Annaly Capital Management Inc. Files 2023 Annual Report on Form 10-K

TL;DR

<b>Annaly Capital Management Inc. has submitted its comprehensive 2023 annual report (10-K), detailing its financial performance and operational status as a Real Estate Investment Trust.</b>

AI Summary

ANNALY CAPITAL MANAGEMENT INC (NLY-PJ) filed a Annual Report (10-K) with the SEC on February 15, 2024. Annaly Capital Management Inc. filed its 10-K report for the fiscal year ending December 31, 2023. The company's primary business is Real Estate Investment Trusts (REITs). The filing covers the period from January 1, 2023, to December 31, 2023. Key financial data points such as common stock, preferred stock, and additional paid-in capital are detailed. The report includes information on assets pledged as collateral and variable interest entities.

Why It Matters

For investors and stakeholders tracking ANNALY CAPITAL MANAGEMENT INC, this filing contains several important signals. This 10-K filing provides investors with a detailed overview of Annaly's financial health, strategic positioning, and risk factors for the fiscal year 2023, crucial for investment decisions. The report's disclosures on assets, liabilities, and equity, including specific preferred stock series, offer insights into the company's capital structure and its management of mortgage-backed securities.

Risk Assessment

Risk Level: medium — ANNALY CAPITAL MANAGEMENT INC shows moderate risk based on this filing. The company operates in the real estate investment trust sector, which is sensitive to interest rate fluctuations and market conditions, as evidenced by the detailed financial data and risk factor disclosures in the 10-K.

Analyst Insight

Investors should review the detailed financial statements and risk factors in the 10-K to assess Annaly Capital Management's performance and outlook in the current interest rate environment.

Key Numbers

• 20231231 — Fiscal Year End (Conformed period of report)
• 20240215 — Filing Date (Filed as of date)
• 6798 — SIC Code (Standard Industrial Classification)
• 001-13447 — SEC File Number (SEC file number)

Key Players & Entities

• ANNALY CAPITAL MANAGEMENT INC (company) — Filer name
• MD (company) — State of incorporation
• NY (company) — State of business address
• 212 696 0100 (dollar_amount) — Business phone number

FAQ

Risk Factors

• Interest Rate Risk [high — financial]: The company's financial performance is significantly impacted by changes in interest rates, affecting the value of its investments and borrowing costs.
• Market Volatility [medium — market]: Fluctuations in the broader financial markets and real estate sector can adversely affect the company's business and investment portfolio.
• Operational Risks [medium — operational]: The company faces risks related to its operations, including the management of its investment portfolio and compliance with regulations.

Key Dates

• 2023-12-31: Fiscal Year End — End of the reporting period for the 10-K.
• 2024-02-15: Filing Date — Date the 10-K was officially filed with the SEC.

Glossary

REIT

Real Estate Investment Trust (Annaly Capital Management operates as a REIT, a company that owns, operates, or finances income-generating real estate.)

10-K

Annual Report (This filing provides a comprehensive overview of the company's financial condition and results of operations for the fiscal year.)

Key Financial Figures

• $0.01 — ch Registered Common Stock, par value $0.01 per share NLY New York Stock Exchange
• $62.2 billion — lar basis. At December 31, 2023, we had $62.2 billion of repurchase agreements outstanding.
• $20.0 billion — eals as of December 31, 2023 comprising $20.0 billion of issuance since the beginning of 2018
• $4.9 billion — issued 13 OBX securitizations backed by $4.9 billion of residential whole loans. We utilize

Filing Documents

• nly-20231231.htm (10-K) — 4110KB
• descriptionsecuritiesex410.htm (EX-4.10) — 350KB
• insidertradingpolicyex191.htm (EX-19.1) — 63KB
• a202310-knlyexhibit211.htm (EX-21.1) — 20KB
• a202310-knlyexhibit231.htm (EX-23.1) — 3KB
• a202310-knlyexhibit311.htm (EX-31.1) — 14KB
• a202310-knlyexhibit312.htm (EX-31.2) — 14KB
• a202310-knlyexhibit321.htm (EX-32.1) — 7KB
• a202310-knlyexhibit322.htm (EX-32.2) — 7KB
• dodd-frankclawbackpolicyex.htm (EX-97.1) — 40KB
• nly-20231231_g1.jpg (GRAPHIC) — 100KB
• nly-20231231_g2.jpg (GRAPHIC) — 101KB
• nly-20231231_g3.jpg (GRAPHIC) — 200KB
• 0001628280-24-005115.txt (&nbsp;) — 18363KB
• nly-20231231.xsd (EX-101.SCH) — 102KB
• nly-20231231_cal.xml (EX-101.CAL) — 108KB
• nly-20231231_def.xml (EX-101.DEF) — 458KB
• nly-20231231_lab.xml (EX-101.LAB) — 1083KB
• nly-20231231_pre.xml (EX-101.PRE) — 744KB
• nly-20231231_htm.xml (XML) — 3216KB

Business

Business 1 Item 1A.

Risk Factors

Risk Factors 12 Item 1B. Unresolved Staff Comments 43 Item 1C. Cybersecurity 43 Item 2.

Properties

Properties 43 Item 3.

Legal Proceedings

Legal Proceedings 43 Item 4. Mine Safety Disclosures 43 PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 44 Item 6. Reserved 46 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 47 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 88 Item 8.

Financial Statements and Supplementary Data

Financial Statements and Supplementary Data 88 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 88 Item 9A.

Controls and Procedures

Controls and Procedures 88 Item 9B. Other Information 91 Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 91 PART III Item 10. Directors, Executive Officers and Corporate Governance 92 Item 11.

Executive Compensation

Executive Compensation 92 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 92 Item 13. Certain Relationships and Related Transactions, and Director Independence 94 Item 14. Principal Accounting Fees and Services 94 PART IV Item 15. Exhibits, Financial Statement Schedules 95 Exhibit Index 95 Item 16. Form 10-K Summary 99

Financial Statements

Financial Statements 100

Signatures

Signatures II-1 Special Note Regarding Forward-Looking Statements This presentation, other written or oral communications, and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Such statements include those relating to the Company's future performance, macro outlook, the interest rate and credit environments, tax reform and future opportunities. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities ("MBS") and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of the Company's assets; changes in business conditions and the general economy; the Company's ability to grow its residential credit business; the Company's ability to grow its mortgage servicing rights business; credit risks related to the Company's investments in credit risk transfer securities and residential mortgage-backed securities and related residential mortgage credit assets; risks related to investments in mortgage servicing rights; the Company's ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting the Company's business; the Company's ability to maintain its qualification as a REIT for U.S. federal income tax purposes; the Company's ability to maintain its exemption from registration under the Investment Company Act of 1940; and oper

BUSINESS

ITEM 1. BUSINESS PART I

BUSINESS

ITEM 1. BUSINESS "Annaly," "we," "us," or "our" refers to Annaly Capital Management, Inc. and our wholly-owned subsidiaries, except where it is made clear that the term means only the parent company. Refer to the section titled "Glossary of Terms" located at the end of Part II, Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." for definitions of certain of the commonly used terms in this annual report on Form 10-K. The following description of our business should be read in conjunction with the Consolidated Financial Statements and the related Notes thereto, and the information set forth under the heading "Special Note Regarding Forward-Looking Statements" in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." INDEX TO ITEM 1. BUSINESS Page Business Overview 2 Business and Investment Strategy 2 Our Portfolio and Capital Allocation Policy 3 Risk Appetite 3 Capital Structure and Financing 5 Operating Platform 6 Risk Management 6 Information about our Executive Officers 6 Human Capital 7 Regulatory Requirements 9 Competition 10 Corporate Governance 10 Distributions 10 Available Information 11 1 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

BUSINESS

ITEM 1. BUSINESS Business Overview Introduction We are a leading diversified capital manager with investment strategies across mortgage finance. Our principal business objective is to generate net income for distribution to our stockholders and optimize our returns through prudent management of our diversified investment strategies. We are an internally-managed Maryland corporation founded in 1997 that has elected to be taxed as a real estate investment trust ("REIT"). Our common stock is listed on the New York Stock Exchange under the symbol "NLY." We use our capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities. We believe that our business objectives are supported by our size and conservative financial posture relative to the industry, the extensive experience of our employees, the diversity of our investment strategy, a comprehensive risk management approach, the availability and diversification of financing sources and our operational efficiencies. Investment Groups Our three investment groups are primarily comprised of the following: Investment Groups Description Annaly Agency Group Invests in Agency mortgage-backed securities ("MBS") collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae and complementary investments within the Agency market, including Agency commercial MBS. Annaly Residential Credit Group Invests primarily in non-Agency residential whole loans and securitized products within the residential and commercial markets. Annaly Mortgage Servicing Rights Group Invests in mortgage servicing rights ("MSR"), which provide the right to service residential mortgage loans in exchange for a portion of the interest payments made on the loans. In April 2022, we entered into a definitive agreement to sell substantially all of the assets that comprise our Mi

BUSINESS

ITEM 1. BUSINESS costs, all in an effort to generate attractive risk-adjusted returns for our shareholders. Additionally, we have attracted capital partners to our business, augmenting our public capital markets efforts, which has resulted in increased scale without sacrificing balance sheet liquidity. Certain of our strategic relationships also afford us the opportunity to support communities through socially responsible investing. We have created multiple strategic and capital partnerships across our investment groups including the following: – Annaly Residential Credit Group has established relationships with key mortgage loan originators and aggregators including well-known money center banks, allowing us to efficiently source proprietary originations suited to our risk parameters. – We have partnered with GIC Private Limited ("GIC"), a leading sovereign wealth fund, through the creation of a joint venture with the purpose of investing in residential credit assets, including newly-originated residential loans and securities issued by our subsidiaries. – We have partnered with Capital Impact Partners, a national community development financial institution, to create a social impact joint venture supporting projects in underserved communities across the country. – We have partnered with Fifth Wall Ventures, the largest venture capital firm focused on technology for the real estate industry, through a commitment to invest in their funds that target investments in North American early- and late-stage real estate software and marketplace companies. The partnership aims to identify innovative platforms and services that provide efficiencies across our core investment strategies. Our Portfolio and Capital Allocation Policy Under our capital allocation policy and subject to oversight by our Board of Directors ("Board"), we may allocate our investments within our target asset classes as we determine to be appropriate from time to time. Our Board may adopt chan

BUSINESS

ITEM 1. BUSINESS Risk Parameter Description Portfolio Composition We will maintain a portfolio comprised of target assets approved by our Board and in accordance with our capital allocation policy. Leverage We generally expect to maintain an economic leverage ratio no greater than 10:1 considerate of our overall capital allocation framework. Liquidity Risk We will seek to maintain an unencumbered asset portfolio sufficient to meet our liquidity needs under adverse market conditions. Interest Rate Risk We will seek to manage interest rate risk to protect the portfolio from adverse rate movements utilizing derivative instruments targeting both income and capital preservation. Credit Risk We will seek to manage credit risk by making investments which conform to our specific investment policy parameters and optimize risk-adjusted returns. Capital Preservation We will seek to protect our capital base through disciplined risk management practices. Operational Risk We will seek to limit impacts to our business through disciplined operational risk management practices addressing areas including but not limited to, management of key third party relationships (i.e. originators, sub-servicers), human capital management, cybersecurity and technology related matters, business continuity and financial reporting risk. Compliance, Regulatory and Legal We will seek to comply with regulatory requirements needed to maintain our REIT status and our exemption from registration under the Investment Company Act and the licenses and approvals of our regulated and licensed subsidiaries. Our Board has reviewed and approved the investment and operating policies and strategies that support our risk appetite statement set forth in this Form 10-K. Our Board has the power to modify or waive these policies and strategies to the extent that our Board, in its discretion, determines that the modification or waiver is in our best interests. Among other factors, market developments that aff

BUSINESS

ITEM 1. BUSINESS Investment Group Targeted Asset Class Description Annaly Agency Group Agency MBS Agency pass-through certificates issued or guaranteed by Agencies. Other Agency MBS include collateralized mortgage obligations ("CMOs"), interest-only securities and inverse floaters To-be-announced forward contracts ("TBAs") Forward contracts for Agency pass-through certificates Agency CMBS Pass-through certificates collateralized by commercial mortgages guaranteed by the Agencies Annaly Residential Credit Group Residential mortgage loans Residential mortgage loans that are not guaranteed by the Agencies Residential MBS Securities collateralized by pools of residential loans that are not guaranteed by one of the Agencies Agency or private label credit risk transfer securities ("CRT") Risk sharing transactions issued by Freddie Mac and Fannie Mae and similarly structured transactions arranged by third party market participants, designed to synthetically transfer mortgage credit risk to private investors Annaly Mortgage Servicing Rights Group Mortgage Servicing Rights ("MSR") Rights to service a pool of residential mortgage loans in exchange for a portion of the interest payments made on the loans We believe that future interest rates and mortgage prepayment rates are very difficult to predict. Therefore, we seek to acquire assets which we believe will provide attractive returns over a broad range of interest rate and prepayment scenarios. Capital Structure and Financing Our capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for our stockholders while maintaining appropriate liquidity to support our business and meet our financial obligations under periods of market stress. To maintain our desired capital profile, we utilize a mix of debt and equity funding. Debt funding may include the use of repurchase agreements, loans, securitizations, participations issued, lines of credit, asse

BUSINESS

ITEM 1. BUSINESS purposes of calculating this ratio, our economic leverage ratio is equal to the sum of Recourse Debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Our target economic leverage ratio is determined under our capital management policy. Should our actual economic leverage ratio increase above the target level, we will consider appropriate measures. Our actions may include asset sales, changes in asset mix, reductions in asset purchases or originations, issuance of capital or other capital enhancing or risk reduction strategies. The following table presents our leverage and capital ratios as of the periods presented. December 31, 2023 December 31, 2022 GAAP leverage ratio 6.8:1 6.0:1 Economic leverage ratio * 5.7:1 6.3:1 GAAP capital ratio 12.2% 13.9% Economic capital ratio * 14.0% 13.4% * Represents a non-GAAP financial measure. Refer to the "Non-GAAP Financial Measures" section for additional information. Operating Platform We maintain a flexible and scalable operating platform to support the management and maintenance of our diverse asset portfolio. We have invested in our infrastructure to enhance resiliency, efficiency, cybersecurity and scalability while also ensuring coverage of our target assets. Our information technology applications span the portfolio life-cycle including pre-trade analysis, trade execution and capture, trade settlement and financing, monitoring, management and financial accounting and reporting. Technology applications also support our control functions including risk, compliance, and middle- and back-offices. We have added breadth to our operating platform to accommodate diverse asset classes and drive automation-based efficiencies. Our business operations in

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