8-K

_________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)

February 25, 2014

          Annaly Capital Management, Inc.          

(Exact Name of Registrant as Specified in its Charter)

Maryland	1-13447	22-3479661
State or Other                                Jurisdiction Of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1211 Avenue of the Americas Suite 2902      New York, New York	10036
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:  (212) 696-0100

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[   ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[   ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[   ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[   ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02.  Results of Operations and Financial Condition

On February 25, 2014, the registrant issued a press release announcing its financial results for the quarter and year ended December 31, 2013.  A copy of the press release is furnished as Exhibit 99.1 to this report.

On February 25, 2014, the registrant posted supplemental financial information on the Investor Relations section of its website (www.annaly.com).  A copy of the supplemental financial information is furnished as Exhibit 99.2 to this report and incorporated herein by reference.

Item 9.01  Financial Statements and Exhibits

(c)     Exhibits

99.1              Press Release, dated February 25, 2014, issued by Annaly Capital Management, Inc.

99.2              Supplemental Financial Information for the quarter ended December 31, 2013

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ANNALY CAPITAL MANAGEMENT, INC.
By:	/s/   Glenn A. Votek_____________________
	Name:  Glenn A. Votek Title:    Chief Financial Officer

Dated: February 25, 2014

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

ANNALY CAPITAL MANAGEMENT, INC. REPORTS 4th QUARTER 2013 RESULTS

·   GAAP net income of $1.0 billion, $1.07 earnings per common share

·   Core earnings of $350.1 million, $0.35 earnings per common share

·   Strong capital position with capital ratio of 15.1%, net capital ratio of 15.9%, and leverage of 5.0:1

·   Commercial investment portfolio doubled since CXS acquisition, now representing 14% of stockholders’ equity

·   Book value of $12.13

New York, New York–February 25, 2014– Annaly Capital Management, Inc. (NYSE: NLY) today announced financial results for the quarter ended December 31, 2013.

Financial Performance

GAAP net income for the quarter ended December 31, 2013 was $1.0 billion or $1.07 per average common share as compared to GAAP net income of $192.5 million or $0.18 per average common share for the quarter ended September 30, 2013, and GAAP net income of $700.5 million or $0.70 per average common share for the quarter ended December 31, 2012. The increase from both prior periods was largely attributable to higher unrealized gains on interest rate swaps, trading assets and interest-only Agency mortgage-backed securities. Core earnings for the quarter ended December 31, 2013 was $350.1 million or $0.35 per average common share as compared to $282.3 million or $0.28 per average common share for the quarter ended September 30, 2013, and $335.1 million or $0.32 per average common share for the quarter ended December 31, 2012. "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 loss on extinguishment of the 4% Convertible Senior Notes due 2015, net gains and losses on trading assets, impairment losses and loss on previously held equity interest in CreXus Investment Corp.

GAAP net income for the years ended December 31, 2013 and 2012, respectively was $3.7 billion or $3.86 per average common share and $1.7 billion or $1.74 per average common share. Core earnings for the years ended December 31, 2013 and 2012, was $1.2 billion or $1.21 per average common share and $1.5 billion or $1.54 per average common share, respectively.

For the quarter ended December 31, 2013, the annualized yield on average interest-earning assets was 3.50% and the annualized cost of funds on average interest-bearing liabilities, including the net interest payments on interest rate swaps, was 2.07%, which resulted in an average interest rate spread of 1.43%.  This was a 36 basis point increase from the 1.07% average interest rate spread for the quarter ended September 30, 2013, and a 49 basis point increase from the 0.94% average interest rate spread for the quarter ended December 31, 2012. Our annualized yield on average interest-earning assets increased for the quarter ended December 31, 2013 when compared to the quarter ended September 30, 2013 due to lower amortization expense on our Investment Securities, primarily driven by lower prepayment speeds experienced during the current quarter. Our annualized cost of funds on average interest-bearing liabilities increased for the quarter ended December 31, 2013 when compared to the quarter ended September 30, 2013 due to higher interest rate swap notional amounts and higher cost of interest rate swaps coupled with lower repurchase agreements balances during the current quarter.

Wellington J. Denahan, Chairman and Chief Executive Officer of Annaly, commented on the Company’s results. “We are encouraged by the reduced uncertainty in the fixed income markets with the introduction of monetary policy tapering.  Our commercial assets continue to build momentum, with commercial investments now representing 14% of our stockholders’ equity.  The lower leverage stance permits us to be opportunistic with capital deployment allowing us to strengthen earnings in future periods.”

Asset Portfolio

Investment Securities, which is comprised of Agency mortgage-backed securities and Agency debentures, were $73.4 billion at December 31, 2013, compared to $83.0 billion at September 30, 2013 and $127.0 billion at December 31, 2012.  As of December 31, 2013, substantially all of the Company’s Investment Securities were Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities and debentures.  Fixed-rate Agency mortgage-backed securities and debentures comprised 91% of the Company’s Investment Securities portfolio at December 31, 2013.  Adjustable-rate Agency mortgage-backed securities and debentures comprised 9% of the Company’s Investment Securities portfolio.  During the quarter ended December 31, 2013, the Company disposed of $11.9 billion of Investment Securities, resulting in a realized gain of $49.6 million.  During the quarter ended September 30, 2013, the Company disposed of $13.0 billion of Investment Securities, resulting in a realized gain of $43.6 million.  During the quarter ended December 31, 2012, the Company disposed of $13.2 billion of Investment Securities, resulting in a realized gain of $121.4 million.

During the year ended December 31, 2013, the Company disposed of $56.8 billion of Investment Securities, resulting in a realized gain of $424.1 million.  During the year ended December 31, 2012, the Company disposed of $32.2 billion of Investment Securities, resulting in a realized gain of $438.5 million.

The Constant Prepayment Rate for the quarters ended December 31, 2013, September 30, 2013, and December 31, 2012, was 7%, 13% and 20%, respectively.  The net amortization of premiums and accretion of discounts on Investment Securities for the quarters ended December 31, 2013, September 30, 2013, and December 31, 2012, was $30.7 million, $201.9 million, and $433.3 million, respectively.  The total net premium balance on Investment Securities at December 31, 2013, September 30, 2013, and December 31, 2012, was $4.6 billion, $4.7 billion, and $5.8 billion, respectively. The amortized cost basis of the Company’s non-interest-only Investment Securities at December 31, 2013, September 30, 2013, and December 31, 2012, was 105.0%, 104.7%, and 104.3%, respectively. The amortized cost basis of the Company’s interest-only Investment Securities at December 31, 2013, September 30, 2013, and December 31, 2012, was 14.1%, 13.8%, and 13.6%, respectively.

The Company’s commercial investment portfolio consists of commercial real estate investments and corporate debt. At December 31, 2013, the Company’s commercial investment portfolio represented 14% of stockholders’ equity compared to 11% at September 30, 2013. Commercial real estate debt and preferred equity totaled $1.6 billion and investments in commercial real estate totaled $60.1 million at December 31, 2013.  Total commercial real estate investments increased from $1.3 billion at September 30, 2013 to $1.6 billion at December 31, 2013.

Capital and Funding

At December 31, 2013 total stockholders’ equity was $12.4 billion. Leverage at December 31, 2013, September 30, 2013, and December 31, 2012, was 5.0:1, 5.4:1 and 6.5:1, respectively.  Leverage includes repurchase agreements, Convertible Senior Notes and non-recourse loan participation and mortgages payable. At December 31, 2013, September 30, 2013, and December 31, 2012, the Company’s capital ratio, which represents the ratio of stockholders’ equity to total assets, was 15.1%, 13.9%, and 11.9%, respectively.  At December 31, 2013, September 30, 2013, and December 31, 2012, the Company’s net capital ratio was 15.9%, 14.8%, and 12.3%, respectively. The Company’s net capital ratio takes into account the net balances of its U.S Treasury securities and U.S Treasury securities sold, not yet purchased, reverse repurchase agreements and repurchase agreements, and securities borrowed and securities loaned.  On a GAAP basis, the Company produced an annualized return on average equity for the quarters ended December 31, 2013, September 30, 2013, and December 31, 2012 of 32.46%, 5.87%, and 16.97%, respectively. On a Core earnings basis, the Company provided an annualized return on average equity for the quarters ended December 31, 2013, September 30, 2013, and December 31, 2012, of 11.05%, 8.62%, and 8.12%, respectively.

At December 31, 2013, September 30, 2013, and December 31, 2012 the Company had outstanding $61.8 billion, $69.2 billion, and $102.8 billion of repurchase agreements, respectively, with weighted average borrowing rates of 2.33%, 2.02%, and 1.53%, respectively, after giving effect to the Company’s interest rate swaps, and weighted average remaining maturities of 204 days, 200 days, and 191 days, respectively.

At December 31, 2013, September 30, 2013, and December 31, 2012, the Company had a common stock book value per share of $12.13, $12.70 and $15.85, respectively. 

The following table presents the maturities of repurchase agreements at December 31, 2013:

Maturity	Principal Balance		Weighted Average Rate
(dollars in thousands)
Within 30 days	$	21,171,574		0.36	%
30 to 59 days		13,373,921		0.43	%
60 to 89 days		3,592,266		0.44	%
90 to 119 days		4,010,334		0.52	%
Over 120 days(1)		19,632,906		1.29	%
Total	$	61,781,001		0.68	%

(1) Approximately 16% of the total repurchase agreements have a remaining maturity over 1 year.

Hedge Portfolio

At December 31, 2013, the Company had entered into interest rate swaps with a notional amount of $52.4 billion and interest rate swaptions with a net notional amount of $4.2 billion, or 92% of the Company’s repurchase agreements, compared to 85% of the Company’s repurchase agreements at September 30, 2013 and 46% of the Company’s repurchase agreements at December 31, 2012.  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 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 December 31, 2013, the swap portfolio had a weighted average pay rate of 2.14%, a weighted average receive rate of 0.20% and weighted average maturity of 5.26 years.

At December 31, 2013, the Company had entered into interest rate swaptions with a net notional amount of $4.2 billion. 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 December 31, 2013, the long swaption portfolio had a weighted average pay rate of 3.07% and weighted average maturity of 4.26 months. As of December 31, 2013, the short swaption portfolio had a weighted average receive rate of 2.83% and weighted average maturity of 23.71 months.

The following table summarizes certain characteristics of the Company’s interest rate swaps at December 31, 2013:

Maturity	Current Notional		Weighted Average Pay Rate			Weighted Average Receive Rate			Weighted Average Years to Maturity
(dollars in thousands)
0 - 3 years	$	24,286,000		1.83	%		0.18	%		1.98
3 - 6 years		8,865,410		2.02	%		0.19	%		4.19
6 - 10 years		15,785,500		2.37	%		0.23	%		7.66
Greater than 10 years		3,490,000		3.62	%		0.20	%		19.93
Total / Weighted Average	$	52,426,910		2.14	%		0.20	%		5.26

The following table summarizes certain characteristics of the Company’s interest rate swaptions at December 31, 2013:

	Current Underlying Notional		Weighted Average Underlying Pay Rate			Weighted Average Underlying Receive Rate			Weighted Average Underlying Years to Maturity		Weighted Average Months to Expiration
	(dollars in thousands)
Long	$	5,150,000		3.07	%		3M LIBOR			10.10		4.26
Short	$	1,000,000		3M LIBOR			2.83	%		5.96		23.71

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 December 31, 2013, September 30, 2013, and December 31, 2012:

	December 31, 2013			September 30, 2013			December 31, 2012
Portfolio Related Metrics:
Fixed-rate Agency mortgage-backed securities and debentures as a percentage of portfolio		91	%		91	%		93	%
Adjustable-rate Agency mortgage-backed securities and debentures as a percentage of portfolio		9	%		9	%		7	%
Weighted average yield on commercial real estate debt and preferred equity at period-end		9.17	%		9.71	%		N/A
Weighted average net equity yield on investments in commercial real estate at period-end (1)		12.69	%		14.13	%		N/A
Liabilities and Hedging Metrics:
Weighted average days to maturity on repurchase agreements outstanding at period-end		204			200			191
Notional amount of interest rate swaps and swaptions as a percentage of repurchase agreements		92	%		85	%		46	%
Weighted average pay rate on interest rate swaps at period-end		2.14	%		2.06	%		2.21	%
Weighted average receive rate on interest rate swaps at period-end		0.20	%		0.21	%		0.24	%
Weighted average net rate on interest rate swaps at period-end		1.94	%		1.85	%		1.97	%
Leverage at period-end (2)	5.0:1			5.4:1			6.5:1
Capital ratio at period end		15.1	%		13.9	%		11.9	%
Net capital ratio at period end		15.9	%		14.8	%		12.3	%
Performance Related Metrics:
Annualized yield on average interest earning assets during the quarter (3)		3.50	%		2.88	%		2.44	%
Annualized cost of funds on average interest bearing liabilities during the quarter		2.07	%		1.81	%		1.50	%
Annualized interest rate spread during the quarter		1.43	%		1.07	%		0.94	%
Annualized return on average equity		32.46	%		5.87	%		16.97	%
Annualized Core return on average equity		11.05	%		8.62	%		8.12	%
Common dividend declared during the quarter	$	0.30		$	0.35		$	0.45
Book value per common share	$	12.13		$	12.70		$	15.85

(1) Excludes real estate held-for-sale.

(2) Includes non-recourse loan participations and mortgages payable.

(3) Average interest earning assets reflects the average amortized cost of our investments during the period.

The following table presents a reconciliation between GAAP net income and Core earnings for the quarters ended December 31, 2013, September 30, 2013, and December 31, 2012:

	For the quarters ended
	December 31, 2013			September 30, 2013			December 31, 2012
	(dollars in thousands)
GAAP net income	$	1,028,749		$	192,458		$	700,495
Realized (gains) losses on termination of interest rate swaps		13,177			36,658			-
Unrealized (gains) losses on interest rate swaps		(561,101	)		(6,343	)		(341,554	)
Net (gains) losses on disposal of investments		(28,602	)		(43,602	)		(114,831	)
Net loss on extinguishment of 4% Convertible Senior Notes		-			-			75,012
Net (gains) losses on trading assets		(41,936	)		96,022			(15,181	)
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities		(60,181	)		7,099			31,148
Core earnings	$	350,106		$	282,292		$	335,089
GAAP net income  per average common share	$	1.07		$	0.18		$	0.70
Core earnings  per average common share	$	0.35		$	0.28		$	0.32

The following table presents a reconciliation between GAAP net income and Core earnings for the years ended December 31, 2013 and 2012:

	For the years ended
	December 31, 2013			December 31, 2012
	(dollars in thousands)
GAAP net income	$	3,729,698		$	1,735,900
Realized (gains) losses on termination of interest rate swaps		101,862			2,385
Unrealized (gains) losses on interest rate swaps		(2,002,200	)		32,219
Net (gains) losses on disposal of investments		(403,045	)		(432,139	)
Net loss on extinguishment of 4% Convertible Senior Notes		-			162,340
Net (gains) losses on trading assets		(1,509	)		(22,910	)
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities		(244,730	)		59,937
Impairment of goodwill		23,987			-
Loss on previously held equity interest in CreXus		18,896			-
Core earnings	$	1,222,959		$	1,537,732
GAAP net income  per average common share	$	3.86		$	1.74
Core earnings  per average common share	$	1.21		$	1.54

Dividend Declarations

Common dividends declared for the quarters ended December 31, 2013, September 30, 2013, and December 31, 2012 were $0.30, $0.35, and $0.45 per common share, respectively.  The Company distributes dividends based on its current estimate of taxable earnings per common share, not GAAP net income. Taxable earnings and GAAP net income will typically differ due to items such as non-taxable unrealized and realized gains and losses, differences in premium amortization and discount accretion, and non-deductible general and administrative expenses. The annualized dividend yield on the Company’s common stock for the quarter ended December 31, 2013, based on the December 31, 2013 closing price of $9.97, was 12.04%, as compared to 12.09% for the quarter ended September 30, 2013, and 12.82% for the quarter ended December 31, 2012.

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 2013 fourth quarter earnings conference call on February 26, 2014 at 10:00 a.m. EST.  The number to call is 888-317-6003 for domestic calls and 412-317-6061 for international calls.  The conference passcode is 1477019.  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 10040001. 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 our wholly-owned subsidiary; and risks associated with the broker-dealer business of our 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)
	December 31,			September 30,			June 30,			March 31,			December 31,
	2013			2013			2013			2013			2012(1)
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
ASSETS
Cash and cash equivalents	$	552,436		$	1,122,722		$	725,537		$	1,862,550		$	615,789
Reverse repurchase agreements		100,000			31,074			171,234			4,933,465			1,811,095
Securities borrowed		2,582,893			3,439,954			2,425,024			2,688,485			2,160,942
Investments, at fair value:
U.S. Treasury securities		1,117,915			2,459,617			-			1,645,930			752,076
Agency mortgage-backed securities		70,388,949			79,902,834			92,487,318			108,256,671			123,963,207
Agency debentures		2,969,885			3,128,853			3,306,473			3,970,279			3,009,568
Investment in affiliates		139,447			136,748			134,948			267,547			234,120
Commercial real estate debt and preferred equity		1,583,969			1,227,182			938,357			-			-
Investments in commercial real estate		60,132			60,424			67,203			-			-
Corporate debt, held for investment		117,687			75,988			61,682			66,539			63,944
Receivable for investments sold		1,193,730			934,964			1,499,140			1,292,478			290,722
Accrued interest and dividends receivable		273,079			297,161			340,671			388,665			419,259
Receivable for investment advisory income		6,839			10,055			10,374			12,817			17,730
Intangible for customer relationships		-			4,572			6,474			6,731			6,989
Goodwill		94,781			103,245			102,783			55,417			55,417
Interest rate swaps, at fair value		559,044			360,373			38,950			-			-
Other derivatives, at fair value		146,725			85,180			91,270			-			9,830
Other assets		34,949			52,211			61,146			54,282			41,607
Total assets	$	81,922,460		$	93,433,157		$	102,468,584		$	125,501,856		$	133,452,295
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
U.S. Treasury securities sold, not yet purchased, at fair value	$	1,918,394		$	2,403,524		$	-		$	611,167		$	495,437
Repurchase agreements		61,781,001			69,211,309			81,397,335			100,322,942			102,785,697
Securities loaned		2,527,668			3,299,090			2,284,245			2,330,060			1,808,315
Payable for investments purchased		764,131			2,546,467			2,833,214			3,203,461			8,256,957
Payable for share buyback program		-			-			-			-			141,149
Convertible Senior Notes		825,262			824,512			824,229			824,902			825,541
Mortgages payable		19,332			19,346			19,361			-			-
Participation sold		14,065			14,164			14,324			-			-
Accrued interest payable		160,921			162,755			164,190			175,749			186,896
Dividends payable		284,230			331,557			396,888			426,173			432,154
Interest rate swaps, at fair value		1,141,828			1,504,258			1,189,178			2,259,173			2,584,907
Other derivatives, at fair value		55,518			125,468			-			4,812			-
Accounts payable and other liabilities		25,055			44,983			82,316			37,048			10,798
Total liabilities		69,517,405			80,487,433			89,205,280			110,195,487			117,527,851
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, 947,432,862, 947,304,761, 947,483,487, 947,293,099 and 947,213,204 issued and outstanding, respectively		9,474			9,473			9,475			9,473			9,472
Additional paid-in capital		14,765,761			14,759,738			14,754,681			14,746,579			14,740,774
Accumulated other comprehensive income (loss)		(2,748,933	)		(1,454,790	)		(1,289,246	)		2,003,248			3,053,242
Accumulated deficit		(534,306	)		(1,281,756	)		(1,124,665	)		(2,365,990	)		(2,792,103	)
Total stockholders’ equity		12,405,055			12,945,724			13,263,304			15,306,369			15,924,444
Total liabilities and stockholders’ equity	$	81,922,460		$	93,433,157		$	102,468,584		$	125,501,856		$	133,452,295

(1)      Derived from the audited consolidated financial statements at December 31, 2012

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands, except per share data)
	For the quarters ended
	December 31,			September 30,			June 30,			March 31,			December 31,
	2013			2013			2013			2013			2012
Interest income:
Investment Securities and corporate debt	$	723,248		$	659,058		$	686,577		$	724,820		$	748,122
Commercial real estate debt and preferred equity		36,124			26,066			13,906			-			-
U.S. Treasury securities		8,125			7,718			7,242			5,996			3,819
Securities loaned		2,087			1,787			2,302			2,612			2,106
Reverse repurchase agreements		1,587			2,461			2,775			3,636			2,449
Other		78			70			134			153			165
Total interest income		771,249			697,160			712,936			737,217			756,661
Interest expense:
Repurchase agreements		111,038			120,123			141,945			157,064			165,600
Convertible Senior Notes		17,788			17,092			16,364			15,813			15,503
U.S. Treasury securities sold, not yet purchased		6,684			6,688			4,075			2,788			2,930
Securities borrowed		1,718			1,405			1,737			1,925			1,458
Participation sold		165			168			134			-			-
Total interest expense		137,393			145,476			164,255			177,590			185,491
Net interest income		633,856			551,684			548,681			559,627			571,170
Other income (loss):
Realized gains (losses) on interest rate swaps(1)		(242,182	)		(227,909	)		(212,727	)		(225,476	)		(228,155	)
Realized gains (losses) on termination of interest rate swaps		(13,177	)		(36,658	)		(35,649	)		(16,378	)		-
Unrealized gains (losses) on interest rate swaps		561,101			6,343			1,109,022			325,734			341,554
Subtotal		305,742			(258,224	)		860,646			83,880			113,399
Investment advisory income		8,490			9,558			12,187			13,408			18,773
Net gains (losses) on disposal of investments		28,602			43,602			147,998			182,843			114,831
Net loss on extinguishment of 4% Convertible Senior Notes		-			-			-			-			(75,012	)
Dividend income from affiliates		4,048			4,048			4,048			6,431			7,097
Net gains (losses) on trading assets		41,936			(96,022	)		54,046			1,549			15,181
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities		60,181			(7,099	)		111,521			80,127			(31,148	)
Impairment of goodwill		-			-			(23,987	)		-			-
Loss on previously held equity interest in CreXus		-			-			(18,896	)		-			-
Other income (loss)		3,945			4,212			7,192			132			161
Subtotal		147,202			(41,701	)		294,109			284,490			49,883
Total other income (loss)		452,944			(299,925	)		1,154,755			368,370			163,282
General and administrative expenses:
Compensation and management fee		43,385			41,774			43,764			38,443			25,842
Other general and administrative expenses		12,909			16,970			21,367			13,469			14,242
Total general and administrative expenses		56,294			58,744			65,131			51,912			40,084
Income (loss) before income taxes		1,030,506			193,015			1,638,305			876,085			694,368
Income taxes		1,757			557			92			5,807			(6,127	)
Net income (loss)		1,028,749			192,458			1,638,213			870,278			700,495
Dividends on preferred stock		17,992			17,992			17,992			17,992			19,717
Net income (loss) available (related) to common shareholders	$	1,010,757		$	174,466		$	1,620,221		$	852,286		$	680,778
Net income (loss) per share available (related) to common shareholders:
Basic	$	1.07		$	0.18		$	1.71		$	0.90		$	0.70
Diluted	$	1.03		$	0.18		$	1.64		$	0.87		$	0.68
Weighted average number of common shares outstanding:
Basic		947,386,060			947,303,205			947,411,380			947,249,901			970,602,863
Diluted		995,625,622			955,690,471			995,229,637			994,815,169			1,017,925,849
Net income (loss)	$	1,028,749		$	192,458		$	1,638,213		$	870,278		$	700,495
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities		(1,244,500	)		(121,942	)		(3,144,496	)		(867,151	)		(894,972	)
Reclassification adjustment for net (gains) losses included in net income (loss)		(49,643	)		(43,602	)		(147,998	)		(182,843	)		(121,393	)
Other comprehensive income (loss)		(1,294,143	)		(165,544	)		(3,292,494	)		(1,049,994	)		(1,016,365	)
Comprehensive income (loss)	$	(265,394	)	$	26,914		$	(1,654,281	)	$	(179,716	)	$	(315,870	)

(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.

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands, except per share data)
	For the years ended
	December 31,			December 31,
	2013			2012 (2)
	(Unaudited)
Interest income:
Investment Securities and corporate debt	$	2,793,703		$	3,225,269
Commercial real estate debt and preferred equity		76,096			-
U.S. Treasury securities		29,081			17,222
Securities loaned		8,788			9,903
Reverse repurchase agreements		10,459			6,218
Other		435			533
Total interest income		2,918,562			3,259,145
Interest expense:
Repurchase agreements		530,170			577,243
Convertible Senior Notes		67,057			67,221
U.S. Treasury securities sold, not yet purchased		20,235			15,114
Securities borrowed		6,785			7,594
Participation sold		467			-
Total interest expense		624,714			667,172
Net interest income		2,293,848			2,591,973
Other income (loss):
Realized gains (losses) on interest rate swaps(1)		(908,294	)		(893,769	)
Realized gains (losses) on termination of interest rate swaps		(101,862	)		(2,385	)
Unrealized gains (losses) on interest rate swaps		2,002,200			(32,219	)
Subtotal		992,044			(928,373	)
Investment advisory income		43,643			82,138
Net gains (losses) on disposal of investments		403,045			432,139
Net loss on extinguishment of 4% Convertible Senior Notes		-			(162,340	)
Dividend income from affiliates		18,575			28,336
Net gains (losses) on trading assets		1,509			22,910
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities		244,730			(59,937	)
Impairment of goodwill		(23,987	)		-
Loss on previously held equity interest in CreXus		(18,896	)		-
Other income (loss)		15,481			525
Subtotal		684,100			343,771
Total other income (loss)		1,676,144			(584,602	)
General and administrative expenses:
Compensation and management fee		167,366			190,702
Other general and administrative expenses		64,715			44,857
Total general and administrative expenses		232,081			235,559
Income (loss) before income taxes		3,737,911			1,771,812
Income taxes		8,213			35,912
Net income (loss)		3,729,698			1,735,900
Dividends on preferred stock		71,968			39,530
Net income (loss) available (related) to common shareholders	$	3,657,730		$	1,696,370
Net income (loss) per share available (related) to common shareholders:
Basic	$	3.86		$	1.74
Diluted	$	3.74		$	1.71
Weighted average number of common shares outstanding:
Basic		947,337,915			972,902,459
Diluted		995,557,026			1,005,755,057
Net income (loss)	$	3,729,698		$	1,735,900
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities		(5,378,089	)		482,765
Reclassification adjustment for net (gains) losses included in net income (loss)		(424,086	)		(438,511	)
Other comprehensive income (loss)		(5,802,175	)		44,254
Comprehensive income (loss)	$	(2,072,477	)	$	1,780,154

(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.

(2) Derived from the audited consolidated financial statements at December 31, 2012.

EX-99.2

Exhibit 99.2