During the year ended December 31, 2022, the Company deconsolidated the 2020 multifamily VIE since it sold all of its interest-only securities and no longer retains a significant variable interest in the entity. As a result of the deconsolidation of this VIE, the Company derecognized approximately $424.0 million of securities and approximately $391.9 million of debt issued by securitization vehicles and recognized a realized gain of $33.4 million, which is included in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). Residential Securitizations The Company also invests in residential mortgage-backed securities issued by entities that are VIEs because they do not have sufficient equity at risk for the entities to finance their activities without additional subordinated financial support from other parties. The Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance. For these entities, the Company’s maximum exposure to loss is the amortized cost basis of the securities it owns and it does not provide any liquidity arrangements, guarantees or other commitments to these VIEs. Refer to the “Securities” Note for further information on Residential Securities. OBX Trusts Residential securitizations are issued by entities generally referred to collectively as the “OBX Trusts.” These securitizations represent financing transactions which provide non-recourse financing to the Company that are collateralized by residential mortgage loans purchased by the Company. Residential securitizations closed during the year are included in the table below. Securitization Date of Closing Face Value at Closing (dollars in thousands) OBX 2023-NQM1 January 2023 $ 405,209 OBX 2023-J1 February 2023 $ 305,755 OBX 2023-NQM2 February 2023 $ 420,650 OBX 2023-NQM3 April 2023 $ 407,525 OBX 2023-NQM4 May 2023 $ 394,291 OBX 2023-INV1 May 2023 $ 314,839 OBX 2023-NQM5 June 2023 $ 390,271 OBX 2023-NQM6 July 2023 $ 400,530 OBX 2023-NQM7 September 2023 $ 411,133 OBX 2023-NQM8 October 2023 $ 406,663 OBX 2023-J2 November 2023 $ 303,008 OBX 2023-NQM9 November 2023 $ 393,507 OBX 2023-NQM10 December 2023 $ 387,556 As of December 31, 2023 and 2022, a total carrying value of $11.6 billion and $7.7 billion, respectively, of bonds were held by third parties and the Company retained $1.4 billion and $1.0 billion, respectively, of MBS, which were eliminated in consolidation. The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. Effective August 1, 2022, upon initial consolidation of new securitization entities, the Company elected to apply the measurement alternative for consolidated collateralized financing entities in order to simplify the accounting and valuation processes. The liabilities of these securitization entities are deemed to be more observable and are used to measure the fair value of the assets. During the years ended December 31, 2023 and 2022, the Company incurred $8.2 million and $7.6 million, respectively, of costs in connection with these securitizations that were expensed as incurred. The contractual principal amount of the OBX Trusts’ debt held by third parties was $12.6 billion and $9.0 billion at December 31, 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, the Company recorded ($305.2) million and $1.2 billion, respectively, of unrealized gains (losses) on debt held by third parties, which is reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss). Although the residential mortgage loans have been sold for bankruptcy and state law purposes, the transfers of the residential mortgage loans to the OBX Trusts did not qualify for sale accounting and are reflected as intercompany secured borrowings that are eliminated upon consolidation. Credit Facility VIEs In connection with the sale of all of the assets that comprise the MML Portfolio, the credit facilities which provided financing for the Company’s corporate debt were paid-off and terminated during the year ended December 31, 2022. Refer to the “Sale of Middle Market Lending Portfolio” Note for additional information on the transaction. ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Financial Statements F-18
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