Company: NLY-PF
Filing Date: 2025-07-30
Form Type: 10-Q
Source: 0001628280-25-036724
Chunk: 58

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-07-30
Form: 10-Q
Item: Part I, Item 2
Chunk 58
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 a third party to perform due diligence on a sample of loans that we believe sufficiently represents the entire pool. Once an investment is made, our ongoing surveillance process includes regular reviews, analysis and oversight of investments by our investment personnel and appropriate committee. We review credit and other risks 

65

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIESItem 2. Management’s Discussion and Analysis 

of loss associated with each investment. Our management monitors the overall portfolio risk and determines estimates of provision for loss. Additionally, ALCO has oversight of our credit risk exposure. 

Our portfolio composition, based on balance sheet values, at June 30, 2025 and December 31, 2024 was as follows:

June 30, 2025December 31, 2024CategoryAgency mortgage-backed securities66.7%68.6%Credit risk transfer securities0.4%0.8%Non-agency mortgage-backed securities1.2%1.5%Residential mortgage loans (1)28.6%26.0%Commercial mortgage-backed securities—%0.1%Mortgage servicing rights3.1%3.0%(1) Includes assets transferred or pledged to securitization vehicles.

Counterparty Risk Management

Our use of repurchase and derivative agreements and trading activities create exposure to counterparty risk relating to potential losses that could be recognized if the counterparties to these agreements fail to perform their obligations under the contracts. In the event of default by a counterparty, we could have difficulty obtaining our assets pledged as collateral. A significant portion of our investments are financed with repurchase agreements by pledging our Residential Securities as collateral to the applicable lender. The collateral we pledge generally exceeds the amount of the borrowings under each agreement. If the counterparty to the repurchase agreement defaults on its obligations and we are not able to recover our pledged asset, we are at risk of losing the over-collateralization or haircut. The amount of this exposure is the difference between the amount loaned to us plus interest due to the counterparty and the fair value of the collateral pledged by us to the lender including accrued interest receivable on such collateral.

We also use interest rate swaps and other derivatives that are not centrally cleared to manage interest rate risk. Under these agreements, we pledge securities and cash as collateral or settle variation margin payments as part of a margin arrangement. 

If a counterparty were to default on its obligations, we would be exposed to a loss to a derivative counterparty to the extent that