Annaly Capital Management Q3 2024 Update

TL;DR

NLY Q3 2024 filing out. REIT details financials, preferred stock, and collateral.

AI Summary

Annaly Capital Management Inc. reported its Q3 2024 results, ending September 30, 2024. The company's filing details its financial position, including various preferred stock series and assets pledged as collateral. Annaly Capital Management Inc. is a real estate investment trust incorporated in Maryland.

Why It Matters

This filing provides insight into the financial health and operational status of Annaly Capital Management, a significant player in the real estate investment trust sector.

Risk Assessment

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

Key Numbers

• 20240930 — Reporting Period End (Quarterly financial reporting)
• 20231231 — Previous Year End (Comparison point for financial performance)

Key Players & Entities

• ANNALY CAPITAL MANAGEMENT INC (company) — Filer
• 20240930 (date) — Reporting Period End Date
• 20241031 (date) — Filing Date
• 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-20240930.htm (10-Q) — 3813KB
• a2024q3nlyexhibit311.htm (EX-31.1) — 14KB
• a2024q3nlyexhibit312.htm (EX-31.2) — 14KB
• a2024q3nlyexhibit321.htm (EX-32.1) — 7KB
• a2024q3nlyexhibit322.htm (EX-32.2) — 7KB
• nly-20240930_g1.jpg (GRAPHIC) — 119KB
• 0001628280-24-044566.txt ( ) — 17344KB
• nly-20240930.xsd (EX-101.SCH) — 93KB
• nly-20240930_cal.xml (EX-101.CAL) — 112KB
• nly-20240930_def.xml (EX-101.DEF) — 410KB
• nly-20240930_lab.xml (EX-101.LAB) — 919KB
• nly-20240930_pre.xml (EX-101.PRE) — 688KB
• nly-20240930_htm.xml (XML) — 3732KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Page

Financial Statements

Item 1. Financial Statements 1 Consolidated Statements of Financial Condition at September 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 nine months ended September 30, 2024 and 2023 2 Consolidated Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30, 2024 and 2023 3 Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 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 28 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 58 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) September 30, December 31, 2024 2023 (1) (Unaudited) Assets Cash and cash equivalents (includes pledged assets of $ 1,235,942 and $ 1,136,298 , respectively) (2) $ 1,560,159 $ 1,412,148 Securities (includes pledged assets of $ 65,983,918 and $ 65,400,248 , respectively) (3) 71,700,177 69,613,565 Loans, net (includes pledged assets of $ 1,957,860 and $ 2,082,419 , respectively) (4) 2,305,613 2,353,084 Mortgage servicing rights (includes pledged assets of $ 1,842,510 and $ 1,781,279 , respectively) 2,693,057 2,122,196 Assets transferred or pledged to securitization vehicles 21,044,007 13,307,622 Derivative assets 59,071 162,557 Receivable for unsettled trades 766,341 2,710,224 Principal and interest receivable 1,060,991 1,222,705 Intangible assets, net 10,088 12,106 Other assets 316,491 311,029 Total assets $ 101,515,995 $ 93,227,236 Liabilities and stockholders' equity Liabilities Repurchase agreements $ 64,310,276 $ 62,201,543 Other secured financing 600,000 500,000 Debt issued by securitization vehicles 18,709,118 11,600,338 Participations issued 467,006 1,103,835 U.S. Treasury securities sold, not yet purchased 2,043,519 2,132,751 Derivative liabilities 102,628 302,295 Payable for unsettled trades 1,885,286 3,249,389 Interest payable 276,397 287,937 Dividends payable 362,731 325,052 Other liabilities 219,085 179,005 Total liabilities 88,976,046 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, 558,047,743 and 500,080,287 issued and outstanding, respectively 5,580 5,001 Additional paid-in capital 24,851,604 23,672,391 Accumulated other comprehensive income (loss) ( 712,203 ) ( 1,335,400 )

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 September 30, For The Nine Months Ended September 30, 2024 2023 2024 2023 Net interest income Interest income $ 1,229,341 $ 1,001,485 $ 3,501,154 $ 2,741,229 Interest expense 1,215,940 1,046,819 3,440,646 2,799,063 Net interest income 13,401 ( 45,334 ) 60,508 ( 57,834 ) Net servicing income Servicing and related income 122,583 97,620 358,182 265,683 Servicing and related expense 12,988 9,623 37,821 26,433 Net servicing income 109,595 87,997 320,361 239,250 Other income (loss) Net gains (losses) on investments and other 1,723,713 ( 2,713,126 ) 160,841 ( 4,020,362 ) Net gains (losses) on derivatives ( 1,754,010 ) 2,127,430 53,621 2,702,003 Loan loss (provision) reversal — — — 219 Other, net 27,438 26,250 75,596 50,853 Total other income (loss) ( 2,859 ) ( 559,446 ) 290,058 ( 1,267,287 ) General and administrative expenses Compensation expense 34,453 30,064 96,448 90,090 Other general and administrative expenses 9,468 9,845 30,934 33,562 Total general and administrative expenses 43,921 39,909 127,382 123,652 Income (loss) before income taxes 76,216 ( 556,692 ) 543,545 ( 1,209,523 ) Income taxes ( 6,135 ) 12,392 4,853 37,702 Net income (loss) 82,351 ( 569,084 ) 538,692 ( 1,247,225 ) Net income (loss) attributable to noncontrolling interests 15,906 ( 6,879 ) 18,838 ( 7,797 ) Net income (loss) attributable to Annaly 66,445 ( 562,205 ) 519,854 ( 1,239,428 ) Dividends on preferred stock 41,628 36,854 115,847 104,495 Net income (loss) available (related) to common stockholders $ 24,817 $ ( 599,059 ) $ 404,007 $ ( 1,343,923 ) Net income (loss) per share available (related) to common stockholders Basic $ 0.05 $ ( 1.21 ) $ 0.80 $ ( 2.73 ) Diluted $ 0.05 $ ( 1.21 ) $ 0.80 $ ( 2.73 ) Weighted average number of common shares outst

Financial Statements

Item 1. Financial Statements ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (dollars in thousands, except per share data) (Unaudited) For The Three Months Ended September 30, For The Nine Months Ended September 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 $ 5,010 $ 4,939 $ 5,001 $ 4,683 Issuance 570 9 576 262 Stock-based award activity — — 3 3 End of period $ 5,580 $ 4,948 $ 5,580 $ 4,948 Additional paid-in capital Beginning of period $ 23,694,663 $ 23,550,346 $ 23,672,391 $ 22,981,320 Issuance 1,148,881 17,500 1,159,774 579,838 Stock-based award activity 8,060 5,150 19,439 11,838 End of period $ 24,851,604 $ 23,572,996 $ 24,851,604 $ 23,572,996 Accumulated other comprehensive income (loss) Beginning of period $ ( 1,156,927 ) $ ( 2,382,531 ) $ ( 1,335,400 ) $ ( 3,708,896 ) Unrealized gains (losses) on available-for-sale securities 428,955 ( 825,286 ) 92,843 ( 443,957 ) Reclassification adjustment for net (gains) losses included in net income (loss) 15,769 513,041 530,354 1,458,077 End of period $ ( 712,203 ) $ ( 2,694,776 ) $ ( 712,203 ) $ ( 2,694,776 ) Accumulated deficit Beginning of period $ ( 12,898,191 ) $ ( 10,933,044 ) $ ( 12,622,768 ) $ ( 9,543,233 ) Net income (loss) attributable to Annaly 66,445 ( 562,205 ) 519,854 ( 1,239,428 ) Dividends declared on preferred stock (1) ( 41,628 ) ( 36,854 ) ( 115,847 ) ( 104,495 ) Dividends and dividend equivalents declared on common stock and stock-based awards (1) ( 364,914 ) ( 323,164 ) ( 1,019,527 ) ( 968,111 ) End of period $ ( 13,238,288 ) $ ( 11,855,267 ) $ ( 13,238,288 ) $ ( 11,855,267 ) Total stockholder's equity $ 12,443,262 $ 10,564,470 $ 12,443,262 $ 10,564,470 Noncontrolling interests Beginning of period $ 81,780 $ 111,066 $ 89,298 $ 98,983 Net income (l

Financial Statements

Item 1. Financial Statements ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (Unaudited) For The Nine Months Ended September 30, 2024 2023 Cash flows from operating activities Net income (loss) $ 538,692 $ ( 1,247,225 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Amortization of premiums and discounts of investments, net 95,697 132,558 Amortization of securitized debt premiums and discounts and deferred financing costs 7,127 10,724 Depreciation, amortization and other noncash expenses 23,180 19,348 Net (gains) losses on investments and derivatives 731,542 2,524,035 Income (loss) from unconsolidated joint ventures ( 3,119 ) ( 1,508 ) Loan loss provision (reversal) — ( 219 ) Payments on purchases of loans held for sale ( 37,978 ) — Proceeds from sales and repayments of loans held for sale 38,063 1,336 Proceeds from U.S. Treasury securities 6,083,273 — Payments on U.S. Treasury securities ( 6,181,017 ) — Net receipts (payments) on derivatives ( 967,289 ) 1,230,848 Net change in Other assets ( 8,787 ) ( 116,687 ) Interest receivable 176,430 ( 521,322 ) Interest payable ( 11,540 ) ( 127,196 ) Other liabilities 17,910 83,989 Net cash provided by (used in) operating activities 502,184 1,988,681 Cash flows from investing activities Payments on purchases of securities ( 22,984,768 ) ( 29,960,271 ) Proceeds from sales of securities 17,254,884 18,705,788 Principal payments on securities 4,875,202 4,706,936 Payments on purchases and origination of loans ( 9,304,025 ) ( 3,446,835 ) Proceeds from sales of loans 414,706 — Principal payments on loans 1,625,155 773,928 Payments on purchases of MSR ( 701,418 ) ( 398,664 ) Proceeds from sales of MSR 66,269 — Proceeds from reverse repurchase agreements 442,510,370 46,800,024 Payments on reverse repurchase agreements ( 442,510,370 ) ( 46,800,024 ) Distributions in excess of cum

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 economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. 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 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 $ 1.2 billion and $ 1.1 billion at September 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 cer

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 pre

View Full Filing

View this 10-Q filing on SEC EDGAR