SECURITIES

9 Months Ended

Sep. 30, 2025

Investments, Debt and Equity Securities [Abstract]


5. SECURITIES

The Company’s investments in securities include agency, credit risk transfer, non-agency and commercial mortgage-backed securities. The Company designates its securities as trading, available-for-sale or held-to-maturity depending upon the type of security and the Company’s intent and ability to hold such security to maturity. Securities classified as available-for-sale and trading are reported at fair value on a recurring basis.

Available-for-sale debt securities are carried at fair value, with changes in fair value recognized in other comprehensive income, unless the fair value option is elected in which case changes in fair value are recognized in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). Effective July 1, 2022, the Company elected the fair value option for any newly purchased Agency mortgage-backed securities in order to simplify the accounting for these securities. During the three and nine months ended September 30, 2025, $621.8 million and $1.6 billion, respectively, of unrealized gains (losses) on the Agency mortgage-backed securities, for which the fair value option was elected, were reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss). During the three and nine months ended September 30, 2024, $1.7 billion and $762.8 million, respectively, of unrealized gains (losses) on the Agency mortgage-backed securities, for which the fair value option was elected, were reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss). Agency mortgage-backed securities purchased prior to July 1, 2022, are still classified as available-for-sale with changes in fair value recognized in other comprehensive income. The Company has also elected the fair value option for CRT securities, interest only securities, Non-Agency and commercial mortgage-backed securities in order to simplify the accounting. Transactions for regular-way securities are recorded on trade date, including to-be-announced (“TBA”) securities that meet the regular-way

securities scope exception from derivative accounting. Gains and losses on disposals of securities are recorded on trade date based on the specific identification method.

Impairment – Management evaluates available-for-sale securities where the fair value option has not been elected and held-to-maturity debt securities for impairment at least quarterly, and more frequently when economic or market conditions warrant such evaluation. When the fair value of an available-for-sale security is less than its amortized cost, the security is considered impaired. For securities that are impaired, the Company determines if it (1) has the intent to sell the security, (2) is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, or (3) does not expect to recover the entire amortized cost basis of the security. Further, the security is analyzed for credit loss (the difference between the present value of cash flows expected to be collected and the amortized cost basis). The credit loss, if any, will then be recognized in the Consolidated Statements of Comprehensive Income (Loss) as a securities loss provision and reflected as an allowance for credit losses on securities in the Consolidated Statements of Financial Condition, while the balance of losses related to other factors will be recognized as a component of Other comprehensive income (loss). When the fair value of a held-to-maturity security is less than the cost, the Company performs an analysis to determine whether it expects to recover the entire cost basis of the security.

Agency Mortgage-Backed Securities - The Company invests in mortgage pass-through certificates, collateralized mortgage obligations and other MBS representing interests in or obligations backed by pools of residential or multifamily mortgage loans and certificates. Many of the underlying loans and certificates are guaranteed by the Government National Mortgage Association (“Ginnie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or the Federal National Mortgage Association (“Fannie Mae”) (collectively, “Agency mortgage-backed securities”).

Agency mortgage-backed securities may include forward contracts for Agency mortgage-backed securities purchases or sales of a generic pool, on a to-be-announced basis. TBA securities without intent to accept delivery (“TBA derivatives”) are accounted for as derivatives as discussed in the “Derivative Instruments” Note.

CRT Securities - CRT securities are risk sharing instruments issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. CRT securities are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.

Non-Agency Mortgage-Backed Securities - The Company invests in non-Agency mortgage-backed securities such as those issued in prime loan, prime jumbo loan, non-qualified mortgage loan (“Non-QM”), small balance commercial loan (“SBC”), non-performing loan (“NPL”), re-performing loan (“RPL”) and residential transition loan (“RTL”) securitizations.

Agency mortgage-backed securities, non-Agency mortgage-backed securities and residential CRT securities are referred to herein as “Residential Securities.” Although the Company generally intends to hold most of its Residential Securities until maturity, it may, from time to time, sell any of its Residential Securities as part of the overall management of its portfolio.

Commercial Mortgage-Backed Securities (“Commercial Securities”) - The Company invests in Commercial Securities such as conduit, credit CMBS, single-asset single borrower and collateralized loan obligations.

The following table represents a rollforward of the activity for the Company’s securities for the nine months ended September 30, 2025:


	Agency Securities		Residential Credit Securities		Commercial Securities		Total
	(dollars in thousands)
Beginning balance January 1, 2025	$	67,434,068	$	2,248,101	$	74,278	$	69,756,447
Purchases	28,423,701		541,147		—		28,964,848
Sales	(9,340,711)		(392,498)		(41,814)		(9,775,023)
Principal paydowns	(5,185,889)		(633,432)		(32,451)		(5,851,772)
(Amortization) / accretion	(117,471)		(4,798)		(80)		(122,349)
Fair value adjustment	2,104,121		(13,614)		67		2,090,574
Ending balance September 30, 2025	$	83,317,819	$	1,744,906	$	—	$	85,062,725

The following tables present the Company’s securities portfolio that were carried at their fair value at September 30, 2025 and December 31, 2024:


	September 30, 2025
	Principal / Notional		Remaining Premium		Remaining Discount		Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Agency	(dollars in thousands)
Fixed-rate pass-through	$	76,814,459	$	1,411,294	$	(1,292,553)	$	76,933,200	$	742,793	$	(973,432)	$	76,702,561
Adjustable-rate pass-through	123,092		7,773		(34)		130,831		1,788		(5,333)		127,286
CMO	2,845		13		—		2,858		—		(115)		2,743
Interest-only	4,724,425		625,831		—		625,831		36,966		(88,472)		574,325
Multifamily (1)	34,199,391		563,100		(14,128)		5,872,077		72,841		(34,014)		5,910,904

Total agency securities	$	115,864,212	$	2,608,011	$	(1,306,715)	$	83,564,797	$	854,388	$	(1,101,366)	$	83,317,819
Residential credit
Credit risk transfer	$	312,945	$	1,111	$	(3,031)	$	311,025	$	19,648	$	(26)	$	330,647
Non-QM	319,048		270		(2,534)		316,784		3,393		(8,069)		312,108
Prime (2)	2,324,593		31,472		(9,940)		127,699		3,468		(696)		130,471

SBC	194,277		22		(10,549)		183,750		5,110		(5,512)		183,348
NPL/RPL	451,673		3,438		(21,882)		433,229		4,675		(2,536)		435,368
RTL	174,097		16		(544)		173,569		1,226		(40)		174,755
Prime jumbo (>=2010 vintage) (3)	11,908,492		101,317		(30,632)		164,056		18,321		(4,168)		178,209

Total residential credit securities	$	15,685,125	$	137,646	$	(79,112)	$	1,710,112	$	55,841	$	(21,047)	$	1,744,906
Total residential securities	$	131,549,337	$	2,745,657	$	(1,385,827)	$	85,274,909	$	910,229	$	(1,122,413)	$	85,062,725
Commercial
Commercial securities	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total securities	$	131,549,337	$	2,745,657	$	(1,385,827)	$	85,274,909	$	910,229	$	(1,122,413)	$	85,062,725


	December 31, 2024
	Principal / Notional		Remaining Premium		Remaining Discount		Amortized Cost		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Agency	(dollars in thousands)
Fixed-rate pass-through	$	65,010,762	$	1,329,117	$	(1,178,444)	$	65,161,435	$	130,742	$	(2,242,503)	$	63,049,674
Adjustable-rate pass-through	157,123		11,936		(42)		169,017		2,216		(8,995)		162,238
CMO	87,467		1,459		—		88,926		—		(15,242)		73,684

Interest-only	3,437,570		493,803		—		493,803		14,843		(127,914)		380,732
Multifamily (1)	26,216,351		514,726		(11,830)		3,844,575		7,644		(110,454)		3,741,765
Reverse mortgages	24,916		2,499		—		27,415		—		(1,440)		25,975
Total agency investments	$	94,934,189	$	2,353,540	$	(1,190,316)	$	69,785,171	$	155,445	$	(2,506,548)	$	67,434,068
Residential credit
Credit risk transfer	$	707,169	$	1,608	$	(3,581)	$	705,196	$	49,819	$	(100)	$	754,915
Non-QM	172,368		35		(1,724)		170,679		2,694		(8,481)		164,892
Prime (2)	1,881,111		27,484		(10,416)		100,039		2,857		(779)		102,117

SBC	253,045		12		(11,624)		241,433		3,632		(11,493)		233,572
NPL/RPL	702,720		4,540		(21,897)		685,363		3,168		(6,091)		682,440
RTL	151,100		—		(134)		150,966		1,030		(144)		151,852
Prime jumbo (>=2010 vintage) (3)	10,334,669		84,431		(30,385)		146,285		17,072		(5,044)		158,313

Total residential credit securities	$	14,202,182	$	118,110	$	(79,761)	$	2,199,961	$	80,272	$	(32,132)	$	2,248,101
Total residential securities	$	109,136,371	$	2,471,650	$	(1,270,077)	$	71,985,132	$	235,717	$	(2,538,680)	$	69,682,169
Commercial
Commercial securities	$	74,151	$	193	$	—	$	74,344	$	38	$	(104)	$	74,278
Total securities	$	109,210,522	$	2,471,843	$	(1,270,077)	$	72,059,476	$	235,755	$	(2,538,784)	$	69,756,447

(1) Principal/Notional amount includes $28.9 billion and $22.9 billion of Agency Multifamily interest-only securities as of September 30, 2025 and December 31, 2024, respectively. (2) Principal/Notional amount includes $2.2 billion and $1.8 billion of Prime interest-only securities as of September 30, 2025 and December 31, 2024, respectively. (3) Principal/Notional amount includes $11.8 billion and $10.2 billion of Prime Jumbo interest-only securities as of September 30, 2025 and December 31, 2024, respectively.

The following table presents the Company’s Agency mortgage-backed securities portfolio by issuing Agency at September 30, 2025 and December 31, 2024:


	September 30, 2025		December 31, 2024
Investment Type	(dollars in thousands)
Fannie Mae	$	79,289,917	$	63,211,517
Freddie Mac	3,887,883		4,115,085
Ginnie Mae	140,019		107,466
Total	$	83,317,819	$	67,434,068

Actual maturities of the Company’s Residential Securities are generally shorter than stated contractual maturities because actual maturities of the portfolio are affected by periodic payments and prepayments of principal on the underlying mortgages.

The following table summarizes the Company’s Residential Securities at September 30, 2025 and December 31, 2024, according to their estimated weighted average life classifications:


	September 30, 2025				December 31, 2024
	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
Estimated weighted average life	(dollars in thousands)
Less than one year	$	271,081	$	268,967	$	407,856	$	408,090
Greater than one year through five years	5,251,891		5,193,314		1,308,898		1,325,093
Greater than five years through ten years	77,747,853		78,033,301		66,027,670		68,242,391
Greater than ten years	1,791,900		1,779,327		1,937,745		2,009,558
Total	$	85,062,725	$	85,274,909	$	69,682,169	$	71,985,132

The estimated weighted average lives of the Residential Securities at September 30, 2025 and December 31, 2024 in the table above are based upon projected principal prepayment rates. The actual weighted average lives of the Residential Securities could be longer or shorter than projected.

The following table presents the gross unrealized losses and estimated fair value of the Company’s Agency mortgage-backed securities, accounted for as available-for-sale where the fair value option has not been elected, by length of time that such securities have been in a continuous unrealized loss position at September 30, 2025 and December 31, 2024.


	September 30, 2025					December 31, 2024
	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	$	12,781	$	(208)	3	$	49,820	$	(1,477)	34
12 Months or more	7,093,209		(629,117)		1,292	8,054,162		(1,020,427)		1,377
Total	$	7,105,990	$	(629,325)	1,295	$	8,103,982	$	(1,021,904)	1,411

(1) Excludes interest-only mortgage-backed securities and reverse mortgages, and effective July 1, 2022, newly purchased Agency pass-through, CMOs and multifamily securities.

The decline in value of these securities is solely due to market conditions and not the quality of the assets. Substantially all of the Agency mortgage-backed securities have an actual or implied credit rating that is the same as that of the U.S. government. An impairment has not been recognized in earnings related to these investments because the decline in value is not related to credit quality, the Company currently has not made a decision to sell the securities nor is it more likely than not that the securities will be required to be sold before recovery.

During the three and nine months ended September 30, 2025, the Company disposed of $1.3 billion and $9.7 billion amortized cost basis of Residential Securities, respectively. During the three and nine months ended September 30, 2024, the Company disposed of $2.8 billion and $16.0 billion amortized cost basis of Residential Securities, respectively. The following table presents the Company’s net gains (losses) from the disposal of Residential Securities for the three and nine months ended September 30, 2025 and 2024, which is included in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).


	Gross Realized Gains		Gross Realized Losses		Net Realized Gains (Losses)
For the three months ended	(dollars in thousands)
September 30, 2025	$	11,353	$	(9,554)	$	1,799
September 30, 2024	$	26,983	$	(35,258)	$	(8,275)
For the nine months ended
September 30, 2025	$	85,463	$	(164,028)	$	(78,565)
September 30, 2024	$	67,209	$	(888,683)	$	(821,474)

ANNALY CAPITAL MANAGEMENT INC 10-Q