NLY Annaly Capital Management Inc

• GAAP net loss of $476.5 million, $0.52 loss per common share
• Core earnings of $254.1 million, $0.25 earnings per common share
• Common stock book value of $12.88, leverage of 4.8:1, economic leverage of 5.7:1
• Diversification strategy advancing – commercial asset growth of 15%, now representing 13% of equity
• Repositioned Agency portfolio into TBA contracts, shorter maturity securities and initiated investment in GSE Credit Risk Transfer bonds

Annaly Capital Management, Inc. (NYSE:NLY) today announced its financial results for the quarter ended March 31, 2015.

Financial Performance

The Company reported a GAAP net loss for the quarter ended March 31, 2015 of $476.5 million, or $0.52 loss per average common share, compared to a GAAP net loss of $658.3 million, or $0.71 loss per average common share, for the quarter ended December 31, 2014, and a GAAP net loss of $203.4 million, or $0.23 loss per average common share, for the quarter ended March 31, 2014. The smaller loss for the quarter ended March 31, 2015 compared to the quarter ended December 31, 2014 was due to changes in realized and unrealized losses on our interest rate swaps. The larger loss for the quarter ended March 31, 2015 compared to the quarter ended March 31, 2014 was primarily attributable to realized losses on termination of interest rate swaps in the current quarter.

Core earnings for the quarter ended March 31, 2015 was $254.1 million, or $0.25 per average common share, compared to $298.9 million, or $0.30 per average common share, for the quarter ended December 31, 2014, and $239.7 million, or $0.23 per average common share, for the quarter ended March 31, 2014. Core earnings declined during the quarter ended March 31, 2015 due to higher amortization expense on Investment Securities, a result of lower interest rates and faster model prepayment expectations. Core earnings were also impacted by portfolio actions that included the disposal of $14.9 billion of Investment Securities which resulted in lower coupon income. The sales generated $62.3 million of realized gains which, as noted below, are excluded from core earnings. "Core earnings" represents a non-GAAP measure and is defined as net income (loss) excluding gains or losses on disposals of investments and termination of interest rate swaps, unrealized gains or losses on interest rate swaps and Agency interest-only mortgage-backed securities, net gains and losses on trading assets, impairment losses, net income (loss) attributable to noncontrolling interest, and certain other non-recurring gains or losses, and inclusive of dollar roll income (a component of Net gains (losses) on trading assets).

As part of a series of portfolio actions executed during the quarter, and further described below, the Company entered into to-be-announced (“TBA”) dollar roll transactions that generate dollar roll income. Dollar roll, or “drop”, income is defined as the difference in price between two TBA contracts with the same terms but different settlement dates. Dollar roll income represents the equivalent of interest income on the underlying security less an implied cost of financing.

Net interest margin, inclusive of TBA dollar rolls, for the quarters ended March 31, 2015, December 31, 2014 and March 31, 2014 was 1.26%, 1.56% and 1.32%, respectively. Net interest margin represents the sum of the Company’s annualized economic net interest income, inclusive of interest expense on interest rate swaps, plus TBA dollar roll income divided by the sum of its average interest-earning assets plus average outstanding TBA contract balances. For the quarter ended March 31, 2015, the average yield on interest earning assets was 2.47% and the average cost of interest bearing liabilities, including interest expense on interest rate swaps, was 1.64%, which resulted in a net interest spread of 0.83%. Our average yield on interest earning assets declined for quarter ended March 31, 2015 when compared to the quarters ended December 31, 2014 and March 31, 2014 as a result of higher amortization expense in the current quarter resulting from faster prepayment speeds. Our average cost of interest bearing liabilities decreased for the quarter ended March 31, 2015 when compared to the quarter ended December 31, 2014 due to lower interest rate swap and repo balances. Our average cost of interest bearing liabilities decreased for the quarter ended March 31, 2015 when compared to the quarter ended March 31, 2014 due to significantly lower interest rate swap and swaption notional balances as a percentage of repurchase agreements.

Wellington J. Denahan, Chairman and Chief Executive Officer of Annaly, commented on the Company’s results. “We, along with the rest of the markets, are patiently waiting for the Federal Reserve to adjust policy accommodation sometime this year. We fully expect increases in volatility and look forward to the opportunities it will bring. We are proud of our ability to continue to deliver attractive relative returns in this zero-interest rate bound world.”

Kevin Keyes, President of Annaly, added “We remain prepared to be opportunistic during this time of heightened volatility. Influenced by our history and demonstrated performance over the longer term, our disposition toward risk management and capital allocation is to maintain a consistent, thoughtful approach through market cycles focusing on the production of stable and durable earnings over time.”

Asset Portfolio

During the quarter ended March 31, 2015, the Company executed a series of portfolio actions based upon a view of relative value given macro-environmental conditions. The actions included (i) the disposal of Investment Securities, which included the rotation out of certain types of Agency mortgage-backed securities while adding to other shorter maturity Agency mortgage-backed securities, (ii) commencement of purchases of Agency Credit-Risk Transfer (“CRT”) securities and (iii) execution of TBA dollar roll transactions. The Company disposals were comprised primarily of 30 year Agency mortgage-backed securities while adding to its holdings of 15 year Agency mortgage-backed securities. The Company purchased $108.3 million of Agency CRT securities. Investment Securities, which are comprised of Agency mortgage-backed securities, Agency debentures and Agency CRT securities were $70.5 billion at March 31, 2015, compared to $82.9 billion at December 31, 2014 and $77.8 billion at March 31, 2014.

The Company’s Investment Securities portfolio at March 31, 2015 was comprised of 94% fixed-rate assets with the remainder constituting adjustable- or floating-rate investments. During the quarter ended March 31, 2015, the Company disposed of $14.9 billion of Investment Securities, resulting in a realized gain of $62.3 million. During the quarter ended December 31, 2014, the Company disposed of $7.3 billion of Investment Securities, resulting in a realized gain of $3.2 million. During the quarter ended March 31, 2014, the Company disposed of $5.0 billion of Investment Securities, resulting in a realized gain of $80.7 million.

At March 31, 2015 the Company had outstanding $13.8 billion in notional balances of TBA derivative positions. Realized and unrealized losses on TBA derivatives are recorded in Net gains (losses) on trading assets in the Company’s Consolidated Statements of Comprehensive Income (Loss). The following table summarizes certain characteristics of the Company’s TBA derivatives at March 31, 2015:

         

Purchase and sale contracts forderivative TBAs

Notional   Implied Cost Basis   Implied Market Value   Net Carrying Value (dollars in thousands) Purchase contracts $ 13,750,000 $ 14,279,766 $ 14,392,695 $ 112,929 Sale contracts   -   -   -   - Net TBA derivatives $ 13,750,000   $ 14,279,766   $ 14,392,695   $ 112,929  

The weighted average experienced constant prepayment rate on our Agency mortgage-backed securities for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014, was 9%, 8% and 6%, respectively. The Company uses a third-party model to project prepayment speeds for purposes of determining amortization of related premiums and discounts on Investment Securities. Changes to model assumptions, including interest rates and other market data, as well as periodic revisions to the model may cause changes in the results. The net amortization of premiums and accretion of discounts on Investment Securities for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014, was $284.8 million, $198.0 million, and $119.0 million, respectively. The total net premium balance on Investment Securities at March 31, 2015, December 31, 2014, and March 31, 2014, was $4.7 billion, $5.3 billion, and $5.1 billion, respectively. The weighted average amortized cost basis of the Company’s non-interest-only Investment Securities at March 31, 2015, December 31, 2014, and March 31, 2014, was 105.1%, 105.3%, and 105.3%, respectively. The weighted average amortized cost basis of the Company’s interest-only Investment Securities at March 31, 2015, December 31, 2014, and March 31, 2014, was 15.7%, 15.4%, and 14.7%, respectively.

The Company’s commercial investment portfolio consists of commercial real estate investments and corporate debt. Commercial real estate debt and preferred equity, including securitized loans of consolidated variable interest entities (“VIEs”), as further described below, totaled $3.0 billion and investments in commercial real estate totaled $207.2 million at March 31, 2015. Commercial real estate debt and preferred equity, including securitized loans of consolidated VIEs, totaled $1.5 billion and investments in commercial real estate totaled $210.0 million at December 31, 2014. The commercial investment portfolio, net of financing, represented 13% and 11% of stockholders’ equity at March 31, 2015 and December 31, 2014, respectively. The weighted average yield on commercial real estate debt and preferred equity as of March 31, 2015, December 31, 2014, and March 31, 2014, was 8.75%, 9.00% and 9.13%, respectively. The weighted average levered equity yield on investments in commercial real estate, excluding real estate held-for-sale, as of March 31, 2015, December 31, 2014, and March 31, 2014, was 13.09%, 13.95% and 10.80%, respectively.

During the quarter, the Company acquired the junior most tranche totaling $102 million issued by the Freddie Mac K-Series and the Company was required to consolidate $1.4 billion of assets and $1.3 billion of liabilities of the issuing trust as of March 31, 2015. The Company also acquired AAA rated commercial mortgage-backed securities totaling $145.0 million during the quarter. During the quarter, the Company acquired $63.0 million of corporate debt, increasing the size of its portfolio to $227.8 million at March 31, 2014, compared to $166.4 million at December 31, 2014. At March 31, 2015, the commercial investment portfolio, net of financing, represented 13% of total equity.

Capital and Funding

At March 31, 2015, total stockholders’ equity was $13.1 billion. Leverage at March 31, 2015, December 31, 2014, and March 31, 2014, was 4.8:1, 5.4:1 and 5:2:1, respectively. For purposes of calculating the Company’s leverage ratio, debt consists of repurchase agreements, Convertible Senior Notes, securitized debt, loan participation and mortgages payable. Securitized debt, loan participation and mortgages payable are non-recourse to the Company. Economic leverage, which also considers other forms of financing, was 5.7:1 at March 31, 2015. Economic leverage is computed as the sum of debt, TBA derivative notional outstanding and net forward purchases of Investment Securities divided by total equity. At March 31, 2015, December 31, 2014, and March 31, 2014, the Company’s capital ratio, which represents the ratio of stockholders’ equity to total assets (inclusive of total market value of TBA derivatives), was 14.1%, 15.1%, and 15.2%, respectively. On a GAAP basis, the Company produced an annualized return (loss) on average equity for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014 of (14.41%), (19.91%), and (6.52%), respectively. On a core earnings basis, the Company provided an annualized return on average equity for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014, of 7.68%, 9.04%, and 7.68%, respectively.

At March 31, 2015, December 31, 2014, and March 31, 2014 the Company had outstanding $60.5 billion, $71.4 billion, and $64.5 billion of repurchase agreements, respectively, with weighted average remaining maturities of 149 days, 141 days, and 187 days, respectively, and with weighted average borrowing rates of 1.74%, 1.62%, and 2.43%, respectively, after giving effect to the Company’s interest rate swaps.

At March 31, 2015, December 31, 2014, and March 31, 2014, the Company had a common stock book value per share of $12.88, $13.10 and $12.30, respectively.

The following table presents the principal balance and weighted average rate of repurchase agreements by maturity at March 31, 2015:

      Maturity   Principal Balance   Weighted Average Rate (dollars in thousands) Within 30 days $ 23,738,473 0.47% 30 to 59 days 7,326,177 0.40% 60 to 89 days 9,534,614 0.40% 90 to 119 days 4,677,222 0.50% Over 120 days(1)   15,200,892   1.45% Total $ 60,477,378   0.70%     (1) Approximately 18% of the total repurchase agreements have a remaining maturity over 1 year.  

Hedge Portfolio

At March 31, 2015, the Company had outstanding interest rate swaps with a net notional amount of $28.1 billion and interest rate swaptions with a net notional amount of $1.0 billion, representing 48% of the Company’s repurchase agreements. Interest rate swaps and swaptions represented 47% of the Company’s repurchase agreements at December 31, 2014 and 94% of the Company’s repurchase agreements at March 31, 2014. Changes in the unrealized gains or losses on the interest rate swaps are reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss). The purpose of the interest rate swaps is to mitigate the risk of rising interest rates that affect the Company’s cost of funds. Since the Company generally pays a fixed rate and receives a floating rate on the notional amount of the swaps, the intended effect of the swaps is to lock in a cost of financing. As of March 31, 2015, the swap portfolio, excluding forward starting swaps, had a weighted average pay rate of 2.37%, a weighted average receive rate of 0.35% and weighted average maturity of 8.09 years.

Changes in the unrealized gains or losses on the interest rate swaptions are reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss). The interest rate swaptions provide the Company with the option to enter into an interest rate swap agreement for a specified notional amount, duration, and pay and receive rates. As of March 31, 2015, the long swaption portfolio had a weighted average pay rate of 2.61% and weighted average expiration of 2.15 months. As of March 31, 2015, there were no short swaption positions.

The following table summarizes certain characteristics of the Company’s interest rate swaps at March 31, 2015:

          Maturity  

Current Notional (1)

 

WeightedAverage PayRate (2) (3)

 

WeightedAverage ReceiveRate (2)

 

WeightedAverage Yearsto Maturity (2)

(dollars in thousands) 0 - 3 years $ 2,852,488 1.78% 0.18% 2.45 3 - 6 years 10,463,000 1.85% 0.41% 4.99 6 - 10 years 11,110,100 2.60% 0.37% 8.64 Greater than 10 years   3,634,400   3.70%   0.22%   20.12 Total / Weighted Average $ 28,059,988   2.37%   0.35%   8.09     (1)   Notional amount includes $3.0 billion in forward starting pay fixed swaps. (2) Excludes forward starting swaps. (3) Weighted average fixed rate on forward starting pay fixed swaps was 1.88%.  

The following table summarizes certain characteristics of the Company’s interest rate swaptions at March 31, 2015:

         

Current UnderlyingNotional

 

Weighted AverageUnderlying PayRate

 

Weighted AverageUnderlying ReceiveRate

 

Weighted AverageUnderlying Years toMaturity

 

Weighted Average Monthsto Expiration

(dollars in thousands) Long $ 1,000,000 2.61 % 3M LIBOR 8.19 2.15  

The Company enters into U.S. Treasury and Eurodollar futures contracts to hedge a portion of its interest rate risk. The following table summarizes outstanding futures positions as of March 31, 2015:

       

Notional - LongPositions

 

Notional - ShortPositions

 

Weighted AverageYears to Maturity

(dollars in thousands)

2-year swap equivalent Eurodollar contracts

$ - $ (3,000,000) 2.00 U.S. Treasury futures - 5 year - (2,000,000) 4.36 U.S. Treasury futures - 10 year and greater   -     (1,800,000)   7.43 Total $ -   $ (6,800,000)   4.13  

Key Metrics

The following table presents key metrics of the Company’s portfolio, liabilities and hedging positions, and performance as of and for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014:

              March 31, 2015   December 31, 2014   March 31, 2014 Portfolio Related Metrics:

Fixed-rate Investment Securities as a percentage of total Investment Securities

94% 95% 93%

Adjustable-rate and floating-rate Investment Securities as a percentage of total Investment Securities

6% 5% 7%

Weighted average yield on commercial real estate debt and preferred equity at period-end

8.75% 9.00% 9.13%

Weighted average net equity yield on investments in commercial real estate at period-end (1)

13.09%   13.95%   10.80%   Liabilities and Hedging Metrics:

Weighted average days to maturity on repurchase agreements outstanding at period-end

149 141 187

Notional amount of interest rate swaps and swaptions as a percentage of repurchase agreements

48% 47% 94% Weighted average pay rate on interest rate swaps at period-end (2) 2.37% 2.49% 2.16% Weighted average receive rate on interest rate swaps at period-end (2) 0.35% 0.22% 0.19% Weighted average net rate on interest rate swaps at period-end (2) 2.02% 2.27% 1.97% Leverage at period-end (3) 4.8:1 5.4:1 5.2:1 Economic leverage at period-end (4) 5.7:1 5.4:1 5.2:1 Capital ratio at period end 14.1%   15.1%   15.2%   Performance Related Metrics: Net interest margin (5) 1.26% 1.56% 1.32% Average yield on interest earning assets (6) 2.47% 2.98% 3.21% Average cost of interest bearing liabilities (7) 1.64% 1.69% 2.31% Net interest spread 0.83% 1.29% 0.90% Annualized return (loss) on average equity (14.41%) (19.91%) (6.52%) Annualized Core return on average equity 7.68% 9.04% 7.68% Common dividend declared during the quarter $0.30 $0.30 $0.30 Book value per common share $12.88   $13.10   $12.30     (1)   Excludes real estate held-for-sale. (2) Excludes forward starting swaps. (3) Debt consists of repurchase agreements, Convertible Senior Notes, securitized debt, loan participation and mortgages payable. Securitized debt, loan participation and mortgages payable are non-recourse to the Company. (4) Computed as the sum of debt, TBA derivative notional outstanding and net forward purchases of Investment Securities divided by total equity. (5) Represents the sum of the Company’s annualized economic net interest income, inclusive of interest expense on interest rate swaps, plus dollar roll income divided by the sum of its average interest-earning assets plus average outstanding TBA derivative balances. (6) Average interest earning assets reflects the average amortized cost of our investments during the period. (7) Includes interest expense on interest rate swaps.  

The following table presents a reconciliation between GAAP net income and Core earnings for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014:

        For the quarters ended March 31, 2015   December 31, 2014   March 31, 2014 (dollars in thousands) GAAP net income (loss) $ (476,499 )   $ (658,272 ) $ (203,351 ) Less: Realized (gains) losses on termination of interest rate swaps 226,462 - 6,842 Unrealized (gains) losses on interest rate swaps 466,202 873,468 348,942 Net (gains) losses on disposal of investments (62,356 ) (3,420 ) (79,710 ) Net (gains) losses on trading assets 6,906 57,454 146,228 Net unrealized (gains) losses on interest-only Agency mortgage-backed securities 33,546 29,520 20,793 GAAP net (income) loss attributable to noncontrolling interest 90 196 - Plus: TBA dollar roll income (1)   59,731       -       -   Core earnings $ 254,082     $ 298,946     $ 239,744     GAAP net income (loss) per average common share $ (0.52 )   $ (0.71 )   $ (0.23 ) Core earnings per average common share $ 0.25     $ 0.30     $ 0.23       (1) Represents a component of Net gains (losses) on trading assets.  

The following table presents the components of the Company’s interest income and interest expense for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014:

        For the quarters ended March 31,   December 31, March 31, 2015   2014   2014 (dollars in thousands)   Interest income: Investment Securities $ 478,239 $ 606,746 $ 614,419 Commercial investment portfolio(1) 40,336 40,913 39,486 U.S. Treasury securities - - 1,329 Securities loaned - - 114 Reverse repurchase agreements 539 429 500 Other   58     56     53 Total interest income   519,172     648,144     655,901 Interest expense: Repurchase agreements 102,748 107,540 103,131 Convertible Senior Notes 23,627 25,701 18,897 U.S. Treasury securities sold, not yet purchased - - 1,076 Securities borrowed - - 95 Securitized debt of consolidated VIEs 2,882 1,106 1,611 Participation sold 159 165 161 Other   4     -     - Total interest expense   129,420     134,512     124,971 Net interest income $ 389,752   $ 513,632   $ 530,930     (1) Consists of commercial real estate debt and preferred equity and corporate debt.  

Dividend Declarations

Common dividends declared for the quarters ended March 31, 2015, December 31, 2014, and March 31, 2014 were $0.30, $0.30, and $0.30 per common share, respectively. The annualized dividend yield on the Company’s common stock for the quarter ended March 31, 2015, based on the March 31, 2015 closing price of $10.40, was 11.54%, compared to 11.10% for the quarter ended December 31, 2014, and 10.94% for the quarter ended March 31, 2014.

Other Information

Annaly’s principal business objective is to generate net income for distribution to its shareholders from its investments. Annaly is a Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”). Annaly is managed and advised by Annaly Management Company LLC.

The Company prepares a supplement to provide additional quarterly information for the benefit of its shareholders. The supplement can be found at the Company’s website in the Investor Relations section under “Quarterly Supplemental Information”.

Conference Call

The Company will hold the first quarter 2015 earnings conference call on May 7, 2015 at 10:00 a.m. Eastern Time. The number to call is 888-317-6003 for domestic calls and 412-317-6061 for international calls. The conference passcode is 6656065. There will also be an audio webcast of the call on www.annaly.com. The replay of the call is available for one week following the conference call. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 10064724. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on Investor Relations, then select Email Alerts and complete the email notification form.

This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financings; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow the commercial mortgage business; credit risks related to our investments in commercial real estate assets and corporate debt; our ability to consummate any contemplated investment opportunities; changes in government regulations affecting our business; our ability to maintain our qualification as a REIT for federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; risks associated with the businesses of our subsidiaries, including the investment advisory business of a wholly-owned subsidiary and the broker-dealer business of a wholly-owned subsidiary. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. We do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

          ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except per share data)   March 31,

December 31,

September 30, June 30, March 31, 2015

2014(1)

2014 2014 2014 (Unaudited)       (Unaudited)   (Unaudited)   (Unaudited) ASSETS   Cash and cash equivalents $ 1,920,326 $ 1,741,244 $ 1,178,621 $ 1,320,666 $ 924,197 Reverse repurchase agreements 100,000 100,000 - - 444,375 Securities borrowed - - - - 513,500 Investments, at fair value: Agency mortgage-backed securities 69,388,001 81,565,256 81,462,387 81,055,337 75,350,388 Agency debentures 995,408 1,368,350 1,334,181 1,348,727 2,408,259 Agency CRT securities 108,337 - - - - Commercial real estate debt investments (2) 1,515,903 - - - - Investment in affiliate 141,246 143,045 136,748 143,495 137,647 Commercial real estate debt and preferred equity, held for investment (3) 1,498,406 1,518,165 1,554,958 1,586,169 1,640,206 Investments in commercial real estate 207,209 210,032 73,827 74,355 40,313 Corporate debt, held for investment 227,830 166,464 144,451 151,344 145,394 Receivable for investments sold 2,009,937 1,010,094 855,161 856,983 19,116 Accrued interest and dividends receivable 247,801 278,489 287,231 283,423 276,007 Receivable for investment advisory income 10,268 10,402 8,369 6,380 6,498 Goodwill 94,781 94,781 94,781 94,781 94,781 Interest rate swaps, at fair value 25,908 75,225 198,066 170,604 340,890 Other derivatives, at fair value 113,503 5,499 19,407 7,938 40,105 Other assets   70,813       68,321       39,798       50,743       33,101     Total assets $ 78,675,677     $ 88,355,367     $ 87,387,986     $ 87,150,945     $ 82,414,777     LIABILITIES AND STOCKHOLDERS’ EQUITY   Liabilities: Repurchase agreements $ 60,477,378 $ 71,361,926 $ 69,610,722 $ 70,372,218 $ 64,543,949 Securities loaned - - 7 7 513,510 Payable for investments purchased 5,205 264,984 2,153,789 781,227 1,898,507 Convertible Senior Notes 749,512 845,295 836,625 831,167 827,486 Securitized debt of consolidated VIEs (4) 1,491,829 260,700 260,700 260,700 260,700 Mortgages payable 146,470 146,553 42,635 30,316 19,317 Participation sold 13,589 13,693 13,768 13,866 13,963 Accrued interest payable 155,072 180,501 180,345 157,782 170,644 Dividends payable 284,310 284,293 284,278 284,261 284,247 Interest rate swaps, at fair value 2,025,170 1,608,286 857,658 928,789 1,272,616 Other derivatives, at fair value 61,778 8,027 - 6,533 6,045 Accounts payable and other liabilities   140,774       47,328       36,511       35,160       39,081     Total liabilities   65,551,087       75,021,586       74,277,038       73,702,026       69,850,065     Stockholders’ Equity:

7.875% Series A Cumulative Redeemable Preferred Stock:7,412,500 authorized, issued and outstanding

 

177,088 177,088 177,088 177,088 177,088

7.625% Series C Cumulative Redeemable Preferred Stock:12,650,000 authorized, 12,000,000 issued and outstanding

 

290,514 290,514 290,514 290,514 290,514 7.50% Series D Cumulative Redeemable Preferred Stock:

18,400,000 authorized, issued and outstanding

445,457 445,457 445,457 445,457 445,457

Common stock, par value $0.01 per share, 1,956,937,500 authorized,947,698,431, 947,643,079, 947,591,766, 947,540,823 and 947,488,945issued and outstanding, respectively

9,477 9,476 9,476 9,475 9,475 Additional paid-in capital 14,787,117 14,786,509 14,781,308 14,776,302 14,770,553 Accumulated other comprehensive income (loss) 773,999 204,883 (967,820 ) (572,256 ) (2,088,479 ) Accumulated deficit   (3,364,147 )     (2,585,436 )     (1,625,075 )     (1,677,661 )     (1,039,896 )   Total stockholders’ equity 13,119,505 13,328,491 13,110,948 13,448,919 12,564,712   Noncontrolling interest   5,085       5,290       -       -       -     Total equity   13,124,590       13,333,781       13,110,948       13,448,919       12,564,712     Total liabilities and equity $ 78,675,677     $ 88,355,367     $ 87,387,986     $ 87,150,945     $ 82,414,777     (1)   Derived from the audited consolidated financial statements at December 31, 2014. (2) Includes senior securitized commercial mortgage loans of consolidated VIE with a carrying value of $1.4 billion at March 31, 2015. (3) Includes senior securitized commercial mortgage loans of consolidated VIE with a carrying value of $361.2 million, $398.6 million, $398.4 million, $398.3 million and $398.1 million, respectively. (4) Includes securitized debt of a consolidated VIE carried at fair value of $1.3 billion at March 31, 2015.               ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED) (dollars in thousands, except per share data)   For the quarters ended March 31, December 31, September 30, June 30, March 31, 2015 2014 2014 2014 2014                   Net interest income: Interest income $ 519,172 $ 648,144 $ 644,640 $ 683,962 $ 655,901 Interest expense   129,420       134,512       127,069       126,107       124,971   Net interest income   389,752       513,632       517,571       557,855       530,930     Other income (loss): Realized gains (losses) on interest rate swaps(1) (158,239 ) (174,908 ) (169,083 ) (220,934 ) (260,435 ) Realized gains (losses) on termination of interest rate swaps (226,462 ) - - (772,491 ) (6,842 ) Unrealized gains (losses) on interest rate swaps   (466,202 )     (873,468 )     98,593       175,062       (348,942 ) Subtotal   (850,903 )     (1,048,376 )     (70,490 )     (818,363 )     (616,219 ) Investment advisory income 10,464 10,858 8,253 6,109 6,123 Net gains (losses) on disposal of investments 62,356 3,420 4,693 5,893 79,710 Dividend income from affiliate 4,318 4,048 4,048 4,048 13,045 Net gains (losses) on trading assets (6,906 ) (57,454 ) 4,676 (46,489 ) (146,228 ) Net unrealized gains (losses) on interest-only Agency mortgage-backed securities (33,546 ) (29,520 ) (37,944 ) 2,085 (20,793 ) Other income (loss)   (1,082 )     3,365       (22,249 )     4,687       1,460   Subtotal   35,604       (65,283 )     (38,523 )     (23,667 )     (66,683 ) Total other income (loss)   (815,299 )     (1,113,659 )     (109,013 )     (842,030 )     (682,902 )   General and administrative expenses: Compensation and management fee 38,629 38,734 39,028 39,277 38,521 Other general and administrative expenses   12,309       19,720       12,289       12,912       8,857   Total general and administrative expenses   50,938       58,454       51,317       52,189       47,378     Income (loss) before income taxes (476,485 ) (658,481 ) 357,241 (336,364 ) (199,350 )   Income taxes   14       (209 )     2,385       (852 )     4,001     Net income (loss) (476,499 ) (658,272 ) 354,856 (335,512 ) (203,351 )   Net income (loss) attributable to noncontrolling interest   (90 )     (196 )     -       -       -     Net income (loss) attributable to Annaly (476,409 ) (658,076 ) 354,856 (335,512 ) (203,351 )   Dividends on preferred stock   17,992       17,992       17,992       17,992       17,992     Net income (loss) available (related) to common stockholders $ (494,401 )   $ (676,068 )   $ 336,864     $ (353,504 )   $ (221,343 )   Net income (loss) per share available (related) to common stockholders: Basic $ (0.52 )   $ (0.71 )   $ 0.36     $ (0.37 )   $ (0.23 ) Diluted $ (0.52 )   $ (0.71 )   $ 0.35     $ (0.37 )   $ (0.23 )   Weighted average number of common shares outstanding: Basic   947,669,831       947,615,793       947,565,432       947,515,127       947,458,813   Diluted   947,669,831       947,615,793       987,315,527       947,515,127       947,458,813     Net income (loss) $ (476,499 )   $ (658,272 )   $ 354,856     $ (335,512 )   $ (203,351 ) Other comprehensive income (loss): Unrealized gains (losses) on available-for-sale securities 631,472 1,175,864 (390,871 ) 1,522,126 741,172 Reclassification adjustment for net (gains) losses included in net income (loss)   (62,356 )     (3,161 )     (4,693 )     (5,903 )     (80,718 ) Other comprehensive income (loss)   569,116       1,172,703       (395,564 )     1,516,223       660,454   Comprehensive income (loss) 92,617 514,431 (40,708 ) 1,180,711 457,103 Comprehensive income (loss) attributable to noncontrolling interest   (90 )     (196 )     -       -       -   Comprehensive income (loss) attributable to Annaly $ 92,707     $ 514,627     $ (40,708 )   $ 1,180,711     $ 457,103     (1) Interest expense related to the Company’s interest rate swaps is recorded in Realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss).

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