Investment Group Targeted Asset Class Description Annaly Agency Group Agency MBS Agency pass-through certificates issued or guaranteed by Agencies. Other Agency MBS include collateralized mortgage obligations (“CMOs”), interestonly securities and inverse floaters To-be-announced forward contracts (“TBAs”) Forward contracts for Agency pass-through certificates Agency CMBS Pass-through certificates collateralized by commercial mortgages guaranteed by the Agencies Annaly Residential Credit Group Residential mortgage loans Residential mortgage loans that are not guaranteed by the Agencies Residential MBS Securities collateralized by pools of residential loans that are not guaranteed by one of the Agencies Agency or private label credit risk transfer securities (“CRT”) Risk sharing transactions issued by Freddie Mac and Fannie Mae and similarly structured transactions arranged by third party market participants, designed to synthetically transfer mortgage credit risk to private investors Annaly Mortgage Servicing Rights Group Mortgage Servicing Rights (“MSR”) Rights to service a pool of residential mortgage loans in exchange for a portion of the interest payments made on the loans We believe that future interest rates and mortgage prepayment rates are very difficult to predict. Therefore, we seek to acquire assets which we believe will provide attractive returns over a broad range of interest rate and prepayment scenarios. Capital Structure and Financing Our capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for our stockholders while maintaining appropriate liquidity to support our business and meet our financial obligations under periods of market stress. To maintain our desired capital profile, we utilize a mix of debt and equity funding. Debt funding may include the use of repurchase agreements, loans, securitizations, participations issued, lines of credit, asset backed lending facilities, corporate bond issuance, convertible bonds, or other liabilities. Equity capital primarily consists of common and preferred stock. We finance our Agency mortgage-backed securities and residential credit investments primarily with repurchase agreements. We seek to diversify our exposure and limit concentrations by entering into repurchase agreements with multiple counterparties. We enter into repurchase agreements with broker-dealers, commercial banks and other lenders that typically offer this type of financing. We enter into collateralized borrowings with financial institutions meeting internal credit standards and we monitor the financial condition of these institutions on a regular basis. At December 31, 2023, we had $62.2 billion of repurchase agreements outstanding. Additionally, our wholly-owned subsidiary, Arcola Securities, Inc. (“Arcola”), provides direct access to third party funding as a member broker-dealer of the Financial Industry Regulatory Authority (“FINRA”). As an eligible institution, Arcola also raises funds through the General Collateral Finance Repo service offered by the Fixed Income Clearing Corporation (“FICC”), with FICC acting as the central counterparty. Arcola provides us greater depth and diversity of repurchase agreement funding while also limiting our counterparty exposure. To reduce our liquidity risk. we maintain a laddered approach to our repurchase agreements. At December 31, 2023, the weighted average days to maturity was 44 days. We also finance our investments in residential mortgage loans through the issuance of securitization transactions sponsored by our wholly-owned subsidiary Onslow Bay Financial LLC (“Onslow Bay”) under the Onslow Bay private-label securitization program (“OBX”). We are a programmatic securitization sponsor of new origination, residential whole loans with 51 deals as of December 31, 2023 comprising $20.0 billion of issuance since the beginning of 2018. During the year ended December 31, 2023, we issued 13 OBX securitizations backed by $4.9 billion of residential whole loans. We utilize leverage to enhance the risk-adjusted returns generated for our stockholders. We generally expect to maintain an economic leverage ratio of no greater than 10:1 considerate of our overall capital allocation framework. This ratio varies from time to time based upon various factors, including our management’s opinion of the level of risk of our assets and liabilities, our mix of assets, our liquidity position, our level of unused borrowing capacity, the availability of credit, over-collateralization levels required by lenders when we pledge assets to secure borrowings and, lastly, our assessment of domestic and international market conditions. Since the financial crisis beginning in 2007, we have maintained an economic leverage ratio below 8:1 and since the Coronavirus Disease 2019 (“COVID-19”) pandemic began, an economic leverage ratio closer to or below 7:1. For ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES ITEM 1. BUSINESS 5
RkJQdWJsaXNoZXIy NDQ4NTc1