Company: NLY-PF
Filing Date: 2025-07-30
Form Type: 10-Q
Source: 0001628280-25-036724
Chunk: 19

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-07-30
Form: 10-Q
Item: Part I, Item 2
Chunk 19
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 security’s acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period.

Our GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of our non-GAAP metrics exclude the effect of the PAA, which quantifies the component of premium amortization representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term Constant Prepayment Rate (“CPR”).

The following table illustrates the impact of the PAA on premium amortization expense for our Residential Securities portfolio  for the periods presented:

 For the Three Months Ended June 30,For the Six Months Ended June 30, 2025202420252024 (dollars in thousands)Premium amortization expense$28,138 $10,437 $85,550 $37,169 Less: PAA cost (benefit)(3,862)(7,306)8,434 (10,319)Premium amortization expense (excluding PAA)$32,000 $17,743 $77,116 $47,488 

Economic Leverage and Economic Capital Ratios

We use capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities. 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.

Our economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and U.S Treasury securities sold, not yet purchased. Debt issued by