process includes procedures related to the initial approval and periodic monitoring of credit risk and other risks associated with each investment.
−Removed: The Company’s investment underwriting procedures include evaluation of the underlying borrowers’ ability to manage and operate their respective properties or companies.
−Removed: Management reviews loan-to-value metrics at origination or acquisition of a new investment and if events occur that trigger re-evaluation by management.
+Added: Allowance for Losses – Prior to the sale of its corporate debt and commercial loan portfolios, the Company evaluated the need for a loss reserve on each of its loans classified as held-for investment and carried at amortized cost based upon estimated current expected credit losses.
The Company recorded net loan loss (provisions) reversals of $ 20.7 million, $ 145.1 million and ($ 147.6 ) million for the years ended December 31, 2022, 2021 and 2020, respectively.
−Removed: As of December 31, 2021 and 2020, the Company’s loan loss allowance was $ 27.9 million and $ 169.5 million, respectively.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
−Removed: The following table presents the activity of the Company’s loan investments, including loans held for sale and excluding loans transferred or pledged to securitization vehicles and loan warehouse facilities, for the year ended December 31, 2021:
−Removed: Residential Commercial Corporate Debt Corporate Debt Held for Sale (1)
+Added: As of December 31, 2022 and 2021, the Company’s loan loss allowance was $ 0 and $ 27.9 million, respectively.
+Added: The following table presents the activity of the Company’s loan investments, excluding loans transferred or pledged to securitization vehicles and loan warehouse facilities, for the year ended December 31, 2022:
+Added: Residential Corporate Debt Total
(dollars in thousands)
10 unchanged sentences
$ 1,809,832 $ — $ 1,809,832
−Removed: (1) Represents loans the Company originated during the three months ended June 30, 2021 and subsequently syndicated and closed.
−Removed: (2) Includes securitizations, syndications and transfers to securitization vehicles and commercial loan transfers to assets for disposal group held for sale.
+Added: (1) Includes securitizations, syndications, transfers to securitization vehicles and corporate debt transfers to assets of disposal group held for sale and other assets.
Includes transfer of residential loans to securitization vehicles with a carrying value of $ 6.1 billion during the year ended December 31, 2022.
(2) Includes loan loss allowances.
−Removed: The Company also has off-balance-sheet credit exposures related to unfunded loan commitments, including revolvers, delayed draw term loans and future funding commitments that are not unconditionally cancellable by the Company.
−Removed: The Company utilizes the same methodology in calculating the liability related to the expected credit losses on these exposures as it does for the calculation of the allowance for loan losses.
−Removed: In determining the estimate of credit losses for off-balance-sheet credit exposures, the Company will consider the contractual period in which the entity is exposed to credit risk and the likelihood that funding will occur, if material.
−Removed: Estimated credit losses for off-balance-sheet credit exposures are included in Other liabilities on the Company’s Consolidated Statements of Financial Condition.
The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans.
−Removed: The Company’s residential loans are accounted for under the fair value option with changes in fair value reflected in Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: Additionally, the Company consolidated a collateralized financing entity that securitized prime adjustable-rate jumbo residential mortgage loans until November 2021, when the Company exercised its clean-up call and liquidated the securitization trust.
+Added: The Company’s residential loans are accounted for under the fair value option with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
The Company also consolidates securitization trusts in which it had purchased subordinated securities because it also has certain powers and rights to direct the activities of such trusts.
Refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated residential mortgage loan trusts.
+Added: The mortgage loans are secured by first liens on primarily one-to-four family residential properties.
+Added: A subsidiary of the Company has engaged a third party to act as its custodian, agent and bailee for the purposes of receiving and holding certain documents, instruments and papers related to the residential mortgage loans it purchases.
+Added: Pursuant to the Company’s custodial agreement, the custodian segregates and maintains continuous custody of all documents constituting the mortgage file with respect to each mortgage loan owned by the subsidiary in secure and fire resistant facilities and in a manner consistent with the standard of care employed by prudent mortgage loan document custodians.
+Added: At or prior to the funding of any residential mortgage loan, the related seller, pursuant to the terms of our mortgage loan purchase agreement, must deliver to the custodian, the mortgage loan documents including the mortgage note, the mortgage and other related loan documents.
+Added: In addition, a complete credit file for the related mortgage and borrower must be delivered to the subsidiary prior to the date of purchase.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles and excluding loan warehouse facilities, at December 31, 2022 and 2021:
8 unchanged sentences
Interest income $ 410,195 $ 182,325
−Removed: Net gains (losses) on disposal of investments and other ( 37,212 ) ( 38,372 )
+Added: Net gains (losses) on disposal of investments (1)
+Added: ( 12,842 ) ( 37,212 )
Net unrealized gains (losses) on instruments measured at fair value through earnings (1)
+Added: ( 1,420,645 ) 19,545
Total included in net income (loss) $ ( 1,023,292 ) $ 164,658
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
+Added: (1) These amounts are presented in the line item Net gains (losses) on investments and other on the Consolidated Statements of Comprehensive Income (loss).
The following table provides the geographic concentrations based on the unpaid principal balances at December 31, 2022 and 2021 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:
5 unchanged sentences
Florida 8.3 % Florida 6.1 %
−Removed: All other (none individually greater than 5%) 32.8 % All other (none individually greater than 5%) 31.1 %
+Added: Texas 5.1 % All other (none individually greater than 5%) 32.8 %
+Added: All other (none individually greater than 5%) 31.5 %
Total 100.0 % 100.0 %
15 unchanged sentences
At December 31, 2022 and 2021, approximately 11 % and 16 %, respectively, of the carrying value of the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, were adjustable-rate.
−Removed: During the year ended December 31, 2021, the Company participated in an arrangement that provided a residential mortgage loan warehouse facility to a third-party originator.
+Added: The Company participates in an arrangement that provides a residential mortgage loan warehouse facility to a third-party originator.
The Company has elected to apply the fair value option to this lending facility in order to simplify the accounting and keep the accounting consistent with other residential credit financial instruments with similar characteristics.
−Removed: At December 31, 2021, the fair value and carrying value of this warehouse facility was approximately $ 1.0 million and is reported as Loans, net in the Consolidated Statements of Financial Condition.
+Added: At December 31, 2022 and December 31, 2021, the fair value and carrying value of this warehouse facility was approximately $ 0.0 million and $ 1.0 million, respectively, and reported as Loans, net in the Consolidated Statements of Financial Condition.
As of December 31, 2022, the lending facility was not on nonaccrual status nor past due.
−Removed: As of December 31, 2021, commercial real estate loans are reported in Assets of disposal group held for sale in the Consolidated Statements of Financial Condition and classified as held for sale.
−Removed: As of December 31, 2020, commercial real estate loans are reported in Loans, net in the Consolidated Statements of Financial Condition and classified as held for investment.
−Removed: Refer to the “Sale of Commercial Real Estate Business” Note for additional information on the transaction.
−Removed: The Company’s commercial real estate loans are comprised of adjustable-rate and fixed-rate loans.
−Removed: The difference between the principal amount of a loan and proceeds at acquisition is recorded as either a discount or premium.
−Removed: Commercial real estate loans and preferred equity interests that were designated as held for investment and were originated or purchased by the Company are carried at their outstanding principal balance, net of unamortized origination fees and costs, premiums or discounts, less an allowance for losses, if necessary.
−Removed: Origination fees and costs, premiums or discounts are amortized into interest income over the life of the loan.
−Removed: During the period the Company owns the assets, management generally reviews the most recent financial information and metrics derived therefrom produced by the borrower, which may include, but is not limited to, net operating income (“NOI”), debt service coverage ratios, property debt yields (net cash flow or NOI divided by the amount of outstanding indebtedness), loan per unit and rent rolls relating to each of the Company’s commercial real estate loans and preferred equity interests (“CRE Debt and Preferred Equity Investments”), and may consider other factors management deems important.
−Removed: Management also reviews market pricing to determine each borrower’s ability to refinance their respective assets at the maturity of each loan, economic trends (both macro and those affecting the property specifically), and the supply and demand of competing projects in the sub-market in which each subject property is located.
−Removed: Management monitors the financial condition and operating results of its borrowers and continually assesses the future outlook of the borrower’s financial performance in light of industry developments, management changes and company-specific considerations.
−Removed: The Company’s commercial loans are collateral-dependent and, as such, for loans experiencing credit deterioration, the Company is required to record an allowance based upon the fair value of the underlying collateral if foreclosure is probable or if the practical expedient is elected.
−Removed: For the year ended December 31, 2021, the Company reversed the loan loss allowance
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: resulting in a loan loss reversal on impaired commercial loans of $ 67.4 million as the loans are classified as held for sale and are carried at lower of cost or fair value.
−Removed: For the year ended December 31, 2020, the Company recorded a loan loss (provision) on impaired commercial loans of ($ 78.4 ) million with a principal balance and carrying value, net of allowances of $ 181.2 million and $ 113.6 million, respectively, based upon the fair value of the underlying collateral.
−Removed: The Company uses a discounted cash flow or market based valuation technique based upon the underlying property to project property cash flows.
−Removed: In projecting these cash flows, the Company reviewed the borrower financial statements, rent rolls, economic trends and other factors management deems important.
−Removed: These nonrecurring fair value measurements are considered to be in level three of the fair value measurement hierarchy as there are unobservable inputs, which are significant to the overall fair value.
−Removed: For the year ended December 31, 2021, the Company reversed the loan loss allowance based upon its Loss Given Default methodology resulting in a loan loss reversal on commercial loans of $ 62.5 million as the loans were classified as held for sale and carried at lower of cost or fair value.
−Removed: For the year ended December 31, 2020, the Company recorded a net loan loss (provision) of ($ 54.8 ) million based upon its Loss Given Default methodology.
−Removed: As a result of the implementation of the Loss Given Default methodology under the modified retrospective method, a cumulative effect loan loss allowance of $ 7.8 million was recorded on January 1, 2020.
−Removed: During the year ended December 31, 2020, the Company modified five commercial loans with a carrying value of $ 243.8 million at December 31, 2020.
−Removed: The maturity dates on four commercial loans were extended and one commercial loan was granted a 120 day forbearance.
−Removed: Additionally, as part of the restructuring two loans had partial paydowns totaling $ 4.5 million.
−Removed: The loan loss allowance recorded for these commercial loans was $ 23.6 million at December 31, 2020.
−Removed: Future funding commitments on the restructured loans total $ 4.1 million at December 31, 2020.
−Removed: At December 31, 2020, the amortized cost basis of commercial loans on nonaccrual status was $ 46.8 million.
−Removed: For the year ended December 31, 2020, the Company recognized interest income on commercial loans on nonaccrual status of $ 2.1 million.
−Removed: At December 31, 2020, the Company had unfunded commercial real estate loan commitments of $ 99.3 million.
−Removed: At December 31, 2020, the liability related to the expected credit losses on the unfunded commercial loan commitments was $ 5.1 million.
−Removed: At December 31, 2020, approximately 94 % of the carrying value of the Company’s CRE Debt and Preferred Equity Investments, including loans transferred or pledged to securitization vehicles were adjustable-rate.
−Removed: The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for sale at December 31, 2021and held for investment at December 31, 2020:
−Removed: December 31, 2021
−Removed: Mortgages Senior
−Removed: Mortgages (1)
−Removed: (dollars in thousands)
−Removed: Beginning balance (January 1, 2021) (2)
−Removed: $ 373,925 $ 874,349 $ 124,156 $ 1,372,430
−Removed: Originations & advances (principal) 127,481 69 644 128,194
−Removed: Principal payments ( 75,007 ) ( 87,584 ) ( 9,922 ) ( 172,513 )
−Removed: Transfers and sales (3)
−Removed: ( 436,408 ) ( 849,469 ) ( 171,794 ) ( 1,457,671 )
−Removed: Net (increase) decrease in origination fees ( 1,403 ) — — ( 1,403 )
−Removed: Amortization of net origination fees 501 486 43 1,030
−Removed: Allowance for loan losses
−Removed: Beginning allowance ( 10,911 ) ( 62,149 ) ( 56,873 ) ( 129,933 )
−Removed: Current period (allowance) reversal 10,911 62,149 56,873 129,933
−Removed: Ending allowance — — — —
−Removed: Net carrying value (December 31, 2021)
−Removed: $ — $ — $ — $ —
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
−Removed: December 31, 2020
−Removed: Mortgages Senior
−Removed: Securitized Mortgages (1)
−Removed: (dollars in thousands)
−Removed: Net carrying value (January 1, 2020)
−Removed: $ 499,690 $ 936,378 $ 182,726 $ 1,618,794
−Removed: Originations & advances (principal) 206,090 — 12,374 218,464
−Removed: Principal payments ( 77,344 ) ( 144,308 ) ( 78 ) ( 221,730 )
−Removed: Principal write off — — ( 7,000 ) ( 7,000 )
−Removed: Transfers (3)
−Removed: ( 245,120 ) 142,621 ( 7,100 ) ( 109,599 )
−Removed: Net (increase) decrease in origination fees ( 1,055 ) ( 653 ) ( 80 ) ( 1,788 )
−Removed: Realized gain 204 — — 204
−Removed: Amortization of net origination fees 2,371 2,460 187 5,018
−Removed: Allowance for loan losses
−Removed: Beginning Allowance, prior to CECL adoption — — ( 12,703 ) ( 12,703 )
−Removed: Impact of adopting CECL ( 2,263 ) ( 4,166 ) ( 1,336 ) ( 7,765 )
−Removed: Current period provision ( 8,648 ) ( 57,983 ) ( 66,521 ) ( 133,152 )
−Removed: Write offs — — 23,687 23,687
−Removed: Ending allowance ( 10,911 ) ( 62,149 ) ( 56,873 ) ( 129,933 )
−Removed: Net carrying value (December 31, 2020)
−Removed: $ 373,925 $ 874,349 $ 124,156 $ 1,372,430
−Removed: (1) Represents assets of consolidated VIEs held for sale at December 31, 2021.
−Removed: (2) Excludes loan loss allowances.
−Removed: (3) Includes transfers to securitization vehicles and for the year ended December 31, 2021, transfers to assets for disposal group held for sale.
+Added: As of December 31, 2021, commercial real estate loans were reported in Assets of disposal group held for sale in the Consolidated Statements of Financial Condition and classified as held for sale.
+Added: Refer to the “Sale of Commercial Real Estate Business” Note for additional information on the transaction.
Corporate Debt
−Removed: The Company’s investments in corporate loans typically take the form of senior secured loans primarily in first or second lien positions.
−Removed: The Company’s senior secured loans generally have stated maturities of five to eight years .
−Removed: In connection with these senior secured loans, the Company receives a security interest in certain assets of the borrower and such assets support repayment of such loans.
−Removed: Senior secured loans are generally exposed to less credit risk than more junior loans given their seniority to scheduled principal and interest and priority of security in the assets of the borrower.
−Removed: Interest income from coupon payments is accrued based upon the outstanding principal amounts of the debt and its contractual terms.
−Removed: Premiums and discounts are amortized or accreted into interest income using the effective interest method.
−Removed: The Company’s internal risk rating rubric for corporate debt has nine categories as depicted below:
−Removed: Risk Rating - Corporate Debt Description
−Removed: 1-5 / Performing Meets all present contractual obligations.
−Removed: 6 / Performing - Closely Monitored Meets all present contractual obligations but exhibits a defined weakness in either leverage or liquidity, but not both.
−Removed: Loans at this rating will require closer monitoring, but where we expect no loss of interest or principal.
−Removed: 7 / Substandard A loan that has a defined weakness in either leverage and/or liquidity, and which may require substantial changes to strengthen the asset.
−Removed: Loans at this rating level have a higher probability of loss, although no determination of the amount or timing of a loss is yet possible.
−Removed: 8 / Doubtful A loan that has missed a scheduled principal or interest payment or is otherwise deemed a non-earning account.
−Removed: The probability of loss is increasingly certain due to significant performance issues.
−Removed: 9 / Loss Considered uncollectible.
−Removed: Management assesses each loan at least quarterly and assigns an internal risk rating based on its evaluation of the most recent financial information produced by the borrower and consideration of economic conditions.
−Removed: See below for a tabular disclosure of the amortized cost basis of the Company’s corporate debt held for investment by year of origination and internal risk rating.
−Removed: There was no provision for loan loss recorded on corporate loans using a discounted cash flow methodology for the year ended December 31, 2021.
−Removed: For the year ended December 31, 2020, the Company recorded a loan loss (provision) of ($ 4.5 ) million on impaired corporate loans using a discounted cash flow methodology.
−Removed: During the year ended December 31, 2020, the loan was restructured and the Company received $ 2.8 million of second lien debt and $ 4.8 million of equity.
−Removed: As a result of the restructuring, $ 19.6 million of first lien debt was written off and the related allowance of $ 11.9 million was charged off.
−Removed: For the year ended December 31, 2019, the Company recorded a loan loss provision of $ 7.4 million on a corporate loan with a principal balance and carrying value of $ 19.6 million and $ 12.2 million, respectively.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
−Removed: For the year ended December 31, 2021, the Company recorded a net loan loss reversal on corporate loans of $ 11.6 million, based upon its Loss Given Default methodology.
−Removed: For the year ended December 31, 2020, the Company recorded a net loan loss (provision) on corporate loans of ($ 9.9 ) million, based upon its Loss Given Default methodology.
−Removed: As a result of the implementation of the Loss Given Default methodology under the modified retrospective method, a cumulative effect loan loss allowance on corporate loans of $ 29.7 million was recorded on January 1, 2020.
−Removed: As of December 31, 2021 and December 31, 2020, no corporate loans were on nonaccrual status.
−Removed: At December 31, 2021 and December 31, 2020, the Company had unfunded corporate loan commitments of $ 278.9 million and $ 87.3 million, respectively.
−Removed: At December 31, 2021 and December 31, 2020, the liability related to the expected credit losses on the unfunded corporate loan commitments was $ 2.3 million and $ 0.7 million, respectively.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
−Removed: The Company invests in corporate loans through its Annaly Middle Market Lending Group.
−Removed: The industry and rate attributes of the portfolio at December 31, 2021 and 2020 are as follows:
−Removed: Industry Dispersion
−Removed: December 31, 2021 December 31, 2020
−Removed: (dollars in thousands)
−Removed: Computer Programming, Data Processing & Other Computer Related Services $ 437,257 $ 483,142
−Removed: Management & Public Relations Services 263,187 300,869
−Removed: Industrial Inorganic Chemicals 156,292 156,391
−Removed: Metal Cans & Shipping Containers 118,204 115,670
−Removed: Public Warehousing & Storage 94,179 132,397
−Removed: Miscellaneous Industrial & Commercial 93,619 77,163
−Removed: Electronic Components & Accessories 92,261 78,129
−Removed: Surgical, Medical & Dental Instruments & Supplies 80,786 83,161
−Removed: Miscellaneous Health & Allied Services, not elsewhere classified 64,133 58,857
−Removed: Research, Development & Testing Services 59,311 62,008
−Removed: Offices & Clinics of Doctors of Medicine 50,017 104,781
−Removed: Engineering, Architectural & Surveying 49,088 77,308
−Removed: Insurance Agents, Brokers & Service 43,598 67,193
−Removed: Electrical Work 42,617 41,128
−Removed: Telephone Communications 42,589 58,450
−Removed: Miscellaneous Equipment Rental & Leasing 32,346 49,587
−Removed: Medical & Dental Laboratories 30,199 30,711
−Removed: Home Health Care Services 28,660 28,587
−Removed: Metal Forgings & Stampings 27,483 27,523
−Removed: Legal Services 26,105 26,399
−Removed: Petroleum & Petroleum Products 21,434 33,890
−Removed: Sanitary Services 20,453 —
−Removed: Grocery Stores 19,745 22,895
−Removed: Coating, Engraving & Allied Services 17,705 19,484
−Removed: Chemicals & Allied Products 14,657 14,686
−Removed: Mailing, Reproduction, Commercial Art & Photography & Stenographic 12,388 12,733
−Removed: Machinery, Equipment & Supplies 10,814 12,096
−Removed: Offices & Clinics of Other Health Practitioners 10,083 9,730
−Removed: Schools & Educational Services, not elsewhere classified 9,781 29,040
−Removed: Miscellaneous Business Services — 12,980
−Removed: Drugs — 12,942
−Removed: Total $ 1,968,991 $ 2,239,930
−Removed: (1) All middle market lending positions are floating rate.
−Removed: The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at December 31, 2021 and 2020.
−Removed: December 31, 2021 December 31, 2020
−Removed: (dollars in thousands)
−Removed: First lien loans $ 1,391,217 $ 1,489,125
−Removed: Second lien loans (1)
−Removed: 577,774 750,805
−Removed: Total $ 1,968,991 $ 2,239,930
−Removed: (1) Includes mezzanine positions
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
−Removed: The following tables represent a rollforward of the activity for the Company’s corporate debt investments held for investment at December 31, 2021 and December 31, 2020:
−Removed: December 31, 2021
−Removed: First Lien Second Lien Total
−Removed: (dollars in thousands)
−Removed: Beginning balance (January 1, 2021) (1)
−Removed: $ 1,489,125 $ 750,805 $ 2,239,930
−Removed: Originations & advances 1,506,705 66,013 1,572,718
−Removed: Sales and transfers (2)
−Removed: ( 1,122,275 ) ( 83,690 ) ( 1,205,965 )
−Removed: Principal payments ( 492,884 ) ( 169,057 ) ( 661,941 )
−Removed: Amortization & accretion of (premium) discounts 9,120 3,497 12,617
−Removed: Allowance for loan losses
−Removed: Beginning allowance ( 18,767 ) ( 20,785 ) ( 39,552 )
−Removed: Current period (allowance) reversal 1,426 10,206 11,632
−Removed: Ending allowance ( 17,341 ) ( 10,579 ) ( 27,920 )
−Removed: Net carrying value (December 31, 2021)
−Removed: $ 1,391,217 $ 577,774 $ 1,968,991
−Removed: December 31, 2020
−Removed: First Lien Second Lien Total
−Removed: (dollars in thousands)
−Removed: Beginning balance (January 1, 2020) (1)
−Removed: $ 1,403,503 $ 748,710 $ 2,152,213
−Removed: Originations & advances 834,211 227,433 1,061,644
−Removed: ( 273,887 ) ( 79,203 ) ( 353,090 )
−Removed: Principal payments ( 444,759 ) ( 132,000 ) ( 576,759 )
−Removed: Amortization & accretion of (premium) discounts 8,374 3,832 12,206
−Removed: Loan restructuring ( 19,550 ) 2,818 ( 16,732 )
−Removed: Allowance for loan losses
−Removed: Beginning allowance, prior to CECL adoption ( 7,363 ) — ( 7,363 )
−Removed: Impact of adopting CECL ( 10,787 ) ( 18,866 ) ( 29,653 )
−Removed: Current period (allowance) reversal ( 12,510 ) ( 1,919 ) ( 14,429 )
−Removed: Write offs 11,893 — 11,893
−Removed: Ending allowance ( 18,767 ) ( 20,785 ) ( 39,552 )
−Removed: Net carrying value (December 31, 2020)
−Removed: $ 1,489,125 $ 750,805 $ 2,239,930
−Removed: (1) Excludes loan loss allowances.
−Removed: (2) Includes syndications.
−Removed: The following table provides the amortized cost basis of corporate debt held for investment as of December 31, 2021 by vintage year and internal risk rating.
−Removed: Amortized Cost Basis by Risk Rating and Vintage (1)
−Removed: Risk Rating Vintage
−Removed: Total 2021 2020 2019 2018 2017 2016
−Removed: (dollars in thousands)
−Removed: 1-5 / Performing $ 1,799,355 $ 565,619 $ 374,894 $ 219,028 $ 477,834 $ 138,660 $ 23,320
−Removed: 6 / Performing - Closely Monitored 64,441 22,036 26,105 16,300 — — —
−Removed: 7 / Substandard 105,195 — 10,814 9,280 85,101 — —
−Removed: 8 / Doubtful — — — — — — —
−Removed: 9 / Loss — — — — — — —
−Removed: Total $ 1,968,991 $ 587,655 $ 411,813 $ 244,608 $ 562,935 $ 138,660 $ 23,320
−Removed: (1) The amortized cost basis excludes accrued interest and includes deferred loan fees on unfunded loans.
−Removed: As of December 31, 2021, the Company had $ 11.2 million of accrued interest receivable on corporate loans, which is reported in Principal and interest receivable in the Consolidated Statements of Financial Condition, and $ 2.6 million of deferred loan fees on unfunded loans, which is reported in Loans, net in the Consolidated Statements of Financial Condition.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
+Added: In April 2022, the Company entered into a definitive agreement to sell substantially all of the corporate loan interests held by the MML business operated by the Company, as well as assets managed for third parties (collectively, the “MML Portfolio”), to Ares Capital Management LLC (“Ares”).
+Added: The vast majority of these assets were legally transferred to Ares at the end of the third quarter and the remaining assets were transferred by the end of the fourth quarter of 2022.
+Added: Refer to the “Sale of Middle Market Lending Portfolio” Note for additional information on the transaction.
MORTGAGE SERVICING RIGHTS
−Removed: The Company owns variable interests in entities that invest in MSR and Interests in MSR.
−Removed: Refer to the “Variable Interest Entities” Note for a detailed discussion on this topic.
MSR represent the rights and obligations associated with servicing pools of residential mortgage loans.
2 unchanged sentences
The Company generally intends to hold the MSR as investments and elected to account for all of its investments in MSR at fair value.
−Removed: As such, they are recognized at fair value on the accompanying Consolidated Statements of Financial Condition with changes in the estimated fair value presented as a component of Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: Servicing income, net of servicing expenses, is reported in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss).
+Added: As such, they are recognized at fair value on the accompanying Consolidated Statements of Financial Condition with changes in the estimated fair value presented as a component of Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
Interests in MSR represent agreements to purchase all, or a component of, net servicing cash flows.
−Removed: A third party acts as a master servicer for the loans providing the net servicing cash flows represented by the Interests in MSR.
−Removed: The Company accounts for its Interests in MSR at fair value with change in fair value presented in Net unrealized gains (losses) on instruments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: Cash flows received for Interests in MSR are recorded in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss).
+Added: A third party acted as a master servicer for the loans providing the net servicing cash flows represented by the Interests in MSR.
+Added: The Company accounts for its Interests in MSR at fair value with change in fair value presented in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
+Added: Cash flows received for Interests in MSR are recorded in Other, net in the Consolidated Statements of Comprehensive Income (Loss).
The following table presents activity related to MSR and Interests in MSR for the years ended December 31, 2022 and 2021:
3 unchanged sentences
Purchases (1)
+Added: 1,009,351 468,196
+Added: Transfers (2)
Sales ( 9,084 ) ( 82,176 )
5 unchanged sentences
(1) Includes adjustments to original purchase price from early payoffs, defaults, or loans that were delivered but were deemed to not be acceptable.
+Added: (2) Transfers from Interests in MSR - Refer to the “Variable Interest Entities” Note for additional information.
(3) Principally represents changes in discount rates and prepayment speed inputs used in valuation model, primarily due to changes in interest rates.
−Removed: Interests in MSR December 31, 2021
+Added: Interests in MSR December 31, 2022 December 31, 2021
(dollars in thousands)
1 unchanged sentence
Purchases (1)
+Added: Transfers (2)
Gain (loss) included in net income 8,474 4,209
1 unchanged sentence
(1) Includes adjustments to original purchase price from early payoffs, defaults, or loans that were delivered but were deemed to not be acceptable.
−Removed: For the years ended December 31, 2021 and 2020, the Company recognized $ 56.8 million and $ 66.6 million of net servicing income from MSR in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: For the year ended December 31, 2021, the Company recognized $ 7.6 million and for the year ended December 31, 2020, the Company did no t recognize net income from Interests in MSR in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss).
+Added: (2) Transfers to MSR - Refer to the “Variable Interest Entities” Note for additional information
ANNALY CAPITAL MANAGEMENT, INC.
2 unchanged sentences
VARIABLE INTEREST ENTITIES
−Removed: At December 31, 2021, commercial trusts, commercial securitizations and the collateralized loan obligation are reported in Assets of disposal group held for sale in the Consolidated Statements of Financial Condition.
−Removed: Refer to the “Sale of Commercial Real Estate Business” Note for additional information.
+Added: The Company’s exposure to the obligations of its VIEs is generally limited to the Company’s investment in the VIEs of $ 1.0 billion at December 31, 2022.
+Added: Assets of the VIEs may only be used to settle obligations of the VIEs.
+Added: Creditors of the VIEs have no recourse to the general credit of the Company.
+Added: The Company is not contractually required to provide and has not provided any form of financial support to the VIEs.
+Added: No gains or losses were recognized upon consolidation of existing VIEs.
+Added: Interest income and expense are recognized using the effective interest method.
Multifamily Securitization
−Removed: In November 2019, the Company repackaged Fannie Mae guaranteed multifamily mortgage-backed securities with a principal cut-off balance of $ 1.0 billion and retained interest-only securities with a notional balance of $ 1.0 billion and senior securities with a principal balance of $ 28.5 million.
In March 2020, the Company repackaged Fannie Mae guaranteed multifamily mortgage-backed securities with a principal cut-off balance of $ 0.5 billion and retained interest-only securities with a notional balance of $ 0.5 billion.
−Removed: At the inception of the arrangements, the Company determined that it was the primary beneficiary based upon its involvement in the design of these VIEs and through the retention of a significant variable interest in the VIEs.
−Removed: The Company elected the fair value option for the financial liabilities of these VIEs in order to simplify the accounting;
+Added: At the inception of this arrangement, the Company determined that it was the primary beneficiary based upon its involvement in the design of this VIE and through the retention of a significant variable interest in the VIE.
+Added: The Company elected the fair value option for the financial liabilities of this VIE in order to simplify the accounting;
however, the financial assets were not eligible for the fair value option as it was not elected at purchase.
−Removed: In 2020, the Company deconsolidated the 2019 multifamily VIE since it sold all of its interest-only securities and no longer retains a significant variable interest in the entity.
−Removed: As a result of the deconsolidation of this VIE, the Company derecognized approximately $ 1.2 billion of securities and approximately $ 1.1 billion of debt issued by securitization vehicles and recognized a realized gain of $ 104.8 million, which is included in Net gains (losses) on disposal of investments and other in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: The Company incurred $ 1.1 million of costs in connection with the 2020 multifamily securitization that were expensed as incurred during the year ended December 31, 2020.
−Removed: Residential Trusts
−Removed: The Company consolidated a securitization trust, which is included in “Residential Trusts” in the table for the year ended December 31, 2020 below, that issued residential mortgage-backed securities that were collateralized by residential mortgage loans that had been transferred to the trust by one of the Company’s subsidiaries.
−Removed: The Company owned the subordinate securities, and a subsidiary of the Company continued to be the master servicer.
−Removed: As such, the Company was deemed to be the primary beneficiary of the residential mortgage trust and consolidated the entity.
−Removed: The Company elected the fair value option for the financial assets and liabilities of this VIE, but did not elect to apply the practical expedient under ASU 2014-13 as prices of both the financial assets and financial liabilities of the residential mortgage trust are available from third party pricing services.
−Removed: The contractual principal amount of the residential mortgage trust’s debt held by third parties was zero and $ 23.0 million at December 31, 2021 and 2020, respectively.
−Removed: In November 2021, the Company exercised its clean-up call and liquidated the securitization trust.
−Removed: There was no gain or loss recorded upon deconsolidation.
+Added: During the year ended December 31, 2022, the Company deconsolidated the 2020 multifamily VIE since it sold all of its interest-only securities and no longer retains a significant variable interest in the entity.
+Added: As a result of the deconsolidation of this VIE, the Company derecognized approximately $ 424.0 million of securities and approximately $ 391.9 million of debt issued by securitization vehicles and recognized a realized gain of $ 33.4 million, which is included in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
Residential Securitizations
−Removed: The Company also invests in residential mortgage-backed securities issued by entities that are VIEs because they do not have sufficient equity at risk for the entities to finance their activities without additional subordinated financial support from other parties, but the Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance.
+Added: The Company also invests in residential mortgage-backed securities issued by entities that are VIEs because they do not have sufficient equity at risk for the entities to finance their activities without additional subordinated financial support from other parties.
+Added: The Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance.
For these entities, the Company’s maximum exposure to loss is the amortized cost basis of the securities it owns and it does not provide any liquidity arrangements, guarantees or other commitments to these VIEs.
See the “Securities” Note for further information on Residential Securities.
−Removed: The entities in the table below are referred to collectively as the “OBX Trusts.” These securitizations represent financing transactions which provide non-recourse financing to the Company that are collateralized by residential mortgage loans purchased by the Company.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
+Added: Residential securitizations are issued by entities generally referred to collectively as the “OBX Trusts.” These securitizations represent financing transactions which provide non-recourse financing to the Company that are collateralized by residential mortgage loans purchased by the Company.
+Added: Residential securitizations closed during the year are included in the table below.
Securitization Date of Closing Face Value at Closing
(dollars in thousands)
−Removed: OBX 2018-1 March 2018 $ 327,162
−Removed: OBX 2018-EXP1 August 2018 $ 383,451
−Removed: OBX 2018-EXP2 October 2018 $ 384,027
−Removed: OBX 2019-INV1 January 2019 $ 393,961
−Removed: OBX 2019-EXP1 April 2019 $ 388,156
−Removed: OBX 2019-INV2 June 2019 $ 383,760
−Removed: OBX 2019-EXP2 July 2019 $ 463,405
−Removed: OBX 2019-EXP3 October 2019 $ 465,492
+Added: OBX 2022-NQM1 January 2022 $ 556,696
OBX 2022-INV1 January 2022 $ 377,275
−Removed: OBX 2020-EXP1 February 2020 $ 467,511
−Removed: OBX 2020-EXP2 July 2020 $ 489,352
−Removed: OBX 2020-EXP3 September 2020 $ 514,609
+Added: OBX 2022-INV2 February 2022 $ 466,686
+Added: OBX 2022-NQM2 February 2022 $ 439,421
+Added: OBX 2022-INV3 March 2022 $ 330,823
OBX 2022-NQM3 March 2022 $ 315,843
−Removed: OBX 2021-J1 April 2021 $ 353,840
+Added: OBX 2022-NQM4 May 2022 $ 457,285
+Added: OBX 2022-J1 May 2022 $ 389,334
OBX 2022-NQM5 June 2022 $ 390,775
−Removed: OBX 2021-J2 July 2021 $ 382,483
+Added: OBX 2022-INV4 June 2022 $ 335,900
+Added: OBX 2022-NQM6 June 2022 $ 387,913
+Added: OBX 2022-J2 August 2022 $ 305,969
OBX 2022-NQM7 August 2022 $ 358,931
−Removed: OBX 2021-INV1 September 2021 $ 320,199
−Removed: OBX 2021-J3 October 2021 $ 453,650
−Removed: OBX 2021-INV2 October 2021 $ 343,571
+Added: OBX 2022-NQM8 September 2022 $ 397,470
OBX 2022-INV5 November 2022 $ 326,226
−Removed: OBX 2021-NQM4 November 2021 $ 542,836
−Removed: As of December 31, 2021 and 2020, a total carrying value of $ 4.6 billion and $ 2.6 billion, respectively, of bonds were held by third parties and the Company retained $ 780.8 million and $ 653.0 million, respectively, of mortgage-backed securities, which were eliminated in consolidation.
−Removed: The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs.
−Removed: The Company has elected the fair value option for the financial assets and liabilities of these VIEs, but has not elected the practical expedient under ASU 2014-13 as prices of both the financial assets and financial liabilities of the residential mortgage trusts are available from third party pricing services.
+Added: OBX 2022-NQM9 December 2022 $ 359,380
+Added: As of December 31, 2022 and 2021, a total carrying value of $ 7.7 billion and $ 4.6 billion, respectively, of bonds were held by third parties and the Company retained $ 1.0 billion and $ 780.8 million, respectively, of mortgage-backed securities, which were eliminated in consolidation.
+Added: The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
+Added: could be potentially significant to these VIEs.
+Added: The Company has elected the fair value option for the financial assets and liabilities of these VIEs.
+Added: Effective August 1, 2022, upon initial consolidation of new securitization entities, the Company elected to apply the measurement alternative for consolidated collateralized financing entities in order to simplify the accounting and valuation processes.
+Added: The liabilities of these securitization entities are deemed to be more observable and are used to measure the fair value of the assets.
During the years ended December 31, 2022 and 2021, the Company incurred $ 7.6 million and $ 5.6 million, respectively, of costs in connection with these securitizations that were expensed as incurred.
The contractual principal amount of the OBX Trusts’ debt held by third parties was $ 9.0 billion and $ 4.6 billion at December 31, 2022 and 2021, respectively.
+Added: During the years ended December 31, 2022 and 2021, the Company recorded $ 1.2 billion and ($ 69.4 ) million, respectively, of unrealized gains (losses) on debt held by third parties, which is reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss).
Although the residential mortgage loans have been sold for bankruptcy and state law purposes, the transfers of the residential mortgage loans to the OBX Trusts did not qualify for sale accounting and are reflected as intercompany secured borrowings that are eliminated upon consolidation.
Credit Facility VIEs
−Removed: In June 2016, a consolidated subsidiary of the Company entered into a credit facility with a third party financial institution.
−Removed: As of December 31, 2021 and 2020, the borrowing limit on this facility was $ 675.0 million and $ 625.0 million, respectively.
−Removed: The subsidiary was deemed to be a VIE and the Company was determined to be the primary beneficiary due to its role as collateral manager and because it holds a variable interest in the entity that could potentially be significant to the entity.
−Removed: The Company has pledged as collateral for this facility corporate loans with a carrying amount of $ 692.6 million and $ 786.9 million at December 31, 2021 and 2020, respectively.
−Removed: The transfers did not qualify for sale accounting and are reflected as an intercompany secured borrowing that is eliminated upon consolidation.
−Removed: At December 31, 2021 and 2020, the subsidiary had an intercompany receivable of $ 433.3 million and $ 441.1 million, respectively, which eliminates upon consolidation and a secured financing of $ 433.3 million and $ 441.1 million, respectively, to the third party financial institution.
−Removed: In July 2017, a consolidated subsidiary of the Company entered into a credit facility with a third party financial institution.
−Removed: As of December 31, 2021 and 2020, the borrowing limit on this facility was $ 400.0 million and $ 320.0 million, respectively.
−Removed: The subsidiary was deemed to be a VIE and the Company was determined to be the primary beneficiary due to its role as servicer and because it holds a variable interest in the entity that could potentially be significant to the entity.
−Removed: The Company has transferred corporate loans to the subsidiary with a carrying amount of $ 402.9 million and $ 400.4 million at December 31, 2021 and 2020, respectively, which continue to be reflected in the Company’s Consolidated Statements of Financial Condition under
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
−Removed: At December 31, 2021 and 2020, the subsidiary had a secured financing of $ 238.2 million and $ 209.7 million, respectively, to the third party financial institution.
−Removed: In January 2019, a consolidated subsidiary of the Company entered into a credit facility with a third party financial institution.
−Removed: As of December 31, 2021 and 2020, the borrowing limit on this facility was $ 400.0 million and $ 300.0 million, respectively.
−Removed: The Company has pledged as collateral for this facility corporate loans with a carrying amount of $ 368.0 million and $ 409.2 million at December 31, 2021 and 2020, respectively.
−Removed: As of December 31, 2021 and 2020, the Borrower had a secured financing of $ 231.8 million and $ 236.6 million, respectively, to the third party financial institution.
+Added: In connection with the sale of all of the assets that comprise the MML Portfolio, the credit facilities which provided financing for the Company’s corporate debt were paid-off and terminated during the year ended December 31, 2022.
+Added: Refer to the “Sale of Middle Market Lending Portfolio” Note for additional information on the transaction.
The Company owns variable interests in an entity that invests in MSR and has structured its operations, funding and capitalization into pools of assets and liabilities, each referred to as a “silo.” Owners of variable interests in a given silo are entitled to all of the returns and subjected to the risk of loss on the investments and operations of that silo and have no substantive recourse to the assets of any other silo.
1 unchanged sentence
As a result, the Company is considered to be the primary beneficiary and consolidates this silo.
−Removed: The Company also owns variable interests in entities that invest in Interests in MSR.
−Removed: These entities are VIEs because they do not have sufficient equity at risk to finance their activities and the Company is the primary beneficiary because it has power to remove the decision makers with or without cause and holds substantially all of the variable interests in the entities.
−Removed: The Company’s exposure to the obligations of its VIEs is generally limited to the Company’s investment in the VIEs of $ 2.4 billion at December 31, 2021.
−Removed: Assets of the VIEs may only be used to settle obligations of the VIEs.
−Removed: Creditors of the VIEs have no recourse to the general credit of the Company.
−Removed: The Company is not contractually required to provide and has not provided any form of financial support to the VIEs.
−Removed: No gains or losses were recognized upon consolidation of existing VIEs.
−Removed: Interest income and expense are recognized using the effective interest method.
+Added: The Company owned variable interests in entities that invested in Interests in MSR.
+Added: These entities were VIEs because they did not have sufficient equity at risk to finance their activities and the Company was the primary beneficiary because it had power to remove the decision makers with or without cause and held substantially all of the variable interests in the entities.
+Added: During the quarter ended September 30, 2022, the Company terminated its contracts previously classified as Interests in MSR on its Consolidated Statements of Financial Condition and purchased the underlying mortgage servicing rights.
+Added: As a result, consolidated VIEs holding the Interests in MSR and related assets and liabilities were liquidated.
+Added: No gain or loss was recognized upon deconsolidation.
+Added: The underlying MSR were initially recognized at fair value and subsequent changes in fair value are recognized in earnings.
+Added: See the “Mortgage Servicing Rights” Note and “Fair Value Measurements” Note for further information regarding MSR.
The statements of financial condition of the Company’s VIEs, excluding the multifamily securitization, credit facility VIEs and OBX Trusts as the transfers of loans or securities did not meet the criteria to be accounted for as sales, that are reflected in the Company’s Consolidated Statements of Financial Condition at December 31, 2022 and 2021 are as follows:
3 unchanged sentences
Mortgage servicing rights 27
−Removed: Interests in MSR 69,316
Other assets 1,238
7 unchanged sentences
December 31, 2021
−Removed: Commercial Trusts Residential Trusts MSR VIEs
Assets (dollars in thousands)
Cash and cash equivalents $ 16,187
−Removed: Loans — — 47,048
−Removed: Assets transferred or pledged to securitization vehicles 2,166,073 40,035 —
Mortgage servicing rights 7,254
−Removed: Principal and interest receivable 5,509 226 —
+Added: Interests in MSR 69,316
+Added: Other assets 10,406
Total assets $ 105,510
−Removed: Debt issued by securitization vehicles (non-recourse) $ 1,836,785 $ 23,351 $ —
−Removed: Other secured financing — — 30,420
Payable for unsettled trades $ 1,911
−Removed: Interest payable 1,697 55 —
Other liabilities 14,582
Total liabilities $ 16,493
−Removed: Corporate Debt Transfers
−Removed: The Company manages parallel funds investing in senior secured first and second lien corporate loans (the “Fund Entities”).
−Removed: The Fund Entities are considered VIEs because the investors do not have substantive liquidation, kick-out or participating rights.
−Removed: The fees that the Company earns are not considered variable interests of the VIE.
−Removed: The Company is not the primary beneficiary of the Fund Entities and therefore does not consolidate the Fund Entities.
−Removed: During the year ended December 31, 2021, the Company transferred $ 316.9 million of loans for cash.
−Removed: The loan transfers were accounted for as sales.
+Added: Corporate Debt Funds
+Added: The Company managed parallel funds investing in senior secured first and second lien corporate loans (the “Fund Entities”).
+Added: The Fund Entities were considered VIEs because the investors did not have substantive liquidation, kick-out or participating rights.
+Added: The fees that the Company earned were not considered variable interests of the VIE.
+Added: The Company was not the primary beneficiary of the Fund Entities and therefore did not consolidate the Fund Entities.
+Added: The corporate loans in the Fund Entities were assets managed for third parties and were part of the MML Portfolio transferred to Ares during the three months ended June 30, 2022.
+Added: Refer to the “Sale of Middle Market Lending Portfolio” Note for additional information on the transaction.
Residential Credit Fund
2 unchanged sentences
The Company is not the primary beneficiary and does not consolidate the residential credit fund as its only interest in the fund is the management and performance fees that it earns, which are not considered variable interests in the entity.
−Removed: As of December 31, 2021 and 2020 the Company had outstanding participating interests in residential mortgage loans of $ 1.0 billion and $ 39.2 million, respectively.
+Added: As of December 31, 2022 and 2021 the Company had outstanding participating interests in residential mortgage loans of $ 0.8 billion and $ 1.0 billion, respectively.
These transfers do not meet the criteria for sale accounting and are accounted for as secured borrowings, thus the residential loans are reported as Loans, net and the associated liability is reported as Participations issued in the Consolidated Statements of Financial Condition.
3 unchanged sentences
and Slate Grocery REIT (together, “Slate”) for $ 2.33 billion.
−Removed: The transaction includes equity interests, loan assets and associated liabilities, and CMBS (other than commercial CRTs).
−Removed: The Company also intends to sell nearly all of the remaining CRE business assets that are not included in the transaction with Slate.
−Removed: A real estate property that was held for sale, which is not included in the transaction with Slate, was sold during the year ended December 31, 2021 and resulted in the recognition of a gain of $ 4.8 million in Business divestiture-related gains (losses) in the Consolidated Statements of Comprehensive Income (Loss).
+Added: The transaction included equity interests, loan assets and associated liabilities, and CMBS (other than commercial CRTs).
+Added: The Company also sold nearly all of the remaining CRE business assets that were not included in the transaction with Slate.
+Added: Certain employees who primarily supported the CRE business joined Slate in connection with the sale.
In connection with the execution of the definitive agreement to sell the CRE business, during the year ended December 31, 2021, the Company performed an assessment of goodwill, which was related to the Company’s 2013 acquisition of CreXus Investment Corp., and recognized an impairment of $ 71.8 million.
−Removed: As a result of classifying the loans as held for sale, the previously recognized allowance for loan losses of $ 135.0 million, which includes $ 5.1 million on unfunded loan commitments, was reversed during the three months ended March 31, 2021.
−Removed: During the year ended December 31, 2021, the majority of assets held for sale and the associated liabilities were transferred to Slate, with the remaining assets expected to be transferred by the end of the first quarter of 2022 subject to regulatory approvals.
−Removed: The pretax income (loss) of the CRE business was ($ 31.6 ) million for the year ended December 31, 2021 and ($ 99.6 ) million for the year
+Added: During the year ended December 31, 2021, the Company reported Business divestiture-related gains (losses) of ($ 262.0 ) million, in its Consolidated Statements of Comprehensive Income (Loss) which includes the aforementioned goodwill impairment as well as valuation adjustments resulting from classifying the CRE assets as held for sale and estimated transaction costs.
+Added: As of December 31, 2022, the assets held for sale and the associated liabilities were transferred to Slate.
+Added: SALE OF MIDDLE MARKET LENDING PORTFOLIO
+Added: In April 2022, the Company entered into a definitive agreement to sell substantially all of the corporate loan interests held by the MML business operated by the Company, as well as assets managed for third parties (collectively, the “MML Portfolio”), to Ares Capital Management LLC (“Ares”) for $ 2.4 billion.
+Added: The Company’s loans, having an unpaid principal balance of $ 1.9 billion, were transferred to Ares for cash proceeds of $ 1.9 billion and a realized gain of $ 20.4 million was recorded during the year ended December 31, 2022.
+Added: As of December 31, 2022, all loans were transferred to Ares.
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: ended December 31, 2020.
−Removed: Certain employees who primarily supported the CRE business joined Slate in connection with the sale.
−Removed: The carrying value of the total assets in the disposal group was $ 194.1 million at December 31, 2021, primarily real estate, net.
−Removed: The carrying value of total liabilities in the disposal group was $ 154.9 million at December 31, 2021, primarily mortgages payable on the related real estate held for sale.
DERIVATIVE INSTRUMENTS
11 unchanged sentences
In the case of market agreed coupon (“MAC”) interest rate swaps, the Company may make or receive a payment at the time of entering into such interest rate swaps, which represents fair value of these swaps, to compensate for the out of market nature of such interest rate swaps.
−Removed: Subsequent changes in fair value from inception of these interest rate swaps are reflected within Unrealized gains (losses) on interest rate swaps in the Consolidated Statements of Comprehensive Income (Loss).
+Added: Subsequent changes in fair value from inception of these interest rate swaps are reflected within Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).
Similar to other interest rate swaps, the Company may have to pledge cash or assets as collateral for the MAC interest rate swap transactions.
1 unchanged sentence
Derivatives are recognized as either assets or liabilities at fair value in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss).
−Removed: The changes in the estimated fair value are presented within Net gains (losses) on other derivatives and financial instruments with the exception of interest rate swaps which are separately presented.
+Added: The changes in the estimated fair value are presented within Net gains (losses) on derivatives.
None of the Company’s derivative transactions have been designated as hedging instruments for accounting purposes.
The Company also maintains collateral in the form of cash on margin with counterparties to its interest rate swaps and other derivatives.
−Removed: In accordance with a clearing organization’s rulebook, the Company presents the fair value of centrally cleared interest rate swaps net of variation margin pledged under such transactions.
−Removed: At December 31, 2021 and 2020, ($ 393.4 ) million and $ 1.5 billion, respectively, of variation margin was reported as an adjustment to interest rate swaps, at fair value.
+Added: In accordance with a clearing organization’s rulebook, the Company presents the fair value of centrally cleared interest rate swaps net of variation margin pledged or received under such transactions.
+Added: At December 31, 2022 and 2021, ($ 3.2 ) billion and ($ 0.4 ) billion, respectively, of variation margin was reported as an adjustment to interest rate swaps, at fair value.
Interest Rate Swap Agreements – Interest rate swap agreements are the primary instruments used to mitigate interest rate risk.
11 unchanged sentences
If the Company sells or exercises a swaption, the realized gain (loss) on the swaption would be equal to the difference between the cash received or the fair value of the underlying interest rate swap received and the premium paid.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
The fair value of swaptions are estimated using internal pricing models and compared to the counterparty market values.
3 unchanged sentences
MBS options are over-the-counter traded instruments and those written on current-coupon mortgage-backed securities are typically the most liquid.
−Removed: MBS options are measured at fair value using internal pricing models and compared to the counterparty market value at the valuation date.
+Added: MBS options are measured at fair value using internal pricing models and compared to the counterparty market values.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
Futures Contracts – Futures contracts are derivatives that track the prices of specific assets or benchmark rates.
6 unchanged sentences
Credit Derivatives – The Company may enter into credit derivatives referencing a commercial mortgage-backed securities index, such as the CMBX index, and synthetic total return swaps.
−Removed: The table below summarizes fair value information about our derivative assets and liabilities at December 31, 2021 and 2020:
+Added: The table below summarizes fair value information about the Company’s derivative assets and liabilities at December 31, 2022 and 2021:
Derivatives Instruments December 31, 2022 December 31, 2021
Assets (dollars in thousands)
+Added: Interest rate swaps $ 33,006 $ —
Interest rate swaptions 256,991 105,710
3 unchanged sentences
Credit derivatives (1)
−Removed: $ 170,370 $ 171,134
+Added: Total derivative assets $ 342,064 $ 170,370
Interest rate swaps $ 108,724 $ 747,036
3 unchanged sentences
Credit derivatives (1)
−Removed: $ 881,537 $ 1,033,345
+Added: Total derivative liabilities $ 204,172 $ 881,537
(1) The maximum potential amount of future payments is the notional amount of credit derivatives in which the Company sold protection of $ 420.0 million and $ 400.0 million at December 31, 2022 and December 31, 2021, respectively, plus any coupon shortfalls on the underlying tranche.
−Removed: As of December 31, 2021 and 2020, the credit derivative tranches referencing the basket of bonds had a range of ratings between AAA and AA, and AAA and A, respectively.
+Added: As of December 31, 2022 and 2021, the credit derivative tranches referencing the basket of bonds had a range of ratings between AAA and AA.
ANNALY CAPITAL MANAGEMENT, INC.
44 unchanged sentences
Purchase contracts $ 10,589,000 $ 10,675,739 $ 10,623,350 $ ( 52,389 )
+Added: Sale contracts ( 44,000 ) ( 44,849 ) ( 44,674 ) 175
+Added: Net TBA derivatives $ 10,545,000 $ 10,630,890 $ 10,578,676 $ ( 52,214 )
December 31, 2021
27 unchanged sentences
$ — $ ( 7,509,200 ) 1.96
+Added: Treasury futures - 5 year
+Added: — ( 5,644,900 ) 4.38
Treasury futures - 10 year and greater
1 unchanged sentence
Total $ — $ ( 22,535,100 ) 4.60
−Removed: The Company presents derivative contracts on a gross basis on the Consolidated Statements of Financial Condition.
+Added: The Company presents derivative contracts on a gross basis in the Consolidated Statements of Financial Condition.
Derivative contracts may contain legally enforceable provisions that allow for netting or setting off receivables and payables with each counterparty.
−Removed: The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset on our Consolidated Statements of Financial Condition at December 31, 2021 and 2020, respectively.
+Added: The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset in the Company’s Consolidated Statements of Financial Condition at December 31, 2022 and 2021, respectively.
December 31, 2022
2 unchanged sentences
Assets (dollars in thousands)
+Added: Interest rate swaps, at fair value $ 33,006 $ ( 24,625 ) $ — $ 8,381
Interest rate swaptions, at fair value 256,991 — — 256,991
2 unchanged sentences
Purchase commitments 1,832 — — 1,832
−Removed: Credit derivatives 1,160 ( 516 ) — 644
Interest rate swaps, at fair value $ 108,724 $ ( 24,625 ) $ ( 1,251 ) $ 82,848
11 unchanged sentences
Purchase commitments 1,779 — — 1,779
+Added: Credit derivatives 1,160 ( 516 ) — 644
Interest rate swaps, at fair value $ 747,036 $ — $ ( 77,607 ) $ 669,429
+Added: TBA derivatives, at fair value 3,916 ( 3,876 ) ( 40 ) —
Futures contracts, at fair value 129,134 ( 9,028 ) ( 120,106 ) —
+Added: Purchase commitments 870 — — 870
Credit derivatives 581 ( 516 ) ( 65 ) —
2 unchanged sentences
Financial Statements
−Removed: The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:
+Added: The effect of interest rate swaps in the Consolidated Statements of Comprehensive Income (Loss) is as follows:
Location on Consolidated Statements of Comprehensive Income (Loss)
−Removed: Net Interest Component of Interest Rate Swaps Realized Gains (Losses) on Termination of Interest Rate Swaps Unrealized Gains (Losses) on Interest Rate Swaps
+Added: Net Interest Component of Interest Rate Swaps (1)
+Added: Realized Gains (Losses) on Termination of Interest Rate Swaps (1)
+Added: Unrealized Gains (Losses) on Interest Rate Swaps (1)
For the years ended (dollars in thousands)
2 unchanged sentences
December 31, 2020 $ ( 207,877 ) $ ( 1,917,628 ) $ ( 904,532 )
−Removed: The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:
+Added: (1) Included in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).
+Added: The effect of other derivative contracts in the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:
Year Ended December 31, 2022
18 unchanged sentences
Upon the occurrence of any one of items (i) through (iv), or another default under the agreement, the counterparty to the applicable agreement has a right to terminate the agreement in accordance with its provisions.
−Removed: The aggregate fair value of all derivative instruments with the aforementioned features that are in a net liability position at December 31, 2021 was approximately $ 0.7 billion, which represents the maximum amount the Company would be required to pay upon termination.
−Removed: This amount is fully collateralized.
−Removed: FAIR VALUE MEASUREMENTS
−Removed: The Company follows fair value guidance in accordance with GAAP to account for its financial instruments and MSR that are accounted for at fair value.
−Removed: The fair value of a financial instrument and MSR is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
+Added: The aggregate fair value of all derivative instruments with the aforementioned features were in a net asset position at December 31, 2022.
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: “Sale of Commercial Real Estate Business” Note for fair value measurements related to the assets and liabilities of the disposal group held for sale as of December 31, 2021.
+Added: FAIR VALUE MEASUREMENTS
+Added: The Company follows fair value guidance in accordance with GAAP to account for its financial instruments and MSR that are accounted for at fair value.
+Added: The fair value of a financial instrument and MSR is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
GAAP requires classification of financial instruments and MSR into a three-level hierarchy based on the priority of the inputs to the valuation technique.
25 unchanged sentences
Model valuations are then compared to valuations obtained from third party pricing providers.
−Removed: Management reviews the valuations received from third party pricing providers and uses them as a point of comparison to modeled values.
−Removed: The valuation of MSR and Interests in MSR require significant judgment by management and the third party pricing providers.
−Removed: Assumptions used for which there is a lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s financial statements.
+Added: Management reviews the valuations received from third party pricing providers and
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
+Added: uses them as a point of comparison to modeled values.
+Added: The valuation of MSR and Interests in MSR require significant judgment by management and the third party pricing providers.
+Added: Assumptions used for which there is a lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s financial statements.
The following tables present the estimated fair values of financial instruments and MSR measured at fair value on a recurring basis.
8 unchanged sentences
Residential mortgage loans — 1,809,832 — 1,809,832
−Removed: Residential mortgage loan warehouse facility — 980 — 980
Mortgage servicing rights — — 1,748,209 1,748,209
−Removed: Interests in MSR — — 69,316 69,316
Assets transferred or pledged to securitization vehicles — 9,121,912 — 9,121,912
Derivative assets
+Added: Interest rate swaps — 33,006 — 33,006
Other derivatives 33,179 275,879 — 309,058
14 unchanged sentences
Residential mortgage loans — 2,272,072 — 2,272,072
+Added: Residential mortgage loan warehouse facility — 980 — 980
Mortgage servicing rights — — 544,562 544,562
+Added: Interests in MSR — — 69,316 69,316
Assets transferred or pledged to securitization vehicles — 6,086,308 — 6,086,308
8 unchanged sentences
Total liabilities $ 129,134 $ 6,957,102 $ — $ 7,086,236
−Removed: Qualitative and Quantitative Information about Level 3 Fair Value Measurements
−Removed: The Company considers unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset.
−Removed: Relevant inputs vary depending on the nature of the instrument being measured at fair value.
−Removed: The sensitivities of significant unobservable
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements are described below.
+Added: Qualitative and Quantitative Information about Level 3 Fair Value Measurements
+Added: The Company considers unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset.
+Added: Relevant inputs vary depending on the nature of the instrument being measured at fair value.
+Added: The sensitivities of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements are described below.
The effect of a change in a particular assumption in the sensitivity analysis below is considered independently from changes in any other assumptions.
3 unchanged sentences
For each of the individual relationships described below, the inverse relationship would also generally apply.
−Removed: For MSR and Interest in MSR, in general, increases in the discount, prepayment or delinquency rates or in annual servicing costs in isolation would result in a lower fair value measurement.
−Removed: A decline in interest rates could lead to higher-than-expected prepayments of mortgages underlying the Company’s investments in MSR and Interest in MSR, which in turn could result in a decline in the estimated fair value of MSR and Interest in MSR.
+Added: For MSR and Interests in MSR, in general, increases in the discount, prepayment or delinquency rates or in annual servicing costs in isolation would result in a lower fair value measurement.
+Added: A decline in interest rates could lead to higher-than-expected prepayments of mortgages underlying the Company’s investments in MSR and Interests in MSR, which in turn could result in a decline in the estimated fair value of MSR and Interests in MSR.
Refer to the “Mortgage Servicing Rights” Note for additional information, including rollforwards.
−Removed: The table below presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 MSR and Interest in MSR.
+Added: The table below presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 MSR and Interests in MSR.
The table does not give effect to the Company’s risk management practices that might offset risks inherent in these Level 3 investments.
6 unchanged sentences
$ 86 - $ 118 ($ 95 )
−Removed: Interests in MSR 8.4 % - 8.4 % ( 8.4 %)
−Removed: 5.0 % - 14.4 % ( 9.1 %)
−Removed: 0.0 % - 0.2 % ( 0.1 %)
−Removed: $ 78 - $ 84 ($ 81 )
December 31, 2021
1 unchanged sentence
Discount rate Prepayment rate Delinquency rate Cost to service
−Removed: MSR consolidated with VIE 9.0 % - 12.0 % ( 9.4 %)
+Added: MSR held directly 3.3 % - 11.1 % ( 7.0 %)
7.3 % - 15.9 % ( 9.4 %)
1 unchanged sentence
$ 90 - $ 103 ($ 96 )
+Added: Interests in MSR 8.4 % - 8.4 % ( 8.4 %)
+Added: 5.0 % - 14.4 % ( 9.1 %)
+Added: 0.0 % - 0.2 % ( 0.1 %)
+Added: $ 78 - $ 84 ($ 81 )
(1) Represents rates, estimates and assumptions that the Company believes would be used by market participants when valuing these assets.
4 unchanged sentences
Financial assets (dollars in thousands)
−Removed: Commercial real estate debt and preferred equity, held for investment (1)
−Removed: $ — $ — $ 1,372,430 $ 1,442,071
Corporate debt, held for investment $ — $ — $ 1,968,991 $ 1,986,379
−Removed: Assets transferred or pledged to securitization vehicles — — 874,349 928,732
Financial liabilities
1 unchanged sentence
Other secured financing 250,000 250,000 903,255 903,255
−Removed: Mortgage payable — — 426,256 474,779
−Removed: (1) Includes assets of consolidated VIEs.
−Removed: Commercial real estate debt and preferred equity, held for investment, corporate debt held, for investment, corporate debt, held for sale and mortgages payable are valued using Level 3 inputs.
+Added: Corporate debt, held for investment is valued using Level 3 inputs.
+Added: Refer to the “Sale of Middle Market Lending Portfolio” Note for additional information.
The carrying values of repurchase agreements and short term other secured financing approximate fair value and are considered Level 2 fair value measurements.
Long term other secured financing is valued using Level 2 inputs.
−Removed: GOODWILL AND INTANGIBLE ASSETS
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
+Added: GOODWILL AND INTANGIBLE ASSETS
The Company’s acquisitions are accounted for using the acquisition method if the acquisition is deemed to be a business.
7 unchanged sentences
If the carrying value of a reporting unit exceeds its fair value, an impairment loss is recognized in amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
−Removed: At December 31, 2021 and 2020, goodwill totaled $ 0 and $ 71.8 million, respectively.
−Removed: The change reflects the goodwill impairment in connection with the sale of the CRE business.
−Removed: Refer to the “Sale of Commercial Real Estate Business” Note for additional information.
+Added: At December 31, 2022 and 2021, there was no goodwill balance.
Intangible assets, net
Finite life intangible assets are amortized over their expected useful lives.
−Removed: As part of the Internalization, which closed on June 30, 2020, the Company recognized an intangible asset for the acquired assembled workforce of approximately $ 41.2 million based on the replacement cost of the employee base acquired by the Company.
−Removed: As part of the sale of the CRE business, certain intangible assets connected with those real estate assets were transferred into the disposal group held for sale.
−Removed: During the year ended December 31, 2021, the Company recognized an impairment of $ 4.3 million in Other income (loss) and $ 5.2 million in Business divestiture-related gains (losses) in the Consolidated Statements of Comprehensive Income (Loss) for changes to the assembled workforce.
+Added: As part of the Company’s management internalization transaction, which closed on June 30, 2020, the Company recognized an intangible asset for the acquired assembled workforce of approximately $ 41.2 million based on the replacement cost of the employee base acquired by the Company.
The following table presents the activity of finite lived intangible assets for the year ended December 31, 2022.
1 unchanged sentence
(dollars in thousands)
−Removed: Balance at December 31, 2020
+Added: Beginning balance January 1, 2022
Impairment ( 4,157 )
−Removed: Intangible assets transferred to disposal group held for sale ( 14,528 )
amortization expense
−Removed: Balance at December 31, 2021
+Added: Ending balance December 31, 2022
SECURED FINANCING
13 unchanged sentences
December 31, 2022
−Removed: Agency Mortgage-Backed Securities CRTs Non-Agency Mortgage-Backed Securities Residential Mortgage Loans Commercial Mortgage-Backed Securities (1)
−Removed: Total Repurchase Agreements Weighted Average Rate
+Added: Agency Mortgage-Backed Securities CRTs Non-Agency Mortgage-Backed Securities Residential Mortgage Loans Commercial Mortgage-Backed Securities Total Repurchase Agreements Weighted Average Rate
(dollars in thousands)
8 unchanged sentences
December 31, 2021
−Removed: Agency Mortgage-Backed Securities CRTs Non-Agency Mortgage-Backed Securities Residential Mortgage Loans Commercial
−Removed: Loans Commercial Mortgage-Backed Securities Total Repurchase Agreements Weighted Average Rate
+Added: Agency Mortgage-Backed Securities CRTs Non-Agency Mortgage-Backed Securities Residential Mortgage Loans Commercial Mortgage-Backed Securities (1)
+Added: Total Repurchase Agreements Weighted Average Rate
(dollars in thousands)
8 unchanged sentences
(1) Includes commercial mortgage-backed securities held for sale.
−Removed: (2) No repurchase agreements had a remaining maturity over 1 year at December 31, 2021.
−Removed: Less than 1 % of the total repurchase agreements had a remaining maturity over 1 year at December 31, 2020.
+Added: (2) No repurchase agreements had a remaining maturity over 1 year at December 31, 2022 and 2021.
The following table summarizes the gross amounts of reverse repurchase agreements and repurchase agreements, amounts offset in accordance with netting arrangements and net amounts of repurchase agreements and reverse repurchase agreements as presented in the Consolidated Statements of Financial Condition at December 31, 2022 and 2021.
6 unchanged sentences
Netted amounts $ — $ 59,512,597 $ — $ 54,769,643
−Removed: The fair value of mortgage-backed securities received as collateral in connection with reverse repurchase agreements was approximately $ 250.0 million, which the Company fully repledged, at December 31, 2020.
−Removed: Other Secured Financing - Refer to the “Variable Interest Entities” Note for additional information on the Company’s other secured financing arrangements.
−Removed: Investments pledged as collateral under secured financing arrangements and interest rate swaps, excluding residential and senior securitized commercial mortgage loans of consolidated VIEs, had an estimated fair value and accrued interest of $ 59.2 billion and $ 160.8 million, respectively, at December 31, 2021 and $ 70.6 billion and $ 196.9 million, respectively, at December 31, 2020.
+Added: Other Secured Financing - As of December 31, 2022, the Company had a $ 500 million committed credit facility to finance a portion of its MSR portfolio.
+Added: Outstanding borrowings under this facility as of December 31, 2022 totaled $ 250.0 million with maturities ranging between one to three years .
+Added: The weighted average rate of the advances was 7.07 % as of December 31, 2022.
+Added: Borrowings are reported in Other secured financing in the Company’s Consolidated Statements of Financial Condition.
+Added: Refer to the “Variable Interest Entities” Note for additional information on the Company’s other secured financing arrangements at December 31, 2021.
+Added: Investments pledged as collateral under secured financing arrangements and interest rate swaps, excluding residential mortgage loans of consolidated VIEs, had an estimated fair value and accrued interest of $ 62.2 billion and $ 226.4 million, respectively, at December 31, 2022 and $ 59.2 billion and $ 160.8 million, respectively, at December 31, 2021.
ANNALY CAPITAL MANAGEMENT, INC.
7 unchanged sentences
2,936,500,000 2,936,500,000 468,309,810 364,934,065 $ 0.01
−Removed: In June 2019, the Company announced that its board of directors (“Board”) had authorized the repurchase of up to $ 1.5 billion of its outstanding shares of common stock, which expired on December 31, 2020 (the “2019 - 2020 Share Repurchase Program”).
−Removed: In December 2020, the Company announced that its Board authorized the repurchase of up to $ 1.5 billion of its outstanding common shares through December 31, 2021 (the “2021 Share Repurchase Program”).
−Removed: The 2021 Share Repurchase Program replaced the Prior Share Repurchase Program.
−Removed: In January 2022, we announced that our Board authorized the repurchase of up to $ 1.5 billion of our outstanding shares of common stock through December 31, 2024 (the “Current Share Repurchase Program”).
−Removed: The Current Share Repurchase Program replaced the 2019 - 2020 Share Repurchase Program, which had replaced the Prior Share Repurchase Program.
−Removed: During the year ended December 31, 2021, no shares were repurchased under the 2021 Share Repurchase Program.
−Removed: During the year ended December 31, 2020, the Company repurchased 32.4 million shares of its common stock for an aggregate amount of $ 208.9 million, excluding commission costs.
−Removed: All common shares purchased were part of a publicly announced plan in open-market transactions.
−Removed: The following table provides a summary of activity related to the Company’s Direct Purchase and Dividend Reinvestment Program.
−Removed: December 31, 2021 December 31, 2020
−Removed: (dollars in thousands)
−Removed: Shares issued through direct purchase and dividend reinvestment program
−Removed: Amount raised from direct purchase and dividend reinvestment program
−Removed: In January 2018, the Company 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.
−Removed: (formerly known as Merrill Lynch, Pierce, Fenner & Smith, Incorporated), Barclays Capital Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co.
−Removed: Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., RBC Capital Markets, LLC and UBS Securities LLC (the “Sales Agents”).
−Removed: The Company may offer and sell shares of its 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 year ended December 31, 2021, the Company issued 60.9 million shares of common stock for proceeds of $ 552.4 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 year ended December 31, 2020.
+Added: In December 2020, the Company announced that its Board authorized the repurchase of up to $ 1.5 billion of its outstanding common shares through December 31, 2021 (the “Prior Share Repurchase Program”).
+Added: In January 2022, the Company announced that its Board authorized the repurchase of up to $ 1.5 billion of its outstanding shares of common stock through December 31, 2024 (the “Current Share Repurchase Program”).
+Added: The Current Share Repurchase Program replaced the Prior Share Repurchase Program.
+Added: During the years ended December 31, 2022 and 2021, no shares were purchased under the Current Share Repurchase Program or Prior Share Repurchase Program.
+Added: During the year ended December 31, 2022, the Company closed two public offerings for an aggregate original issuance of 50 million shares of common stock for aggregate proceeds of $ 1.31 billion before deducting offering expenses.
+Added: In connection with each offering, the Company granted the underwriters a thirty-day option to purchase up to an additional 3.75 million shares of common stock, which the underwriters exercised in full in both instances, resulting in an additional $ 196.5 million in proceeds before deducting offering expenses for the year ended December 31, 2022.
+Added: The stock offerings conducted during the year ended December 31, 2022 were completed prior to the Reverse Stock Split and the foregoing share amounts have been retroactively adjusted to reflect the effects thereof.
+Added: On August 6, 2020, the Company entered into separate Amended and Restated Distribution Agency Agreements (as amended by Amendment No.
+Added: 1 to the Amended and Restated Distribution Agency Agreements on August 6, 2021, and Amendment No.
+Added: 2 to the Amended and Restated Distribution Agency Agreements on November 3, 2022, collectively, the “Sales Agreements”) with each of RBC Capital Markets, LLC, Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co.
+Added: LLC, Keefe, Bruyette & Woods, Inc., J.P.
+Added: Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Sales Agents”).
+Added: Pursuant to the Sales Agreements, the Company may offer and sell shares of its common stock, having an aggregate offering price of up to $ 1.5 billion, from time to time through any of the Sales Agents (the “at-the-market sales program”).
+Added: During the year ended December 31, 2022, under the at-the-market sales program, the Company issued 45.7 million shares for proceeds of $ 1.1 billion, net of commissions and fees.
+Added: During the year ended December 31, 2021, under the at-the-market sales program, the Company issued 15.2 million shares for proceeds of $ 552.4 million, net of commissions and fees.
+Added: The foregoing share amounts have been retroactively adjusted to reflect the effects of the Reverse Stock Split.
(B) Preferred Stock
1 unchanged sentence
In the event of a liquidation or dissolution of the Company, the Company’s then outstanding preferred stock takes precedence over the Company’s common stock with respect to payment of dividends and the distribution of assets.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
Shares Authorized Shares Issued And Outstanding Carrying Value Contractual Rate Earliest Redemption Date (1)
1 unchanged sentence
December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021
−Removed: Fixed-rate (dollars in thousands)
−Removed: Series D — 18,400,000 — — — — 7.50 % 9/13/2017 NA NA
Fixed-to-floating rate
4 unchanged sentences
(1) Subject to the Company’s right under limited circumstances to redeem preferred stock earlier in order to preserve its qualification as a REIT or under limited circumstances related to a change in control of the Company.
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
Each series of preferred stock has a par value of $ 0.01 per share and a liquidation and redemption price of $ 25.00 , plus accrued and unpaid dividends through their redemption date.
Through December 31, 2022, the Company had declared and paid all required quarterly dividends on the Company’s preferred stock.
−Removed: During the year ended December 31, 2020, the Company redeemed all 18.4 million of its issued and outstanding shares of 7.50 % Series D Cumulative Redeemable Preferred Stock (“Series D Preferred Stock”) for $ 460.0 million.
−Removed: The cash redemption amount for each share of Series D Preferred Stock was $ 25.00 .
The Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, Series G Fixed-to-Floating Rate Cumulative Preferred Stock and Series I Fixed-to-Floating Rate Cumulative Preferred Stock rank senior to the common stock of the Company.
+Added: On November 3, 2022, the Company’s Board of Directors approved a repurchase plan for all of its existing outstanding Preferred Stock (as defined below, the “Preferred Stock Repurchase Program”).
+Added: Under the terms of the plan, the Company is authorized to repurchase up to an aggregate of 63,500,000 shares of Preferred Stock, comprised of up to (i) 28,800,000 shares of its 6.95 % Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $ 0.01 per share (the “Series F Preferred Stock”), (ii) 17,000,000 shares of its 6.50 % Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $ 0.01 per share (the “Series G Preferred Stock”), and (iii) 17,700,000 shares of its 6.75 % Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $ 0.01 per share (the “Series I Preferred Stock”, and together with Series F Preferred Stock and Series G Preferred Stock, the “Preferred Stock”).
+Added: The aggregate liquidation value of the Preferred Stock that may be repurchased by the Company pursuant to the Preferred Stock Repurchase Program, as of November 3, 2022, was approximately $ 1.6 billion.
+Added: The Preferred Stock Repurchase Program became effective on November 3, 2022, and shall expire on December 31, 2024.
+Added: No shares were repurchased to with respect to the Preferred Stock Repurchase Program during the year ended December 31, 2022.
(C) Distributions to Stockholders
9 unchanged sentences
Date of distributions paid to common stockholders after period end January 31, 2023 January 31, 2022
−Removed: Dividends declared to series D preferred stockholders $ — $ 34,500
−Removed: Dividends declared per share of series D preferred stock (2)
Dividends declared to series F preferred stockholders $ 53,131 $ 50,040
7 unchanged sentences
$ 1.688 $ 1.688
−Removed: (1) For the year ended December 31, 2021, 100 % of common stock dividend distributions of $ 0.87 per share was taxable as a return of capital.
−Removed: For the year ended December 31, 2020, 74 % and 26 % of common stock dividend distributions of $ 0.95 per share were taxable as ordinary income and capital gains, respectively.
−Removed: (2) For the year ended December 31, 2021, 100 % of the preferred stock dividend distributions per share was taxable as a return of capital.
−Removed: For the year ended December 31, 2020, 74 % and 26 % of the preferred stock dividend distributions per share were taxable as ordinary income and capital gains, respectively.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
+Added: (1) For the year ended December 31, 2022, 86.5 % and 13.5 % of common stock dividend distributions of $ 3.52 per share was taxable as ordinary income and a return of capital, respectively.
+Added: For the year ended December 31, 2021, 100 % of common stock dividend distributions of $ 3.49 per share were taxable as a return of capital.
+Added: (2) For the year ended December 31, 2022, 100 % of the preferred stock dividend distributions per share were taxable as ordinary income.
+Added: For the year ended December 31, 2021, 100 % of the preferred stock dividend distributions per share were taxable as a return of capital.
LONG-TERM STOCK INCENTIVE PLAN
5 unchanged sentences
For RSUs that vest, the underlying shares of common stock are delivered (net of required withholding tax) as outlined in the applicable award agreements.
−Removed: PSUs are subject to the Company’s achievement of specified performance criteria and the number of awards that vest can range from zero to 150 % of the grant amount.
+Added: PSUs are subject
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
+Added: to the Company’s achievement of specified performance criteria and the number of awards that vest can range from zero to 150 % of the grant amount.
Award agreements generally provide that vesting is accelerated in certain circumstances, such as death and disability.
Delivery of the underlying shares of common stock, which generally occurs over a three-year period, is conditioned on the grantees satisfying certain vesting and other requirements outlined in the award agreements.
−Removed: The following table sets forth activity related to the Company’s RSUs and PSUs awarded under the Plans:
−Removed: For the Year Ended
−Removed: December 31, 2021
−Removed: Number of Shares Weighted Average Grant Date Fair Value
−Removed: (dollars in thousands)
−Removed: Beginning balance 1,670,738 $ 7.05
−Removed: 1,824,434 $ 6.92
−Removed: Vested ( 739,815 ) $ 7.35
−Removed: Forfeited (1)
−Removed: ( 94,353 ) $ 8.22
−Removed: Ending balance (2)
−Removed: 2,661,004 $ 6.84
−Removed: (1) Includes dividend equivalent rights.
−Removed: (2) The ending balance includes 680,351 PSUs and related dividend equivalent rights subject to performance conditions and future service requirements, and represents the target amount of such PSUs that may be earned.
The Company recognized equity-based compensation expense of $ 19.4 million for the year ended December 31, 2022.
1 unchanged sentence
This cost is expected to be recognized over a weighted average period of 1.85 years.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
INTEREST INCOME AND INTEREST EXPENSE
13 unchanged sentences
Prime jumbo (2)
−Removed: (1) Changes in fair value are recognized in Other comprehensive income (loss) on the accompanying Consolidated Statements of Comprehensive Income (Loss).
−Removed: (2) Changes in fair value are recognized in Net unrealized gains (losses) on instruments measured at fair value through earnings on the accompanying Consolidated Statements of Comprehensive Income (Loss).
+Added: (1) Changes in fair value are recognized in Other comprehensive income (loss) on the accompanying Consolidated Statements of Comprehensive Income (Loss) for securities purchased prior to July 1, 2022.
+Added: Effective July 1, 2022, changes in fair value are recognized in Net gains (losses) on investments and other on the accompanying Consolidated Statements of Comprehensive Income (Loss) for newly purchased securities.
+Added: (2) Changes in fair value are recognized in Net gains (losses) on investments and other on the accompanying Consolidated Statements of Comprehensive Income (Loss).
(3) Effective yield is recalculated for differences between estimated and actual prepayments and the amortized cost is adjusted as if the new effective yield had been applied since inception.
40 unchanged sentences
Diluted $ 3.92 $ 6.39 $ ( 2.92 )
−Removed: The computations of diluted net income (loss) per share available (related) to common share for the year ended December 31, 2020 excludes 1.0 million of potentially dilutive restricted stock units and performance stock units because their effect would have been anti-dilutive.
+Added: The computations of diluted net income (loss) per share available (related) to common share for the years ended December 31, 2022 and 2020 exclude 0.7 million and 1.0 million, respectively, of potentially dilutive restricted stock units and performance stock units because their effect would have been anti-dilutive.
For the year ended December 31, 2022 the Company was qualified to be taxed as a REIT under Code Sections 856 through 860.
38 unchanged sentences
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.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
RELATED PARTY TRANSACTIONS
6 unchanged sentences
Pursuant to the Internalization Agreement, the Former Manager waived any Acceleration Fee (as defined in the Management Agreement).
+Added: ANNALY CAPITAL MANAGEMENT, INC.
+Added: AND SUBSIDIARIES
+Added: Financial Statements
Prior to the closing of the Internalization, the Former Manager, under the Management Agreement and subject to the supervision and direction of the Board, was responsible for (i) the selection, purchase and sale of assets for the Company’s investment portfolio;
7 unchanged sentences
For the six months ended June 30, 2020, the compensation and management fee computed in accordance with the Management Agreement was $ 77.9 million and reimbursement payments to the former manager was $ 14.2 million.
−Removed: For the year ended December 31, 2019, the compensation and management fee was $ 170.6 million and reimbursement payments to the former manager was $ 21.4 million.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
−Removed: AND SUBSIDIARIES
−Removed: Financial Statements
LEASE COMMITMENTS AND CONTINGENCIES
−Removed: The Company’s operating leases are primarily comprised of a corporate office lease with a remaining lease term of approximately four years .
−Removed: The corporate office lease includes an option to extend for up to five years , however the extension term was not included in the operating lease liability calculation.
+Added: The Company’s operating leases are primarily comprised of corporate office leases with a remaining lease terms of approximately three years and five years , respectively.
+Added: The corporate office leases include options to extend for up to five years , however the extension terms were not included in the operating lease liability calculation.
Leases with an initial term of 12 months or less are not recorded on the balance sheet.
12 unchanged sentences
Operating cash flows from operating leases $ 3,872
−Removed: (1) As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.
+Added: (1) For the Company’s leases that do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.
The following table provides details related to maturities of lease liabilities:
1 unchanged sentence
Years ended December 31, (dollars in thousands)
+Added: Later years 291
Total lease payments $ 11,869
5 unchanged sentences
There were no material contingencies at December 31, 2022 and 2021.
−Removed: ARCOLA REGULATORY REQUIREMENTS
−Removed: Arcola is the Company’s wholly owned and consolidated broker-dealer.
−Removed: Arcola is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees.
−Removed: Arcola is a member of various clearing organizations with which it maintains cash required to conduct its day-to-day clearance activities.
−Removed: Arcola enters into reverse repurchase agreements and repurchase agreements as part of its matched book trading activity.
−Removed: Reverse repurchase agreements are recorded on settlement date at the contractual amount and are collateralized by mortgage-backed or other securities.
−Removed: Arcola generates income from the spread between what is earned on the reverse repurchase agreements and what is paid on the matched repurchase agreements.
−Removed: Arcola’s policy is to obtain possession of collateral with a market value in excess of the principal amount loaned under reverse repurchase agreements.
−Removed: To ensure that the market value of the underlying collateral remains sufficient, collateral is valued daily, and Arcola will require counterparties to deposit additional collateral, when necessary.
−Removed: All reverse repurchase activities are transacted under master repurchase agreements or other documentation that give Arcola the right, in the event of default, to liquidate collateral held and in some instances, to offset receivables and payables with the same counterparty.
ANNALY CAPITAL MANAGEMENT, INC.
1 unchanged sentence
Financial Statements
−Removed: As a member of FINRA, Arcola is required to maintain a minimum net capital balance.
−Removed: At December 31, 2021, Arcola had a minimum net capital requirement of $ 0.3 million.
−Removed: Arcola consistently operates with capital in excess of its regulatory capital requirements.
−Removed: Arcola’s regulatory net capital as defined by SEC Rule 15c3-1 at December 31, 2021 was $ 512.3 million with excess net capital of $ 512.0 million.
SUBSEQUENT EVENTS
−Removed: In January 2022, the Company completed and closed the securitizations of residential mortgage loans, OBX 2022-NQM1 and OBX 2022-INV1, with face values of $ 556.7 million and $ 377.3 million, respectively and in February 2022, completed and closed OBX 2022-INV2, with a face value of $ 466.7 million.
−Removed: The securitizations represented financing transactions which provided non-recourse financing to the Company collateralized by residential mortgage loans purchased by the Company.
−Removed: Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
−Removed: ANNALY CAPITAL MANAGEMENT, INC.
+Added: In January 2023, the Company completed and closed the securitization of residential mortgage loans, OBX 2023-NQM1, with a face value of $ 405.2 million.
+Added: The securitization represents financing transactions which provided non-recourse financing to the Company collateralized by residential mortgage loans purchased by the Company.
+Added: In January 2023, the Company upsized capacity of an existing credit facility by $ 200 million for the Company’s residential mortgage loans.
+Added: In February 2023, the Company closed a $ 250 million credit facility for Annaly’s MSR platform.
+Added: Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
February 16, 2023 By:
−Removed: Chief Executive Officer and President (Principal Executive Officer)
+Added: Chief Executive Officer and Chief Investment Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Signature Title Date
−Removed: Chief Executive Officer, President and Director (Principal Executive Officer)
+Added: Chief Executive Officer, Chief Investment Officer, and Director (Principal Executive Officer)
February 16, 2023
7 unchanged sentences
Director, Vice Chair of the Board February 16, 2023
−Removed: /s/ Katherine Beirne Fallon
−Removed: Katherine Beirne Fallon
−Removed: Director February 17, 2022
/s/ Thomas Edward Hamilton
13 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.