VARIABLE INTEREST ENTITIES

12 Months Ended

Dec. 31, 2025

Organization, Consolidation and Presentation of Financial Statements [Abstract]


8. VARIABLE INTEREST ENTITIES

The Company’s exposure to the obligations of its VIEs is generally limited to the Company’s investment in the VIEs of $3.3 billion at December 31, 2025. Assets of the VIEs may only be used to settle obligations of the VIEs. Creditors of the VIEs generally have no recourse to the general credit of the Company. The Company is not contractually required to provide and has not provided any form of financial support to the VIEs. No gains or losses were recognized upon consolidation of existing VIEs. Interest income and expense are recognized using the effective interest method.

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 that provide non-recourse financing to the Company and 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 2025-NQM1	January 2025	$	618,433
OBX 2025-NQM2	February 2025	$	719,218
OBX 2025-NQM3	February 2025	$	577,442
OBX 2025-NQM4	March 2025	$	625,807
OBX 2025-HE1	March 2025	$	216,455
OBX 2025-NQM5	March 2025	$	334,879
OBX 2025-NQM6	April 2025	$	553,236
OBX 2025-NQM7	April 2025	$	572,441
OBX 2025-J1	May 2025	$	325,702
OBX 2025-NQM8	May 2025	$	595,560
OBX 2025-NQM9	May 2025	$	275,711
OBX 2025-NQM10	June 2025	$	623,602
OBX 2025-NQM11	June 2025	$	650,072
OBX 2025-NQM12	July 2025	$	274,468
OBX 2025-NQM13	July 2025	$	662,708
OBX 2025-NQM14	August 2025	$	701,027
OBX 2025-NQM15	August 2025	$	697,303
OBX 2025-HE2	August 2025	$	216,324
OBX 2025-J2	September 2025	$	304,395
OBX 2025-NQM16	September 2025	$	708,473
OBX 2025-NQM17	September 2025	$	298,662
OBX 2025-NQM18	October 2025	$	743,151
OBX 2025-J3	October 2025	$	359,416
OBX 2025-NQM19	October 2025	$	707,185
OBX 2025-NQM20	November 2025	$	739,489
OBX 2025-NQM21	November 2025	$	742,051
OBX 2025-NQM22	November 2025	$	438,642
OBX 2025-R1	December 2025	$	407,935
OBX 2025-NQM23	December 2025	$	502,809

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. 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. 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.

As of December 31, 2025 and 2024, a total carrying value of $28.7 billion and $19.5 billion, respectively, of bonds were held by third parties and the Company retained $3.2 billion and $2.3 billion, respectively, of MBS, which were eliminated in consolidation. The contractual principal amount of the OBX Trusts’ debt held by third parties was $29.0 billion and $20.5 billion at December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 2024, the Company recorded ($368.9) million and $3.5 million, 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).

During the year ended December 31, 2025, the Company exercised its optional redemption on OBX 2022-NQM8 in September 2025, OBX 2019-EXP1 in October 2025 and OBX 2022-NQM9 in December 2025. In each instance the Company liquidated the securitization trusts. Upon deconsolidation, there was a net ($0.4) million loss recognized in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).

Structured Repurchase Transaction

The Company pledged securities retained from its OBX Trusts to a structured repurchase transaction, OBX 2025-SR1, to diversify its financing sources. The OBX 2025-SR1 Trust is deemed to be a VIE because the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support. The Company is deemed to be the primary beneficiary and consolidates the OBX 2025-SR1 Trust 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. The securities issued by the OBX 2025-SR1 Trust are recognized as Debt issued by securitization vehicles in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). The changes in the estimated fair value are presented within Net gains (losses) on investments and other. This transaction provides recourse to the Company and two of its subsidiaries for their obligations as sellers under repurchase agreements.

During the years ended December 31, 2025 and 2024, the Company incurred $27.8 million and $20.3 million, respectively, of costs in connection with OBX Trust and structured repurchase transaction securitizations that were expensed as incurred.

Residential Credit Fund

The Company manages a fund investing in participations in residential mortgage loans and mortgage-backed securities. The residential credit fund is deemed to be a VIE because the entity does not have sufficient equity at risk to permit the legal entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders, as capital commitments are not considered equity at risk. The Company is not the primary beneficiary and does not consolidate the residential credit fund as its only interest in the fund is the management and performance fees that it earns, which are not considered variable interests in the entity. As of December 31, 2025 and 2024 the Company had outstanding participations issued in residential mortgage loans of $1.9 billion and $1.2 billion, respectively. These transfers do not meet the criteria for sale accounting and are accounted for as secured borrowings, thus the residential loans are reported as Loans, net and the associated liability is reported as Participations issued in the Consolidated Statements of Financial Condition. The Company elected the fair value option for participations issued with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss) to more accurately reflect the economics of the transfers as the underlying loans are carried at fair value through earnings.

ANNALY CAPITAL MANAGEMENT INC 10-K