Annaly Capital Management Files Q2 2024 10-Q

TL;DR

NLY dropped its Q2 10-Q, check financials for REIT performance.

AI Summary

Annaly Capital Management Inc. (NLY) filed its 10-Q for the period ending June 30, 2024. The filing details the company's financial position and operations, including its various investment groups and preferred stock series. Key financial data and disclosures relevant to its real estate investment trust business are presented.

Why It Matters

This filing provides investors with a detailed look at Annaly's financial health and strategic positioning as a real estate investment trust during the second quarter of 2024.

Risk Assessment

Risk Level: medium — As a real estate investment trust, Annaly is subject to market fluctuations and interest rate risks inherent in the financial sector.

Key Numbers

• 2024 Q2 — Reporting Period (Quarterly financial results)
• 2024-06-30 — As of Date (End of reporting period)
• 2023-12-31 — Prior Year End (Comparison point for financial statements)

Key Players & Entities

• ANNALY CAPITAL MANAGEMENT INC (company) — Filer
• 20240630 (date) — Period of Report
• 20240729 (date) — Filing Date
• 0001043219 (company) — Central Index Key
• 212 696 0100 (phone_number) — Business Phone

FAQ

Key Financial Figures

• $0.01 — ch Registered Common Stock, par value $0.01 per share NLY New York Stock Exchange

Filing Documents

• nly-20240630.htm (10-Q) — 3797KB
• a2024q2nlyexhibit311.htm (EX-31.1) — 14KB
• a2024q2nlyexhibit312.htm (EX-31.2) — 14KB
• a2024q2nlyexhibit321.htm (EX-32.1) — 7KB
• a2024q2nlyexhibit322.htm (EX-32.2) — 7KB
• nly-20240630_g1.jpg (GRAPHIC) — 119KB
• 0001628280-24-033212.txt ( ) — 16989KB
• nly-20240630.xsd (EX-101.SCH) — 93KB
• nly-20240630_cal.xml (EX-101.CAL) — 112KB
• nly-20240630_def.xml (EX-101.DEF) — 405KB
• nly-20240630_lab.xml (EX-101.LAB) — 913KB
• nly-20240630_pre.xml (EX-101.PRE) — 682KB
• nly-20240630_htm.xml (XML) — 3575KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Page

Financial Statements

Item 1. Financial Statements 1 Consolidated Statements of Financial Condition at June 30, 2024 (Unaudited) and December 31, 2023 (Derived from the audited consolidated financial statements at December 31, 2023 ) 1 Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and six months ended June 30, 2024 and 2023 2 Consolidated Statements of Stockholders' Equity (Unaudited) for the three and six months ended June 30, 2024 and 2023 3 Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2024 and 2023 4

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 5 Note 1. Description of Business 5 Note 2. Basis of Presentation 5 Note 3. Significant Accounting Policies 5 Note 4. Financial Instruments 8 Note 5. Securities 8 Note 6. Loans 12 Note 7. Mortgage Servicing Rights 13 Note 8. Variable Interest Entities 14 Note 9. Derivative Instruments 15 Note 10. Fair Value Measurements 21 Note 11. Intangible Assets 24 Note 12. Secured Financing 24 Note 13. Capital Stock 26 Note 14. Interest Income and Interest Expense 27 Note 15. Net Income (Loss) per Common Share 29 Note 16. Income Taxes 29 Note 17. Segments 30 Note 18. Risk Management 33 Note 19. Lease Commitments and Contingencies 34 Note 20. Subsequent Events 35

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

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 36 Special Note Regarding Forward-Looking Statements 36 Overview 38 Business Environment 38 Results of Operations 40 Financial Condition 52 Capital Management 56 Risk Management 57 Critical Accounting Estimates 67 Glossary of Terms 70

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 79

Controls and Procedures

Item 4. Controls and Procedures 79

- OTHER INFORMATION

PART II - OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 80

Risk Factors

Item 1A. Risk Factors 80

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 80

Other Information

Item 5. Other Information 80

Exhibits

Item 6. Exhibits 80

SIGNATURES

SIGNATURES II-1 ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Financial Statements

Item 1. Financial Statements

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

ITEM 1. FINANCIAL STATEMENTS ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except per share data) June 30, December 31, 2024 2023 (1) (Unaudited) Assets Cash and cash equivalents (includes pledged assets of $ 1,266,528 and $ 1,136,298 , respectively) (2) $ 1,587,108 $ 1,412,148 Securities (includes pledged assets of $ 62,801,367 and $ 65,400,248 , respectively) (3) 67,044,753 69,613,565 Loans, net (includes pledged assets of $ 2,326,386 and $ 2,082,419 , respectively) (4) 2,548,228 2,353,084 Mortgage servicing rights (includes pledged assets of $ 1,865,890 and $ 1,781,279 , respectively) 2,785,614 2,122,196 Assets transferred or pledged to securitization vehicles 17,946,812 13,307,622 Derivative assets 187,868 162,557 Receivable for unsettled trades 320,659 2,710,224 Principal and interest receivable 917,130 1,222,705 Intangible assets, net 10,761 12,106 Other assets 319,644 311,029 Total assets $ 93,668,577 $ 93,227,236 Liabilities and stockholders' equity Liabilities Repurchase agreements $ 60,787,994 $ 62,201,543 Other secured financing 600,000 500,000 Debt issued by securitization vehicles 15,831,915 11,600,338 Participations issued 1,144,821 1,103,835 U.S. Treasury securities sold, not yet purchased 1,974,602 2,132,751 Derivative liabilities 100,829 302,295 Payable for unsettled trades 1,096,271 3,249,389 Interest payable 369,106 287,937 Dividends payable 325,662 325,052 Other liabilities 174,473 179,005 Total liabilities 82,405,673 81,882,145 Stockholders' equity Preferred stock, par value $ 0.01 per share, 63,500,000 authorized, issued and outstanding 1,536,569 1,536,569 Common stock, par value $ 0.01 per share, 1,468,250,000 authorized, 501,018,415 and 500,080,287 issued and outstanding, respectively 5,010 5,001 Additional paid-in capital 23,694,663 23,672,391 Accumulated other comprehensive income (loss) ( 1,156,927 ) ( 1,335,400 ) Ac

Financial Statements

Item 1. Financial Statements ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except per share data) (Unaudited) For The Three Months Ended June 30, For The Six Months Ended June 30, 2024 2023 2024 2023 Net interest income Interest income $ 1,177,325 $ 921,494 $ 2,271,813 $ 1,739,744 Interest expense 1,123,767 953,457 2,224,706 1,752,244 Net interest income 53,558 ( 31,963 ) 47,107 ( 12,500 ) Net servicing income Servicing and related income 120,515 83,790 235,599 168,063 Servicing and related expense 12,617 8,930 24,833 16,810 Net servicing income 107,898 74,860 210,766 151,253 Other income (loss) Net gains (losses) on investments and other ( 568,745 ) ( 1,308,948 ) ( 1,562,872 ) ( 1,307,236 ) Net gains (losses) on derivatives 430,487 1,475,325 1,807,631 574,573 Loan loss (provision) reversal — — — 219 Other, net 24,791 9,105 48,158 24,603 Total other income (loss) ( 113,467 ) 175,482 292,917 ( 707,841 ) General and administrative expenses Compensation expense 33,274 30,635 61,995 60,026 Other general and administrative expenses 11,617 12,280 21,466 23,717 Total general and administrative expenses 44,891 42,915 83,461 83,743 Income (loss) before income taxes 3,098 175,464 467,329 ( 652,831 ) Income taxes 11,931 14,277 10,988 25,310 Net income (loss) ( 8,833 ) 161,187 456,341 ( 678,141 ) Net income (loss) attributable to noncontrolling interests 650 ( 5,846 ) 2,932 ( 918 ) Net income (loss) attributable to Annaly ( 9,483 ) 167,033 453,409 ( 677,223 ) Dividends on preferred stock 37,158 35,766 74,219 67,641 Net income (loss) available (related) to common stockholders $ ( 46,641 ) $ 131,267 $ 379,190 $ ( 744,864 ) Net income (loss) per share available (related) to common stockholders Basic $ ( 0.09 ) $ 0.27 $ 0.76 $ ( 1.51 ) Diluted $ ( 0.09 ) $ 0.27 $ 0.76 $ ( 1.51 ) Weighted average number of common shares outstanding Basic 500,950,563 494,165,256 500,

Financial Statements

Item 1. Financial Statements For The ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands) (Unaudited) For The Three Months Ended June 30, For The Six Months Ended June 30, 2024 2023 2024 2023 Preferred stock Beginning of period $ 1,536,569 $ 1,536,569 $ 1,536,569 $ 1,536,569 End of period $ 1,536,569 $ 1,536,569 $ 1,536,569 $ 1,536,569 Common stock Beginning of period $ 5,004 $ 4,939 $ 5,001 $ 4,683 Issuance 6 — 6 253 Stock-based award activity — — 3 3 End of period $ 5,010 $ 4,939 $ 5,010 $ 4,939 Additional paid-in capital Beginning of period $ 23,673,687 $ 23,543,091 $ 23,672,391 $ 22,981,320 Issuance 10,941 ( 118 ) 10,893 562,338 Stock-based award activity 10,035 7,373 11,379 6,688 End of period $ 23,694,663 $ 23,550,346 $ 23,694,663 $ 23,550,346 Accumulated other comprehensive income (loss) Beginning of period $ ( 1,281,918 ) $ ( 2,550,614 ) $ ( 1,335,400 ) $ ( 3,708,896 ) Unrealized gains (losses) on available-for-sale securities ( 54,243 ) ( 294,045 ) ( 336,112 ) 381,329 Reclassification adjustment for net (gains) losses included in net income (loss) 179,234 462,128 514,585 945,036 End of period $ ( 1,156,927 ) $ ( 2,382,531 ) $ ( 1,156,927 ) $ ( 2,382,531 ) Accumulated deficit Beginning of period $ ( 12,523,809 ) $ ( 10,741,863 ) $ ( 12,622,768 ) $ ( 9,543,233 ) Net income (loss) attributable to Annaly ( 9,483 ) 167,033 453,409 ( 677,223 ) Dividends declared on preferred stock (1) ( 37,158 ) ( 35,766 ) ( 74,219 ) ( 67,641 ) Dividends and dividend equivalents declared on common stock and stock-based awards (1) ( 327,741 ) ( 322,448 ) ( 654,613 ) ( 644,947 ) End of period $ ( 12,898,191 ) $ ( 10,933,044 ) $ ( 12,898,191 ) $ ( 10,933,044 ) Total stockholder's equity $ 11,181,124 $ 11,776,279 $ 11,181,124 $ 11,776,279 Noncontrolling interests Beginning of period $ 86,580 $ 116,911 $ 89,298 $ 98,983 Net income (loss) attributable to noncontrolling

Financial Statements

Item 1. Financial Statements ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (Unaudited) For The Six Months Ended June 30, 2024 2023 Cash flows from operating activities Net income (loss) $ 456,341 $ ( 678,141 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Amortization of premiums and discounts of investments, net 40,216 105,438 Amortization of securitized debt premiums and discounts and deferred financing costs 5,238 6,435 Depreciation, amortization and other noncash expenses 16,134 12,032 Net (gains) losses on investments and derivatives 383,762 1,543,662 Income (loss) from unconsolidated joint ventures ( 2,617 ) ( 289 ) Loan loss provision (reversal) — ( 219 ) Payments on purchases of loans held for sale ( 20,225 ) — Proceeds from sales and repayments of loans held for sale 17,368 747 Proceeds from U.S. Treasury securities 4,039,385 — Payments on U.S. Treasury securities ( 4,118,083 ) — Net receipts (payments) on derivatives 963,260 ( 332,685 ) Net change in Other assets ( 7,208 ) ( 12,979 ) Interest receivable 305,552 ( 306,771 ) Interest payable 81,169 ( 184,660 ) Other liabilities 14,670 ( 34,903 ) Net cash provided by (used in) operating activities 2,174,962 117,667 Cash flows from investing activities Payments on purchases of securities ( 16,710,894 ) ( 18,067,651 ) Proceeds from sales of securities 14,936,642 12,501,702 Principal payments on securities 3,050,093 3,012,034 Payments on purchases and origination of loans ( 5,978,114 ) ( 1,946,157 ) Proceeds from sales of loans 92,637 — Principal payments on loans 928,297 466,538 Payments on purchases of MSR ( 636,658 ) ( 213,346 ) Proceeds from sales of MSR 1,068 — Proceeds from reverse repurchase agreements 295,838,237 32,900,024 Payments on reverse repurchase agreements ( 295,838,237 ) ( 32,900,024 ) Distributions in excess of cumulative earnings fro

Financial Statements

Item 1. Financial Statements ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. DESCRIPTION OF BUSINESS Annaly Capital Management, Inc. (the "Company" or "Annaly") is a Maryland corporation that commenced operations on February 18, 1997. The Company is a leading diversified capital manager with investment strategies across mortgage finance. 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. Annaly is an internally-managed company that has elected to be taxed as a Real Estate Investment Trust ("REIT") as defined under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder (the "Code"). The Company's 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. 2. BASIS OF PRESENTATION The accompanying consolidated financial statements and related notes of the Company have been prepared in accor

Financial Statements

Item 1. Financial Statements The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company's involvement with a VIE causes the Company's consolidation conclusion to change. Refer to the "Variable Interest Entities" Note for further information. Equity Method Investments - For entities that are not consolidated, but where the Company has significant influence over the operating or financial decisions of the entity, the Company accounts for the investment under the equity method of accounting. In accordance with the equity method of accounting, the Company will recognize its share of earnings or losses of the investee in the period in which they are reported by the investee. The Company also considers whether there are any indicators of other-than-temporary impairment of joint ventures accounted for under the equity method. 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. Cash deposited with clearing organizations is carried at cost, which approximates fair value. Cash and securities deposited with clearing organizations and collateral held in the form of cash on margin with counterparties to the Company's interest rate swaps and other derivatives totaled $ 1.3 billion and $ 1.1 billion at June 30, 2024 and December 31, 2023, respectively. Fair Value Measurements and the Fair Value Option – The Company reports various investments at fair value, including certain eligible financial instruments elected to be accounted for under the fair value option ("FVO"). The Company chooses to elect the FVO in order to simplify the accounting treatment for certain financial instruments. Items for which the FVO has been elected are presented at fair value in the Consolidated Statements of Financial Conditio

Financial Statements

Item 1. Financial Statements For its securities, the Company recognizes coupon income, which is a component of interest income, based upon the outstanding principal amounts of the financial instruments and their contractual terms. In addition, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities (other than interest-only securities, multifamily and reverse mortgages), taking into account estimates of future principal prepayments in the calculation of the effective yield. The Company recalculates the effective yield as differences between anticipated and actual prepayments occur. Using third party model and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security's acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date, which results in a cumulative premium amortization adjustment in each period. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period. Premiums or discounts associated with the purchase of Agency interest-only securities, reverse mortgages and residential credit securities are amortized or accreted into interest income based upon current expected future cash flows with any adjustment to yield made on a prospective basis. Premiums or discounts associated with the purchase of multifamily securities are amortized or accreted into inte

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