ANNALY CAPITAL MANAGEMENT, INC.
|
(Exact Name of Registrant as Specified in its Charter)
|
MARYLAND
(State or other jurisdiction of
incorporation or organization)
|
22-3479661
(IRS Employer Identification No.)
|
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036
(Address of principal executive offices)
|
10036
(Zip Code)
|
(212) 696-0100
|
(Registrant’s telephone number, including area code)
|
Class
|
Outstanding at October 31, 2017
|
Common Stock, $.01 par value
|
1,159,543,027
|
ANNALY CAPITAL MANAGEMENT, INC.
|
|
FORM 10-Q
|
|
TABLE OF CONTENTS
|
|
Page
|
|
1 | |
2
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|
3 | |
4 | |
6 | |
6 | |
6 | |
16 | |
17 | |
19 | |
20 | |
20 | |
24 | |
25 | |
29 | |
34 | |
35 | |
40 | |
42 | |
42 | |
43 | |
43 | |
44 | |
45 | |
45 | |
46 | |
46 | |
47 | |
48 | |
50 | |
50 | |
50 | |
52 | |
64 | |
67 | |
69 | |
80 | |
82 | |
91 | |
91 | |
92 | |
92 | |
92
|
|
93 | |
94 |
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
|
||||||||
(dollars in thousands, except per share data)
|
||||||||
September 30,
|
December 31,
|
|||||||
2017
(1)
|
2016
(2)
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Cash and cash equivalents (including cash pledged as collateral of $689,290 and $1,428,475, respectively)
(3)
|
$
|
867,840
|
$
|
1,539,746
|
||||
Investments, at fair value:
|
||||||||
Agency mortgage-backed securities (including pledged assets of $74,711,243 and $70,796,872, respectively)
|
85,889,131
|
75,589,873
|
||||||
Credit risk transfer securities (including pledged assets of $251,077 and $608,707, respectively)
|
582,938
|
724,722
|
||||||
Non-Agency mortgage-backed securities (including pledged assets of $670,425 and $1,064,603, respectively)
(4)
|
1,227,235
|
1,401,307
|
||||||
Residential mortgage loans (including pledged assets of $723,705 and $314,746, respectively)
(5)
|
895,919
|
342,289
|
||||||
Mortgage servicing rights (including pledged assets of $2,693 and $5,464, respectively)
|
570,218
|
652,216
|
||||||
Commercial real estate debt investments (including pledged assets of $3,866,629 and $4,321,739, respectively)
(6)
|
3,869,110
|
4,321,739
|
||||||
Commercial real estate debt and preferred equity, held for investment (including pledged assets of $482,822 and $506,997, respectively)
|
981,748
|
970,505
|
||||||
Commercial loans held for sale, net
|
-
|
114,425
|
||||||
Investments in commercial real estate
|
470,928
|
474,567
|
||||||
Corporate debt (including pledged assets of $432,460 and $592,871, respectively)
|
856,110
|
773,274
|
||||||
Interest rate swaps, at fair value
|
12,250
|
68,194
|
||||||
Other derivatives, at fair value
|
266,249
|
171,266
|
||||||
Receivable for investments sold
|
340,033
|
51,461
|
||||||
Accrued interest and dividends receivable
|
293,207
|
270,400
|
||||||
Other assets
|
353,708
|
333,063
|
||||||
Goodwill
|
71,815
|
71,815
|
||||||
Intangible assets, net
|
25,742
|
34,184
|
||||||
Total assets
|
$
|
97,574,181
|
$
|
87,905,046
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Liabilities:
|
||||||||
Repurchase agreements
|
$
|
69,430,268
|
$
|
65,215,810
|
||||
Other secured financing
|
3,713,256
|
3,884,708
|
||||||
Securitized debt of consolidated VIEs
(7)
|
3,357,929
|
3,655,802
|
||||||
Participation sold
|
-
|
12,869
|
||||||
Mortgages payable
|
311,886
|
311,636
|
||||||
Interest rate swaps, at fair value
|
606,960
|
1,443,765
|
||||||
Other derivatives, at fair value
|
75,529
|
86,437
|
||||||
Dividends payable
|
326,425
|
305,674
|
||||||
Payable for investments purchased
|
5,243,868
|
65,041
|
||||||
Accrued interest payable
|
231,611
|
163,013
|
||||||
Accounts payable and other liabilities
|
121,231
|
184,319
|
||||||
Total liabilities
|
83,418,963
|
75,329,074
|
||||||
Stockholders’ Equity:
|
||||||||
7.875% Series A Cumulative Redeemable Preferred Stock: 7,412,500 authorized, 0 and 7,412,500 issued and outstanding, respectively
|
-
|
177,088
|
||||||
7.625% Series C Cumulative Redeemable Preferred Stock: 12,650,000 authorized, 12,000,000 issued and outstanding
|
290,514
|
290,514
|
||||||
7.50% Series D Cumulative Redeemable Preferred Stock: 18,400,000 authorized, issued and outstanding
|
445,457
|
445,457
|
||||||
7.625% Series E Cumulative Redeemable Preferred Stock: 11,500,000 authorized, issued and outstanding
|
287,500
|
287,500
|
||||||
6.95% Series F Cumulative Redeemable Preferred Stock: 32,200,000 and 0 authorized, 28,800,000 and 0 issued and outstanding, respectively
|
696,910
|
-
|
||||||
Common stock, par value $0.01 per share, 1,917,837,500 and 1,945,437,500 authorized, 1,088,083,794 and 1,018,913,249 issued and outstanding, respectively
|
10,881
|
10,189
|
||||||
Additional paid-in capital
|
16,377,805
|
15,579,342
|
||||||
Accumulated other comprehensive income (loss)
|
(640,149
|
)
|
(1,085,893
|
)
|
||||
Accumulated deficit
|
(3,320,160
|
)
|
(3,136,017
|
)
|
||||
Total stockholders’ equity
|
14,148,758
|
12,568,180
|
||||||
Noncontrolling interest
|
6,460
|
7,792
|
||||||
Total equity
|
14,155,218
|
12,575,972
|
||||||
Total liabilities and equity
|
$
|
97,574,181
|
$
|
87,905,046
|
(1) | As a result of a change to a clearing organization’s rulebook effective January 3, 2017, beginning with the first quarter 2017 and in subsequent periods the Company is presenting the fair value of centrally cleared interest rate swaps net of variation margin pledged under such transactions. The variation margin was previously reported under cash and cash equivalents and is currently reported as a reduction to interest rate swaps, at fair value. Balances reported prior to the effective date will not be adjusted. |
(2) |
Derived from the audited consolidated financial statements at December 31, 2016.
|
(3) |
Includes cash of consolidated Variable Interest Entities (“VIEs”) of $40.0 million and $23.2 million at September 30, 2017 and December 31, 2016, respectively.
|
(4) |
Includes $72.1 million and $88.6 million at September 30, 2017 and December 31, 2016, respectively, of non-Agency mortgage-backed securities in a consolidated VIE pledged as collateral and eliminated from the Company’s Consolidated Statements of Financial Condition.
|
(5) | Includes securitized residential mortgage loans of a consolidated VIE carried at fair value of $139.8 million and $165.9 million at September 30, 2017 and December 31, 2016, respectively. |
(6) | Includes senior securitized commercial mortgage loans of consolidated VIEs carried at fair value of $3.6 billion and $3.9 billion at September 30, 2017 and December 31, 2016, respectively. |
(7) | Includes securitized debt of consolidated VIEs carried at fair value of $3.4 billion and $3.7 billion at September 30, 2017 and December 31, 2016, respectively. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
2017
|
2016
|
2017
|
2016
|
|||||||||||||
Net interest income:
|
||||||||||||||||
Interest income
|
$
|
622,550
|
$
|
558,668
|
$
|
1,747,703
|
$
|
1,403,929
|
||||||||
Interest expense
|
268,937
|
174,154
|
689,643
|
474,356
|
||||||||||||
Net interest income
|
353,613
|
384,514
|
1,058,060
|
929,573
|
||||||||||||
Realized and unrealized gains (losses):
|
||||||||||||||||
Realized gains (losses) on interest rate swaps
(1)
|
(88,211
|
)
|
(124,572
|
)
|
(288,837
|
)
|
(402,809
|
)
|
||||||||
Realized gains (losses) on termination of interest rate swaps
|
-
|
1,337
|
(58
|
)
|
(58,727
|
)
|
||||||||||
Unrealized gains (losses) on interest rate swaps
|
56,854
|
256,462
|
28,471
|
(1,148,478
|
)
|
|||||||||||
Subtotal
|
(31,357
|
)
|
133,227
|
(260,424
|
)
|
(1,610,014
|
)
|
|||||||||
Net gains (losses) on disposal of investments
|
(11,552
|
)
|
14,447
|
(11,833
|
)
|
25,307
|
||||||||||
Net gains (losses) on trading assets
|
154,208
|
162,981
|
140,104
|
370,050
|
||||||||||||
Net unrealized gains (losses) on investments measured at fair value through earnings
|
(67,492
|
)
|
29,675
|
(27,569
|
)
|
(24,351
|
)
|
|||||||||
Bargain purchase gain
|
-
|
72,576
|
-
|
72,576
|
||||||||||||
Subtotal
|
75,164
|
279,679
|
100,702
|
443,582
|
||||||||||||
Total realized and unrealized gains (losses)
|
43,807
|
412,906
|
(159,722
|
)
|
(1,166,432
|
)
|
||||||||||
Other income (loss):
|
||||||||||||||||
Other income (loss)
|
28,282
|
29,271
|
90,793
|
13,226
|
||||||||||||
Total other income (loss)
|
28,282
|
29,271
|
90,793
|
13,226
|
||||||||||||
General and administrative expenses:
|
||||||||||||||||
Compensation and management fee
|
41,993
|
38,709
|
120,193
|
111,754
|
||||||||||||
Other general and administrative expenses
|
15,023
|
59,028
|
44,674
|
83,149
|
||||||||||||
Total general and administrative expenses
|
57,016
|
97,737
|
164,867
|
194,903
|
||||||||||||
Income (loss) before income taxes
|
368,686
|
728,954
|
824,264
|
(418,536
|
)
|
|||||||||||
Income taxes
|
1,371
|
(1,926
|
)
|
2,019
|
(2,839
|
)
|
||||||||||
Net income (loss)
|
367,315
|
730,880
|
822,245
|
(415,697
|
)
|
|||||||||||
Net income (loss) attributable to noncontrolling interest
|
(232
|
)
|
(336
|
)
|
(437
|
)
|
(883
|
)
|
||||||||
Net income (loss) attributable to Annaly
|
367,547
|
731,216
|
822,682
|
(414,814
|
)
|
|||||||||||
Dividends on preferred stock
(2)
|
30,355
|
22,803
|
77,301
|
58,787
|
||||||||||||
Net income (loss) available (related) to common stockholders
|
$
|
337,192
|
$
|
708,413
|
$
|
745,381
|
$
|
(473,601
|
)
|
|||||||
Net income (loss) per share available (related) to common stockholders:
|
||||||||||||||||
Basic
|
$
|
0.31
|
$
|
0.70
|
$
|
0.72
|
$
|
(0.50
|
)
|
|||||||
Diluted
|
$
|
0.31
|
$
|
0.70
|
$
|
0.72
|
$
|
(0.50
|
)
|
|||||||
Weighted average number of common shares outstanding:
|
||||||||||||||||
Basic
|
1,072,566,395
|
1,007,607,893
|
1,037,033,076
|
953,301,855
|
||||||||||||
Diluted
|
1,073,040,637
|
1,007,963,406
|
1,037,445,177
|
953,301,855
|
||||||||||||
Dividends declared per share of common stock
|
$
|
0.30
|
$
|
0.30
|
$
|
0.90
|
$
|
0.90
|
||||||||
Net income (loss)
|
$
|
367,315
|
$
|
730,880
|
$
|
822,245
|
$
|
(415,697
|
)
|
|||||||
Other comprehensive income (loss):
|
||||||||||||||||
Unrealized gains (losses) on available-for-sale securities
|
195,251
|
18,237
|
397,600
|
1,519,874
|
||||||||||||
Reclassification adjustment for net (gains) losses included in net income (loss)
|
15,367
|
(15,606
|
)
|
48,144
|
(22,601
|
)
|
||||||||||
Other comprehensive income (loss)
|
210,618
|
2,631
|
445,744
|
1,497,273
|
||||||||||||
Comprehensive income (loss)
|
$
|
577,933
|
$
|
733,511
|
$
|
1,267,989
|
$
|
1,081,576
|
||||||||
Comprehensive income (loss) attributable to noncontrolling interest
|
(232
|
)
|
(336
|
)
|
(437
|
)
|
(883
|
)
|
||||||||
Comprehensive income (loss) attributable to Annaly
|
578,165
|
733,847
|
1,268,426
|
1,082,459
|
||||||||||||
Dividends on preferred stock
(2)
|
30,355
|
22,803
|
77,301
|
58,787
|
||||||||||||
Comprehensive income (loss) attributable to common stockholders
|
$
|
547,810
|
$
|
711,044
|
$
|
1,191,125
|
$
|
1,023,672
|
(1) |
Consists of interest expense on interest rate swaps.
|
(2) |
Includes cumulative and undeclared dividends on the Company’s Series F Preferred Stock of $
8.3 million
for the three and nine months ended September 30, 2017.
|
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2017 and 2016
|
||||||||||||||||||||||||||||||||||||||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||||||||||||||||||||||||||||||||||||||
(Unaudited)
|
||||||||||||||||||||||||||||||||||||||||||||||||
7.875%
Series A Cumulative Redeemable Preferred Stock |
7.625%
Series C Cumulative Redeemable Preferred Stock |
7.50%
Series D Cumulative Redeemable Preferred Stock |
7.625%
Series E Cumulative Redeemable Preferred Stock |
6.95%
Series F Fixed-to- Floating Rate Cumulative Redeemable Preferred Stock |
Common
stock par value |
Additional
paid-in capital |
Accumulated
other comprehensive income (loss) |
Accumulated deficit
|
Total stockholders’ equity
|
Noncontrolling interest
|
Total
|
|||||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2015
|
$
|
177,088
|
$
|
290,514
|
$
|
445,457
|
$
|
-
|
$
|
-
|
$
|
9,359
|
$
|
14,675,768
|
$
|
(377,596
|
)
|
$
|
(3,324,616
|
)
|
$
|
11,895,974
|
$
|
9,948
|
$
|
11,905,922
|
||||||||||||||||||||||
Net income (loss) attributable to Annaly
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(414,814
|
)
|
(414,814
|
)
|
-
|
(414,814
|
)
|
|||||||||||||||||||||||||||||||||
Net income (loss) attributable to
noncontrolling interest
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(883
|
)
|
(883
|
)
|
||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on available-for-sale
securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
1,519,874
|
-
|
1,519,874
|
-
|
1,519,874
|
||||||||||||||||||||||||||||||||||||
Reclassification adjustment for net (gains)
losses included in net income (loss)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(22,601
|
)
|
-
|
(22,601
|
)
|
-
|
(22,601
|
)
|
|||||||||||||||||||||||||||||||||
Stock compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
6,949
|
-
|
-
|
6,949
|
-
|
6,949
|
||||||||||||||||||||||||||||||||||||
Net proceeds from direct purchase and dividend
reinvestment
|
-
|
-
|
-
|
-
|
-
|
2
|
1,793
|
-
|
-
|
1,795
|
-
|
1,795
|
||||||||||||||||||||||||||||||||||||
Buyback of common stock
|
-
|
-
|
-
|
-
|
-
|
(111
|
)
|
(102,601
|
)
|
-
|
-
|
(102,712
|
)
|
-
|
(102,712
|
)
|
||||||||||||||||||||||||||||||||
Acquisition of subsidiary
|
-
|
-
|
-
|
287,500
|
-
|
939
|
996,768
|
-
|
-
|
1,285,207
|
-
|
1,285,207
|
||||||||||||||||||||||||||||||||||||
Equity contributions from (distributions to)
noncontrolling interest |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(924
|
)
|
(924
|
)
|
||||||||||||||||||||||||||||||||||
Preferred Series A dividends, declared $1.477
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(10,944
|
)
|
(10,944
|
)
|
-
|
(10,944
|
)
|
|||||||||||||||||||||||||||||||||
Preferred Series C dividends, declared $1.430
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(17,157
|
)
|
(17,157
|
)
|
-
|
(17,157
|
)
|
|||||||||||||||||||||||||||||||||
Preferred Series D dividends, declared $1.406
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(25,875
|
)
|
(25,875
|
)
|
-
|
(25,875
|
)
|
|||||||||||||||||||||||||||||||||
Preferred Series E dividends, declared $0.477
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(4,811
|
)
|
(4,811
|
)
|
-
|
(4,811
|
)
|
|||||||||||||||||||||||||||||||||
Common dividends declared, $0.90 per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(857,223
|
)
|
(857,223
|
)
|
-
|
(857,223
|
)
|
|||||||||||||||||||||||||||||||||
BALANCE, September 30, 2016
|
$
|
177,088
|
$
|
290,514
|
$
|
445,457
|
$
|
287,500
|
$
|
-
|
$
|
10,189
|
$
|
15,578,677
|
$
|
1,119,677
|
$
|
(4,655,440
|
)
|
$
|
13,253,662
|
$
|
8,141
|
$
|
13,261,803
|
|||||||||||||||||||||||
BALANCE, December 31, 2016
|
$
|
177,088
|
$
|
290,514
|
$
|
445,457
|
$
|
287,500
|
$
|
-
|
$
|
10,189
|
$
|
15,579,342
|
$
|
(1,085,893
|
)
|
$
|
(3,136,017
|
)
|
$
|
12,568,180
|
$
|
7,792
|
$
|
12,575,972
|
||||||||||||||||||||||
Net income (loss) attributable to Annaly
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
822,682
|
822,682
|
-
|
822,682
|
||||||||||||||||||||||||||||||||||||
Net income (loss) attributable to
noncontrolling interest
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(437
|
)
|
(437
|
)
|
||||||||||||||||||||||||||||||||||
Unrealized gains (losses) on available-for-sale
securities
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
397,600
|
-
|
397,600
|
-
|
397,600
|
||||||||||||||||||||||||||||||||||||
Reclassification adjustment for net (gains)
losses included
in net income (loss) |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
48,144
|
-
|
48,144
|
-
|
48,144
|
||||||||||||||||||||||||||||||||||||
Stock compensation expense
|
-
|
-
|
-
|
-
|
-
|
-
|
1,276
|
-
|
-
|
1,276
|
-
|
1,276
|
||||||||||||||||||||||||||||||||||||
Redemption of preferred stock
|
(177,088
|
)
|
-
|
-
|
-
|
-
|
-
|
(8,224
|
)
|
-
|
-
|
(185,312
|
)
|
-
|
(185,312
|
)
|
||||||||||||||||||||||||||||||||
Net proceeds from direct purchase and dividend
reinvestment
|
-
|
-
|
-
|
-
|
-
|
2
|
1,947
|
-
|
-
|
1,949
|
-
|
1,949
|
||||||||||||||||||||||||||||||||||||
Net proceeds from issuance of common stock
|
-
|
-
|
-
|
-
|
-
|
690
|
803,464
|
-
|
-
|
804,154
|
-
|
804,154
|
||||||||||||||||||||||||||||||||||||
Net proceeds from issuance of preferred stock
|
-
|
-
|
-
|
-
|
696,910
|
-
|
-
|
-
|
-
|
696,910
|
-
|
696,910
|
||||||||||||||||||||||||||||||||||||
Equity contributions from (distributions to)
noncontrolling interest |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(895
|
)
|
(895
|
)
|
||||||||||||||||||||||||||||||||||
Preferred Series A dividends, declared $1.477
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(9,527
|
)
|
(9,527
|
)
|
-
|
(9,527
|
)
|
|||||||||||||||||||||||||||||||||
Preferred Series C dividends, declared $1.430
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(17,157
|
)
|
(17,157
|
)
|
-
|
(17,157
|
)
|
|||||||||||||||||||||||||||||||||
Preferred Series D dividends, declared $1.406
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(25,875
|
)
|
(25,875
|
)
|
-
|
(25,875
|
)
|
|||||||||||||||||||||||||||||||||
Preferred Series E dividends, declared $1.430
per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(16,441
|
)
|
(16,441
|
)
|
-
|
(16,441
|
)
|
|||||||||||||||||||||||||||||||||
Common dividends declared, $0.90 per share
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(937,825
|
)
|
(937,825
|
)
|
-
|
(937,825
|
)
|
|||||||||||||||||||||||||||||||||
BALANCE, September 30, 2017
|
$
|
-
|
$
|
290,514
|
$
|
445,457
|
$
|
287,500
|
$
|
696,910
|
$
|
10,881
|
$
|
16,377,805
|
$
|
(640,149
|
)
|
$
|
(3,320,160
|
)
|
$
|
14,148,758
|
$
|
6,460
|
$
|
14,155,218
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(dollars in thousands)
|
||||||||
(Unaudited)
|
||||||||
Nine Months Ended September 30,
|
||||||||
2017
|
2016
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$
|
822,245
|
$
|
(415,697
|
)
|
|||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
||||||||
Amortization of Residential Investment Securities premiums and discounts, net
|
675,354
|
834,257
|
||||||
Amortization of Residential Mortgage Loans premiums and discounts, net
|
1,036
|
-
|
||||||
Amortization of securitized debt premiums and discounts, net
|
(813
|
)
|
-
|
|||||
Amortization of commercial real estate investment premiums and discounts, net
|
(4,404
|
)
|
(2,393
|
)
|
||||
Amortization of intangibles
|
6,965
|
10,446
|
||||||
Amortization of deferred financing costs
|
1,431
|
1,315
|
||||||
Amortization of net origination fees and costs, net
|
(3,791
|
)
|
(3,925
|
)
|
||||
Depreciation expense
|
13,445
|
16,511
|
||||||
Bargain purchase gain
|
-
|
(72,576
|
)
|
|||||
Net (gains) losses on sales of commercial real estate
|
(5,050
|
)
|
(821
|
)
|
||||
Net (gains) losses on sales of commercial loans held for sale
|
3
|
72
|
||||||
Net (gains) losses on sales of Residential Investment Securities
|
14,263
|
(24,941
|
)
|
|||||
Net (gains) losses on sales of residential mortgage loans
|
3,407
|
383
|
||||||
Net (gain) on sale of subsidiary
|
(790
|
)
|
-
|
|||||
Stock compensation expense
|
1,276
|
6,949
|
||||||
Unrealized (gains) losses on interest rate swaps
|
(28,471
|
)
|
1,148,478
|
|||||
Net unrealized (gains) losses on investments measured at fair value through earnings
|
27,569
|
24,351
|
||||||
Equity in net income from unconsolidated joint ventures
|
1,355
|
5,344
|
||||||
Distributions of cumulative earnings from unconsolidated joint venture
|
868
|
-
|
||||||
Net (gains) losses on trading assets
|
(140,104
|
)
|
(370,050
|
)
|
||||
Proceeds from sale of commercial loans held for sale
|
114,422
|
134,253
|
||||||
Payments on purchase of residential mortgage loans
|
(211,009
|
)
|
(73,370
|
)
|
||||
Proceeds from repayments from residential mortgage loans
|
196,258
|
107,648
|
||||||
Payment on purchase of corporate debt held for sale
|
(19,494
|
)
|
-
|
|||||
Proceeds from sale of corporate debt held for sale
|
19,605
|
-
|
||||||
Proceeds from repurchase agreements of RCap
|
2,354,907,385
|
1,661,650,000
|
||||||
Payments on repurchase agreements of RCap
|
(2,350,682,385
|
)
|
(1,662,100,000
|
)
|
||||
Proceeds from reverse repurchase agreements of RCap
|
50,280,000
|
48,390,000
|
||||||
Payments on reverse repurchase agreements of RCap
|
(50,280,000
|
)
|
(48,390,000
|
)
|
||||
Net payments on derivatives
|
(732,998
|
)
|
23,168
|
|||||
Net change in:
|
||||||||
Due to / from brokers
|
(16
|
)
|
-
|
|||||
Other assets
|
(30,371
|
)
|
(72,800
|
)
|
||||
Accrued interest and dividends receivable
|
(17,322
|
)
|
13,970
|
|||||
Accrued interest payable
|
68,598
|
15,729
|
||||||
Accounts payable and other liabilities
|
(43,936
|
)
|
(23,162
|
)
|
||||
Net cash provided by (used in) operating activities
|
$
|
4,954,531
|
$
|
833,139
|
||||
Cash flows from investing activities:
|
||||||||
Payments on purchases of Residential Investment Securities
|
(25,852,497
|
)
|
(13,628,516
|
)
|
||||
Proceeds from sales of Residential Investment Securities
|
11,598,472
|
8,729,912
|
||||||
Principal payments on Residential Investment Securities
|
8,971,444
|
8,580,353
|
||||||
Purchase of MSRs
|
(11,081
|
)
|
(127,489
|
)
|
||||
Payments on purchases of corporate debt
|
(374,358
|
)
|
(324,863
|
)
|
||||
Principal payments on corporate debt
|
295,380
|
98,542
|
||||||
Purchases of commercial real estate debt investments
|
(40,904
|
)
|
(76,862
|
)
|
||||
Purchase of securitized loans at fair value
|
-
|
(1,489,268
|
)
|
|||||
Origination of commercial real estate investments, net
|
(324,581
|
)
|
(204,184
|
)
|
||||
Proceeds from sale of commercial real estate investments
|
11,960
|
12,750
|
||||||
Principal payments on commercial real estate debt investments
|
182,792
|
71,116
|
||||||
Principal payments on securitized loans at fair value
|
352,475
|
106,786
|
||||||
Principal payments on commercial real estate investments
|
317,114
|
486,435
|
||||||
Purchase of investments in real estate
|
(947
|
)
|
(2,043
|
)
|
||||
Investment in unconsolidated joint venture
|
(22,519
|
)
|
(3,109
|
)
|
||||
Distributions in excess of cumulative earnings from unconsolidated joint ventures
|
6,160
|
4,155
|
||||||
Payments on purchase of residential mortgage loans held for investment
|
(668,977
|
)
|
(8,022
|
)
|
||||
Proceeds from repayments from residential mortgage loans held for investment
|
131,052
|
11,771
|
||||||
Purchase of equity securities
|
(2,104
|
)
|
(88,062
|
)
|
||||
Proceeds from sales of equity securities
|
-
|
16,112
|
||||||
Cash acquired in business combination
|
-
|
41,697
|
||||||
Net payment from disposal of subsidiary
|
5,337
|
-
|
||||||
Net cash provided by (used in) investing activities
|
$
|
(5,425,782
|
)
|
$
|
2,207,211
|
Cash flows from financing activities:
|
||||||||
Proceeds from repurchase agreements
|
151,081,565
|
128,601,867
|
||||||
Principal payments on repurchase agreements
|
(151,092,107
|
)
|
(133,021,365
|
)
|
||||
Proceeds from other secured financing
|
6,801
|
2,358,314
|
||||||
Payments on other secured financing
|
(178,325
|
)
|
(434,458
|
)
|
||||
Proceeds from issuance of securitized debt
|
-
|
1,381,640
|
||||||
Principal repayments on securitized debt
|
(334,386
|
)
|
(273,091
|
)
|
||||
Payment of deferred financing cost
|
(2,054
|
)
|
(3,076
|
)
|
||||
Net proceeds from issuance of preferred stock
|
696,910
|
-
|
||||||
Redemption of preferred stock
|
(185,312
|
)
|
-
|
|||||
Net proceeds from direct purchases and dividend reinvestments
|
1,949
|
1,795
|
||||||
Net proceeds from issuance of common stock
|
804,154
|
-
|
||||||
Principal payments on participation sold
|
(12,827
|
)
|
(230
|
)
|
||||
Principal payments on mortgages payable
|
(54
|
)
|
(7,500
|
)
|
||||
Contributions from noncontrolling interests
|
19
|
-
|
||||||
Distributions to noncontrolling interests
|
(914
|
)
|
(926
|
)
|
||||
Net payment on share repurchase
|
-
|
(102,712
|
)
|
|||||
Dividends paid
|
(986,074
|
)
|
(927,678
|
)
|
||||
Net cash provided by (used in) financing activities
|
$
|
(200,655
|
)
|
$
|
(2,427,420
|
)
|
||
Net (decrease) increase in cash and cash equivalents
|
$
|
(671,906
|
)
|
$
|
612,930
|
|||
Cash and cash equivalents, beginning of period
|
1,539,746
|
1,769,258
|
||||||
Cash and cash equivalents, end of period
|
$
|
867,840
|
$
|
2,382,188
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Interest received
|
$
|
2,460,097
|
$
|
2,197,880
|
||||
Dividends received
|
$
|
3,774
|
$
|
1,253
|
||||
Interest paid (excluding interest paid on interest rate swaps)
|
$
|
693,983
|
$
|
441,121
|
||||
Net interest paid on interest rate swaps
|
$
|
264,965
|
$
|
415,223
|
||||
Taxes paid
|
$
|
2,612
|
$
|
858
|
||||
Noncash investing activities:
|
||||||||
Receivable for investments sold
|
$
|
340,033
|
$
|
493,839
|
||||
Payable for investments purchased
|
$
|
5,243,868
|
$
|
454,237
|
||||
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment
|
$
|
445,744
|
$
|
1,497,273
|
||||
Noncash financing activities
:
|
||||||||
Dividends declared, not yet paid
|
$
|
326,425
|
$
|
269,111
|
•
|
The Annaly Agency Group invests in Agency mortgage-backed securities collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae.
|
•
|
The Annaly Residential Credit Group invests in non-Agency residential mortgage assets within securitized product and whole loan markets.
|
•
|
The Annaly Commercial Real Estate Group (“ACREG”) originates and invests in commercial mortgage loans, securities, and other commercial real estate debt and equity investments.
|
•
|
The Annaly Middle Market Lending Group (“AMML”) provides financing to private equity backed middle market businesses across the capital structure.
|
Interest Income
Methodology
|
||
Agency
|
||
Fixed-rate pass-through
(1)
|
Effective yield
(3)
|
|
Adjustable-rate pass-through
(1)
|
Effective yield
(3)
|
|
Multifamily
(1)
|
Contractual Cash Flows
|
|
Collateralized Mortgage Obligation (“CMO”)
(1)
|
Effective yield
(3)
|
|
Debentures
(1)
|
Contractual Cash Flows
|
|
Interest-only
(2)
|
Prospective
|
|
Residential Credit
|
||
CRT
(2)
|
Prospective
|
|
Legacy
(2)
|
Prospective
|
|
NPL/RPL
(2)
|
Prospective
|
|
New issue
(2)
|
Prospective
|
|
New issue interest-only
(2)
|
Prospective
|
Category
|
Term
|
Building
|
30 - 40 years
|
Site improvements
|
1 - 28 years
|
Standard
|
Description
|
Effective Date
|
Effect on the financial statements or other significant matters
|
|||
Standards that are not yet adopted
|
||||||
ASU 2017-05
Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets
|
This update clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in-substance nonfinancial asset, including nonfinancial assets transferred within a legal entity to a counterparty. The ASU requires the Company to derecognize a distinct nonfinancial asset or in-substance nonfinancial asset in a partial sale transaction when it ceases to have a controlling financial interest in a legal entity that holds the asset or transfers control of the asset, with any noncontrolling interest retained recognized at fair value. Transfers of ownership interest in a consolidated subsidiary with controlling financial interest retained are accounted for as equity transactions.
|
January 1, 2018 (early adoption permitted).
|
The Company is evaluating the expected impact of this ASU.
|
|||
ASU 2017-01
Business Combinations (Topic 805) Clarifying the Definition of a Business
|
This update provides a screen to determine and a framework to evaluate when a set of assets and activities is a business.
|
January 1, 2018 (early adoption permitted)
|
The amendments are expected to result in fewer transactions being accounted for as business combinations.
|
|||
ASU 2016-13
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
|
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. The amendments affect 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. There are also limited amendments to the impairment model for available-for-sale debt securities.
|
January 1, 2020 (early adoption permitted)
|
The Company currently plans to adopt the new standard on its effective date and has developed an implementation plan, which it has begun executing. While the Company is continuing to assess the impact the ASU will have on the consolidated financial statements, the measurement of expected credit losses under the CECL model will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts of the financial assets in scope of the model. Further, based on the amended guidance for available-for-sale debt securities, the Company:
• will be required to use an allowance approach to recognize credit impairment, with the allowance to be limited to the amount by which the security’s fair value is less than its amortized cost basis;
• may not consider the length of time fair value has been below amortized cost, and
• may not consider recoveries of fair value after the balance sheet date when assessing whether a credit loss exists.
|
July 12, 2016
|
||||
Consideration Transferred:
|
(dollars in thousands)
|
|||
Cash
|
$
|
521,082
|
||
Common equity
|
997,707
|
|||
Preferred shares:
|
||||
Exchange of Hatteras preferred stock for Annaly preferred stock
|
278,252
|
|||
Preferred stock fair value adjustment
|
9,248
|
|||
Preferred shares
|
287,500
|
|||
Total consideration
|
$
|
1,806,289
|
||
Net Assets:
|
||||
Cash
|
$
|
562,780
|
||
Agency mortgage-backed securities, at fair value
|
10,863,070
|
|||
Credit risk transfer securities, at fair value
|
116,770
|
|||
Residential mortgage loans
|
360,447
|
|||
Mortgage servicing rights
|
355,820
|
|||
Other derivatives, at fair value
|
8,677
|
|||
Principal receivable
|
438,005
|
|||
Accrued interest and dividend receivable
|
83,814
|
|||
Other assets
|
57,250
|
|||
Total assets acquired
|
$
|
12,846,633
|
||
Repurchase agreements
|
$
|
10,422,757
|
||
Other secured financing
|
35,769
|
|||
Securitized debt of consolidated VIEs
|
54,135
|
|||
Other derivatives, at fair value
|
349,922
|
|||
Dividends payable
|
670
|
|||
Payable for investments purchased
|
2,643
|
|||
Accrued interest payable
|
4,833
|
|||
Accounts payable and other liabilities
|
97,039
|
|||
Total liabilities assumed
|
10,967,768
|
|||
Net assets acquired
|
$
|
1,878,865
|
||
Bargain purchase gain
|
$
|
72,576
|
September 30, 2017
|
|||||||||||||||||||||
Principal / Notional
|
Remaining Premium
|
Remaining Discount
|
Amortized Cost
|
Unrealized Gains
(1)
|
Unrealized Losses
(1)
|
Estimated Fair Value
|
|||||||||||||||
Agency
|
(dollars in thousands)
|
||||||||||||||||||||
Fixed-rate pass-through
|
$
|
73,190,164
|
$
|
4,249,983
|
$
|
(1,236
|
)
|
$
|
77,438,911
|
$
|
267,534
|
$
|
(854,518
|
)
|
$
|
76,851,927
|
|||||
Adjustable-rate pass-through
|
7,274,214
|
285,022
|
(2,608
|
)
|
7,556,628
|
21,917
|
(74,739
|
)
|
7,503,806
|
||||||||||||
Interest-only
|
6,821,975
|
1,322,697
|
—
|
1,322,697
|
2,257
|
(203,082
|
)
|
1,121,872
|
|||||||||||||
Multifamily
|
409,791
|
3,828
|
(424
|
)
|
413,195
|
68
|
(1,737
|
)
|
411,526
|
||||||||||||
Total Agency investments
|
$
|
87,696,144
|
$
|
5,861,530
|
$
|
(4,268
|
)
|
$
|
86,731,431
|
$
|
291,776
|
$
|
(1,134,076
|
)
|
$
|
85,889,131
|
|||||
Residential Credit
|
|||||||||||||||||||||
CRT
|
$
|
534,608
|
$
|
21,083
|
$
|
(4,062
|
)
|
$
|
551,629
|
$
|
31,954
|
$
|
(645
|
)
|
$
|
582,938
|
|||||
Alt-A
|
200,757
|
667
|
(33,716
|
)
|
167,708
|
12,143
|
(126
|
)
|
179,725
|
||||||||||||
Prime
|
235,851
|
371
|
(33,821
|
)
|
202,401
|
18,257
|
(17
|
)
|
220,641
|
||||||||||||
Prime Interest-only
|
334,298
|
954
|
—
|
954
|
—
|
(42
|
)
|
912
|
|||||||||||||
Subprime
|
597,658
|
1,885
|
(78,375
|
)
|
521,168
|
46,750
|
(28
|
)
|
567,890
|
||||||||||||
NPL/RPL
|
104,936
|
86
|
(142
|
)
|
104,880
|
420
|
(27
|
)
|
105,273
|
||||||||||||
Prime Jumbo (>= 2010 Vintage)
|
135,669
|
636
|
(3,980
|
)
|
132,325
|
1,846
|
—
|
134,171
|
|||||||||||||
Prime Jumbo (>= 2010 Vintage) Interest-Only
|
1,037,547
|
16,174
|
—
|
16,174
|
2,449
|
—
|
18,623
|
||||||||||||||
Total residential credit investments
|
$
|
3,181,324
|
$
|
41,856
|
$
|
(154,096
|
)
|
$
|
1,697,239
|
$
|
113,819
|
$
|
(885
|
)
|
$
|
1,810,173
|
|||||
Total Residential Investment Securities
|
$
|
90,877,468
|
$
|
5,903,386
|
$
|
(158,364
|
)
|
$
|
88,428,670
|
$
|
405,595
|
$
|
(1,134,961
|
)
|
$
|
87,699,304
|
|||||
December 31, 2016
|
|||||||||||||||||||||
Principal / Notional
|
Remaining Premium
|
Remaining Discount
|
Amortized Cost
|
Unrealized Gains
(1)
|
Unrealized Losses
(1)
|
Estimated Fair Value
|
|||||||||||||||
Agency
|
(dollars in thousands)
|
||||||||||||||||||||
Fixed-rate pass-through
|
$
|
60,759,317
|
$
|
3,633,354
|
$
|
(1,956
|
)
|
$
|
64,390,715
|
$
|
228,430
|
$
|
(1,307,771
|
)
|
$
|
63,311,373
|
|||||
Adjustable-rate pass-through
|
10,653,109
|
391,267
|
(4,081
|
)
|
11,040,295
|
47,250
|
(53,795
|
)
|
11,033,751
|
||||||||||||
Interest-only
|
8,133,805
|
1,436,192
|
—
|
1,436,192
|
4,225
|
(195,668
|
)
|
1,244,749
|
|||||||||||||
Total Agency investments
|
$
|
79,546,231
|
$
|
5,460,813
|
$
|
(6,037
|
)
|
$
|
76,867,202
|
$
|
279,905
|
$
|
(1,557,234
|
)
|
$
|
75,589,873
|
|||||
Residential Credit
|
|||||||||||||||||||||
CRT
|
$
|
690,491
|
$
|
11,113
|
$
|
(10,907
|
)
|
$
|
690,697
|
$
|
34,046
|
$
|
(21
|
)
|
$
|
724,722
|
|||||
Alt-A
|
173,108
|
1,068
|
(23,039
|
)
|
151,137
|
3,721
|
(685
|
)
|
154,173
|
||||||||||||
Prime
|
248,176
|
287
|
(35,068
|
)
|
213,395
|
7,050
|
(253
|
)
|
220,192
|
||||||||||||
Subprime
|
697,983
|
380
|
(96,331
|
)
|
602,032
|
12,578
|
(1,061
|
)
|
613,549
|
||||||||||||
NPL/RPL
|
269,802
|
670
|
(209
|
)
|
270,263
|
1,004
|
(429
|
)
|
270,838
|
||||||||||||
Prime Jumbo (>= 2010 Vintage)
|
129,453
|
852
|
(345
|
)
|
129,960
|
267
|
(308
|
)
|
129,919
|
||||||||||||
Prime Jumbo (>= 2010 Vintage) Interest-Only
|
863,370
|
15,129
|
—
|
15,129
|
—
|
(2,493
|
)
|
12,636
|
|||||||||||||
Total residential credit investments
|
$
|
3,072,383
|
$
|
29,499
|
$
|
(165,899
|
)
|
$
|
2,072,613
|
$
|
58,666
|
$
|
(5,250
|
)
|
$
|
2,126,029
|
|||||
Total Residential Investment Securities
|
$
|
82,618,614
|
$
|
5,490,312
|
$
|
(171,936
|
)
|
$
|
78,939,815
|
$
|
338,571
|
$
|
(1,562,484
|
)
|
$
|
77,715,902
|
(1)
|
Unrealized gains and losses on Agency investments, excluding interest-only investments, are reported as a component of Other comprehensive income (loss). Unrealized gains and losses on residential credit securities and Agency interest-only investments are reported in Net unrealized gains (losses) on investments measured at fair value through earnings in the Consolidated Statements of Comprehensive Income (Loss).
|
Investment Type
|
September 30, 2017
|
December 31, 2016
|
||||||
(dollars in thousands)
|
||||||||
Fannie Mae
|
$
|
59,635,438
|
$
|
51,658,391
|
||||
Freddie Mac
|
26,189,947
|
23,858,110
|
||||||
Ginnie Mae
|
63,746
|
73,372
|
||||||
Total
|
$
|
85,889,131
|
$
|
75,589,873
|
September 30, 2017
|
December 31, 2016
|
|||||||||||||||
Weighted Average Life
|
Estimated Fair Value
|
Amortized Cost
|
Estimated Fair Value
|
Amortized Cost
|
||||||||||||
(dollars in thousands)
|
||||||||||||||||
Less than one year
|
$
|
1,330,463
|
$
|
1,344,966
|
$
|
63,510
|
$
|
61,775
|
||||||||
Greater than one year through five years
|
16,173,212
|
16,164,913
|
12,626,932
|
12,666,394
|
||||||||||||
Greater than five years through ten years
|
69,944,328
|
70,675,577
|
56,785,601
|
57,738,588
|
||||||||||||
Greater than ten years
|
251,301
|
243,214
|
8,239,859
|
8,473,058
|
||||||||||||
Total
|
$
|
87,699,304
|
$
|
88,428,670
|
$
|
77,715,902
|
$
|
78,939,815
|
September 30, 2017
|
December 31, 2016
|
|||||||||||||||||||||
Estimated Fair
Value
(1)
|
Gross Unrealized
Losses
(1)
|
Number of
Securities
(1)
|
Estimated Fair
Value
(1)
|
Gross Unrealized
Losses
(1)
|
Number of
Securities
(1)
|
|||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||
Less than 12 Months
|
$
|
49,631,846
|
$
|
(644,526
|
)
|
1,230
|
$
|
52,465,045
|
$
|
(1,094,957
|
)
|
1,368
|
||||||||||
12 Months or More
|
8,987,810
|
(286,468
|
)
|
175
|
6,277,814
|
(266,609
|
)
|
54
|
||||||||||||||
Total
|
$
|
58,619,656
|
$
|
(930,994
|
)
|
1,405
|
$
|
58,742,859
|
$
|
(1,361,566
|
)
|
1,422
|
(1)
|
Excludes interest-only mortgage-backed securities.
|
September 30, 2017
|
December 31, 2016
|
|||||||
(dollars in thousands)
|
||||||||
Fair value
|
$
|
895,919
|
$
|
342,289
|
||||
Unpaid principal balance
|
$
|
878,574
|
$
|
338,323
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30, 2017
|
September 30, 2016
|
September 30, 2017
|
September 30, 2016
|
|||||||||||||
(dollars in thousands)
|
||||||||||||||||
Net gains (losses) on disposal of investments
|
$
|
(2,093
|
)
|
$
|
(383
|
)
|
$
|
(3,407
|
)
|
$
|
(383
|
)
|
||||
Net unrealized gains (losses) on investments measured at fair value through earnings
|
(725
|
)
|
(493
|
)
|
5,400
|
(493
|
)
|
|||||||||
Net interest income
|
8,226
|
1,203
|
18,935
|
1,203
|
||||||||||||
Total included in net income (loss)
|
$
|
5,408
|
$
|
327
|
$
|
20,928
|
$
|
327
|
September 30, 2017
|
December 31, 2016
|
|||||||
Portfolio
Range
|
Portfolio Weighted Average
|
Portfolio
Range
|
Portfolio Weighted Average
|
|||||
(dollars in thousands)
|
(dollars in thousands)
|
|||||||
Unpaid principal balance
|
$2 - $3,677
|
$616
|
$22 - $1,905
|
$691
|
||||
Interest rate
|
2.38% - 7.25%
|
4.37%
|
2.50% - 6.75%
|
3.72%
|
||||
Maturity
|
8/1/2029 - 9/1/2047
|
10/9/2045
|
4/8/2044 - 11/1/2046
|
8/20/2045
|
||||
FICO score at loan origination
|
620 - 828
|
754
|
665 - 814
|
761
|
||||
Loan-to-value ratio at loan origination
|
14% - 105%
|
67%
|
24% - 90%
|
71%
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||||
September 30, 2017
|
September 30, 2016
|
September 30, 2017
|
September 30, 2016
|
||||||||||||
(dollars in thousands)
|
|||||||||||||||
Fair value, beginning of period
|
$
|
605,653
|
$
|
—
|
$
|
652,216
|