Annaly's Q3 Net Income Soars to $843M on Strong Interest Income

TL;DR

**Annaly is crushing it with massive net income growth and asset expansion, making it a solid buy for dividend-hungry investors.**

AI Summary

Annaly Capital Management Inc. (NLY) reported a significant increase in net income for the three months ended September 30, 2025, reaching $843.06 million, a substantial rise from $82.35 million in the same period of 2024. Net interest income also saw a robust increase, climbing to $275.75 million for Q3 2025 from $13.40 million in Q3 2024. For the nine months ended September 30, 2025, net income attributable to Annaly surged to $1.01 billion, up from $519.85 million in the prior year. Total assets expanded significantly to $125.86 billion as of September 30, 2025, compared to $103.56 billion at December 31, 2024, driven by increased securities holdings of $85.06 billion and higher repurchase agreements of $75.12 billion. The company's strategic outlook remains focused on diversified investment strategies across mortgage finance, including Agency MBS, residential whole loans, and Mortgage Servicing Rights (MSR), with MSR assets growing to $3.48 billion from $2.91 billion. Key risks include interest rate fluctuations and credit risk inherent in its investment portfolio, as evidenced by the substantial derivative liabilities of $199.10 million in Q3 2025, up from $59.59 million at year-end 2024.

Why It Matters

Annaly's substantial increase in net income and asset growth signals a strong performance in a volatile mortgage market, potentially boosting investor confidence in its diversified strategy. For investors, the significant rise in net income available to common stockholders to $791.32 million from $24.82 million year-over-year could translate to sustained or increased dividends, making NLY an attractive income play. Employees benefit from a stable, growing company, while customers of its mortgage-backed securities and loan products see continued market liquidity. Competitively, Annaly's ability to significantly grow its MSR portfolio to $3.48 billion and expand its overall asset base to $125.86 billion demonstrates its resilience and strategic positioning against other REITs in a challenging interest rate environment.

Risk Assessment

Risk Level: medium — The company's significant reliance on repurchase agreements, totaling $75.12 billion as of September 30, 2025, up from $65.69 billion at December 31, 2024, exposes it to substantial refinancing and interest rate risk. Additionally, derivative liabilities increased to $199.10 million from $59.59 million, indicating increased hedging activity but also potential counterparty and market risk.

Analyst Insight

Investors should consider Annaly's strong Q3 performance and significant asset growth as a positive indicator for future dividend stability and potential capital appreciation. Given the substantial increase in net income and net interest income, NLY appears well-positioned to navigate current market conditions, making it a compelling option for income-focused portfolios.

Financial Highlights

debt To Equity

7.41

revenue

$1.25B

operating Margin

N/A

total Assets

$125.86B

total Debt

$101.73B

net Income

$843.06M

eps

$1.21

gross Margin

N/A

cash Position

$2.10B

revenue Growth

N/A

Revenue Breakdown

Key Numbers

• $843.06M — Net Income (Q3 2025) (Increased from $82.35M in Q3 2024, representing a 923.8% increase.)
• $275.75M — Net Interest Income (Q3 2025) (Increased from $13.40M in Q3 2024, a 1957.8% increase.)
• $1.01B — Net Income Attributable to Annaly (9M 2025) (Increased from $519.85M in 9M 2024, a 95.0% increase.)
• $125.86B — Total Assets (Sep 30, 2025) (Increased from $103.56B at Dec 31, 2024, a 21.5% increase.)
• $75.12B — Repurchase Agreements (Sep 30, 2025) (Increased from $65.69B at Dec 31, 2024, a 14.4% increase.)
• $3.48B — Mortgage Servicing Rights (Sep 30, 2025) (Increased from $2.91B at Dec 31, 2024, a 19.6% increase.)
• $199.10M — Derivative Liabilities (Sep 30, 2025) (Increased from $59.59M at Dec 31, 2024, a 234.1% increase.)
• $1.21 — Basic EPS (Q3 2025) (Increased from $0.05 in Q3 2024.)

Key Players & Entities

• ANNALY CAPITAL MANAGEMENT INC (company) — Registrant
• $843,063,000 (dollar_amount) — Net income for the three months ended September 30, 2025
• $82,351,000 (dollar_amount) — Net income for the three months ended September 30, 2024
• $275,750,000 (dollar_amount) — Net interest income for the three months ended September 30, 2025
• $13,401,000 (dollar_amount) — Net interest income for the three months ended September 30, 2024
• $1,013,768,000 (dollar_amount) — Net income attributable to Annaly for the nine months ended September 30, 2025
• $125,861,572,000 (dollar_amount) — Total assets as of September 30, 2025
• $103,556,384,000 (dollar_amount) — Total assets as of December 31, 2024
• $75,118,963,000 (dollar_amount) — Repurchase agreements as of September 30, 2025
• $3,476,181,000 (dollar_amount) — Mortgage servicing rights as of September 30, 2025

FAQ

Risk Factors

• Interest Rate Fluctuations [high — market]: Annaly's profitability is highly sensitive to changes in interest rates. Rising rates can decrease the value of its mortgage-backed securities portfolio and increase borrowing costs, while falling rates can reduce net interest margins. The company actively uses derivatives to manage this risk, as evidenced by the substantial increase in derivative liabilities to $199.10 million from $59.59 million.
• Leverage and Financing Risk [high — financial]: The company employs significant leverage, primarily through repurchase agreements ($75.12 billion as of September 30, 2025). A sudden increase in borrowing costs or a reduction in the availability of financing could materially impact its financial condition and ability to operate.
• Credit Risk [medium — financial]: The investment portfolio, including residential whole loans and Agency MBS, carries inherent credit risk. While Agency MBS are guaranteed by government-sponsored enterprises, non-Agency MBS and whole loans are subject to potential defaults and credit losses.
• Valuation of MSRs [medium — market]: Mortgage Servicing Rights (MSRs) are sensitive to interest rate changes and prepayment speeds. Fluctuations in their fair value can impact earnings and equity. MSR assets grew to $3.48 billion, highlighting their increasing importance and associated valuation risk.
• Operational and Execution Risk [medium — operational]: The company's ability to execute its diversified investment strategies across mortgage finance, including residential whole loans and MSRs, is critical. Any failures in operational execution or strategy implementation could negatively affect financial performance.

Industry Context

Annaly operates within the complex mortgage finance sector, a segment highly sensitive to interest rate movements and credit market conditions. The industry is characterized by significant leverage and reliance on short-term funding. Key players like Annaly focus on managing interest rate risk through hedging strategies and diversifying their investment portfolios across Agency MBS, residential loans, and MSRs to generate stable income.

Regulatory Implications

As a mortgage REIT, Annaly is subject to regulations governing financial institutions and capital markets. Changes in monetary policy by the Federal Reserve significantly impact its operating environment. Compliance with accounting standards and disclosure requirements, particularly for complex financial instruments and securitization structures, is crucial.

What Investors Should Do

1. Monitor interest rate sensitivity and hedging effectiveness.
2. Analyze the growth in repurchase agreements and overall leverage.
3. Assess the performance and valuation of Mortgage Servicing Rights (MSRs).
4. Evaluate the drivers of the surge in net income and net interest income.

Glossary

Mortgage Servicing Rights (MSR)

The right to service a pool of mortgage loans, which includes collecting principal and interest payments, managing escrow accounts, and handling delinquencies and foreclosures. Servicers earn fees for these services. (MSRs are a significant asset class for Annaly, contributing to net servicing income and representing a growing portion of their portfolio ($3.48 billion).)

Repurchase Agreements

A form of short-term borrowing where a dealer sells securities to investors with an agreement to repurchase them at a higher price. It's a common financing method in the mortgage REIT industry. (Annaly relies heavily on repurchase agreements for financing its assets, with balances reaching $75.12 billion, indicating significant leverage.)

Agency MBS

Mortgage-backed securities whose principal and interest payments are guaranteed by government-sponsored enterprises like Fannie Mae, Freddie Mac, or Ginnie Mae. (These are a core investment for Annaly, providing a relatively stable income stream backed by government guarantees.)

Derivative Instruments

Financial contracts whose value is derived from an underlying asset, index, or rate. They are often used for hedging purposes, such as managing interest rate risk. (Annaly uses derivatives to hedge interest rate risk, but these instruments also introduce potential volatility and significant liabilities, as seen with the increase in derivative liabilities to $199.10 million.)

Variable Interest Entities (VIEs)

Entities for which the total equity investment is not sufficient to permit the entity to finance its activities without additional financial support from other parties, or entities in which the equity investors do not have the characteristics of a voting interest. Annaly consolidates VIEs where it has a controlling financial interest. (VIEs are used in securitization structures and can hold significant assets and liabilities that are consolidated onto Annaly's balance sheet.)

Year-Over-Year Comparison

Compared to the prior year period, Annaly Capital Management Inc. has demonstrated exceptional growth, with net income soaring by 923.8% to $843.06 million in Q3 2025 and net interest income increasing by an astounding 1957.8% to $275.75 million. Total assets have expanded by 21.5% to $125.86 billion, driven by increased securities and repurchase agreements. A notable shift is the significant rise in derivative liabilities, up 234.1% to $199.10 million, indicating heightened risk management activities or market volatility impacting hedging positions.

Key Financial Figures

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

Filing Documents

• nly-20250930.htm (10-Q) — 3849KB
• ex31articlesrestate.htm (EX-3.1) — 468KB
• a2025q3nlyexhibit311.htm (EX-31.1) — 14KB
• a2025q3nlyexhibit312.htm (EX-31.2) — 14KB
• a2025q3nlyexhibit321.htm (EX-32.1) — 7KB
• a2025q3nlyexhibit322.htm (EX-32.2) — 7KB
• nly-20250930_g1.jpg (GRAPHIC) — 119KB
• 0001043219-25-000012.txt ( ) — 18462KB
• nly-20250930.xsd (EX-101.SCH) — 99KB
• nly-20250930_cal.xml (EX-101.CAL) — 119KB
• nly-20250930_def.xml (EX-101.DEF) — 437KB
• nly-20250930_lab.xml (EX-101.LAB) — 979KB
• nly-20250930_pre.xml (EX-101.PRE) — 725KB
• nly-20250930_htm.xml (XML) — 3855KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Page

Financial Statements

Item 1. Financial Statements 1 Consolidated Statements of Financial Condition at September 30, 2025 (Unaudited) and December 31, 2024 (Derived from the audited consolidated financial statements at December 31, 2024 ) 1 Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and nine months ended September 30, 2025 and 2024 2 Consolidated Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30, 2025 and 2024 3 Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2025 and 2024 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 14 Note 8. Variable Interest Entities 14 Note 9. Derivative Instruments 16 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 31 Note 18. Risk Management 35 Note 19. Lease Commitments and Contingencies 36 Note 20. Subsequent Events 37

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 38 Special Note Regarding Forward-Looking Statements 38 Overview 40 Business Environment 40 Results of Operations 43 Financial Condition 56 Capital Management 59 Risk Management 62 Critical Accounting Estimates 71 Glossary of Terms 74

Quantitative and Qualitative Disclosures about Market Risk

Item 3. Quantitative and Qualitative Disclosures about Market Risk 83

Controls and Procedures

Item 4. Controls and Procedures 83

- OTHER INFORMATION

PART II - OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 84

Risk Factors

Item 1A. Risk Factors 84

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 84

Other Information

Item 5. Other Information 84

Exhibits

Item 6. Exhibits 84

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, 2025 2024 (1) (Unaudited) Assets Cash and cash equivalents (includes pledged assets of $ 1,776,349 and $ 1,202,880 , respectively) (2) $ 2,096,696 $ 1,488,027 Securities (includes pledged assets of $ 76,380,480 and $ 67,692,062 , respectively) (3) 85,062,725 69,756,447 Loans, net (includes pledged assets of $ 3,954,154 and $ 2,754,028 , respectively) (4) 4,008,299 3,546,902 Mortgage servicing rights (includes pledged assets of $ 3,164,697 and $ 2,460,252 , respectively) 3,476,181 2,909,134 Interests in MSR 35,833 — Assets transferred or pledged to securitization vehicles 29,512,309 21,973,188 Derivative assets 47,899 225,351 Reverse repurchase agreements 35,004 — Receivable for unsettled trades 185,916 2,201,447 Principal and interest receivable 959,435 1,069,038 Intangible assets, net 7,398 9,416 Other assets 433,877 377,434 Total assets $ 125,861,572 $ 103,556,384 Liabilities and stockholders' equity Liabilities Repurchase agreements $ 75,118,963 $ 65,688,923 Other secured financing 1,025,000 750,000 Debt issued by securitization vehicles 26,601,790 19,540,678 Participations issued 1,831,657 1,154,816 U.S. Treasury securities sold, not yet purchased 2,442,570 2,470,629 Derivative liabilities 199,100 59,586 Payable for unsettled trades 2,604,278 308,282 Interest payable 285,080 268,317 Dividends payable 476,737 375,932 Other liabilities 279,818 242,269 Total liabilities 110,864,993 90,859,432 Stockholders' equity Preferred stock, par value $ 0.01 per share, 75,000,000 and 63,500,000 authorized, 74,500,000 and 63,500,000 issued and outstanding, respectively 1,802,480 1,536,569 Common stock, par value $ 0.01 per share, 1,456,750,000 and 1,468,250,000 authorized, 681,052,317 and 578,357,118 issued and outstanding, respectivel

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, 2025 2024 2025 2024 Net interest income Interest income $ 1,532,497 $ 1,229,341 $ 4,268,498 $ 3,501,154 Interest expense 1,256,747 1,215,940 3,499,577 3,440,646 Net interest income 275,750 13,401 768,921 60,508 Net servicing income Servicing and related income 141,356 122,583 423,461 358,182 Servicing and related expense 15,104 12,988 43,788 37,821 Net servicing income 126,252 109,595 379,673 320,361 Other income (loss) Net gains (losses) on investments and other 561,927 1,723,713 1,456,242 160,841 Net gains (losses) on derivatives ( 92,308 ) ( 1,754,010 ) ( 1,458,960 ) 53,621 Other, net 13,959 27,438 37,169 75,596 Total other income (loss) 483,578 ( 2,859 ) 34,451 290,058 General and administrative expenses Compensation expense 38,393 34,453 112,273 96,448 Other general and administrative expenses 11,947 9,468 36,149 30,934 Total general and administrative expenses 50,340 43,921 148,422 127,382 Income (loss) before income taxes 835,240 76,216 1,034,623 543,545 Income taxes ( 7,823 ) ( 6,135 ) 884 4,853 Net income (loss) 843,063 82,351 1,033,739 538,692 Net income (loss) attributable to noncontrolling interests 10,618 15,906 19,971 18,838 Net income (loss) attributable to Annaly 832,445 66,445 1,013,768 519,854 Dividends on preferred stock (1) 41,127 41,628 115,544 115,847 Net income (loss) available (related) to common stockholders $ 791,318 $ 24,817 $ 898,224 $ 404,007 Net income (loss) per share available (related) to common stockholders Basic $ 1.21 $ 0.05 $ 1.45 $ 0.80 Diluted $ 1.20 $ 0.05 $ 1.44 $ 0.80 Weighted average number of common shares outstanding Basic 656,335,974 515,729,658 621,484,893 505,800,723 Diluted 657,856,427 516,832,152 622,768,481 506

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, 2025 2024 2025 2024 Preferred stock Beginning of period $ 1,536,569 $ 1,536,569 $ 1,536,569 $ 1,536,569 Issuance 265,911 — 265,911 — End of period $ 1,802,480 $ 1,536,569 $ 1,802,480 $ 1,536,569 Common stock Beginning of period $ 6,421 $ 5,010 $ 5,784 $ 5,001 Issuance 390 570 1,021 576 Stock-based award activity — — 6 3 End of period $ 6,811 $ 5,580 $ 6,811 $ 5,580 Additional paid-in capital Beginning of period $ 26,520,657 $ 23,694,663 $ 25,257,716 $ 23,672,391 Issuance 822,731 1,148,881 2,078,388 1,159,774 Stock-based award activity 9,588 8,060 16,872 19,439 End of period $ 27,352,976 $ 24,851,604 $ 27,352,976 $ 24,851,604 Accumulated other comprehensive income (loss) Beginning of period $ ( 740,046 ) $ ( 1,156,927 ) $ ( 1,017,682 ) $ ( 1,335,400 ) Unrealized gains (losses) on available-for-sale securities 113,281 428,955 311,717 92,843 Reclassification adjustment for net (gains) losses included in net income (loss) 2,378 15,769 81,578 530,354 End of period $ ( 624,387 ) $ ( 712,203 ) $ ( 624,387 ) $ ( 712,203 ) Accumulated deficit Beginning of period $ ( 13,942,302 ) $ ( 12,898,191 ) $ ( 13,173,146 ) $ ( 12,622,768 ) Net income (loss) attributable to Annaly 832,445 66,445 1,013,768 519,854 Dividends declared on preferred stock (1) ( 37,466 ) ( 41,628 ) ( 111,883 ) ( 115,847 ) Dividends and dividend equivalents declared on common stock and stock-based awards (1) ( 479,660 ) ( 364,914 ) ( 1,355,722 ) ( 1,019,527 ) End of period $ ( 13,626,983 ) $ ( 13,238,288 ) $ ( 13,626,983 ) $ ( 13,238,288 ) Total stockholder's equity $ 14,910,897 $ 12,443,262 $ 14,910,897 $ 12,443,262 Noncontrolling interests Beginning of period $ 93,064 $ 81,780 $ 87,711 $ 89,298

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, 2025 2024 Cash flows from operating activities Net income (loss) $ 1,033,739 $ 538,692 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities Amortization of premiums and discounts of investments, net 176,712 95,697 Amortization of securitized debt premiums and discounts and deferred financing costs ( 18,577 ) 7,127 Depreciation, amortization and other noncash expenses 26,090 23,180 Net (gains) losses on investments and derivatives 571,804 731,542 Income (loss) from unconsolidated joint ventures ( 573 ) ( 3,119 ) Payments on purchases of loans held for sale ( 154,086 ) ( 37,978 ) Proceeds from sales and repayments of loans held for sale 153,190 38,063 Proceeds from U.S. Treasury securities 4,855,429 6,083,273 Payments on U.S. Treasury securities ( 4,977,675 ) ( 6,181,017 ) Net receipts (payments) on derivatives ( 1,735,541 ) ( 967,289 ) Net change in Other assets ( 23,252 ) ( 8,787 ) Interest receivable 107,289 176,430 Interest payable 16,763 ( 11,540 ) Other liabilities 17,256 17,910 Net cash provided by (used in) operating activities 48,568 502,184 Cash flows from investing activities Payments on purchases of securities ( 26,670,451 ) ( 22,984,768 ) Proceeds from sales of securities 11,727,813 17,254,884 Principal payments on securities 5,855,619 4,875,202 Payments on purchases and origination of loans ( 12,662,479 ) ( 9,304,025 ) Proceeds from sales of loans 1,221,545 414,706 Principal payments on loans 3,827,244 1,625,155 Payments on purchases of MSR ( 710,020 ) ( 701,418 ) Proceeds from sales of MSR 1,871 66,269 Payments on purchases of interests in MSR ( 32,240 ) — Proceeds from reverse repurchase agreements 510,513,471 442,510,370 Payments on reverse repurchase agreements ( 510,548,475

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 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 accordance with U.S. generally acce

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 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 $ 1.8 billion and $ 1.2 billion at September 30, 2025 and December 31, 2024, 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 tr

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

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