10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:  MARCH 31, 2015

OR

[  ]             TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _______________ TO _________________

COMMISSION FILE NUMBER:  1-13447

ANNALY CAPITAL MANAGEMENT, INC.

(Exact name of registrant as specified in its charter)

MARYLAND	22-3479661
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
1211 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK	10036
(Address of principal executive offices)	(Zip Code)

(212) 696-0100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes þ    No 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ    Accelerated filer o Non-accelerated filer o Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the last practicable date:

Class	Outstanding at April 30, 2015
Common Stock, $.01 par value	947,710,129

ANNALY CAPITAL MANAGEMENT, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I  -  FINANCIAL INFORMATION
Item 1.  Financial Statements	Page
Consolidated Statements of Financial Condition at March 31, 2015 (Unaudited) and December 31, 2014 (Derived from the audited consolidated financial statements at December 31, 2014)	1
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the quarters ended March 31, 2015 and 2014	2
Consolidated Statements of Stockholders’ Equity (Unaudited) for the quarters ended March 31, 2015 and 2014	3
Consolidated Statements of Cash Flows (Unaudited) for the quarters ended March 31, 2015 and 2014	4
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Description of Business	6
Note 2. Basis of Presentation	6
Note 3. Significant Accounting Policies	6
Note 4. Agency Mortgage-Backed Securities	15
Note 5. Commercial Real Estate Investments	17
Note 6. Fair Value Measurements	23
Note 7. Secured Financing	25
Note 8. Derivative Instruments	26
Note 9. Convertible Senior Notes	29
Note 10. Common Stock and Preferred Stock	30
Note 11. Interest Income and Interest Expense	31
Note 12. Goodwill	32
Note 13. Net Income (Loss) per Common Share	32
Note 14. Long-Term Stock Incentive Plan	32
Note 15. Income Taxes	33
Note 16. Lease Commitments and Contingencies	33
Note 17. Risk Management	34
Note 18. RCap Regulatory Requirements	34
Note 19. Related Party Transactions	35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Special Note Regarding Forward-Looking Statements	36
Overview	38
Business Environment	38
Results of Operations	39
Financial Condition	46
Capital Management	49
Risk Management	51
Critical Accounting Policies and Estimates	59
Glossary of Terms	61
Item 3. Quantitative and Qualitative Disclosures about Market Risk	69
Item 4. Controls and Procedures	69
PART II  -  OTHER INFORMATION	70
Item 1. Legal Proceedings	70
Item 1A. Risk Factors	70
Item 6. Exhibits	71
SIGNATURES	73

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1.  Financial Statements

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share data)
	March 31,			December 31,
	2015			2014(1)
	(Unaudited)
ASSETS
Cash and cash equivalents (including cash pledged as collateral of $1,819,173 and $1,584,701, respectively)	$	1,920,326		$	1,741,244
Reverse repurchase agreements		100,000			100,000
Investments, at fair value:
Agency mortgage-backed securities (including pledged assets of $63,865,632 and $74,006,480, respectively)		69,388,001			81,565,256
Agency debentures (including pledged assets of $691,716 and $1,368,350, respectively)		995,408			1,368,350
Agency CRT securities		108,337			-
Commercial real estate debt investments (including pledged assets of $104,000 and $0, respectively) (2)		1,515,903			-
Investment in affiliate		141,246			143,045
Commercial real estate debt and preferred equity, held for investment (including pledged assets of $72,750 and $0, respectively) (3)		1,498,406			1,518,165
Investments in commercial real estate		207,209			210,032
Corporate debt, held for investment		227,830			166,464
Receivable for investments sold		2,009,937			1,010,094
Accrued interest and dividends receivable		247,801			278,489
Receivable for investment advisory income (including from affiliate of $10,268 and $10,402, respectively)		10,268			10,402
Goodwill		94,781			94,781
Interest rate swaps, at fair value		25,908			75,225
Other derivatives, at fair value		113,503			5,499
Other assets		70,813			68,321
Total assets	$	78,675,677		$	88,355,367
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements		60,477,378			71,361,926
Payable for investments purchased		5,205			264,984
Convertible Senior Notes		749,512			845,295
Securitized debt of consolidated VIEs (4)		1,491,829			260,700
Mortgages payable		146,470			146,553
Participation sold		13,589			13,693
Accrued interest payable		155,072			180,501
Dividends payable		284,310			284,293
Interest rate swaps, at fair value		2,025,170			1,608,286
Other derivatives, at fair value		61,778			8,027
Accounts payable and other liabilities		140,774			47,328
Total liabilities		65,551,087			75,021,586
Stockholders’ Equity:
7.875% Series A Cumulative Redeemable Preferred Stock: 7,412,500 authorized, issued and outstanding		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
7.50% Series D Cumulative Redeemable Preferred Stock: 18,400,000 authorized, issued and outstanding		445,457			445,457
Common stock, par value $0.01 per share, 1,956,937,500 authorized, 947,698,431 and 947,643,079 issued and outstanding, respectively		9,477			9,476
Additional paid-in capital		14,787,117			14,786,509
Accumulated other comprehensive income (loss)		773,999			204,883
Accumulated deficit		(3,364,147	)		(2,585,436	)
Total stockholders’ equity		13,119,505			13,328,491
Noncontrolling interest		5,085			5,290
Total equity		13,124,590			13,333,781
Total liabilities and equity	$	78,675,677		$	88,355,367

(1) Derived from the audited consolidated financial statements at December 31, 2014.

(2) Includes  senior securitized commercial mortgage loans of a consolidated VIE carried at fair value of $1.4 billion and $0 at March 31, 2015 and December 31, 2014, respectively. 

(3) Includes senior securitized commercial mortgage loans of a consolidated VIE with a carrying value of $361.2 million and $398.6 million carried at amortized cost, net of an allowance for losses of $0 and $0, at March 31, 2015 and December 31, 2014, respectively. 

(4) Includes securitized debt of a consolidated VIE carried at fair value of $1.3 billion and $0 at March 31, 2015 and December 31, 2014, respectively. 

See notes to consolidated financial statements.

1

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except per share data)
(Unaudited)
	For the Quarter Ended
	March 31,			March 31,
	2015			2014
Net interest income:
Interest income	$	519,172		$	655,901
Interest expense		129,420			124,971
Net interest income		389,752			530,930
Other income (loss):
Realized gains (losses) on interest rate swaps(1)		(158,239	)		(260,435	)
Realized gains (losses) on termination of interest rate swaps		(226,462	)		(6,842	)
Unrealized gains (losses) on interest rate swaps		(466,202	)		(348,942	)
Subtotal		(850,903	)		(616,219	)
Investment advisory income		10,464			6,123
Net gains (losses) on disposal of investments		62,356			79,710
Dividend income from affiliate		4,318			13,045
Net gains (losses) on trading assets		(6,906	)		(146,228	)
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities		(33,546	)		(20,793	)
Other income (loss)		(1,082	)		1,460
Subtotal		35,604			(66,683	)
Total other income (loss)		(815,299	)		(682,902	)
General and administrative expenses:
Compensation and management fee		38,629			38,521
Other general and administrative expenses		12,309			8,857
Total general and administrative expenses		50,938			47,378
Income (loss) before income taxes		(476,485	)		(199,350	)
Income taxes		14			4,001
Net income (loss)		(476,499	)		(203,351	)
Net income (loss) attributable to noncontrolling interest		(90	)		-
Net income (loss) attributable to Annaly		(476,409	)		(203,351	)
Dividends on preferred stock		17,992			17,992
Net income (loss) available (related) to common stockholders	$	(494,401	)	$	(221,343	)
Net income (loss) per share available (related) to common stockholders:
Basic	$	(0.52	)	$	(0.23	)
Diluted	$	(0.52	)	$	(0.23	)
Weighted average number of common shares outstanding:
Basic		947,669,831			947,458,813
Diluted		947,669,831			947,458,813
Dividends Declared Per Share of Common Stock	$	0.30		$	0.30
Net income (loss)	$	(476,499	)	$	(203,351	)
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities		631,472			741,172
Reclassification adjustment for net (gains) losses included in net income (loss)		(62,356	)		(80,718	)
Other comprehensive income (loss)		569,116			660,454
Comprehensive income (loss)		92,617			457,103
Comprehensive income (loss) attributable to noncontrolling interest		(90	)		-
Comprehensive income (loss) attributable to Annaly	$	92,707		$	457,103

(1) Consists of interest expense on interest rate swaps. 

See notes to consolidated financial statements.

2

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in thousands, except per share data)
(Unaudited)
	7.875% Series A Cumulative Redeemable Preferred Stock		7.625% Series C Cumulative Redeemable Preferred Stock		7.50% Series D Cumulative Redeemable Preferred Stock		Common stock par value		Additional paid-in capital		Accumulated other comprehensive income (loss)			Accumulated deficit			Total stockholders’ equity			Noncontrolling interest			Total
BALANCE, December 31, 2013	$	177,088	$	290,514	$	445,457	$	9,474	$	14,765,761	$	(2,748,933	)	$	(534,306	)	$	12,405,055		$	-		$	12,405,055
Net income (loss) attributable to Annaly		-		-		-		-		-		-			(203,351	)		(203,351	)		-			(203,351	)
Unrealized gains (losses) on available-for-sale securities		-		-		-		-		-		741,172			-			741,172			-			741,172
Reclassification adjustment for net (gains) losses included in net income (loss)		-		-		-		-		-		(80,718	)		-			(80,718	)		-			(80,718	)
Net proceeds from direct purchase and dividend reinvestment		-		-		-		1		606		-			-			607			-			607
Contingent beneficial conversion feature on 4% Convertible Senior Notes		-		-		-		-		4,186		-			-			4,186			-			4,186
Preferred Series A dividends, declared $0.492 per share		-		-		-		-		-		-			(3,648	)		(3,648	)		-			(3,648	)
Preferred Series C dividends, declared $0.477 per share		-		-		-		-		-		-			(5,719	)		(5,719	)		-			(5,719	)
Preferred Series D dividends, declared $0.469 per share		-		-		-		-		-		-			(8,625	)		(8,625	)		-			(8,625	)
Common dividends declared, $0.30 per share		-		-		-		-		-		-			(284,247	)		(284,247	)		-			(284,247	)
BALANCE, March 31, 2014	$	177,088	$	290,514	$	445,457	$	9,475	$	14,770,553	$	(2,088,479	)	$	(1,039,896	)	$	12,564,712		$	-		$	12,564,712
BALANCE, December 31, 2014	$	177,088	$	290,514	$	445,457	$	9,476	$	14,786,509	$	204,883		$	(2,585,436	)	$	13,328,491		$	5,290		$	13,333,781
Net income (loss) attributable to Annaly		-		-		-		-		-		-			(476,409	)		(476,409	)		-			(476,409	)
Net income (loss) attributable to noncontrolling interest		-		-		-		-		-		-			-			-			(90	)		(90	)
Unrealized gains (losses) on available-for-sale securities		-		-		-		-		-		631,472			-			631,472			-			631,472
Reclassification adjustment for net (gains  losses included in net income (loss)		-		-		-		-		-		(62,356	)		-			(62,356	)		-			(62,356	)
Stock compensation expense		-		-		-		-		39		-			-			39			-			39
Net proceeds from direct purchase and dividend reinvestment		-		-		-		1		569		-			-			570			-			570
Equity contributions from (distributions to) noncontrolling interest		-		-		-		-		-		-			-			-			(115	)		(115	)
Preferred Series A dividends, declared $0.492 per share		-		-		-		-		-		-			(3,648	)		(3,648	)		-			(3,648	)
Preferred Series C dividends, declared $0.477 per share		-		-		-		-		-		-			(5,719	)		(5,719	)		-			(5,719	)
Preferred Series D dividends, declared $0.469 per share		-		-		-		-		-		-			(8,625	)		(8,625	)		-			(8,625	)
Common dividends declared, $0.30 per share		-		-		-		-		-		-			(284,310	)		(284,310	)		-			(284,310	)
BALANCE, March 31, 2015	$	177,088	$	290,514	$	445,457	$	9,477	$	14,787,117	$	773,999		$	(3,364,147	)	$	13,119,505		$	5,085		$	13,124,590

See notes to consolidated financial statements.

3

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
	For the Quarter Ended March 31,
	2015			2014
Cash flows from operating activities:
Net income (loss)	$	(476,499	)	$	(203,351	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating  activities:
Amortization of Investment Securities premiums and discounts, net		284,777			118,988
Amortization of commercial real estate investment premiums and discounts, net		(160	)		792
Amortization of intangibles		1,195			99
Amortization of deferred financing costs		2,914			2,813
Amortization of net origination fees and costs, net		(1,190	)		(973	)
Amortization of contingent beneficial conversion feature and equity component of Convertible Senior Notes		11,758			6,410
Depreciation expense		2,823			292
Net gain on sale of commercial real estate		-			(1,213	)
Net (gains) losses on sales of Investment Securities		(62,356	)		(80,718	)
Stock compensation expense		39			-
Unrealized (gains) losses on interest rate swaps		466,202			348,942
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities		33,546			20,793
Net (gains) losses on trading assets		6,906			146,228
Proceeds from repurchase agreements of RCap		386,000,000			329,649,937
Payments on repurchase agreements of RCap		(391,250,000	)		(324,602,992	)
Proceeds from reverse repurchase agreements		15,325,000			35,181,890
Payments on reverse repurchase agreements		(15,325,000	)		(35,526,265	)
Proceeds from securities borrowed		-			19,993,580
Payments on securities borrowed		-			(17,924,187	)
Proceeds from securities loaned		-			37,178,735
Payments on securities loaned		-			(39,192,893	)
Proceeds from U.S. Treasury securities		-			3,159,253
Payments on U.S. Treasury securities		-			(3,920,425	)
Net payments on derivatives		(66,604	)		(90,440	)
Net change in:
Due to / from brokers		-			8,596
Other assets		(2,627	)		3,439
Accrued interest and dividends receivable		28,886			(16,035	)
Receivable for investment advisory income		134			341
Accrued interest payable		(25,425	)		25,032
Accounts payable and other liabilities		3,709			13,801
Net cash provided by (used in) operating activities		(5,041,972	)		4,300,469
Cash flows from investing activities:
Payments on purchases of Investment Securities		(5,065,764	)		(9,367,034	)
Proceeds from sales of Investment Securities		13,973,224			6,155,091
Principal payments on Agency mortgage-backed securities		2,596,964			1,675,575
Payments on purchases of corporate debt		(63,015	)		(28,705	)
Principal payments on corporate debt		1,733			1,051
Purchases of commercial real estate debt investments		(185,925	)		-
Sales of commercial real estate debt investments		41,016			-
Purchase of securitized loans at fair value		(1,370,011	)		-
Origination of commercial real estate investments, net		(61,502	)		(125,949	)
Proceeds from sales of commercial real estate held for sale		-			20,740
Principal payments on commercial real estate investments		82,408			69,795
Purchase of equity securities		(3,602	)		-
Net cash provided by (used in) investing activities		9,945,526			(1,599,436	)

Statements continued on following page.

4

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

Cash flows from financing activities:
Proceeds from repurchase agreements		57,776,249			49,726,537
Principal payments on repurchase agreements		(63,410,797	)		(52,010,534	)
Payments on maturity of convertible senior notes		(107,541	)		-
Proceeds from other secured financing		90,000			-
Proceeds from issuance of securitized debt		1,267,914			260,700
Principal repayments on securitized debt		(37,680	)		-
Payment of deferred financing cost		(641	)		(4,288	)
Net proceeds from direct purchases and dividend reinvestments		569			607
Principal payments on participation sold		(76	)		(72	)
Principal payments on mortgages payable		(69	)		-
Distributions to noncontrolling interests		(115	)		-
Dividends paid		(302,285	)		(302,222	)
Net cash provided by (used in) financing activities		(4,724,472	)		(2,329,272	)
Net (decrease) increase in cash and cash equivalents		179,082			371,761
Cash and cash equivalents, beginning of period		1,741,244			552,436
Cash and cash equivalents, end of period	$	1,920,326		$	924,197
Supplemental disclosure of cash flow information:
Interest received	$	815,765		$	769,627
Dividends received	$	4,048		$	13,045
Investment advisory income received	$	10,992		$	6,464
Interest paid (excluding interest paid on interest rate swaps)	$	124,673		$	118,131
Net interest paid on interest rate swaps	$	176,395		$	250,571
Taxes paid	$	643		$	2,137
Noncash investing activities:
Receivable for investments sold	$	2,009,937		$	19,116
Payable for investments purchased	$	5,205		$	1,898,507
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment	$	569,116		$	660,454
Noncash financing activities:
Dividends declared, not yet paid	$	284,310		$	284,247
Contingent beneficial conversion feature on 4% Convertible Senior Notes	$	-		$	4,186
See notes to consolidated financial statements.

5

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.    DESCRIPTION OF BUSINESS   Annaly Capital Management, Inc. (the “Company” or “Annaly”) is a Maryland corporation that commenced operations on February 18, 1997.  The Company owns a portfolio of real estate related investments, including mortgage pass-through certificates, collateralized mortgage obligations, Agency debentures, other securities representing interests in or obligations backed by pools of mortgage loans, commercial real estate assets and corporate loans. The Company’s principal business objective is to generate net income for distribution to its stockholders from its investments. The Company is externally managed by Annaly Management Company LLC (the “Manager”).   The Company’s business operations are primarily comprised of the following:   – Annaly, the parent company, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments.   – Annaly Commercial Real Estate Group, Inc. (“ACREG,” formerly known as CreXus Investment Corp. (“CreXus”)), a wholly-owned subsidiary that was acquired during the second quarter of 2013 which specializes in acquiring, financing and managing commercial real estate loans and other commercial real estate debt, commercial mortgage-backed securities and other commercial real estate-related assets.   – RCap Securities, Inc. (“RCap”), a wholly-owned subsidiary which operates as a broker-dealer, and is a member of the Financial Industry Regulatory Authority (“FINRA”).   – Fixed Income Discount Advisory Company (“FIDAC”), a wholly-owned subsidiary which manages an affiliated real estate investment trust (“REIT”) for which it earns fee income.   – Annaly Middle Market Lending LLC (“MML”) (formerly known as Charlesfort Capital Management LLC), a wholly-owned subsidiary which engages in corporate middle market lending transactions. The Company has elected to be taxed as a REIT as defined under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder (the “Code”). 2.    BASIS OF PRESENTATION The accompanying consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The accompanying consolidated financial statements and related notes are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s most recent annual report on Form 10-K. The consolidated financial information as of December 31, 2014 has been derived from audited consolidated financial statements not included herein. In the opinion of management, all normal, recurring adjustments have been included for a fair presentation of this interim financial information. Interim period operating results may not be indicative of the operating results for a full year. 3. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and consolidated variable interest entities. All intercompany balances and transactions have been eliminated in consolidation. The Company has evaluated all of its investments in legal entities in order to determine if they are variable interests in Variable Interest Entities ("VIEs"). A VIE is defined as an entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A variable interest is an investment or other interest that will absorb portions of a VIE's expected losses or receive portions of the entity’s expected residual returns. A VIE is required to be consolidated by its primary beneficiary, which is defined as the party that (i) has the power to control the activities

6

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

that most significantly impact the VIE’s economic performance and (ii) has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including the Company’s role in establishing the VIE and the Company’s ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE. To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company applies significant judgment and considers all of its economic interests, including debt and equity investments and other arrangements deemed to be variable interests, both explicit and implicit,  in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company. The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE causes the Company’s consolidation conclusion regarding the VIE to change. Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, cash held in money market funds on an overnight basis and cash pledged as collateral with counterparties. Cash and securities deposited with clearing organizations are carried at cost, which approximates fair value. The Company also maintains collateral in the form of cash on margin with counterparties to its interest rate swaps and other derivatives. RCap is a member of various clearing organizations with which it maintains cash required to conduct its day-to-day clearance activities. Cash and securities deposited with clearing organizations and collateral held in the form of cash on margin with counterparties to its interest rate swaps and other derivatives totaled approximately $1.8 billion and $1.6 billion at March 31, 2015 and December 31, 2014, respectively. Fair Value Measurements – The Company reports various financial instruments at fair value.  A complete discussion of the methodology utilized by the Company to estimate the fair value of certain financial instruments is included in these Notes to Consolidated Financial Statements. Revenue Recognition – The revenue recognition policy by asset class is discussed below. Agency Mortgage-Backed Securities, Agency Debentures and Agency Credit Risk Transfer Securities – The Company invests primarily in mortgage pass-through certificates, collateralized mortgage obligations and other mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans and certificates 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”).  These 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”). The Company also invests in Agency debentures issued by the Federal Home Loan Banks, Freddie Mac and Fannie Mae and securities in the Agency credit risk transfer (“CRT”) sector. The CRT sector is comprised of the risk sharing transactions issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. The securities issued in the CRT sector are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors. Agency mortgage-backed securities, Agency debentures and Agency CRT securities are referred to herein as “Investment Securities.” Although the Company generally intends to hold most of its Investment Securities until maturity, it may, from time to time, sell any of its Investment Securities as part of its overall management of its portfolio. Investment Securities are classified as available-for-sale and are reported at fair values estimated by management that are compared to independent sources for reasonableness, with unrealized gains and losses reported as a component of other comprehensive income (loss). Investment Securities transactions are recorded on trade date, including TBA securities that meet the regular-way securities scope exception from derivative accounting. Realized gains and

7

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Item 1. Financial Statements

losses on sales of Investment Securities are determined using the average cost method. The Company elected the fair value option for Agency interest-only mortgage-backed securities. Interest-only securities and inverse interest-only securities are collectively referred to as “interest-only securities.” These Agency interest-only mortgage-backed securities represent the Company’s right to receive a specified proportion of the contractual interest flows of specific Agency mortgage-backed securities. Agency interest-only mortgage-backed securities are measured at fair value with changes in fair value recorded as Net unrealized gains (losses) on interest-only Agency mortgage-backed securities in the Company’s Consolidated Statements of Comprehensive Income (Loss).  The interest-only securities are included in Agency mortgage-backed securities at fair value on the accompanying Consolidated Statements of Financial Condition.  Interest income from coupon payments is accrued based on the outstanding principal amounts of the Investment Securities and their contractual terms. Premiums and discounts associated with the purchase of the Investment Securities are amortized or accreted into interest income over the projected lives of the securities using the interest method. The Company uses a third-party supplied model to project prepayment speeds related to Investment Securities. The Company’s prepayment speed projections incorporate underlying loan characteristics (e.g., coupon, term, original loan size, original loan to value, etc.) and market data, including interest rate and home price index forecasts. Changes to model assumptions, including interest rates and other market data, as well as periodic revisions to the model will cause changes in the results. Adjustments are made for actual prepayment activity. Corporate Debt– The Company’s investments in corporate debt are designated as held for investment, and are carried at their principal balance outstanding plus any premiums or discounts less allowances for loan losses. No allowance for loan losses was deemed necessary as of March 31, 2015 and December 31, 2014. Equity Securities– The Company may invest in equity securities that are classified as available-for-sale or trading.  Equity securities classified as available-for-sale are reported at fair value, based on market quotes, with unrealized gains and losses reported as a component of other comprehensive income (loss). Equity securities classified as trading are reported at fair value, based on market quotes, with unrealized gains and losses reported in the Consolidated Statements of Comprehensive Income (Loss) as Net gains (losses) on trading assets.  Dividends are recorded in earnings based on the declaration date. Derivative Instruments – The Company may use a variety of derivative instruments to economically hedge some of its exposure to market risks, including interest rate and prepayment risk. These instruments include, but are not limited to, interest rate swaps, options to enter into interest rate swaps (“swaptions”), TBA securities with the intent to net settle (“TBA derivatives”), options on TBA securities (“MBS options”) and U.S. Treasury and Eurodollar futures contracts.  The Company may also invest in other types of mortgage derivatives such as interest-only securities and synthetic total return swaps, such as the Markit IOS Synthetic Total Return Swap Index.  Derivatives are accounted for in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, which requires recognition of all derivatives as either assets or liabilities at fair value in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). None of the Company’s derivative transactions have been designated as hedging instruments for accounting purposes.  Some derivative agreements contain provisions that allow for netting or setting off by counterparty; however, the Company elected to present related assets and liabilities on a gross basis in the Consolidated Statements of Financial Condition. Interest rate swap agreements - Interest rate swaps are the primary instrument used to mitigate interest rate risk.  In particular, the Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings.  Swap agreements may or may not be cleared through a derivatives clearing organization (“DCO”).  Uncleared swaps are fair valued using internal pricing models and compared to the counterparty market values.  Centrally cleared swaps are fair valued using internal pricing models and compared to the DCO’s market values. Interest rate swaptions - Interest rate swaptions are purchased/sold to mitigate the potential impact of increases or decreases in interest rates.  Interest rate swaptions provide the option to enter into an interest rate

8

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future.  They are not centrally cleared.  The premium paid/received for interest rate swaptions is reported as an asset/liability in the Consolidated Statement of Financial Condition. The difference between the premium and the fair value of the swaption is reported in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss). If a swaption expires unexercised, the realized gain (loss) on the swaption would be equal to the premium received/paid. If the Company sells or exercises a swaption, the realized gain or loss on the swaption would be equal to the difference between the cash received or the fair value of the underlying interest rate swap received and the premium paid. The fair value of interest rate swaptions is estimated using internal pricing models and compared to the counterparty market value. TBA Dollar Rolls - TBA dollar roll transactions are accounted for as a series of derivative transactions. The fair value of TBA derivatives is based on similar methods used to value Agency mortgage-backed securities with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss). MBS Options – MBS options are generally options on TBA contracts, which help manage mortgage market risks and volatility while providing the potential to enhance returns.  MBS options are over-the-counter traded instruments and those written on current-coupon mortgage-backed securities are typically the most liquid.  MBS options are fair valued using internal pricing models and compared to the counterparty market value at the valuation date with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss). Futures Contracts- Futures contracts are derivatives that track the prices of specific assets. Short sales of futures contracts help mitigate the potential impact of changes in interest rates on the portfolio performance. The Company maintains margin accounts which are settled daily with Futures Commission Merchants (“FCMs”). The margin requirement varies based on the market value of the open positions and the equity retained in the account. Futures contracts are fair valued based on exchange pricing with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss). Other-Than-Temporary Impairment – Management evaluates available-for-sale securities for other-than- temporary 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), while the balance of losses related to other factors will be recognized as a component of other comprehensive income (loss).  There was no other-than-temporary impairment recognized for the quarters ended March 31, 2015 and 2014. Loan Loss Reserves – To determine if loan loss allowances are required on investments in corporate debt, the Company reviews the monthly and/or quarterly financial statements of the borrowers to verify they meet the covenants of the loan documents.  If based on the financial review it is deemed probable that the Company will be unable to collect contractual principal and interest amounts (e.g. financial performance and delinquencies), a loan loss provision would be recorded. No allowance for loan losses was deemed necessary as of March 31, 2015 and December 31, 2014. Repurchase Agreements – The Company finances the acquisition of a significant portion of its Agency mortgage-backed securities with repurchase agreements. The Company examines each of the specified criteria in ASC 860, Transfers and Servicing, at the inception of each transaction and has determined that each of the financings meet the specified criteria in this guidance. Reverse repurchase agreements and repurchase agreements with the same counterparty and the same maturity are presented net in the Consolidated Statements of Financial Condition when the terms of the agreements meet the criteria to permit netting. The Company reports cash flows on repurchase agreements as financing activities in the Consolidated Statements of Cash Flows. The Company reports cash flows on reverse repurchase and repurchase agreements entered into by RCap as operating activities in the Consolidated Statements of Cash Flows. Goodwill and Intangible Assets–The Company’s acquisitions of FIDAC and CreXus were accounted for using the acquisition method. Under the acquisition method, net assets and results of operations of acquired

9

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

companies are included in the consolidated financial statements from the date of acquisition. The purchase prices of FIDAC and CreXus were allocated to the assets acquired, including identifiable intangible assets, and the liabilities assumed based on their estimated fair values at the date of acquisition. The excess of purchase price over the fair value of the net assets acquired was recognized as goodwill. The Company tests goodwill for impairment on an annual basis and at interim periods when events or circumstances may make it more likely than not that an impairment has occurred. If a qualitative analysis indicates that there may be an impairment, a quantitative analysis is performed.  The quantitative impairment test for goodwill utilizes a two-step approach, whereby the Company compares the carrying value of each identified reporting unit to its fair value.  If the carrying value of the reporting unit is greater than its fair value, the second step is performed, where the implied fair value of goodwill is compared to its carrying value. The Company recognizes an impairment charge for the amount by which the carrying amount of goodwill exceeds its fair value. Intangible assets with an estimated useful life are amortized over their expected useful lives. Convertible Senior Notes – The Company records the 4% Convertible Senior Notes and 5% Convertible Senior Notes (collectively, the “Convertible Senior Notes”) at their contractual amounts, adjusted by the effects of a beneficial conversion feature and a contingent beneficial conversion feature (collectively, the “Conversion Features”).  The Conversion Features’ intrinsic value is included in “Additional paid-in capital” on the Company’s Consolidated Statements of Financial Condition and reduces the recorded liability amount associated with the Convertible Senior Notes. A Conversion Feature may be recognized as a result of adjustments to the conversion price for dividends declared to common stockholders. Stock Based Compensation – The Company is required to measure and recognize in the consolidated financial statements the compensation cost relating to share-based payment transactions. The Company recognizes compensation expense on a straight-line basis over the requisite service period for the entire award. Income Taxes – The Company has elected to be taxed as a REIT and intends to comply with the provisions of the Code, with respect thereto.  Accordingly, the Company will not be subject to federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and stock ownership tests are met.  The Company and certain of its direct and indirect subsidiaries, including FIDAC, RCap and certain subsidiaries of ACREG, have made separate joint elections to treat these subsidiaries as taxable REIT subsidiaries (“TRSs”).  As such, each of these TRSs is taxable as a domestic C corporation and subject to federal, state and local income taxes based upon their taxable income. The provisions of ASC 740, Income Taxes, (“ASC 740”) clarify the accounting for uncertainty in income taxes recognized in financial statements and prescribe a recognition threshold and measurement attribute for uncertain tax positions taken or expected to be taken on a tax return. ASC 740 also requires that interest and penalties related to unrecognized tax benefits be recognized in the financial statements. The Company does not have any unrecognized tax benefits that would affect its financial position.  Thus, no accruals for penalties and interest were necessary as of March 31, 2015 and December 31, 2014. Use of Estimates–The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Commercial Real Estate Investments Commercial Real Estate Loans – The Company's commercial real estate loans are comprised of fixed-rate and adjustable-rate loans. Commercial real estate loans are designated as held for investment and are originated or purchased by the Company and carried at their outstanding principal balance, net of unamortized origination fees and costs, premiums or discounts, less a reserve for estimated losses if necessary. The difference between the principal amount of a loan and proceeds at acquisition is recorded as either a discount or premium. Origination fees and costs, premiums and discounts are amortized or accreted into interest income over the estimated life of the loan.  The Company has also elected the fair value option for multi-family mortgage loans held in a securitization trust that it was required to consolidate.  Interest income is recognized as earned determined by the stated coupon and outstanding principal balance.  See “Commercial Real Estate Investments” footnote for additional information. Preferred Equity Interests Held for Investment – Preferred equity interests are designated as held for investment and are carried at their outstanding principal

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

balance, net of unamortized origination fees and costs, premiums or discounts, less a reserve for estimated losses if necessary.  Origination fees and costs, premiums and discounts are amortized or accreted into interest income over the estimated life of the investment. Allowance for Losses–The Company evaluates the need for a loss reserve on its commercial real estate loans and preferred equity interests held for investment (collectively referred to as “CRE Debt and Preferred Equity Investments”). A provision for losses related to CRE Debt and Preferred Equity Investments, including those accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, may be established when it is probable the Company will not collect amounts contractually due or all amounts previously estimated to be collectable. Management assesses the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. Depending on the expected recovery of its investment, the Company considers the estimated net recoverable value of the CRE Debt and Preferred Equity Investments as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive landscape where the borrower conducts business. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date. The Company may be exposed to various levels of credit risk depending on the nature of its investments and the nature of the assets underlying the investments and credit enhancements, if any, supporting its assets. The Company’s core investment process includes procedures related to the initial approval and periodic monitoring of credit risk and other risks associated with each investment.  The Company’s investment underwriting procedures include evaluation of the underlying borrowers’ ability to manage and operate their respective properties.  Management reviews loan-to-value metrics upon either the origination or the acquisition of a new investment but generally does not update the loan-to-value metrics in the course of quarterly surveillance. Management generally reviews the most recent financial information produced by the borrower, which may include, but is not limited to, net operating income (“NOI”), debt service coverage ratios, property debt yields (net cash flow or NOI divided by the amount of outstanding indebtedness), loan per unit and rent rolls relating to each of the Company’s CRE Debt and Preferred Equity Investments, and may consider other factors management deems important. Management also reviews market pricing to determine each borrower’s ability to refinance their respective assets at the maturity of each loan. Management also reviews economic trends, both macro as well as those directly affecting the property, and the supply and demand of competing projects in the sub-market in which each subject property is located. In connection with the quarterly surveillance review process, loans are assigned an internal rating of “Performing”, “Watch List”, “Defaulted-Recovery” or “Impaired”. Loans that are deemed to be Performing meet all present contractual obligations and do not qualify for Watch List designation.  Watch List loans are defined as Performing loans that are significantly lagging expectations and/or for which there is an increased potential for default.  Defaulted–Recovery loans are currently in default; however full recovery of contractual principal and interest is expected. Impaired loans may or may not be in default, impairment is anticipated, and a loan loss provision has been recognized to reflect expected losses. Investments in Commercial Real Estate– Investments in commercial real estate are carried at historical cost less accumulated depreciation. Historical cost includes all costs necessary to bring the asset to the condition and location necessary for its intended use, including financing during the construction period.  Costs directly related to acquisitions deemed to be business combinations are expensed. Ordinary repairs and maintenance which are not reimbursed by tenants are expensed as incurred. Major replacements and improvements that extend the useful life of the asset are capitalized and depreciated over their useful life. Investments in commercial real estate are depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows: Category                           Term Building                             31-40 years Site improvements           1-10 years The Company follows the acquisition method of accounting for acquisitions of operating real estate held for investment, where the purchase price of operating real estate is allocated to tangible assets such as land, building, site improvements and other identified intangibles such as above/below market and in-place leases. The Company evaluates whether real estate acquired in connection with a foreclosure (“REO”) or UCC/deed in lieu of foreclosure (herein collectively referred to as a foreclosure) constitutes a business and whether business combination accounting is applicable. Upon foreclosure

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Item 1. Financial Statements

of a property, the excess of the carrying value of a loan, if any, over the estimated fair value of the property, less estimated costs to sell, is charged to provision for loan losses. Investments in commercial real estate, including REO, which do not meet the criteria to be classified as held for sale, are separately presented in the Consolidated Statements of Financial Condition as held for investment. Real estate held for sale is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. Once a property is determined to be held for sale, depreciation is no longer recorded. In addition, if considered material to the overall consolidated financial statements, the results of operations are reclassified to income (loss) from discontinued operations in the Consolidated Statements of Comprehensive Income (Loss). The Company's real estate portfolio (REO and real estate held for investment) is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property's value is considered impaired if the Company's estimate of the aggregate future undiscounted cash flows to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers U.S. macroeconomic factors, including real estate sector conditions, together with asset specific and other factors. To the extent impairment has occurred and is considered to be other than temporary, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property. Revenue Recognition – Commercial Real Estate Investments - Interest income is accrued based on the outstanding principal amount of the CRE Debt and Preferred Equity Investments and their contractual terms. Premiums and discounts associated with the purchase of CRE Debt and Preferred Equity Investments are amortized or accreted into interest income over the projected lives of the CRE Debt and Preferred Equity Investments using the interest method. Broker Dealer Activities In January 2014, RCap ceased its trading activity in U.S. Treasury securities, derivatives and securities borrowed and loaned transactions. Reverse Repurchase Agreements – RCap enters into reverse repurchase agreements as part of its matched book trading activity. Reverse repurchase agreements are recorded on settlement date at the contract amount and are collateralized by mortgage-backed or other securities. Margin calls are made by RCap as necessary based on the daily valuation of the underlying collateral as compared to the contract price. RCap generates income from the spread between what is earned on the reverse repurchase agreements and what is paid on the matched repurchase agreements. RCap’s policy is to obtain possession of collateral with a market value in excess of the principal amount loaned under reverse repurchase agreements. To ensure that the market value of the underlying collateral remains sufficient, collateral is valued daily, and RCap will require counterparties to deposit additional collateral, when necessary.  All reverse repurchase activities are transacted under master repurchase agreements that give RCap the right, in the event of default, to liquidate collateral held and in some instances, to offset receivables and payables with the same counterparty. Securities Borrowed and Loaned Transactions – RCap recorded securities borrowed and loaned transactions as collateralized financings.   Securities borrowed transactions required RCap to provide the counterparty with collateral in the form of cash, or other securities. RCap received collateral in the form of cash or other securities for securities loaned transactions.  RCap monitored the fair value of the securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary.  Securities borrowed and securities loaned transactions were recorded at contract value.  For these transactions, the rebates accrued by RCap were recorded as interest income or expense. U.S. Treasury Securities – RCap traded in U.S. Treasury securities for its proprietary portfolio, which consisted of long and short positions on U.S Treasury notes and bonds. U.S. Treasury securities were classified as trading investments and were recorded on the trade date at cost. Changes in fair value were reflected in Net gains (losses) on trading assets in the Company’s Consolidated Statement of Comprehensive Income (Loss). Interest income or expense on U.S. Treasury notes and bonds was accrued based on the outstanding principal amount of those investments and their stated terms. Derivatives- RCap entered primarily into U.S. Treasury, Eurodollar, federal funds, German government and U.S. equity index and currency futures and options contracts. RCap maintained a margin account which was settled daily with FCMs. Changes in the unrealized gains or losses on the futures and options contracts as well as any foreign exchange gains and losses were reflected in Net gains (losses) on trading assets in the Company’s Consolidated Statements of Comprehensive Income (Loss).  Unrealized gains (losses) were excluded from net

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

income (loss) in arriving at cash flows from operating activities in the Consolidated Statements of Cash Flows. Recent Accounting Pronouncements The following table provides a brief description of recent accounting pronouncements that could potentially impact the Company’s consolidated financial statements:

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

Standard	Description	Date of Adoption	Effect on the financial statements or other significant matters
Standards that are not yet adopted
ASU 2015-05 - Customer's Accounting for Fees Paid in a Cloud Computing Arrangement	This update clarifies that customers should determine whether a cloud computing arrangement includes the license of software by applying the same guidance cloud service providers use. The guidance also eliminates the current requirement that customers analogized to the leasing standard when determining the asset acquired in a software licensing arrangement.		Not expected to have a significant impact on the consolidated financial statements
ASU 2015-03 Interest -Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs	This ASU requires that debt issue costs are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.  The recognition and measurement of debt issue costs are not affected.	January 1, 2016 (early adoption permitted)	Impacts presentation only and will not have a significant impact on the consolidated financial statements.
ASU 2015-02 Consolidation (Topic 810) Amendments to the Consolidation Analysis	This update affects the following areas of the consolidation analysis: limited partnerships and similar entities, evaluation of fees paid to a decision maker or service provider as a variable interest and in determination of the primary beneficiary, effect of related parties on the primary beneficiary determination and for certain investment funds.		Not expected to have a significant impact on the consolidated financial statements
ASU 2015-01 Income Statement - Extraordinary and Unusual Items (Subtopic 225-20)	This update eliminates from GAAP the concept of extraordinary items.	January 1, 2016 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-16 Derivatives and Hedging (Topic 815) Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or Equity	This ASU provides additional guidance for evaluating whether conversion rights, redemption rights, voting rights, liquidation rights and dividend payment preferences and other features embedded in a share, including preferred stock, contain embedded derivatives requiring bifurcation.  The update requires that an entity determine the nature of the host contract by considering all stated and implied terms and features in a hybrid instrument.	January 1, 2016 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern	This ASU requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.	January 1, 2017 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-09, Revenue from Contracts with Customers	This guidance applies to contracts with customers to transfer goods or services and contracts to transfer nonfinancial assets unless those contracts are within the scope of other standards (for example, lease transactions).	January 1, 2017	Not expected to have a significant impact on the consolidated financial statements.
Standards that were adopted
ASU 2014-17 Business Combinations (Topic 805): Pushdown Accounting	This amendment provides an acquired entity with the option to apply push down accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.	November 18, 2014	Did not have a significant impact on the consolidated financial statements.
ASU 2014-13, Consolidation (Topic 810) Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.	This Update provides a practical expedient to measure the fair value of the financial assets and financial liabilities of a consolidated collateralized financing entity, which the reporting entity has elected to or is required to measure on a fair value basis.	January 1, 2015 (early adoption permitted)	The Company early adopted this ASU and applied the guidance to a commercial mortgage backed securitization transaction.  See "Commercial Real Estate Investments" footnote for further disclosure.
ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosure.	This update makes limited amendments to the guidance in ASC 860 on accounting for certain repurchase agreements.	January 1, 2015, except for the disclosure requirements for transactions accounted for as secured borrowings, which are required to be presented for interim periods beginning after March 15, 2015	Impacts disclosures only and does not have a significant impact on the consolidated financial statements.
ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity	This ASU raises the threshold for a disposal to be treated as discontinued operations.	January 1, 2015 (early adoption permitted)	Did not have a significant impact on the consolidated financial statements.
ASU 2014-04  Receivables–Troubled Debt Restructurings by Creditors, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure	This update clarifies that an in substance repossession or foreclosure has occurred, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, when the creditor obtains legal title to the property upon completion of a foreclosure or the borrower conveys all interest in the property to the creditor through a deed in lieu of foreclosure or similar arrangement	January 1, 2015	Did not have a significant impact on the consolidated financial statements.
ASU 2013-02, Comprehensive Income: Reporting of Amounts Reclassified  Out of Accumulated Other Comprehensive Income	This update requires the provision of information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, it requires presentation of significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period	January 1, 2014	Did not have a significant impact on the consolidated financial statements.
ASU 2011-11, Balance Sheet: Disclosures about Offsetting Assets and Liabilities	Under this update, the Company is required to disclose both gross and net information about both instruments and transactions eligible for offset in the Company’s Consolidated Statements of Financial Condition and transactions subject to an agreement similar to a master netting arrangement.  The scope includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements and securities borrowing and securities lending arrangements.	January 1, 2014	Did not have a significant impact on the consolidated financial statements.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

4.   AGENCY MORTGAGE-BACKED SECURITIES

The following tables present the Company’s available-for-sale Agency mortgage-backed securities portfolio as of March 31, 2015 and December 31, 2014, which were carried at their fair value:

March 31, 2015	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)
Principal outstanding	$	23,214,759		$	40,662,639		$	92,317		$	63,969,715
Unamortized premium		1,814,818			2,857,467			19,773			4,692,058
Unamortized discount		(7,489	)		(7,549	)		(347	)		(15,385	)
Amortized cost		25,022,088			43,512,557			111,743			68,646,388
Gross unrealized gains		345,566			759,828			8,374			1,113,768
Gross unrealized losses		(160,483	)		(208,764	)		(2,908	)		(372,155	)
Estimated fair value	$	25,207,171		$	44,063,621		$	117,209		$	69,388,001
	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	65,176,426		$	3,469,962			68,646,388
Gross unrealized gains		971,043			142,725			1,113,768
Gross unrealized losses		(355,330	)		(16,825	)		(372,155	)
Estimated fair value	$	65,792,139		$	3,595,862		$	69,388,001
December 31, 2014	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)
Principal outstanding	$	27,906,221		$	47,979,778		$	97,000		$	75,982,999
Unamortized premium		1,951,798			3,396,368			20,560			5,368,726
Unamortized discount		(8,985	)		(8,857	)		(358	)		(18,200	)
Amortized cost		29,849,034			51,367,289			117,202			81,333,525
Gross unrealized gains		313,761			660,230			8,010			982,001
Gross unrealized losses		(322,094	)		(424,800	)		(3,376	)		(750,270	)
Estimated fair value	$	29,840,701		$	51,602,719		$	121,836		$	81,565,256
	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	78,250,313		$	3,083,212		$	81,333,525
Gross unrealized gains		847,615			134,386			982,001
Gross unrealized losses		(732,533	)		(17,737	)		(750,270	)
Estimated fair value	$	78,365,395		$	3,199,861		$	81,565,256

Actual maturities of Agency mortgage-backed securities are generally shorter than stated contractual maturities because actual maturities of Agency mortgage-backed securities are affected by periodic payments and prepayments of principal on the underlying mortgages. The following table summarizes the Company’s Agency mortgage-backed securities as of March 31, 2015 and December 31, 2014, according to their estimated weighted average life classifications:

	March 31, 2015				December 31, 2014
Weighted Average Life	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
	(dollars in thousands)
Less than one year	$	27,752	$	27,847	$	43,248	$	42,831
Greater than one year through five years		46,648,676		46,120,064		42,222,114		41,908,586
Greater than five years through ten years		22,520,713		22,308,291		39,018,833		39,098,352
Greater than ten years		190,860		190,186		281,061		283,756
Total	$	69,388,001	$	68,646,388	$	81,565,256	$	81,333,525

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Item 1. Financial Statements

The weighted average lives of the Agency mortgage-backed securities at March 31, 2015 and December 31, 2014 in the table above are based upon projected principal prepayment rates. The actual weighted average lives of the Agency mortgage-backed 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 by length of time that such securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014.

	March 31, 2015							December 31, 2014
	Estimated Fair Value		Gross Unrealized Losses			Number of Securities		Estimated Fair Value		Gross Unrealized Losses			Number of Securities
	(dollars in thousands)
Less than 12 Months		2,595,905		(54,883	)		207		4,613,599		(36,959	)		205
12 Months or More		25,474,816		(317,272	)		232		35,175,194		(713,311	)		302
Total		28,070,721		(372,155	)		439		39,788,793		(750,270	)		507

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 are “AAA” rated or carry an implied “AAA” rating.  The investments are not considered to be other-than-temporarily impaired because the Company currently has the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost bases, which may be maturity.  Also, the Company is guaranteed payment of the principal amount of the securities by the respective issuing Agency. During the quarter ended March 31, 2015, the Company disposed of $14.5 billion of Agency mortgage-backed securities, resulting in a net realized gain of $65.3 million. During the quarter ended March 31, 2014, the Company disposed of $4.3 billion of Agency mortgage-backed securities, resulting in a net realized gain of $129.5 million. Average cost is used as the basis on which the realized gain or loss on sale is determined. Agency interest-only mortgage-backed securities represent the right to receive a specified portion of the contractual interest flows of the underlying outstanding principal balance of specific Agency mortgage-backed securities.  Agency interest-only mortgage-backed securities in the Company’s portfolio as of March 31, 2015 and December 31, 2014 had net unrealized gains (losses) of $(41.6) million and $(8.0) million and an amortized cost of $1.4 billion and $1.2 billion, respectively.

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Item 1. Financial Statements

5.   COMMERCIAL REAL ESTATE INVESTMENTS

At March 31, 2015 and December 31, 2014, commercial real estate investments held for investment were composed of the following:

CRE Debt and Preferred Equity Investments

	March 31, 2015							December 31, 2014
	Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)			Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)
	(dollars in thousands)
Senior mortgages		431,872		430,228		28.7	%		384,304		383,895		25.2	%
Senior securitized mortgages(3)		361,861		361,179		24.1	%		399,541		398,634		26.3	%
Mezzanine loans		495,305		495,405		33.0	%		522,474		522,731		34.4	%
Preferred equity		213,213		211,594		14.2	%		214,653		212,905		14.1	%
Total	$	1,502,251	$	1,498,406		100.0	%	$	1,520,972	$	1,518,165		100.0	%

  (1) Carrying value includes unamortized origination fees of $4.0 million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively.

  (2) Based on outstanding principal.

  (3) Assets of consolidated VIEs.

	March 31, 2015
	Senior Mortgages			Senior Securitized Mortgages(1)			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Beginning balance	$	383,895		$	398,634		$	522,731		$	212,905		$	1,518,165
Originations & advances (principal)		47,645			-			16,043			-			63,688
Principal payments		(76	)		(37,680	)		(43,212	)		(1,441	)		(82,409	)
Sales (principal)		-			-			-			-			-
Amortization & accretion of (premium) discounts		(36	)		-			(31	)		25			(42	)
Net (increase) decrease in origination fees		(1,950	)		-			(236	)		-			(2,186	)
Amortization of net origination fees		750			225			110			105			1,190
Transfers		-			-			-			-			-
Allowance for loan losses		-			-			-			-			-
Net carrying value	$	430,228		$	361,179		$	495,405		$	211,594		$	1,498,406
(1) Assets of consolidated VIE.

	December 31, 2014
	Senior Mortgages			Senior Securitized Mortgages(1)			Subordinate Notes			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Beginning balance	$	667,299		$	-		$	41,408		$	628,102		$	247,160		$	1,583,969
Originations & advances (principal)		127,112			-			-			122,742			-			249,854
Principal payments		(12,756	)		-			(41,059	)		(227,151	)		(35,116	)		(316,082	)
Sales (principal)		-			-			-			-			-			-
Amortization & accretion of (premium) discounts		(138	)		-			(349	)		(1,093	)		108			(1,472	)
Net (increase) decrease in origination fees		(2,427	)		(116	)		-			(478	)		-			(3,021	)
Amortization of net origination fees		2,783			772			-			609			753			4,917
Transfers		(397,978	)		397,978			-			-			-			-
Allowance for loan losses		-			-			-			-			-			-
Net carrying value	$	383,895		$	398,634		$	-		$	522,731		$	212,905		$	1,518,165
(1) Assets of consolidated VIE.

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Item 1. Financial Statements

Internal CRE Debt and Preferred Equity Investment Ratings

	March 31, 2015
						Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio			Performing		Watch List(2)		Defaulted- Recovery(3)		Impaired
	(dollars in thousands)
Senior mortgages	$	431,872		28.7	%	$	188,899	$	230,000	$	12,973	$	-
Senior securitized mortgages(1)		361,861		24.1	%		352,611		9,250		-		-
Mezzanine loans		495,305		33.0	%		495,305		-		-		-
Preferred equity		213,213		14.2	%		162,213		51,000		-		-
	$	1,502,251		100.0	%	$	1,199,028	$	290,250	$	12,973	$	-
(1) Assets of consolidated VIE.
(2) Includes a $230.0 million loan maturing on June 30, 2015 with a risk that the borrower will be  unable to refinance the outstanding principal amount before the maturity date, but full recovery is expected.
(3) Related to one loan on non-accrual status.
	December 31, 2014
						Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio			Performing		Watch List		Defaulted- Recovery(2)		Impaired
	(dollars in thousands)
Senior mortgages	$	384,304		25.2	%	$	371,331	$	-	$	12,973	$	-
Senior securitized mortgages(1)		399,541		26.3	%		390,291		9,250		-		-
Subordinate notes		-		0.0	%		-		-		-		-
Mezzanine loans		522,474		34.4	%		522,474		-		-		-
Preferred equity		214,653		14.1	%		214,653		-		-		-
	$	1,520,972		100.0	%	$	1,498,749	$	9,250	$	12,973	$	-
(1) Assets of consolidated VIE.
(2) Relates to one loan on nonaccrual status.

Real Estate Acquisitions In November 2014, a joint venture, in which the Company has a 90% interest, acquired eleven retail properties located in New York, Ohio and Georgia. The purchase price was funded with cash and a new $104.0 million, ten-year, 4.03% fixed-rate interest-only mortgage loan. There were no acquisitions of real estate during the quarter ended March 31, 2015. The following table summarizes acquisitions of real estate held for investment in 2014:

Date of Acquisition	Type	Location	Purchase Price	Remaining Lease Term (Years) (1)
(dollars in thousands)
April 2014	Single-tenant retail	Tennessee	$ 19,000	8
June 2014	Multi-tenant retail	Virginia	$ 17,743	7
November 2014	Multi-tenant retail	New York, Ohio, Georgia	$ 154,000	4.6
(1) Does not include extension options.

The aforementioned acquisitions were accounted for using the acquisition method of accounting. No additional real estate acquisition costs were expensed during the period ended March 31, 2015. The following table presents the aggregate allocation of the purchase price:

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

	Tennessee			Virginia			Joint Venture			Total
	(dollars in thousands)
Purchase Price Allocation:
Land	$	3,503		$	6,394		$	21,581		$	31,478
Buildings		11,960			10,862			97,133			119,955
Site improvements		1,349			1,184			12,952			15,485
Tenant Improvements		-			-			9,601			9,601
Real estate held for investment		16,812			18,440			141,267			176,519
Intangible assets (liabilities):
Leasehold intangible assets		4,288			3,218			22,555			30,061
Above market lease		-			-			5,463			5,463
Below market lease value		(2,100	)		(3,915	)		(15,285	)		(21,300	)
Total purchase price	$	19,000		$	17,743		$	154,000		$	190,743

The weighted average amortization period for intangible assets and liabilities is 3.7 years.  Above market leases and leasehold intangible assets are included in Other assets and below market leases are included in Accounts payable and other liabilities in the Consolidated Statements of Financial Condition.  The fair value of the 10% non-controlling interest in the joint venture at the acquisition date was $15.4 million. The fair value of the acquisition and the related non-controlling interest was determined based on the purchase price.

Total Commercial Real Estate Investment at amortized cost

	March 31, 2015			December 31, 2014
	(dollars in thousands)
Real estate held for investment, at amortized cost
Land	$	38,117		$	38,117
Buildings and improvements		176,139			176,139
Subtotal		214,256			214,256
Less: accumulated depreciation		(7,047	)		(4,224	)
Total real estate held for investment at amortized cost, net		207,209			210,032
Total investment in commercial real estate, net		207,209			210,032
Net carrying value of CRE Debt and Preferred Equity Investments		1,498,406			1,518,165
Total commercial real estate investments, at amortized cost	$	1,705,615		$	1,728,197

Depreciation expense was $2.8 million and $0.3 million for the quarters ended March 31, 2015 and 2014, respectively, and is included in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss).  The table below presents the minimum future rentals on noncancelable leases of the Company’s commercial real estate investments as of March 31, 2015. Rental Income
The minimum rental amounts due under the leases are generally either subject to scheduled fixed increases or adjustments. The leases generally also require that the tenants reimburse us for certain operating costs. Approximate future minimum rents to be received over the next five years and thereafter for non-cancelable operating leases in effect at March 31, 2015 for the consolidated properties, including consolidated joint venture properties are as follows (in thousands):

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

	March 31, 2015
	(dollars in thousands)
2015 (remaining)	$	15,495
2016		18,684
2017		15,977
2018		13,620
2019		11,301
Later years		51,241
	$	126,318

Mortgage loans payable as of March 31, 2015 and December 31, 2014, were as follows:

March 31, 2015
Property	Mortgage Carrying Value		Mortgage Principal		Interest Rate			Fixed/Floating Rate	Maturity Date	Priority
			(dollars in thousands)
Joint Venture	$	103,950	$	103,950		4.03	%	Fixed	12/6/2024	First liens
Tennessee		12,350		12,350		4.01	%	Fixed	6/6/2019	First liens
Virginia		11,025		11,025		3.58	%	Fixed	9/6/2019	First liens
Arizona		16,644		16,548		3.50	%	Fixed	1/1/2017	First liens
Nevada		2,501		2,488		3.45	%	Floating (1)	3/29/2017	First liens
	$	146,470	$	146,361
(1) Rate is fixed via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).

December 31, 2014
Property	Mortgage Carrying Value		Mortgage Principal		Interest Rate			Fixed/Floating Rate	Maturity Date	Priority
			(dollars in thousands)
Joint Venture	$	103,950	$	103,950		4.03	%	Fixed	12/6/2024	First liens
Tennessee		12,350		12,350		4.01	%	Fixed	6/6/2019	First liens
Virginia		11,025		11,025		3.58	%	Fixed	9/6/2019	First liens
Arizona		16,709		16,600		3.50	%	Fixed	1/1/2017	First liens
Nevada		2,519		2,505		3.45	%	Floating (1)	3/29/2017	First liens
	$	146,553	$	146,430
(1) Rate is fixed via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).

The following table details future mortgage loan principal payments as of March 31, 2015:

	Mortgage Loan Principal Payments
	(dollars in thousands)
2015 (remaining)	$	291
2016		399
2017		18,346
2018		-
2019		23,375
Later years		103,950
	$	146,361

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

VIEs
Securitizations
In January 2014, the Company closed NLY Commercial Mortgage Trust 2014-FL1 (the “Trust”), a $399.5 million securitization financing transaction which provides permanent, non-recourse financing collateralized by floating-rate first mortgage debt investments originated or co-originated by the Company and is not subject to margin calls. A total of $260.7 million of investment grade bonds were issued by the Trust, representing an advance rate of 65.3% at a weighted average coupon of LIBOR plus 1.74% at closing. The Company is using the proceeds to originate commercial real estate investments. The Company retained bonds rated below investment grade and the only interest-only bond issued by the Trust, which are referred to as the subordinate bonds. The Company incurred approximately $4.3 million of costs in connection with the securitization that have been capitalized and are being amortized to interest expense.  Deferred financing costs are included in Other assets in the accompanying Consolidated Statements of Financial Condition.
The Trust is structured as a pass-through entity that receives principal and interest on the underlying collateral and distributes those payments to the certificate holders. The Trust is a VIE and the Company is the primary beneficiary as a result of its ability to replace the special servicer without cause through its ownership interest in the subordinate bonds. The Company’s exposure to the obligations of the VIE is generally limited to the Company’s investment in the Trust. Assets of the Trust may only be used to settle obligations of the Trust. Creditors of the Trust 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 Trust. No gain or loss was recognized upon initial consolidation of the Trust.
As of March 31, 2015 the carrying value of the Trust’s assets was $361.2 million, net of $0.7 million of unamortized origination fees, which are included in Commercial real estate debt and preferred equity in the accompanying Consolidated Statements of Financial Condition. As of March 31, 2015, the carrying value of the Trust’s liabilities was $223.0 million, classified as Securitized debt in the accompanying Consolidated Statements of Financial Condition. In February 2015, the Company purchased the junior-most tranche, Class C Certificates of the Freddie Mac securitization, FREMF Mortgage Trust 2015-KLSF (the “FREMF Trust”) for $102.1 million.  The underlying portfolio is a pool of 11 floating rate multifamily mortgage loans with a cut-off principal balance of $1.4 billion. The Company was required to consolidate the FREMF Trust’s assets and liabilities of $1.4 billion and $1.3 billion, respectively, at March 31, 2015.
The FREMF Trust is structured as a pass-through entity that receives principal and interest on the underlying collateral and distributes those payments to the certificate holders. The FREMF Trust is a VIE and the Company is the primary beneficiary as a result of its ability to replace the special servicer without cause through its ownership of the Class C Certificates and its current designation as the directing certificate holder. The Company’s exposure to the obligations of the VIE is generally limited to the Company’s investment in the FREMF Trust of $102.1 million. Assets of the FREMF Trust may only be used to settle obligations of the FREMF Trust. Creditors of the FREMF Trust 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 FREMF Trust. A nominal loss was recognized upon initial consolidation of the FREMF Trust and $0.6 million of related costs were expensed.
Upon consolidation, the Company elected the fair value option for the financial assets and liabilities of the FREMF Trust in order to avoid an accounting mismatch, and to more faithfully represent the economics of its interest in the entity.  The fair value option requires that changes in fair value be reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss). The Company has early adopted ASU 2014-13 and applied the fair value measurement practical expedient whereby the Company determines whether the fair value of the financial assets or financial liabilities is more observable as a basis for measuring the less observable financial instruments.The Company has determined that the fair value of the financial liabilities of the FREMF Trust are more observable, since the prices for these liabilities are primarily available from third-party pricing services utilized for multifamily mortgage-backed securities, while the individual assets of the trusts are inherently less capable of precise measurement given their illiquid nature and the limitations on available information related to these assets. Given that the Company’s methodology for valuing the financial assets of the FREMF Trust is an aggregate fair value derived from the fair value of the financial liabilities, the Company

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Item 1. Financial Statements

has determined that the fair value of each of the financial assets in their entirety should be classified in Level 2 of the fair value measurement hierarchy. The statement of financial condition of the FREMF Trust that is reflected in the Company’s Consolidated Statements of Financial Condition at March 31, 2015 follows:

	March 31, 2015
	(dollars in thousands)
Securitized loans at fair value	$	1,370,903
Accrued interest receivable		2,431
Total assets	$	1,373,334
Liabilities and equity
Securitized debt (non-recourse) at fair value	$	1,268,809
Accrued interest payable		2,204
	$	1,271,013
Equity		102,321
Total liabilities and equity	$	1,373,334

The FREMF Trust mortgage loans had an unpaid principal balance of $1.4 billion, at March 31, 2015.   As of March 31, 2015 there are no loans 90 days or more past due or on nonaccrual status.  There is no gain or loss attributable to instrument-specific credit risk of the underlying loans or securitized debt securities as of March 31, 2015 based upon the Company’s process of monitoring events of default on the underlying mortgage loans.  
The statement of comprehensive income (loss) of the FREMF Trust that is reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss) at March 31, 2015 follows:

	For the period February 25, 2015 to March 31, 2015
	(dollars in thousands)
Net interest income:
Interest income	$	2,742
Interest expense		(1,606	)
Net interest income		1,136
Other income:
Unrealized gain (loss) on financial instruments at fair value (1)		3
Transaction and acquistion expenses		810
Other income		813
General and administration expenses		96
Net income	$	227
(1) Included in Other income (loss).

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

The geographic concentrations of credit risk exceeding 5% of the total loan balances related to the trusts as of March 31, 2015 follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk
Property Location	Principal Balance		% of Balance
	(dollars in thousands)
North Carolina	$	516,150		37.9	%
Texas		339,014		24.9	%
Ohio		197,455		14.5	%
Florida		156,836		11.5	%

6.  FAIR VALUE MEASUREMENTS   The Company follows fair value guidance in accordance with GAAP to account for its financial instruments. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP requires classification of financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).  If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded at fair value on the Consolidated Statements of Financial Condition or disclosed in the related notes are categorized based on the inputs to the valuation techniques as follows: Level 1– inputs to the valuation methodology are quoted prices (unadjusted) for identical assets and liabilities in active markets. Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 – inputs to the valuation methodology are unobservable and significant to overall fair value. The Company designates its financial instruments as available for sale or trading depending upon the type of instrument and the Company’s intent and ability to hold such instrument to maturity. Instruments classified as available for sale and trading are reported at fair value on a recurring basis.   The following is a description of the valuation methodologies used for instruments carried at fair value. These methodologies are applied to assets and liabilities across the three level fair value hierarchy, with the observability of inputs determining the appropriate level.
U.S. Treasury securities, futures contracts and investment in affiliate are valued using quoted prices for identical instruments in active markets. Investment Securities, interest rate swaps, swaptions and other derivatives are valued using quoted prices or internally estimated prices for similar assets using internal models. The Company incorporates common market pricing methods, including a spread measurement to the Treasury curve as well as underlying characteristics of the particular security including coupon, prepayment speeds, periodic and life caps, rate reset period and expected life of the security in its estimates of fair value. Management reviews and indirectly corroborates its estimates of the fair value derived using internal models by comparing its results to independent prices provided by dealers in the securities and/or third party pricing services.  Certain liquid asset classes, such as Agency fixed-rate pass-throughs, may be priced using independent sources such as quoted prices for TBA securities.
The Investment Securities, interest rate swap and swaption markets are considered to be active markets such that participants transact with sufficient frequency and volume to provide transparent pricing information on an ongoing basis. The liquidity of the Investment Securities, interest rate swaps, swaptions, TBA derivatives and MBS options markets and the similarity of the Company’s securities to those actively traded enable the Company to observe quoted prices in the market and utilize those prices as a basis for formulating fair value measurements.  Consequently, the Company has classified Investment Securities, interest rate swaps, swaptions, TBA derivatives and MBS options as Level 2 inputs in the fair value hierarchy.  Additionally, as discussed in the

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

"Commercial Real Estate Investments" footnote, Commercial real estate debt investments are classified as Level 2. The following table presents the estimated fair values of financial instruments measured at fair value on a recurring basis.

	Level 1		Level 2		Level 3		Total
March 31, 2015	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	69,388,001	$	-	$	69,388,001
Agency debentures		-		995,408		-		995,408
Agency CRT securities		-		108,337		-		108,337
Commercial real estate debt investments		-		1,515,903		-		1,515,903
Investment in affiliate		141,246		-		-		141,246
Interest rate swaps		-		25,908		-		25,908
Other derivatives		-		113,503		-		113,503
Total Assets	$	141,246	$	72,147,060	$	-	$	72,288,306
Liabilities:
Securitized debt of consolidated VIEs	$	-	$	1,268,809	$	-	$	1,268,809
Interest rate swaps		-		2,025,170		-		2,025,170
Other derivatives		61,778		-		-		61,778
Total Liabilities	$	61,778	$	3,293,979	$	-	$	3,355,757
	Level 1		Level 2		Level 3		Total
December 31, 2014	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	81,565,256	$	-	$	81,565,256
Agency debentures		-		1,368,350		-		1,368,350
Investment in affiliate		143,045		-		-		143,045
Interest rate swaps		-		75,225		-		75,225
Other derivatives		117		5,382		-		5,499
Total Assets	$	143,162	$	83,014,213	$	-	$	83,157,375
Liabilities:
Interest rate swaps	$	-	$	1,608,286	$	-	$	1,608,286
Other derivatives		3,769		4,258		-		8,027
Total Liabilities	$	3,769	$	1,612,544	$	-	$	1,616,313

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon discounted cash flows using market yields, methodologies that incorporate market-based transactions or other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, fair values are not necessarily indicative of the amount the Company would realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts.
The carrying value of short term instruments, including cash and cash equivalents, reverse repurchase agreements and repurchase agreements whose term is less than twelve months, generally approximates fair value due to the short term nature of the instruments.
The estimated fair value of commercial real estate debt and preferred equity investments takes into consideration changes in credit spreads and interest rates from the date of origination or purchase to the reporting date. The fair value also reflects consideration of asset-specific maturity dates and other items that could have an impact on the fair value as of the reporting date.
Estimates of fair value of corporate debt require the use of judgments and inputs including, but not limited to, the enterprise value of the borrower (i.e., an estimate of the total fair value of the borrower's debt and equity), the nature and realizable value of any collateral, the borrower’s ability to make payments when due and its earnings history.  Management also considers factors

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Item 1. Financial Statements

that affect the macro and local economic markets in which the borrower operates. 
The fair value of repurchase agreements with remaining maturities greater than one year or with embedded optionality are valued as structured notes, with term to maturity, LIBOR rates and the Treasury curve being primary determinants of estimated fair value.
The fair value of mortgages payable is calculated using the estimated yield of a new par loan to value the remaining terms in place. A par loan is created using the identical terms of the existing loan; however, the coupon is derived by using the original spread against the interpolated Treasury. The fair value of mortgages payable also reflects consideration of the value of the underlying collateral and changes in credit risk from the time the debt was originated.
The carrying value of participation sold is based on the loan’s amortized cost. The fair value of participation sold is based on the fair value of the underlying related commercial loan.
The fair value of convertible senior notes is determined using end of day quoted prices in active markets.
The fair value of securitized debt of consolidated VIEs is determined using the average of external vendor pricing services.
The following table summarizes the estimated fair value for financial assets and liabilities as of March 31, 2015 and December 31, 2014.

		March 31, 2015				December 31, 2014
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:	(dollars in thousands)
Cash and cash equivalents	1	$	1,920,326	$	1,920,326	$	1,741,244	$	1,741,244
Reverse repurchase agreements	1		100,000		100,000		100,000		100,000
Agency mortgage-backed securities	2		69,388,001		69,388,001		81,565,256		81,565,256
Agency debentures	2		995,408		995,408		1,368,350		1,368,350
Agency CRT securities	2		108,337		108,337		-		-
Commercial real estate debt investments, at fair value	2		1,515,903		1,515,903		-		-
Investment in affiliate	1		141,246		141,246		143,045		143,045
Commercial real estate debt and preferred equity, held for investment	3		1,498,406		1,513,878		1,518,165		1,528,444
Corporate debt	2		227,830		228,012		166,464		166,056
Interest rate swaps	2		25,908		25,908		75,225		75,225
Other derivatives	1,2		113,503		113,503		5,499		5,499
Financial liabilities:
Repurchase agreements	1,2	$	60,477,378	$	60,691,054	$	71,361,926	$	71,587,222
Convertible Senior Notes	1		749,512		752,325		845,295		863,470
Securitized debt of consolidated VIE	2		1,491,829		1,492,102		260,700		262,061
Mortgages payable	2		146,470		150,765		146,553		146,611
Participation sold	3		13,589		13,620		13,693		13,655
Interest rate swaps	2		2,025,170		2,025,170		1,608,286		1,608,286
Other derivatives	1,2		61,778		61,778		8,027		8,027

7.  SECURED FINANCING
The Company had outstanding $60.5 billion and $71.4 billion of repurchase agreements with weighted average borrowing rates of 1.74% and 1.62%, after giving effect to the Company’s interest rate swaps, and weighted average remaining maturities of 149 days and 141 days as of March 31, 2015 and December 31, 2014, respectively.
At March 31, 2015 and December 31, 2014, the repurchase agreements had the following remaining maturities and weighted average rates:

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Item 1. Financial Statements

	March 31, 2015					December 31, 2014
	Repurchase Agreements		Weighted Average Rate			Repurchase Agreements		Weighted Average Rate
1 day	$	7,658,440		0.64	%	$	-		0.00	%
2 to 29 days		16,080,033		0.39	%		28,354,167		0.35	%
30 to 59 days		7,326,177		0.40	%		17,336,469		0.43	%
60 to 89 days		9,534,614		0.40	%		4,040,677		0.38	%
90 to 119 days		4,677,222		0.50	%		2,945,495		0.50	%
Over 120 days(1)		15,200,892		1.45	%		18,685,118		1.24	%
Total	$	60,477,378		0.70	%	$	71,361,926		0.61	%
(1) Approximately 18% and 16% of the total repurchase agreements had a remaining maturity over 1 year as of March 31, 2015 and December 31, 2014, respectively.

Repurchase agreements and reverse repurchase agreements with the same counterparty and the same maturity are presented net in the Consolidated Statements of Financial Condition when the terms of the agreements permit netting. The following table summarizes the gross amounts of reverse repurchase agreements and repurchase agreements, amounts offset in accordance with netting arrangements and net amounts of repurchase agreements and reverse repurchase agreements as presented in the Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014. Refer to “Derivative Instruments” footnote for information related to the effect of netting arrangements on the Company’s derivative instruments.

	March 31, 2015						December 31, 2014
	Reverse Repurchase Agreements			Repurchase Agreements			Reverse Repurchase Agreements			Repurchase Agreements
	(dollars in thousands)
Gross Amounts	$	1,700,000		$	62,077,378		$	700,000		$	71,961,926
Amounts Offset		(1,600,000	)		(1,600,000	)		(600,000	)		(600,000	)
Netted Amounts	$	100,000		$	60,477,378		$	100,000		$	71,361,926

Investment Securities pledged as collateral under these secured financings and interest rate swaps had an estimated fair value and accrued interest of $64.6 billion and $189.9 million, respectively, at March 31, 2015 and $75.4 billion and $226.6 million, respectively, at December 31, 2014.
8.  DERIVATIVE INSTRUMENTS
In connection with the Company’s investment/market rate risk management strategy, the Company economically hedges a portion of its interest rate risk by entering into derivative financial instrument contracts, which include interest rate swaps, swaptions and futures contracts. The Company may also enter into TBA derivatives, MBS options and eurodollar futures contracts to economically hedge its exposure to market risks. The purpose of using derivatives is to manage overall portfolio risk with the potential to generate additional income for distribution to stockholders. These derivatives are subject to changes in market values resulting from changes in interest rates, volatility, Agency mortgage-backed security spreads to U.S. Treasuries and market liquidity. The use of derivatives also creates exposure to credit risk relating to potential losses that could be recognized if the counterparties to these instruments fail to perform their obligations under the stated contract. Additionally, the Company may have to pledge cash or assets as collateral for the derivative transactions, the amount of which may vary based on the market value, notional amount and remaining term of the derivative contract. In the event of a default by the counterparty, the Company could have difficulty obtaining its Investment Securities pledged as collateral as well as receiving payments in accordance with the terms of the derivative contracts.
The table below summarizes fair value information about our derivative assets and liabilities as of March 31, 2015 and December 31, 2014:

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Item 1. Financial Statements

Derivatives Instruments	Balance Sheet Location	March 31, 2015		December 31, 2014
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	25,908	$	75,225
Interest rate swaptions	Other derivative contracts, at fair value		574		5,382
TBA derivatives	Other derivative contracts, at fair value		112,929		-
Futures contracts	Other derivative contracts, at fair value		-		117
		$	139,411	$	80,724
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	2,025,170	$	1,608,286
TBA derivatives	Other derivative contracts, at fair value		-		4,258
Futures contracts	Other derivative contracts, at fair value		61,778		3,769
		$	2,086,948	$	1,616,313

The following table summarizes certain characteristics of the Company’s interest rate swaps at March 31, 2015 and December 31, 2014:

March 31, 2015
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate (2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	2,852,488		1.78	%		0.18	%		2.45
3 - 6 years		10,463,000		1.85	%		0.41	%		4.99
6 - 10 years		11,110,100		2.60	%		0.37	%		8.64
Greater than 10 years		3,634,400		3.70	%		0.22	%		20.12
Total / Weighted Average	$	28,059,988		2.37	%		0.35	%		8.09
December 31, 2014
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate (2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	2,502,505		1.63	%		0.17	%		2.64
3 - 6 years		11,138,000		2.06	%		0.22	%		5.18
6 - 10 years		13,069,200		2.67	%		0.23	%		8.57
Greater than 10 years		4,751,800		3.58	%		0.20	%		19.53
Total / Weighted Average	$	31,461,505		2.49	%		0.22	%		8.38

(1) Notional amount includes $3.0 billion and $500.0 million in forward starting pay fixed swaps as of March 31, 2015 and December 31, 2014, respectively.

(2) Excludes forward starting swaps.

(3) Weighted average fixed rate on forward starting pay fixed swaps was 1.88% and 3.25% as of March 31, 2015 and December 31, 2014, respectively.

The following table summarizes certain characteristics of the Company’s interest rate swaptions at March 31, 2015 and December 31, 2014:

March 31, 2015	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	$	1,000,000	2.61%	3M LIBOR	8.19	2.15
December 31, 2014	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	$	1,750,000	2.88%	3M LIBOR	9.17	3.59

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Item 1. Financial Statements

The following table summarizes certain characteristics of the Company’s TBA derivatives as of March 31, 2015 and December 31, 2014:

March 31, 2015
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	13,750,000		$	14,279,766		$	14,392,695		$	112,929
Sale contracts		-			-			-			-
Net TBA derivatives	$	13,750,000		$	14,279,766		$	14,392,695		$	112,929
December 31, 2014
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	-		$	-		$	-		$	-
Sale contracts		(375,000	)		(375,430	)		(379,688	)		(4,258	)
Net TBA derivatives	$	(375,000	)	$	(375,430	)	$	(379,688	)	$	(4,258	)

The Company presents derivative contracts on a gross basis on the Consolidated Statements of Financial Condition. Derivative contracts may contain legally enforceable provisions that allow for netting or setting off receivables and payables with each counterparty. The following tables present information about derivative assets and liabilities that are subject to such provisions and can potentially be offset on our Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014, respectively.

March 31, 2015			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	25,908	$	(24,782	)	$	-		$	1,126
Interest rate swaptions, at fair value		574		-			-			574
TBA derivatives, at fair value		112,929		-			-			112,929
Liabilities:
Interest rate swaps, at fair value	$	2,025,170	$	(24,782	)	$	(1,111,199	)	$	889,189
Futures contracts, at fair value		61,778		-			(61,778	)		-
December 31, 2014			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	75,225	$	(66,180	)	$	-		$	9,045
Interest rate swaptions, at fair value		5,382		-			-			5,382
Futures contracts, at fair value		117		(117	)		-			-
Liabilities:
Interest rate swaps, at fair value	$	1,608,286	$	(66,180	)	$	(869,302	)	$	672,804
TBA derivatives, at fair value		4,258		-			-			4,258
Futures contracts, at fair value		3,769		(117	)		-			3,652

The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:

	Location on Consolidated Statements of Comprehensive Income (Loss)
	Realized Gains (Losses) on Interest Rate Swaps(1)			Realized Gains (Losses) on Termination of Interest Rate Swaps			Unrealized Gains (Losses) on Interest Rate Swaps
	(dollars in thousands)
Quarter Ended:
March 31, 2015	$	(158,239	)	$	(226,462	)	$	(466,202	)
March 31, 2014	$	(260,435	)	$	(6,842	)	$	(348,942	)

(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 (Loss).

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Item 1. Financial Statements

The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:

Quarter Ended March 31, 2015
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	(55,644	)	$	117,188		$	61,544
Net interest rate swaptions	$	(21,891	)	$	17,083		$	(4,808	)
Futures	$	(5,506	)	$	(58,126	)	$	(63,632	)
							$	(6,896	)
Quarter Ended March 31, 2014
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	(37,837	)	$	(11,410	)	$	(49,247	)
Net interest rate swaptions	$	(40,943	)	$	(52,917	)	$	(93,860	)
Futures	$	(5,669	)	$	(3,048	)	$	(8,717	)
							$	(151,824	)

(1) Includes options on TBA securities.

Certain of the Company’s derivative contracts are subject to International Swaps and Derivatives Association Master Agreements or other similar agreements which may contain provisions that grant counterparties certain rights with respect to the applicable agreement upon the occurrence of certain events such as (i) a decline in stockholders’ equity in excess of specified thresholds or dollar amounts over set periods of time, (ii) the Company’s failure to maintain its REIT status, (iii) the Company’s failure to comply with limits on the amount of leverage, and (iv) the Company’s stock being delisted from the New York Stock Exchange (NYSE). Upon the occurrence of any one of items (i) through (iv), or another default under the agreement, the counterparty to the applicable agreement has a right to terminate the agreement in accordance with its provisions. The aggregate fair value of all derivative instruments with the aforementioned features that are in a net liability position at March 31, 2015 was approximately $1.9 billion, which represents the maximum amount the Company would be required to pay upon termination. This amount is fully collateralized.
9.      CONVERTIBLE SENIOR NOTES
In 2010, the Company issued $600.0 million in aggregate principal amount of its 4% convertible senior notes (“4% Convertible Senior Notes”) for net proceeds of approximately $582.0 million. In 2012, the Company repurchased $492.5 million in aggregate principal amount of its 4% Convertible Senior Notes. In February 2015, the 4% Convertible Senior Notes matured and the Company repaid the remaining 4% convertible senior notes for the face amount of $107.5 million.   In May 2012, the Company issued $750.0 million in aggregate principal amount of its 5% convertible senior notes due 2015 (“5% Convertible Senior Notes”) for net proceeds of approximately $727.5 million. Interest on the 5% Convertible Senior Notes is paid semi-annually at a rate of 5% per year and the 5% Convertible Senior Notes will mature on May 15, 2015 unless repurchased or converted earlier.  The 5% Convertible Senior Notes are convertible into shares of Common Stock at a conversion rate for each $1,000 principal amount of 5% Convertible Senior Notes. The initial conversion rate and conversion rate at March 31, 2015 was 52.7969, which was equivalent to an initial conversion price of approximately $18.94 per share of Common Stock, subject to adjustment in certain circumstances.  Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s sole discretion. There is no limit on the total number of shares of Common Stock that the Company would be required to issue upon a conversion.
At issuance, the Company determined that the 5% Convertible Senior Notes included an equity component of $11.7 million, which is reflected in Additional paid-in capital on the Company’s Consolidated Statements of Financial Condition, and reduces the recorded liability on the 5% Convertible

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Item 1. Financial Statements

Senior Notes.  The $11.7 million discount to the principal amount of the Convertible Senior Notes is recognized in interest expense over the remaining life of the notes. At March 31, 2015 and December 31, 2014, $0.5 million and $1.5 million, respectively, of the unamortized discount had not been reflected in interest expense.
The 5% Convertible Senior Notes due 2015 are a general corporate obligation and therefore rank junior to collateralized debt of the Company with respect to secured collateral.
The 5% Convertible Senior Notes rank senior to the 7.875% Series A Cumulative Redeemable Preferred Stock, 7.625% Series C Cumulative Redeemable Preferred Stock and 7.50% Series D Cumulative Redeemable Preferred Stock.  The 7.875% Series A Cumulative Redeemable Preferred Stock, 7.625% Series C Cumulative Redeemable Preferred Stock and 7.50% Series D Cumulative Redeemable Preferred Stock rank pari-passu with each other.    10. COMMON STOCK AND PREFERRED STOCK The Company’s authorized shares of capital stock, par value of $0.01 per share, consists of 1,956,937,500 shares classified as common stock, 7,412,500 shares classified as 7.875% Series A Cumulative Redeemable Preferred Stock, 4,600,000 shares classified as 6.00% Series B Cumulative Convertible Preferred Stock, 12,650,000 shares classified as 7.625% Series C Cumulative Redeemable Preferred Stock and 18,400,000 shares classified as 7.50% Series D Cumulative Redeemable Preferred Stock.   (A) Common Stock   At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 947,698,431 and 947,643,079  shares of common stock, with a par value of $0.01 per share.
No options were exercised during the quarters ended March 31, 2015 and 2014.
During the quarter ended March 31, 2015, the Company raised $0.6 million, by issuing 53,000 shares, through the Direct Purchase and Dividend Reinvestment Program. During the quarter ended March 31, 2014, the Company raised $0.6 million, by issuing 56,000 shares, through the Direct Purchase and Dividend Reinvestment Program. In March 2012, the Company entered into six separate Distribution Agency Agreements (“Distribution Agency Agreements”) with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and RCap Securities, Inc. (together, the Agents).  Pursuant to the terms of the Distribution Agency Agreements, the Company may sell from time to time through the Agents, as its sales agents, up to 125,000,000 shares of the Company’s common stock. The Company did not make any sales under the Distribution Agency Agreements during the quarters ended March 31, 2015 and 2014.
(B) Preferred Stock
At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 7,412,500 shares of Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”), with a par value of $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series A Preferred Stock is entitled to a dividend at a rate of 7.875% per year based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series A Preferred Stock is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company's option commencing on April 5, 2009 (subject to the Company's right under limited circumstances to redeem the Series A Preferred Stock earlier in order to preserve its qualification as a REIT). Through March 31, 2015, the Company had declared and paid all required quarterly dividends on the Series A Preferred Stock.
At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 12,000,000 shares of Series C Preferred Stock, with a par value of $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series C Preferred Stock is entitled to a dividend at a rate of 7.625% per year based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series C Preferred Stock is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company’s option commencing on May 16, 2017 (subject to the Company’s right under limited circumstances to redeem the Series C Preferred Stock earlier in order to preserve its qualification as a REIT or under limited circumstances related to a change of control of the Company). Through March 31, 2015, the Company

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Item 1. Financial Statements

had declared and paid all required quarterly dividends on the Series C Preferred Stock.
At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 18,400,000 shares of Series D Preferred Stock, with a par value of $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series D Preferred Stock is entitled to a dividend at a rate of 7.50% per year based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series D Preferred Stock is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company’s option commencing on September 13, 2017 (subject to the Company’s right under limited circumstances to redeem the Series D Preferred Stock earlier in order to preserve its qualification as a REIT or under limited circumstances related to a change of control of the Company). Through March 31, 2015, the Company had declared and paid all required quarterly dividends on the Series D Preferred Stock.
The 7.875% Series A Cumulative Redeemable Preferred Stock, 7.625% Series C Cumulative Redeemable Preferred Stock and 7.50% Series D Cumulative Redeemable Preferred Stock rank senior to the common stock of the Company.
(C) Distributions to Stockholders During the quarter ended March 31, 2015, the Company declared dividends to common stockholders totaling $284.3 million, or $0.30 per common share which was paid to common stockholders on April 30, 2015. During the quarter ended March 31, 2015, the Company declared and paid dividends to Series A Preferred Stock stockholders totaling approximately $3.6 million, or $0.492 per preferred share, Series C Preferred Stock stockholders totaling approximately $5.7 million, or $0.477 per preferred share and Series D Preferred Stock stockholders totaling approximately $8.6 million, or $0.469 per preferred share.
During the quarter ended March 31, 2014, the Company declared dividends to common stockholders totaling $284.2 million, or $0.30 per common share, paid to common stockholders on April 30, 2014. During the quarter ended March 31, 2014, the Company declared and paid dividends to Series A Preferred stockholders totaling approximately $3.6 million, or $0.492 per preferred share, Series C Preferred stockholders totaling approximately $5.7 million, or $0.477 per preferred share, Series D Preferred stockholders totaling approximately $8.6 million, or $0.469 per preferred share.
11.  INTEREST INCOME AND INTEREST EXPENSE   The table below presents the components of the Company’s interest income and interest expense for the quarters ended March 31, 2015 and 2014.

	Quarter Ended March 31,
	2015		2014
Interest income:	(dollars in thousands)
Investment Securities	$	478,239	$	614,419
Commercial investment portfolio(1)		40,336		39,486
U.S. Treasury securities		-		1,329
Securities loaned		-		114
Reverse repurchase agreements		539		500
Other		58		53
Total interest income		519,172		655,901
Interest expense:
Repurchase agreements		102,748		103,131
Convertible Senior Notes		23,627		18,897
U.S. Treasury securities sold, not yet purchased		-		1,076
Securities borrowed		-		95
Securitized debt of consolidated VIEs		2,882		1,611
Participation sold		159		161
Other		4		-
Total interest expense		129,420		124,971
Net interest income	$	389,752	$	530,930
(1) Includes commercial real estate debt, preferred equity and corporate debt.

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Item 1. Financial Statements

12.   GOODWILL

At March 31, 2015 and December 31, 2014, goodwill totaled $94.8 million.

13.  NET INCOME (LOSS) PER COMMON SHARE The following table presents a reconciliation of net income (loss) and shares used in calculating basic and diluted net income (loss) per share for the quarters ended March 31, 2015 and 2014.

	For the Quarter Ended
	March 31, 2015			March 31, 2014
	(dollars in thousands, except per share data)
Net income (loss) attributable to Annaly	$	(476,409	)	$	(203,351	)
Less: Preferred stock dividends		17,992			17,992
Net income (loss) per share available (related) to common stockholders, prior to adjustment for dilutive potential common shares, if necessary		(494,401	)		(221,343	)
Add:  Interest on Convertible Senior Notes, if dilutive		-			-
Net income (loss) available to common stockholders, as adjusted		(494,401	)		(221,343	)
Weighted average shares of common stock outstanding-basic		947,669,831			947,458,813
Add:  Effect of stock awards and Convertible Senior Notes, if dilutive		-			-
Weighted average shares of common  stock outstanding-diluted		947,669,831			947,458,813
Net income (loss) per share available (related) to common share:
Basic	$	(0.52	)	$	(0.23	)
Diluted	$	(0.52	)	$	(0.23	)

Options to purchase 2.3 million and 3.2 million shares of common stock were outstanding and considered anti-dilutive as their exercise price and option expense exceeded the average stock price for the quarters ended March 31, 2015 and 2014, respectively.   14.  LONG-TERM STOCK INCENTIVE PLAN   The Company adopted the 2010 Equity Incentive Plan (the “Plan”), which authorizes the Compensation Committee of the Board of Directors to grant options, stock appreciation rights, dividend equivalent rights, or other share-based awards, including restricted shares up to an aggregate of 25,000,000 shares, subject to adjustments as provided in the 2010 Equity Incentive Plan.   The Company had previously adopted a long term stock incentive plan for executive officers, key employees and non-employee directors (the “Prior Plan”).  The Prior Plan authorized the Compensation Committee of the Board of Directors to grant awards, including non-qualified options as well as incentive stock options as defined under Section 422 of the Code.  The Prior Plan authorized the granting of options or other awards for an aggregate of the greater of 500,000 shares or 9.5% of the diluted outstanding shares of the Company’s common stock, up to a ceiling of 8,932,921 shares.  No further awards will be made under the Prior Plan, although existing awards remain effective.
Stock options were issued at the market price on the date of grant, subject to an immediate or four year vesting in four equal installments with a contractual term of 5 or 10 years.    The following table sets forth activity related to the Company’s stock options awarded under the Plan:

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Item 1. Financial Statements

	For the Quarter Ended
	March 31, 2015					March 31, 2014
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Options outstanding at the beginning of period		2,259,335		$	15.35		3,581,752		$	15.44
Granted		-		$	-		-		$	-
Exercised		-		$	-		-		$	-
Forfeited		(8,799	)	$	14.80		(353,417	)	$	14.94
Expired		-		$	-		-		$	-
Options outstanding at the end of period		2,250,536		$	15.35		3,228,335		$	15.49
Options exercisable at the end of the period		2,250,536		$	15.35		3,228,335		$	15.49

The weighted average remaining contractual term was approximately 2.8 years and 3.5 years for stock options outstanding and exercisable as of March 31, 2015 and 2014, respectively. 
As of March 31, 2015 and 2014, there was no unrecognized compensation cost related to nonvested share-based compensation awards.
15.  INCOME TAXES
For the quarter ended March 31, 2015 the Company was qualified to be taxed as a REIT under Code Sections 856 through 860. As a REIT, the Company is not subject to federal income tax to the extent that it distributes its taxable income to its stockholders.  To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements such as assets it may hold, income it may generate and its stockholder composition. It is generally the Company’s policy to distribute 100% of its REIT taxable income. To the extent there is any undistributed REIT taxable income at the end of a year, the Company distributes such shortfall within the next year as permitted by the Code. For years prior to 2013, the Company retained the amount of taxable income attributable to certain employee remuneration deductions disallowed for tax purposes pursuant to Section 162(m) of the Code (“Section 162(m)”). As a result of the externalization of management effective as of July 1, 2013, the Company was not subject to the Section 162(m) disallowance for the 2014 tax year.   The state and local tax jurisdictions for which the Company is subject to tax-filing obligations recognize the Company’s status as a REIT, and therefore, the Company generally does not pay income tax in such jurisdictions. The Company may, however, be subject to certain minimum state and local tax filing fees as well as certain excise, franchise or business taxes. The Company’s TRSs are subject to federal, state and local taxes.
During the quarter ended March 31, 2015, the Company recorded $14 thousand of income tax expense for income attributable to its TRSs.  During the quarter ended March 31, 2014, the Company’s TRSs recorded $4.0 million of income tax expense for income attributable to those subsidiaries, and the portion of earnings retained based on Code Section 162(m) limitations.
The Company’s 2013, 2012 and 2011 federal, state and local tax returns remain open for examination.
16.  LEASE COMMITMENTS AND CONTINGENCIES   Commitments
The Company had a non-cancelable lease for office space which commenced in May 2002 and expired in December 2014. In June 2014, the Company entered into a non-cancelable lease for office space which commenced in July 2014 and expires in September 2025. FIDAC has a lease for office space which commenced in October 2010 and expires in February 2016.  The lease expense for the quarters ended March 31, 2015 and 2014 was $0.6 million and $0.4 million, respectively. The Company’s aggregate future minimum lease payments total $37.4 million.  The following table details the lease payments.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

Years Ending December 31,	Lease Commitments
	(dollars in thousands)
2015 (remaining)	$	1,159
2016		3,591
2017		3,565
2018		3,565
2019		3,565
Later years		21,994
	$	37,439

The Company had no material unfunded loan commitments as of March 31, 2015 and December 31, 2014.
Contingencies
From time to time, the Company is involved in various claims and legal actions arising in the ordinary course of business.  In the opinion of management, the ultimate disposition of these matters will not have a material effect on the Company’s consolidated financial statements. There were no material contingencies as of March 31, 2015 and December 31, 2014.
17.     RISK MANAGEMENT   The primary risks to the Company are liquidity and investment/market risk. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the Company’s control. Changes in the general level of interest rates can affect net interest income, which is the difference between the interest income earned on interest earning assets and the interest expense incurred in connection with the interest bearing liabilities, by affecting the spread between the interest earning assets and interest bearing liabilities. Changes in the level of interest rates can also affect the value of the interest earning assets and the Company’s ability to realize gains from the sale of these assets.  A decline in the value of the interest earning assets pledged as collateral for borrowings under repurchase agreements and derivative contracts could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels.   The Company may seek to mitigate the potential financial impact by entering into interest rate agreements such as interest rate swaps, interest rate swaptions and other hedges.
Weakness in the mortgage market, the shape of the yield curve and changes in the expectations for the volatility of future interest rates may adversely affect the performance and market value of the Company’s investments. This could negatively impact the Company’s book value.  Furthermore, if many of the Company’s lenders are unwilling or unable to provide additional financing, the Company could be forced to sell its Investment Securities at an inopportune time when prices are depressed. The Company has established policies and procedures for mitigating risks, including conducting scenario analyses and utilizing a range of hedging strategies.
The payment of principal and interest on the Freddie Mac and Fannie Mae Agency mortgage-backed securities, excluding Agency CRT securities, are guaranteed by those respective agencies and the payment of principal and interest on Ginnie Mae Agency mortgage-backed securities are backed by the full faith and credit of the U.S. government.  Principal and interest on Agency debentures are guaranteed by the Agency issuing the debenture.  Substantially all of the Company’s Investment Securities have an actual or implied “AAA” rating.
The Company faces credit risk on the portions of its portfolio which are not guaranteed by the respective Agency or by the full faith and credit of the U.S. government. The Company is exposed to credit risk on CRE Debt and Preferred Equity Investments, investments in commercial real estate, commercial mortgage-backed securities, Agency CRT securities and corporate debt. The Company is exposed to risk of loss if an issuer, borrower, tenant or counterparty fails to perform its obligations under contractual terms. The Company has established policies and procedures for mitigating credit risk, including reviewing and establishing limits for credit exposure, limiting transactions with specific counterparties, maintaining qualifying collateral and continually assessing the creditworthiness of issuers, borrowers, tenants and counterparties.
18.  RCAP REGULATORY REQUIREMENTS
RCap is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 1. Financial Statements

structure, recordkeeping and conduct of directors, officers and employees. 
As a self-clearing, registered broker dealer, RCap is required to maintain minimum net capital by FINRA.  As of March 31, 2015 RCap had a minimum net capital requirement of $0.3 million. RCap consistently operates with capital in excess of its regulatory capital requirements. RCap’s regulatory net capital as defined by SEC Rule 15c3-1, as of March 31, 2015 was $399.9 million with excess net capital of $399.6 million.
19.  RELATED PARTY TRANSACTIONS   Investment in Affiliate, Available-For-Sale Equity Security
At March 31, 2015, the Company’s available-for-sale equity securities represented shares of Chimera Investment Corporation (“Chimera”), which are reported at fair value. The Company owned approximately 45.0 million shares of Chimera at a fair value of approximately $141.2 million at March 31, 2015 and approximately 45.0 million shares of Chimera at a fair value of approximately $143.0 million at December 31, 2014. At March 31, 2015 and December 31, 2014, the investment in Chimera had an unrealized gain of $2.4 million and $4.2 million, respectively.
Advisory fees
For the quarter ended March 31, 2015, the Company recorded advisory fees from Chimera totaling $10.5 million.  In August 2014, the management agreement between FIDAC and Chimera was amended and restated to amend certain of the terms and conditions of the prior agreement.  Among other amendments to the terms of the prior agreement, effective August 8, 2014, the management fee was increased from 0.75% to 1.20% of Chimera’s gross stockholders’ equity (as defined in the amended and restated management agreement). For the quarter ended March 31, 2014, the Company recorded advisory fees from Chimera totaling $6.1 million. At March 31, 2015 and December 31, 2014, the Company had amounts receivable from Chimera of $10.3 million and $10.4 million, respectively.
Management Agreement
The Company and the Manager have entered into a management agreement pursuant to which the Company’s management is conducted by the Manager through the authority delegated to it in the Management Agreement and pursuant to the policies established by the Board of Directors (the “Externalization”). The management agreement was effective as of July 1, 2013 and applicable for the entire 2013 calendar year and was amended on November 5, 2014 (the management agreement, as amended, is referred to as “Management Agreement”).
Pursuant to the terms of the Management Agreement, the Company pays the Manager a monthly management fee in an amount equal to 1/12th of 1.05% of stockholders’ equity, as defined in the Management Agreement, for its management services.
The Management Agreement provides for a two year term ending December 31, 2016 with automatic two-year renewals unless at least two-thirds of the Company’s independent directors or the holders of a majority of the Company’s outstanding shares of common stock elect to terminate the agreement in their sole discretion and for any or no reason. At any time during the term or any renewal term the Company may deliver to the Manager written notice of the Company’s intention to terminate the Management Agreement. The Company must designate a date not less than one year from the date of the notice on which the Management Agreement will terminate. The Management Agreement also provides that the Manager may terminate the Management Agreement by providing to the Company prior written notice of its intention to terminate the Management Agreement no less than one year prior to the date designated by the Manager on which the Manager would cease to provide services or such earlier date as determined by the Company in its sole discretion.
Effective July 1, 2013, a majority of the Company’s employees were terminated by the Company and were hired by the Manager.  The Company has a limited number of employees following the Externalization, all of whom are employees of the Company’s subsidiaries for regulatory or corporate efficiency reasons. All compensation expenses associated with such retained employees reduce the amount paid to the Manager.
The Management Agreement may be amended or modified by agreement between the Company and the Manager. There is no termination fee for a termination of the Management Agreement by either the Company or the Manager.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 2.  Management’s Discussion and Analysis

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Statements   Certain statements contained in this quarterly report, and certain statements contained in our future filings with the Securities and Exchange Commission (the SEC or the Commission), in our press releases or in our other public or stockholder communications may not be based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, which are based on various assumptions, (some of which are beyond our control) 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 financing, 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 Agency CRT securities, commercial real estate assets and corporate debt, our ability to consummate any contemplated investment opportunities and other corporate transactions, changes in governmental regulations affecting our business, our ability to maintain our classification as a real estate investment trust (or REIT) for federal income tax purposes, our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended (or Investment Company Act), and risks associated with the business of our subsidiaries, including the investment advisory businesses of our subsidiary, and risks associated with the broker dealer business of our 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 the information under the caption “Risk Factors” contained in our most recent Annual Report on Form 10-K. 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. This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our most recent annual report on Form 10-K. All references to “Annaly,” “we,” “us” or “our” mean Annaly Capital Management, Inc. and all entities owned by us, except where it is made clear that the term means only the parent company.  Refer to the Glossary of Terms for definitions of commonly used terms in this quarterly report on Form 10-Q.

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Item 2. Management’s Discussion and Analysis

INDEX TO ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	Page
Overview	38
Business Environment	38
Economic Environment	38
Financial Regulatory Reform	39
Results of Operations	39
Net Income (Loss) Summary	40
Non-GAAP Financial Measures	41
Core Earnings Summary	41
Economic Interest Expense and Economic Net Interest Income	42
Interest Income and Average Yield on Interest Earning Assets	42
Economic Interest Expense and Average Cost of Interest Bearing Liabilities	43
Economic Net Interest Income	43
Other Income (Loss)	44
General and Administrative Expenses	45
Unrealized Gains and Losses	45
Net Income (Loss) and Return on Average Equity	46
Financial Condition	46
Investment Securities	46
Contractual Obligations	48
Off-Balance Sheet Arrangements	49
Capital Management	49
Stockholders’ Equity	50
Common and Preferred Stock	50
Distributions to Stockholders	50
Leverage and Capital	51
Risk Management	51
Risk Appetite	51
Governance	52
Description of Risks	52
Liquidity Risk Management	53
Funding	53
Excess Liquidity	54
Maturity Profile	55
Liquidity Management Policies	56
Stress Testing	56
Investment/Market Risk Management	56
Credit and Counterparty Risk Management	57
Operational Risk Management	59
Compliance, Regulatory and Legal Risk Management	59
Critical Accounting Policies	59
Valuation of Financial Instruments	59
Investment Securities	59
Interest Rate Swaps	60
Revenue Recognition	60
Use of Estimates	60
Glossary of Terms	61

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis

Overview We are a leading mortgage REIT that is externally managed by Annaly Management Company LLC (or Manager). Our common stock is listed on the New York Stock Exchange under the symbol “NLY.” Since our founding in 1997, we have strived to generate net income for distribution to our stockholders through the prudent selection and management of our investments. We own a portfolio of real estate related investments. We use our capital coupled with borrowed funds to invest in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities. We are primarily organized around the following operations:

Annaly, the parent company	Invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments.
Annaly Commercial Real Estate Group, Inc. (or ACREG)	Wholly-owned subsidiary that was acquired during the second quarter of 2013 and specializes in acquiring, financing and managing commercial loans and other commercial real estate debt, commercial mortgage-backed securities and other commercial real estate-related assets.
RCap Securities, Inc.	Wholly-owned subsidiary that operates as a broker-dealer, and is a member of the Financial Industry Regulatory Authority.
Fixed Income Discount Advisory Company (or FIDAC)	Wholly-owned subsidiary that manages an affiliated REIT for which it earns fee income.
Annaly Middle Market Lending LLC	Wholly-owned subsidiary that engages in corporate middle market lending transactions.

Business Environment The size of our Agency mortgage-backed securities portfolio declined in the first quarter of 2015; however, this decline was largely offset by an increase in TBA contracts as part of a series of portfolio actions executed during the quarter. We remain cautious as the Federal Reserve (or Fed) has ceased adding to their Agency mortgage-backed securities portfolio and increases to the federal funds rate target are likely later in 2015.  Additionally, further financial and housing regulatory reform is possible, and its effect on our business is unclear. Economic Environment Economic growth, as measured by real gross domestic product (or GDP), declined to a seasonally-adjusted annualized rate of 0.2% in the first quarter of 2015, significantly slower than the pace throughout much of 2014, according to the Bureau of Economic Analysis. The components were generally negative, as the sharp rise in the U.S. dollar reduced net exports, and the sharp fall in oil prices cut spending on goods and business investment. However, consumer spending on services picked up to 2.8% quarter-over-quarter, compared to 2.1% in 2014, a sign of a strengthening consumer. The year-over-year growth rate of 3.0% was strong, as the first quarter of 2014 was similarly stunted by temporary factors. Continued hiring and signs of budding wage growth provide optimism for a rebound over the rest of 2015. The Fed currently conducts monetary policy with a dual mandate: full employment and price stability. The employment situation improved vastly in 2014, with average monthly employment gains of 260,000 through December 2014 compared to 199,000 per month in 2013, according to the Bureau of Labor Statistics. Nonfarm payrolls have grown at a slower pace so far in 2015, averaging 197,000 over the first three months of the year.  The unemployment rate continued to decline, however, down to 5.5% in March 2015 compared to 5.6% in December 2014.  This is approaching the upper-end of the Fed’s own estimate of their mandate-consistent unemployment rate, which was lowered to 5.0-5.2% at their March 18, 2015 meeting. However, signs of labor market slack persist as measures of long-term unemployment, the part-time employment share and those out of

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis

the labor force who desire a job remain elevated versus long-term averages. Inflation remained below the Fed’s 2% target through the first quarter of 2015, as measured by the Personal Consumer Expenditure Chain Price Index (or PCE)  weakening in the first quarter of 2015 in the wake of the oil price fallout. The headline PCE measure fell to 0.3% year-over-year in March 2015, down from 0.8% in December 2014, though it was above the recent low of 0.2% in January 2015. The more stable core PCE measure, which excludes food and energy prices, remained below the Fed’s 2.0% target at 1.3% year-over-year in March 2015, unchanged from December 2014. The Federal Open Market Committee (FOMC or the Committee) has noted that “inflation persistently below its 2% objective could pose risks to economic performance,” and believes the current level of inflation below target is due to “transitory effects of declines in energy and import prices.” The Committee expects inflation to rise gradually toward 2% over the medium term. At their January 27-28th, 2015 meeting, the FOMC kept in place their forward guidance that they would be “patient” in raising rates, meaning rate hikes would be unlikely for the following two meetings. They also openly acknowledged renewed risks abroad, adding that their hike decision “will include an assessment of international developments,” a nod to the rise in the dollar amidst weakness in the Eurozone and a new European Central Bank stimulus program. At their March 17-18th, 2015 meeting, the Fed removed the aforementioned guidance that they would be “patient”, meaning rate hikes would be more likely by the summer. In contrast to this hawkish guidance, members lowered their forecasts for the expected future policy rate, with the median expectations reflecting only two 25 basis point hikes in 2015 versus a previously expected five. The rise in the U.S. dollar was cited as a primary factor contributing to this downgrade, coinciding with lowered GDP forecasts through 2017. The Fed made little change to their statement at their April 28-29th, 2015 meeting, indicating that in spite of the recent slowdown, they expect economic activity to rebound. During the first quarter of 2015, the 10-year U.S. Treasury yielded between 1.6% and 2.2%. The market’s pricing of future inflation, as measured by trading in the Treasury Inflation-Protected Securities market, rose over the period, though it remained below the Fed’s 2% goal. The mortgage basis, or the spread between the 30-year Agency mortgage-backed security current coupon and 10-year U.S. Treasury, remained stable quarter over quarter, despite intra-quarter volatility. The following table summarizes interest rates as of each date presented:

	March 31, 2015			December 31, 2014			March 31, 2014
30-Year mortgage current coupon		2.65	%		2.83	%		3.44	%
Mortgage basis	73 bp		s	66 bp		s	72 bp		s
10-Year U.S. Treasury rate		1.92	%		2.17	%		2.72	%
LIBOR:
1-Month		0.18	%		0.17	%		0.15	%
6-Month		0.40	%		0.36	%		0.33	%

Financial Regulatory Reform Uncertainty remains surrounding financial regulatory reform and its impact on the markets and the broader economy. In particular, the government is attempting to change its involvement through the Agencies in the mortgage market. There have been numerous legislative initiatives introduced regarding the Agencies, and it is unclear which approach, if any, may become law. In addition, regulators remain focused on the wholesale funding markets, bank capital levels and shadow banking. It is difficult to predict the ultimate legislative and other regulatory outcomes of these efforts. We continue to monitor these legislative and regulatory developments and evaluate their potential impact on our business. Results of Operations The results of our operations are affected by various factors, many of which are beyond our control. Certain

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis

of such risks and uncertainties are described herein (see “Special Note Regarding Forward-Looking Statements”) and in Part I, Item 1A. “Risk factors” of our most recent annual report on Form 10-K. Net Income (Loss) Summary The following table presents summarized financial information related to our results of operations as of and for the quarters ended March 31, 2015 and 2014.

	For the Quarter Ended March 31,
	2015			2014
	(dollars in thousands, except per share data)
Interest income	$	519,172		$	655,901
Interest expense		129,420			124,971
Net interest income		389,752			530,930
Other income (loss)		(815,299	)		(682,902	)
General and administrative expenses		50,938			47,378
Income (loss) before income taxes		(476,485	)		(199,350	)
Income taxes		14			4,001
Net income (loss)		(476,499	)		(203,351	)
Net income (loss) attributable to noncontrolling interest		(90	)		-
Net income (loss) attributable to Annaly		(476,409	)		(203,351	)
Dividends on preferred stock		17,992			17,992
Net income (loss) available (related) to common stockholders	$	(494,401	)	$	(221,343	)
Net income (loss) per share available (related) to common stockholders:
Basic	$	(0.52	)	$	(0.23	)
Diluted	$	(0.52	)	$	(0.23	)
Weighted average number of common shares outstanding:
Basic		947,669,831			947,458,813
Diluted		947,669,831			947,458,813
Non-GAAP financial measures (1):
Economic interest expense		287,659			385,406
Economic net interest income		231,513			270,495
Core earnings		254,082			239,744
Core earnings per average basic common share	$	0.25		$	0.23
Other information:
Asset portfolio at period-end		73,941,094			79,584,560
Average total assets	$	83,515,522		$	82,168,619
Average equity	$	13,229,186		$	12,484,884
Leverage at period-end (2)	4.8:1			5.2:1
Economic leverage at period-end (3)	5.7:1			5.2:1
Capital ratio (4)		14.1	%		15.2	%
Net interest margin		1.26	%		1.32	%
Net interest spread		0.83	%		0.90	%
Return on average total assets		(2.28	%)		(0.99	%)
Return on average equity		(14.41	%)		(6.52	%)
Constant prepayment rate		9	%		6	%
Common stock book value per share	$	12.88		$	12.30

(1) See “Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to their corresponding GAAP amounts.

(2) Includes repurchase agreements, Convertible Senior Notes and non-recourse securitized debt, loan participation and mortgages payable.

(3) Computed as the sum of debt, TBA derivative notional outstanding and net forward purchases of Investment Securities divided by total equity.

(4) Represents the ratio of stockholders’ equity to total assets (inclusive of total market value of TBA derivatives).

This Management Discussion and Analysis section contains analysis and discussion of non-GAAP measurements.  See “Non-GAAP Financial Measures” for further information. GAAP Net income (loss) was ($476.5) million, which includes ($0.1) million attributable to a noncontrolling interest, or ($0.52) per average basic common share, for the quarter ended March 31, 2015 compared to ($203.4) million, or ($0.23) per average basic common share, for the same period in 2014. We attribute the majority of the change in

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis

net income (loss) to higher realized losses on termination of interest rate swaps and unrealized losses on interest rates swaps reflecting lower forward interest rates, lower interest income resulting from a 74 basis point decrease in the average yield on Interest Earning Assets due to an increase in amortization expense, reflecting higher prepayment speeds for the quarter ended March 31, 2015 compared to the same period in 2014. The decrease in net income (loss) was partially offset by lower interest expense on interest rate swaps, reflecting a decline in swap notional amounts, and lower net losses on trading assets for the quarter ended March 31, 2015 compared to the same period in 2014. Non-GAAP Core earnings increased $14.3 million to $254.1 million, or $0.25 per average basic common share, for the quarter ended March 31, 2015 compared to $239.7 million, or $0.23 per average basic common share, for the same period in 2014. We attribute the majority of the increase to lower interest expense on interest rate swaps reflecting a decline in swap notional amounts, partially offset by lower interest income primarily attributable to a 74 basis point decrease in the average yield on Interest Earning Assets due to higher amortization expense for the quarter ended March 31, 2015 compared to the same period in 2014. Non-GAAP Financial Measures This Management Discussion and Analysis section contains analysis and discussion of non-GAAP measurements. The non-GAAP measurements include the following: ●  core earnings; ●  core earnings per average basic common share; ●  economic interest expense; and ●  economic net interest income. 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 gains and losses on trading assets, impairment losses, GAAP net income (loss) attributable to noncontrolling interest and certain other non-recurring gains or losses, and inclusive of TBA dollar roll income (a component of Net gains (losses) on trading assets). TBA dollar roll income is defined as the difference in price between two TBA contracts with the same terms but different settlement dates. Dollar roll income represents the equivalent of interest income on the underlying security less an implied cost of financing. We believe that core earnings, core earnings per average basic common share, economic interest expense and economic net interest income provide meaningful information to consider, in addition to the respective amounts prepared in accordance with GAAP. The non-GAAP measures help us to evaluate our financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of our current investment portfolio and operations. Our presentation of non-GAAP financial measures has important limitations.  Other market participants may calculate core earnings, core earnings per average basic common share, economic interest expense and economic net interest income differently than we calculate them, making comparative analysis difficult. Although we believe that the calculation of non-GAAP financial measures described above helps evaluate and measure our financial position and performance without the effects of certain transactions, it is of limited usefulness as an analytical tool.  Therefore, the non-GAAP financial measures should not be viewed in isolation and are not a substitute for net income (loss), net income (loss) per basic share available (related) to common stockholders, interest expense and net interest income computed in accordance with GAAP. Core Earnings The following table provides GAAP measures of net income (loss) and net income (loss) per basic share available to common stockholders for the quarters ended March 31, 2015 and 2014 and details with respect to reconciling the aforementioned line items on a non-GAAP basis:

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Item 2. Management’s Discussion and Analysis

	For the Quarter Ended March 31,
	2015			2014
	(dollars in thousands, except per share data)
GAAP net income (loss)	$	(476,499	)	$	(203,351	)
Less:
Realized (gains) losses on termination of interest rate swaps		226,462			6,842
Unrealized (gains) losses on interest rate swaps		466,202			348,942
Net (gains) losses on disposal of investments		(62,356	)		(79,710	)
Net (gains) losses on trading assets		6,906			146,228
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities		33,546			20,793
GAAP net (income) loss attributable to noncontrolling interest		90			-
Plus:
TBA dollar roll income (loss) (1)		59,731			-
Core earnings	$	254,082		$	239,744
GAAP net income (loss) per average basic common share	$	(0.52	)	$	(0.23	)
Core earnings per average basic common share	$	0.25		$	0.23

(1) This amount is included as a component of Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss).

Economic Interest Expense and Economic Net Interest Income We believe the economic value of our investment strategy is depicted by the economic net interest income we earn. We calculate economic net interest income by determining our GAAP net interest income and reducing it by realized losses on interest rate swaps, which represents interest expense on interest rate swaps. Our economic interest expense, which is composed of interest expense on our Interest Bearing Liabilities plus interest expense on interest rate swaps, reflects total contractual interest payments. The following table provides GAAP measures of interest expense and net interest income and details with respect to reconciling the aforementioned line items on a non-GAAP basis for each respective period:

	GAAP Interest Expense		Add: Realized Losses on Interest Rate Swaps (1)		Economic Interest Expense		GAAP Net Interest Income		Less: Realized Losses on Interest Rate Swaps (1)		Economic Net Interest Income
For the Quarter Ended:	(dollars in thousands)
March 31, 2015	$	129,420	$	158,239	$	287,659	$	389,752	$	158,239	$	231,513
March 31, 2014	$	124,971	$	260,435	$	385,406	$	530,930	$	260,435	$	270,495
(1)  Economic interest expense includes interest expense on interest rate swaps.

Interest Income and Average Yield on Interest Earning Assets Prepayment speeds, as reflected by the Constant Prepayment Rate, or CPR, and interest rates vary according to the type of investment, conditions in financial markets, competition and other factors, none of which can be predicted with any certainty. In general, as prepayment speeds on our Agency mortgage-backed securities portfolio increase, related purchase premium amortization increases, thereby reducing the yield on such assets. The following table presents the weighted average experienced CPR on our Agency mortgage-backed securities portfolio for the periods presented. Quarter Ended              CPR           March 31, 2015                9% December 31, 2014          8% March 31, 2014                6% December 31, 2013          7% Our interest income for the quarters ended March 31, 2015 and 2014 was $519.2 million and $655.9 million, respectively. We had average Interest Earning Assets of $83.9 billion and $81.9 billion, and the average yield on Interest Earning Assets was 2.47% and 3.21 % for the quarters ended March 31, 2015 and 2014,

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Item 2. Management’s Discussion and Analysis

respectively. The decline in interest income of $136.7 million for the quarter ended March 31, 2015 compared to the same period in 2014 was primarily due to a 74 basis point decrease in the average yield on Interest Earning Assets due to an increase in amortization expense reflecting higher prepayment speeds, partially offset by a $2.1 billion increase in average Interest Earning Assets. Economic Interest Expense and the Average Cost of Interest Bearing Liabilities Typically, our largest expense is the average cost of Interest Bearing Liabilities and interest expense on interest rate swaps, which is recorded in realized gains (losses) on interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss). The table below shows our average Interest Bearing Liabilities and average cost of Interest Bearing Liabilities as compared to average one-month and average six month LIBOR for the periods presented.

	Average Interest Bearing Liabilities		Interest Bearing Liabilities at Period End		Economic Interest Expense(1)		Average Cost of Interest Bearing Liabilities			Average One- Month LIBOR			Average Six- Month LIBOR			Average One- Month LIBOR Relative to Average Six-Month LIBOR			Average Cost of Interest Bearing Liabilities Relative to Average One- Month LIBOR			Average Cost of Interest Bearing Liabilities Relative to Average Six- Month LIBOR
For the Quarter Ended:	(dollars in thousands)
March 31, 2015	$	70,137,382	$	62,822,308	$	287,659		1.64	%		0.17	%		0.38	%		(0.21	%)		1.47	%		1.26	%
March 31, 2014	$	66,870,534	$	66,159,608	$	385,406		2.31	%		0.16	%		0.33	%		(0.17	%)		2.15	%		1.98	%

(1) Economic interest expense includes interest expense on interest rate swaps.

Economic interest expense, including interest expense on interest rate swaps, for the quarter ended March 31, 2015 decreased by $97.7 million when compared to the quarter ended March 31, 2014, primarily due to lower interest expense on interest rate swaps, partially offset by a $3.3 billion increase in average Interest Bearing Liabilities. We do not manage our portfolio to have a pre-designated amount of borrowings at quarter or year end.  Our borrowings at period end are a snapshot of our borrowings as of a date, and this number should be expected to differ from average borrowings over the period for a number of reasons.  The mortgage-backed securities we own pay principal and interest towards the end of each month and the mortgage-backed securities we purchase are typically settled during the beginning of the month.  As a result, depending on the amount of mortgage-backed securities we have committed to purchase, we may retain the principal and interest we receive in the prior month, or we may use it to pay down our borrowings. Moreover, we use interest rate swaps, swaptions and other derivative instruments to hedge our portfolio and as we pledge or receive collateral under these agreements, our borrowings on any given day may be increased or decreased.  Our average borrowings during a quarter will differ from period end borrowings as we implement our portfolio management strategies and risk management strategies over changing market conditions by increasing or decreasing leverage.  Additionally, these numbers will differ during periods when we conduct capital raises, as in certain instances we may purchase additional assets and increase leverage with the expectation of a successful capital raise. Since our average borrowings and period end borrowings can be expected to differ, we believe our average borrowings during a period provide a more accurate representation of our exposure to the risks associated with leverage. As of March 31, 2015 and December 31, 2014, 96% and 98%, respectively, of our debt consisted of borrowings collateralized by a pledge of our Investment Securities. These borrowings appear on our Consolidated Statements of Financial Condition as Repurchase Agreements. All of our Agency mortgage-backed securities and debentures are currently accepted as collateral for these borrowings. However, we limit our borrowings, and thus our potential asset growth, in order to maintain unused borrowing capacity and thus increase the liquidity and strength of our balance sheet. As of March 31, 2015, the term to maturity of our repurchase agreements ranged from one day to four years. Additionally, we have entered into borrowings giving the counterparty the right to call the balance prior to maturity. At March 31, 2015 and December 31, 2014, the weighted average cost of funds for all our borrowings was 1.74% and 1.65%, respectively, including the effect of the interest rate swaps, 4% Convertible Senior Notes due 2015, 5% Convertible Senior Notes due 2015 (collectively, the Convertible Senior Notes) and securitized debt of consolidated VIEs, and the weighted average days to maturity was 193 days and 142 days, respectively. Economic Net Interest Income

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Item 2. Management’s Discussion and Analysis

The table below shows our average Interest Earning Assets, total interest income, average yield on Interest Earning Assets, average Interest Bearing Liabilities, economic interest expense, average cost of Interest Bearing Liabilities, economic net interest income, net interest spread and net interest margin for the periods presented.

Economic Net Interest Income

	Average Interest Earning Assets(1)		Total Interest Income		Average Yield on Interest Earning Assets			Average Interest Bearing Liabilities		Economic Interest Expense(2)		Average Cost of Interest Bearing Liabilities			Economic Net Interest Income(3)		Net Interest Spread			Net Interest Margin(4)
Quarter Ended:	(dollars in thousands)
March 31, 2015	$	83,912,008	$	519,172		2.47	%	$	70,137,382	$	287,659		1.64	%	$	231,513		0.83	%		1.26	%
March 31, 2014	$	81,852,609	$	655,901		3.21	%	$	66,870,534	$	385,406		2.31	%	$	270,495		0.90	%		1.32	%

(1) Does not reflect unrealized gains/(losses) or premium/(discount).

(2) Economic interest expense includes interest expense on interest rate swaps.

(3) Economic net interest income includes interest expense on interest rate swaps.

(4) Represents the sum of annualized economic net interest income, inclusive of interest expense on interest rate swaps, plus TBA dollar roll income divided by the sum of average Interest Earning Assets plus average outstanding TBA contract balances.

Other Income (Loss) Other income (loss) is largely comprised of net gains (losses) on interest rate swaps, investment advisory income, net gains (losses) on disposal of investments, dividend income from affiliate, net gains (losses) on trading assets, net unrealized gains (losses) on interest-only Agency mortgage-backed securities and other income (loss), which includes certain operating and transaction expenses related to commercial real estate. These components of other income (loss) for the quarters ended March 31, 2015 and 2014 were as follows:

	For the Quarters Ended March 31,
	2015			2014
	(dollars in thousands)
Net gains (losses) on interest rate swaps (1)	$	(850,903	)	$	(616,219	)
Investment advisory income		10,464			6,123
Net gains (losses) on disposal of investments		62,356			79,710
Dividend income from affiliate		4,318			13,045
Net gains (losses) on trading assets		(6,906	)		(146,228	)
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities		(33,546	)		(20,793	)
Other income (loss)		(1,082	)		1,460

(1) Includes realized gains (losses) on interest rate swaps, realized gains (losses) on termination of interest rate swaps and unrealized gains (losses) on interest rate swaps.

The aggregate net gains (losses) on interest rate swaps were ($850.9) million for the quarter ended March 31, 2015 compared to ($616.2) million for the same period in 2014. The change was primarily attributable to higher realized losses on termination of interest rate swaps and unrealized losses on interest rates swaps, partially offset by lower interest expense on interest rate swaps for the quarter ended March 31, 2015 compared to the same period in 2014. Investment advisory income increased $4.3 million to $10.5 million for the quarter ended March 31, 2015, primarily due to higher advisory fees from an affiliate. For the quarter ended March 31, 2015, we disposed of Investment Securities with a carrying value of $14.9 billion for an aggregate net gain of $62.3 million. For the same period in 2014, we disposed of Investment Securities with a carrying value of $5.0 billion for an aggregate net gain of $80.7 million. We may from time to time sell existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns, or to manage our balance sheet as part of our asset/liability management strategy. Dividend income from affiliate was $4.3 million for the quarter ended March 31, 2015, a decrease of $8.7 million compared to the same period in 2014 due to a

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Item 2. Management’s Discussion and Analysis

$9.0 million special dividend from our investment in Chimera recognized during the first quarter of 2014. Net gains (losses) on trading assets was ($6.9) million for the quarter ended March 31, 2015 compared to ($146.2) million for the same period in 2014. The change was primarily attributable to the change in net gains (losses) on TBA derivatives and lower net losses from interest rate swaptions. Net unrealized gains (losses) on interest-only Agency mortgage-backed securities was ($33.5) million for the quarter ended March 31, 2015 compared to ($20.8) million for the same period in 2014. The change was primarily attributable to the downward trend in interest rates experienced in 2015 compared to the same period in 2014. Other income (loss) was ($1.1) million for the quarter ended March 31, 2015 compared to $1.5 million for the same period in 2014. The change was primarily attributable to certain transaction related costs of ACREG. General and Administrative Expenses General and administrative (or G&A) expenses consists of compensation expense, the management fee and other expenses. The table below shows our total G&A expenses as compared to average total assets and average equity for the periods presented.

G&A Expenses and Operating Expense Ratios

	Total G&A Expenses		Total G&A Expenses/Average Assets			Total G&A Expenses/Average Equity
Quarter Ended:	(dollars in thousands)
March 31, 2015	$	50,938		0.24	%		1.54	%
March 31, 2014	$	47,378		0.23	%		1.52	%

G&A expenses was $50.9 million for the quarter ended March 31, 2015, an increase of $3.6 million compared to the same period in 2014. The change was attributable to higher other general and administrative expenses, primarily professional fees. Unrealized Gains and Losses With our available-for-sale accounting treatment on our Agency mortgage-backed securities which represent the largest portion of assets on balance sheet, unrealized fluctuations in market values of assets do not impact our GAAP or taxable income but rather are reflected on our balance sheet by changing the carrying value of the asset and stockholders’ equity under Accumulated Other Comprehensive Income (Loss). As a result of this fair value accounting treatment, our book value and book value per share are likely to fluctuate far more than if we used amortized cost accounting. As a result, comparisons with companies that use amortized cost accounting for some or all of their balance sheet may not be meaningful. The table below shows cumulative unrealized gains and losses on our available-for-sale investments reflected in the Consolidated Statements of Financial Condition.

	March 31, 2015			December 31, 2014
	(dollars in thousands)
Unrealized gain	$	1,083,222		$	950,072
Unrealized loss		(309,223	)		(745,189	)
Net unrealized gain (loss)	$	773,999		$	204,883

Unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on our potential earnings and dividends: positive changes will increase our equity base and allow us to increase our borrowing capacity while negative changes tend to reduce borrowing capacity under our investment policy.  A very large negative change in the net fair value of our available-for-sale investment securities might impair our liquidity position, requiring us to sell assets with the likely result of realized losses upon sale. The fair value of these securities being below amortized cost for the quarter ended March 31, 2015 is solely due to market conditions and not the quality of the assets.  Substantially all of the Agency mortgage-backed securities are “AAA” rated or carry an implied “AAA” rating. The investments are not considered to

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Item 2. Management’s Discussion and Analysis

be other-than-temporarily impaired because we currently have the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that we will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. Also, we are guaranteed payment of the principal amount of the securities by the respective issuing government agency. Net Income (Loss) and Return on Average Equity We recorded net income (loss) of ($476.5) million, which includes a ($0.1) million net income (loss) attributable to a noncontrolling interest, and ($203.4) million for the quarters ended March 31, 2015 and 2014, respectively. Our return (loss) on average equity was (14.41)% and (6.52)% for the quarters ended March 31, 2015 and 2014, respectively. The table below shows the components of our return on average equity for the periods presented.

Components of Return on Average Equity

	Economic Net Interest Income/ Average Equity(1)			Net Investment Advisory and Service Fees/Average Equity			Realized and Unrealized Gains and Losses/Average Equity			Other Income (Loss)/Average Equity(2)			G&A Expenses/ Average Equity			Income Taxes/ Average Equity			Return on Average Equity
Quarter Ended:
March 31, 2015		7.00	%		0.31	%		(20.28	%)		0.10	%		(1.54	%)		0.00	%		(14.41	%)
March 31, 2014		8.67	%		0.20	%		(14.20	%)		0.46	%		(1.52	%)		(0.13	%)		(6.52	%)

(1) Economic net interest income includes interest expense on interest rate swaps.

(2) Other income (loss) includes dividend income from affiliate, impairment of goodwill, loss on previously held equity interest in CreXus and other income (loss).

Financial Condition Total assets were $78.7 billion and $88.4 billion as of March 31, 2015 and December 31, 2014, respectively. The change was primarily due to a $12.2 billion decrease in Agency mortgage-backed securities as we repositioned our Agency portfolio into TBA contracts with a notional value of $13.8 billion at March 31, 2015, partially offset by $1.5 billion of commercial real estate debt investments made in the first quarter of 2015, which was largely comprised of $1.4 billion of trust assets of a VIE consolidated for accounting purposes. Investment Securities Substantially all of our Agency mortgage-backed securities at March 31, 2015 and December 31, 2014 were backed by single-family mortgage loans. Substantially all of the mortgage assets underlying these mortgage-backed securities were secured with a first lien position on the underlying single-family properties. Our mortgage-backed securities were largely Freddie Mac, Fannie Mae or Ginnie Mae pass through certificates or CMOs, which carry an actual or implied “AAA” rating. We carry all of our Agency mortgage-backed securities at fair value on the Consolidated Statements of Financial Condition.    We accrete discount balances as an increase to interest income over the expected life of the related Interest Earning Assets and we amortize premium balances as a decrease to interest income over the expected life of the related Interest Earning Assets.  At March 31, 2015 and December 31, 2014 we had on our Consolidated Statements of Financial Condition a total of $17.5 million and $19.6 million, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Investment Securities acquired at a price below principal value) and a total of $4.7 billion and $5.4 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Investment Securities acquired at a price above principal value). We received mortgage principal repayments of $2.6 billion and $1.7 billion for the quarter ended March 31, 2015 and 2014, respectively. The weighted average experienced prepayment speed for the quarters ended March 31, 2015 and 2014 was 9% and 6%, respectively.  Given our current portfolio composition,

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Item 2. Management’s Discussion and Analysis

if mortgage principal prepayment rates were to increase over the life of our mortgage-backed securities, all other factors being equal, our net interest income would decrease during the life of these mortgage-backed securities as we would be required to amortize our net premium balance into income over a shorter time period.  Similarly, if mortgage principal prepayment rates were to decrease over the life of our mortgage-backed securities, all other factors being equal, our net interest income would increase during the life of these mortgage-backed securities as we would amortize our net premium balance over a longer time period. The table below summarizes certain characteristics of our Investment Securities (excluding Agency interest-only mortgage-backed securities) and Agency interest-only mortgage-backed securities as of the dates presented.

	March 31, 2015			December 31, 2014
	(dollars in thousands)
Investment Securities: (1)
Principal Amount	$	65,084,689		$	77,391,804
Net Premium		3,326,485			4,118,679
Amortized Cost		68,411,174			81,510,483
Amortized Cost/Principal Amount		105.11	%		105.32	%
Carrying Value		69,182,780			81,711,172
Carrying Value / Principal Amount		106.30	%		105.58	%
Weighted Average Coupon Rate		3.63	%		3.69	%
Weighted Average Yield		2.76	%		2.81	%
Adjustable-Rate Investment Securities:(1)
Principal Amount	$	3,833,816		$	3,870,609
Weighted Average Coupon Rate		2.90	%		2.82	%
Weighted Average Yield		2.65	%		2.73	%
Weighted Average Term to Next Adjustment	39 Months			35 Months
Weighted Average Lifetime Cap		8.16	%		7.95	%
Principal Amount at Period End as % of Total Investment Securities		5.89	%		5.00	%
Fixed-Rate Investment Securities: (1)
Principal Amount	$	61,250,873		$	73,521,195
Weighted Average Coupon Rate		3.67	%		3.73	%
Weighted Average Yield		2.77	%		2.82	%
Principal Amount at Period End as % of Total Investment Securities		94.11	%		95.00	%
Agency Interest-Only Mortgage-Backed Securities:
Notional Amount	$	8,580,519		$	8,008,538
Net Premium		1,350,548			1,230,471
Amortized Cost		1,350,548			1,230,471
Amortized Cost/Notional Amount		15.74	%		15.36	%
Carrying Value		1,308,966			1,222,434
Carrying Value/Notional Amount		15.26	%		15.26	%
Weighted Average Coupon Rate		4.08	%		4.00	%
Weighted Average Yield		7.72	%		7.29	%

(1) Excludes Agency interest-only mortgage-backed securities.

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Item 2. Management’s Discussion and Analysis

Investment Securities by Index

March 31, 2015

	One Month Libor			Six- Month Libor			Twelve Month Libor			12- Month Moving Average			11th District Cost of Funds			1-Year Treasury Index			Other Indices(1)
Weighted average term to next adjustment	1 mo.			3 mo.			56 mo.			1 mo.			1 mo.			11 mo.			19 mo.
Weighted average annual period cap		14.90	%		1.80	%		2.00	%		-			-			2.00	%		0.00	%
Weighted average lifetime cap		15.54	%		11.33	%		9.26	%		9.15	%		10.66	%		10.72	%		3.80	%
Investment principal value as percentage of Investment Securities		0.16	%		0.20	%		3.52	%		0.15	%		0.20	%		0.12	%		1.54	%
(1)  Combination of indices that account for less than 0.05% of total or adjust over time, without a reset index.

Investment Securities by Index

December 31, 2014

	Six- Month Libor			Twelve Month Libor			12- Month Moving Average			11th District Cost of Funds			1-Year Treasury Index			Other Indices(1)
Weighted average term to next adjustment	4 mo.			50 mo.			1 mo.			1 mo.			12 mo.			22 mo.
Weighted average annual period cap		1.75	%		2.00	%		-			-			2.00	%		-
Weighted average lifetime cap		11.28	%		9.58	%		9.15	%		10.71	%		10.72	%		4.28	%
Investment principal value as percentage of Investment Securities		0.19	%		2.73	%		0.13	%		0.18	%		0.12	%		1.65	%
(1)  Combination of indices that account for less than 0.05% of total or adjust over time, without a reset index.

Contractual Obligations The following table summarizes the effect on our liquidity and cash flows from contractual obligations for repurchase agreements, Convertible Senior Notes, interest expense on repurchase agreements and Convertible Senior Notes, securitized debt of consolidated VIEs, mortgages payable, participation sold, the non-cancelable office leases and employment agreements as of March 31, 2015.  The table does not include the effect of net interest rate payments on our interest rate swap agreements.  The net swap payments will fluctuate based on monthly changes in the receive rate.  As of March 31, 2015, the interest rate swaps had a net negative fair value of $2.0 billion.

	Within One Year		One to Three Years		Three to Five Years		More than Five Years		Total
	(dollars in thousands)
Repurchase agreements	$	49,854,826	$	10,522,552	$	100,000	$	-	$	60,477,378
Interest expense on repurchase agreements(1)		277,482		145,644		3,082		-		376,208
Convertible Senior Notes (principal)		750,000		-		-		-		750,000
Interest expense on Convertible Senior Notes		4,688		-		-		-		4,688
Securitized debt of consolidated VIE (principal)		159,555		63,465		-		1,259,185		1,482,205
Mortgages payable (principal)		391		18,645		23,375		103,950		146,361
Participation sold (principal)		297		13,061		-		-		13,358
Long-term operating lease obligations		1,780		7,129		7,129		21,401		37,439
Total	$	50,999,019	$	10,770,496	$	133,586	$	1,384,536	$	63,287,637
(1) Interest expense on repurchase agreements calculated based on rates at March 31, 2015.

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Item 2. Management’s Discussion and Analysis

We had no material unfunded loan commitments issued as of March 31, 2015. In the coming periods, we expect to continue to finance our Agency mortgage-backed securities in a manner that is largely consistent with our current operations via repurchase agreements. We may use Federal Home Loan Bank of Des Moines (FHLB Des Moines) advances, securitization structures, mortgages payable or other term financing structures to finance certain of our assets. During the quarter ended March 31, 2015, we received $2.6 billion from principal repayments and $14.0 billion in cash from disposal of Investment Securities, respectively. During the quarter ended March 31, 2014, we received $1.7 billion from principal repayments and $6.2 billion in cash from disposal of Investment Securities. Off-Balance Sheet Arrangements We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.  Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities.  As such, we are not materially exposed to any market, credit, liquidity or financing risk that could arise if we had engaged in such relationships. Capital Management Maintaining a strong balance sheet that can support the business even in times of economic stress and market volatility is of critical importance to our business strategy. A strong and robust capital position is essential to executing our investment strategy. Our capital strategy is predicated on a strong capital position, which enables us to execute our investment strategy regardless of the market environment. Our Internal Capital Adequacy Assessment Program (or ICAAP) framework supports capital and business performance measurement, and is integrated within the overall risk governance framework.  The ICAAP framework is designed to align capital measurement with our risk appetite. Our objective is to maintain an active ICAAP that reflects sound governance, requires active assessment and reporting of internal capital adequacy, incorporates stress testing based on internal and external factors and identifies potential capital actions to ensure our capital and available financial resources remain in excess of internal capital requirements. The capital policy defines the parameters and principles supporting a comprehensive capital management practice, including processes that effectively identify, measure and monitor risks impacting capital adequacy. The capital assessment process considers the precision in risk measures as well as the volatility of exposures and the relative activities producing risk. Parameters used in modeling economic capital must align with our risk appetite. Economic capital is our internal quantification of the risks inherent in our business and considers the amount of capital we need as a buffer to protect against risks.  It is considered the capital needed to remain solvent under extreme scenarios. It is a probabilistic measure of potential future losses at a given confidence level over a given time horizon. The major risks impacting capital applicable to us are liquidity, investment/market, credit, counterparty, operational, and other risks such as compliance, legal and regulatory risks. For further discussion of the risks we are subject to, please see Part I, Item 1A. “Risk Factors” of our most recent annual report on Form 10-K. Capital requirements are based on maintaining levels above approved limits, ensuring the quality of our capital appropriately reflects our asset mix, market and funding structure. As such we use a complement of capital metrics and related threshold levels to measure and analyze our capital from a magnitude and composition perspective. Our policy is to maintain an appropriate amount of available financial resources over the aggregate economic capital requirements. Available Financial Resources (or AFR) is the actual capital held to protect against the unexpected losses measured in our capital management process and may include: ● Common and preferred equity ● Other forms of equity-like capital ● Surplus credit reserves over expected losses ● Other loss absorption instruments In the event we fall short of our internal limits we will take appropriate actions which may include asset sales, changes in asset mix, reductions in asset purchases or

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Item 2. Management’s Discussion and Analysis

originations, issuance of capital or other capital enhancing or risk reduction strategies. The following table provides a summary of total stockholders’ equity as of March 31, 2015 and December 31, 2014:

Stockholders’ Equity

	March 31, 2015			December 31, 2014
Stockholders’ Equity:	(dollars in thousands)
7.875% Series A Cumulative Redeemable Preferred Stock	$	177,088		$	177,088
7.625% Series C Cumulative Redeemable Preferred Stock		290,514			290,514
7.50% Series D Cumulative Redeemable Preferred Stock		445,457			445,457
Common stock		9,477			9,476
Additional paid-in capital		14,787,117			14,786,509
Accumulated other comprehensive income (loss)		773,999			204,883
Accumulated deficit		(3,364,147	)		(2,585,436	)
Total stockholders’ equity	$	13,119,505		$	13,328,491

Common and Preferred Stock

	Options Exercised		Aggregate Exercise Price		Shares Issued Through Direct Purchase		Amount Raised from Direct Purchase and Dividend Reinvestment Program
For the Quarters Ended:	(dollars in millions)
March 31, 2015		-	$	-		53,000	$	0.6
March 31, 2014		-	$	-		56,000	$	0.6

In March 2012, we entered into six separate Distribution Agency Agreements (or Distribution Agency Agreements) with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and RCap (together, the Agents).  Pursuant to the terms of the Distribution Agency Agreements, we may sell from time to time through the Agents, as our sales agents, up to 125,000,000 shares of our common stock. We did not make any sales under the Distribution Agency Agreements during the quarters ended March 31, 2015 and 2014. Distributions to Stockholders Our policy is to distribute at least 100% of our REIT taxable income. To the extent there is any undistributed REIT taxable income at the end of a year, we distribute such shortfall within the next year as permitted by the Code. REIT taxable income will differ from GAAP net income (loss) due to timing differences, such as the amortization/accretion of premiums/discounts from purchases of Investment Securities and unrealized gains (losses) included in net income (loss). We seek to generate income for distribution to our stockholders, typically by earning a spread between the yield on our assets and the cost of our borrowings. Our REIT taxable income, which serves as the basis for distributions to our stockholders, is generated primarily from this spread income.

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Item 2. Management’s Discussion and Analysis

The following table provides a summary of dividend distribution activity for the periods presented:

	For the Quarters Ended:
	March 31, 2015		March 31, 2014
	(dollars in thousands, except per share data)
Dividends declared to common stockholders	$	284,310	$	284,247
Dividends declared per common share	$	0.30	$	0.30
Dividends paid to common stockholders after period end	$	284,310	$	284,247
Dividends paid per common share after period end	$	0.30	$	0.30
Date of dividends paid to common stockholders after period end	April 30, 2015		April 30, 2014
Dividends declared to Series A Preferred stockholders	$	3,648	$	3,648
Dividends declared per Series A Preferred share	$	0.492	$	0.492
Dividends declared to Series C Preferred stockholders	$	5,719	$	5,719
Dividends declared per Series C Preferred share	$	0.477	$	0.477
Dividends declared to Series D Preferred stockholders	$	8,625	$	8,625
Dividends declared per Series D Preferred share	$	0.469	$	0.469

Leverage and Capital
We believe that it is prudent to maintain conservative debt-to-equity and economic leverage ratios as there continues to be volatility in the mortgage and credit markets. Our capital policy governs our capital and leverage position including setting limits. Based on the guidelines, we generally expect to maintain a ratio of debt-to-equity of less than 12:1. Our actual leverage ratio varies from time to time based upon various factors, including our management’s opinion of the level of risk of our assets and liabilities, our liquidity position, our level of unused borrowing capacity, the availability of credit, over-collateralization levels required by lenders when we pledge assets to secure borrowings and our assessment of domestic and international market conditions.
Our debt-to-equity ratio (including securitized debt of consolidated VIEs, loan participation sold and mortgages payable which are non-recourse to us, subject to customary carveouts) at March 31, 2015 and December 31, 2014 was 4.8:1 and 5.4:1, respectively.  Our economic leverage ratio, which is computed as the sum of debt, TBA derivative notional outstanding and net forward purchases of Investment Securities divided by total equity, at March 31, 2015 and December 31, 2014 was 5.7:1 and 5.4:1, respectively. Our capital ratio, which represents our ratio of stockholders’ equity to total assets (inclusive of total market value of TBA derivatives), was 14.1% and 15.1% at March 31, 2015 and December 31, 2014, respectively. Risk Management We are subject to a variety of risks in the ordinary conduct of our business. The effective management of these risks is of critical importance to the overall success of Annaly. The objective of our risk management framework is to measure, monitor and manage these risks. Our risk management framework is intended to facilitate a holistic, enterprise wide view of risk. We have built a strong and collaborative risk culture throughout Annaly focused on awareness which ensures the key risks are understood and managed appropriately. Each employee of our manager is accountable for monitoring and managing risk within their area of responsibility. Risk Appetite We maintain a firm-wide risk appetite statement which defines the types and levels of risk we are willing to take in order to achieve our business objectives, and reflects our risk management philosophy.  Fundamentally, we will only engage in risk activities based on our core expertise that enhance value for our stockholders. Our activities focus on capital preservation and income generation through proactive portfolio management, supported by a conservative liquidity and leverage posture. The risk appetite statement asserts the following key parameters to guide our risk management activities.

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Item 2. Management’s Discussion and Analysis

Portfolio composition	We will maintain a high quality asset portfolio with (1) at least 75% of the portfolio to be high quality mortgage-backed securities and short term investments (equivalency rating of AA+ or better) and (2) an aggregate weighted average equivalency rating of single “A” or better.
Leverage	We will operate at a debt-to-equity ratio no greater than 12:1.
Capital buffer	We will seek to maintain an excess capital buffer, of which at least 25% will be invested in AAA rated mortgage-backed securities (or assets of similar or better liquidity characteristics), to meet the liquidity needs of the firm.
Interest rate risk	We will seek to manage interest rate risk to protect the portfolio from adverse rate movements.
Hedging	We will use swaps and other derivatives to hedge market risk, targeting both income and capital preservation.
Capital preservation	We will seek to protect our capital base through disciplined risk management practices.
Compliance	We will comply with regulatory requirements needed to maintain our REIT status and our exemption from registration under the Investment Company Act.

Governance Risk management begins with our board of directors, through the review and oversight of the risk management framework, and executive management, through the ongoing formulation of risk management practices and related execution in managing risk. The board of directors exercises its oversight of risk management primarily through the Board Risk Committee (or BRC) and Board Audit Committee (or BAC).  The BRC is responsible for oversight of our risk governance structure, risk management and risk assessment guidelines and policies, our risk tolerance and our capital, liquidity and funding. The BAC is responsible for oversight of the quality and integrity of our accounting, internal controls and financial reporting practices, including independent auditor selection, evaluation and review, and oversight of the internal audit function. Risk assessment and risk management are the responsibility of our management.  A series of management committees have oversight or decision-making responsibilities for risk management activities. Memberships of these committees are reviewed regularly to ensure the appropriate personnel are engaged in the risk management process. Three primary management committees have been established to provide a comprehensive framework for risk management. The management committees responsible for our risk management include the Enterprise Risk Committee, Asset and Liability Committee and the Financial Reporting and Disclosure Committee. Audit Services is an independent function with reporting lines to the BAC. Audit Services is responsible for performing our internal audit activities, which includes independently assessing and validating key controls within the risk management framework. Description of Risks We are subject to a variety of risks due to the business we operate. Risk categories are an important component of a robust enterprise wide risk management framework. We have identified the following primary categories that we utilize to identify, assess, measure and monitor risk.

Risk	Description
Liquidity Risk	Risk to earnings, capital or business arising from our inability to meet our obligations when they come due without incurring unacceptable losses because of inability to liquidate assets or obtain adequate funding.
Investment/Market Risk	Risk to earnings, capital or business resulting in the decline in value of our assets or an increase in the costs of financing caused by changes in market variables, such as interest rates, which affect the values of invested securities and other investment instruments.
Credit and Counterparty Risk	Risk to earnings, capital or business, resulting from an obligor’s or counterparty's failure to meet the terms of any contract or otherwise failure to perform as agreed. This risk is present in lending, investing, funding and hedging activities.
Operational Risk	Risk to earnings, capital, reputation or business arising from inadequate or failed internal processes or systems, human factors or external events. Model risk is included in operational risk.
Compliance, Regulatory and Legal Risk	Risk to earnings, capital, reputation or conduct of business arising from violations of, or nonconformance with internal and external applicable rules and regulations, losses resulting from lawsuits or adverse judgments, or from changes in the regulatory environment that may impact our business model.

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Item 2. Management’s Discussion and Analysis

Liquidity Risk Management Our liquidity risk management strategy is designed to ensure the availability of sufficient resources to support our business and meet our financial obligations under both normal and adverse market and business environments.  Our liquidity risk management practices consist of the following primary elements:

Funding	Availability of diverse and stable sources of funds.
Excess Liquidity	Excess liquidity primarily in the form of unencumbered assets.
Maturity Profile	Diversity and tenor of liabilities and modest use of leverage.
Stress Testing	Scenario modeling to measure the resiliency of our liquidity position.
Liquidity Management Policies	Comprehensive policies including monitoring, risk limits and an escalation protocol.

Funding Our primary financing sources are repurchase agreements and various forms of equity. Through the judicious use of leverage, we maintain excess liquidity through investing in high quality unencumbered assets, which serve as our capital buffer. We conservatively manage our repurchase agreement funding position through a variety of methods including diversity, breadth and depth of counterparties and maintaining a staggered and longer-term maturity profile. Our repurchase agreements generally provide that in the event of a margin call we must provide additional securities or cash on the same business day that a margin call is made.  Should prepayment speeds on the mortgages underlying our Agency mortgage-backed securities and/or market interest rates or other factors move suddenly and cause declines in the market value of assets posted as collateral, resulting margin calls may cause an adverse change in our liquidity position. At March 31, 2015, we had total financial instruments and cash pledged as collateral for repurchase agreements and interest rate swaps of $64.6 billion. The weighted average haircut was approximately 4% on repurchase agreements. The quality and character of the Agency mortgage-backed securities that we pledge as collateral under the repurchase agreements and interest rate swaps did not materially change during the quarter ended March 31, 2015 compared to the quarter ended December 31, 2014, and our counterparties did not materially alter any requirements, including required haircuts, related to the collateral we pledge under repurchase agreements and interest rate swaps during the quarter ended March 31, 2015. The table below presents our quarterly average and quarter-end repurchase agreement and reverse repurchase agreement balances outstanding for the periods presented:

	Repurchase Agreements				Reverse Repurchase Agreements
	Average Daily Amount Outstanding		Ending Amount Outstanding		Average Daily Amount Outstanding		Ending Amount Outstanding
Quarters Ended:	(dollars in thousands)
March 31, 2015	$	68,572,119	$	60,477,378	$	100,000	$	100,000
December 31, 2014		72,117,895		71,361,926		10,870		100,000
September 30, 2014		71,312,473		69,610,722		-		-
June 30, 2014		70,133,219		70,372,218		227,640		-
March 31, 2014		64,443,248		64,543,949		379,042		444,375
December 31, 2013		67,509,177		61,781,001		345,470		100,000
September 30, 2013		76,265,080		69,211,309		217,693		31,074
June 30, 2013		93,250,767		81,397,335		2,569,531		171,234

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Item 2. Management’s Discussion and Analysis

At March 31, 2015, the repurchase agreements outstanding had weighted average remaining maturities of 149 days and the following remaining maturities and weighted average rates:

	March 31, 2015
	Repurchase Agreements		Weighted Average Rate			% of Total
	(dollars in thousands)
1 day	$	7,658,440		0.64	%		12.7	%
2 to 29 days		16,080,033		0.39	%		26.6	%
30 to 59 days		7,326,177		0.40	%		12.1	%
60 to 89 days		9,534,614		0.40	%		15.8	%
90 to 119 days		4,677,222		0.50	%		7.7	%
Over 120 days(1)		15,200,892		1.45	%		25.1	%
Total	$	60,477,378		0.70	%		100.0	%
(1) Approximately 18% of the total repurchase agreements had a remaining maturity over 1 year.

Excess Liquidity Our primary source of liquidity is the availability of unencumbered assets which may be provided as collateral to support additional funding needs. We target minimum thresholds of available, unencumbered assets to maintain excess liquidity. The following table illustrates our asset portfolio available to support potential collateral obligations and funding needs. Assets are considered encumbered if pledged as collateral against an existing liability, and therefore no longer available to support additional funding. An asset is considered unencumbered if it has not been pledged or securitized. The following table provides the carrying amount of our encumbered and unencumbered financial assets as of March 31, 2015:

Encumbered and Unencumbered Assets

	Encumbered Assets		Unencumbered Assets		Total
	(dollars in thousands)
Financial Assets:
Cash and cash equivalents	$	1,819,173	$	101,153	$	1,920,326
Investments, at carrying value:(1)
Agency mortgage-backed securities		63,865,632		7,506,439		71,372,071
Agency debentures		691,716		303,692		995,408
Agency CRT securities		-		108,337		108,337
Commerical real estate debt investments		1,474,903		41,000		1,515,903
Commercial real estate debt and preferred equity, held for investment		531,635		966,771		1,498,406
Corporate debt		-		227,830		227,830
Total financial assets	$	68,383,059	$	9,255,222	$	77,638,281

(1) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported on the Consolidated Statements of Financial Condition.

We maintain liquid assets in order to satisfy our current and future obligations in normal and stressed operating environments. These are held as the primary means of liquidity risk mitigation. The composition of our liquid assets is considered as well and is subject to certain parameters. The composition is monitored for concentration risk, asset type and ratings. We believe the assets we consider liquid can be readily converted into cash, through liquidation or used as collateral in financing arrangements (including certain collateral currently supporting existing financial arrangements). Our balance sheet also generates liquidity on an on-going basis through mortgage principal and interest repayments and net earnings held prior to payment of

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Item 2. Management’s Discussion and Analysis

dividends.  The following table presents our liquid assets as a percentage of total assets as of March 31, 2015.

Liquid Assets	Carrying Value(1)
	(dollars in thousands)
Cash and cash equivalents	$	1,920,326
Investment Securities(2)		72,475,816
Commercial real estate debt investments		145,000
Total liquid assets	$	74,541,142
Percentage of liquid assets to total assets		94.74	%

(1) Carrying value represents the market value of assets. The assets listed in this table include $66.6 billion of assets that have been pledged as collateral against existing liabilities as of March 31, 2015. Please refer to the Encumbered and Unencumbered Assets table for related information.

(2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported on the Consolidated Statements of Financial Condition.

Maturity Profile We consider the profile of our assets, liabilities and derivatives when managing both liquidity risk as well as investment/market risk employing a measurement of both the maturity gap and interest rate gap. We determine the amount of liquid assets that are required to be held by monitoring several liquidity metrics.  We utilize several modeling techniques to analyze our current and potential obligations including the expected cash flows from our assets, liabilities and derivatives. The following table illustrates the expected maturities and cash flows of our assets, liabilities and derivatives. The table is based on a static portfolio and assumes no reinvestment of asset cash flows and no future liabilities are entered into. In assessing the maturity of our assets, liabilities and off balance sheet obligations we use the stated maturities or prepayment expectations for assets that exhibit prepayment characteristics.  Cash and cash equivalents are included in the ‘within 3 months’ maturity bucket, as they are typically held for a short period of time. With respect to each maturity bucket, our maturity gap is considered negative when the amount of maturing liabilities exceeds the amount of maturing assets. A negative gap increases our liquidity risk as we must enter into future liabilities. Our interest rate sensitivity gap is the difference between Interest Earning Assets and Interest Bearing Liabilities maturing or re-pricing within a given time period. Unlike the calculation of maturity gap, interest rate sensitivity gap includes the effect of our interest rate swaps. A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities. A gap is considered negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to affect net interest income adversely. Because different types of assets and liabilities with the same or similar maturities may react differently to changes in overall market rates or conditions, changes in interest rates may affect net interest income positively or negatively even if an institution were perfectly matched in each maturity category. The amount of assets and liabilities utilized to compute our interest rate sensitivity gap was determined in accordance with the contractual terms of the assets and liabilities, except for adjustable-rate loans and securities are included in the period in which their interest rates are first scheduled to adjust and not in the period in which they mature. The effects of interest rate swaps, which effectively lock in our financing costs for a longer term are also reflected in our interest rate sensitivity gap. The interest rate sensitivity of our assets and liabilities in the table below could vary substantially based on actual prepayment experience.

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Item 2. Management’s Discussion and Analysis

	Less than 3 Months			3-12 Months			More than 1 Year to 3 Years			3 Years and Over			Total
Financial Assets:	(dollars in thousands)
Cash and cash equivalents	$	1,920,326		$	-		$	-		$	-		$	1,920,326
Reverse repurchase agreements		100,000			-			-			-			100,000
Agency mortgage-backed securities (principal)		1,889			21,376			2,587,121			61,359,329			63,969,715
Agency debentures (principal)		-			-			150,000			858,803			1,008,803
Agency CRT securities (principal)		-			-			-			106,171			106,171
Senior securitized commercial mortgage loans of a consolidated VIE (principal)		-			-			-			1,361,282			1,361,282
Corporate debt (principal)		-			9,590			-			220,429			230,019
Commercial real estate debt and preferred equity (principal)		242,973			386,751			587,909			284,618			1,502,251
Total financial assets	$	2,265,188		$	417,717		$	3,325,030		$	64,190,632		$	70,198,567
Financial Liabilities:
Repurchase agreements	$	40,599,264		$	9,255,562		$	10,522,552		$	100,000		$	60,477,378
Convertible Senior Notes (principal)		750,000			-			-			-			750,000
Securitized debt of consolidated VIE (principal)		-			159,555			63,465			1,259,185			1,482,205
Participation sold (principal)		72			226			13,060			-			13,358
Total financial liabilities	$	41,349,336		$	9,415,343		$	10,599,077		$	1,359,185		$	62,722,941
Maturity gap	$	(39,084,148	)	$	(8,997,626	)	$	(7,274,047	)	$	62,831,447		$	7,475,626
Cumulative maturity gap	$	(39,084,148	)	$	(48,081,774	)	$	(55,355,821	)	$	7,475,626
Interest rate sensitivity gap	$	(9,753,859	)	$	(8,140,754	)	$	(12,183,124	)	$	37,553,363		$	7,475,626
Cumulative rate sensitivity gap	$	(9,753,859	)	$	(17,894,613	)	$	(30,077,737	)	$	7,475,626
Cumulative rate sensitivity gap as a % of total rate sensitive assets		(13.89	%)		(25.49	%)		(42.85	%)		10.65	%

The methodologies we employ for evaluating interest rate risk include an analysis of our interest rate “gap,” measurement of the duration and convexity of our portfolio and sensitivities to interest rates and spreads. Liquidity Management Policies We utilize a comprehensive liquidity policy structure to inform our liquidity risk management practices including monitoring and measurement, along with well-defined key limits. Both quantitative and qualitative targets are utilized to measure the ongoing stability and condition of the liquidity position, and include the level and composition of unencumbered assets, as well as both short-term and long-term sustainability of the funding composition under stress conditions. We also monitor early warning metrics designed to measure the quality and depth of liquidity sources based upon both company-specific and macro environmental conditions. The metrics assess both the short-term and long-term liquidity conditions and are integrated into our escalation protocol, with various liquidity ratings influencing management actions with respect to contingency planning and potential related actions. Stress Testing We utilize liquidity stress testing to ensure we have sufficient liquidity under a variety of scenarios and stresses. These stress tests are considered and assist with the management of our pool of liquid assets, and influence our current and future funding plans. Our stress tests are modeled over both short term and longer time horizons. The stresses applied include market-wide and firm-specific stresses. Investment/Market Risk Management One of the primary risks we are subject to is interest rate risk. Changes in the level of interest rates can affect our net interest income, which is the difference between the income we earn on our Interest Earning Assets and the interest expense incurred from Interest Bearing Liabilities and derivatives. Changes in the level of interest rates can also affect the value of our securities and potential realization of gains or losses from the sale of these assets. We may utilize a variety of financial instruments, including interest rate swaps, swaptions, options, futures and other hedges, in order to limit the adverse effects of interest rates on our

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Item 2. Management’s Discussion and Analysis

results. Our portfolio and the value of our portfolio, including derivatives, may be adversely affected as a result of changing interest rates and spreads. We simulate a wide variety of interest rate scenarios in evaluating our risk. Scenarios are run to capture our sensitivity to changes in interest rates, spreads and the shape of the yield curve. We also consider the assumptions affecting our analysis such as those related to prepayments. In addition to predefined interest rate scenarios, we utilize Value-at-Risk measures to estimate potential losses in the portfolio over various time horizons utilizing various confidence levels. The following tables estimate the potential changes in economic net interest income over a twelve month period and the immediate effect on our portfolio market value (inclusive of derivative instruments), should interest rates increase or decrease by 25, 50 or 75 basis points, and the effect of portfolio market value if mortgage option-adjusted spreads increase or decrease by 5, 15 or 25 basis points (assuming shocks are parallel and instantaneous). All changes to income and portfolio market value are measured as percentage changes from the projected net interest income and portfolio value at the base interest rate scenario. The base interest rate scenario assumes interest rates at March 31, 2015 and various estimates regarding prepayments and all activities are made at each level of rate shock. Actual results could differ significantly from these estimates.

Change in Interest Rate	Projected Percentage Change in Economic Net Interest Income(1)	Estimated Percentage Change in Portfolio Value(2)	Estimated Change as a % on NAV(2)(3)
-75 Basis Points	(14.8%)	0.1%	0.5%
-50 Basis Points	(8.0%)	0.2%	1.1%
-25 Basis Points	(1.0%)	0.2%	1.1%
Base Interest Rate	-	-	-
+25 Basis Points	1.7%	(0.3%)	(1.7%)
+50 Basis Points	3.7%	(0.7%)	(4.1%)
+75 Basis Points	4.9%	(1.3%)	(7.3%)
MBS Spread Shock	Estimated Change in Portfolio Market Value	Estimated Change as a % on NAV(2)(3)
-25 Basis Points	1.3%	7.5%
-15 Basis Points	0.8%	4.5%
-5 Basis Points	0.3%	1.5%
Base Interest Rate	-	-
+5 Basis Points	(0.3%)	(1.5%)
+15 Basis Points	(0.8%)	(4.4%)
+25 Basis Points	(1.3%)	(7.3%)
(1)  Scenarios include Investment Securities, repurchase agreements and interest rate swaps only. Economic net interest income includes interest expense on interest rate swaps.
(2)  Scenarios include Investment Securities and derivative instruments.
(3)  NAV represents book value of equity.

Credit and Counterparty Risk Management Key risk parameters have been established to specify Annaly’s credit risk appetite. We will maintain a high quality asset portfolio with at least 75% of the portfolio to be high quality mortgage-backed securities and short term investments (equivalency rating of AA+ or better), and an aggregate weighted average equivalency rating of single “A” or better. While we do not expect to encounter credit risk in our Agency investments, we face credit risk on the Agency CRT securities in our portfolio. We are exposed to credit risk on commercial real estate investments and corporate debt. We generally face more credit risk on investments where we hold subordinated debt or equity positions. We are exposed to risk of loss if an issuer, borrower or counterparty fails to perform its contractual obligations. We have established policies and procedures for mitigating credit risk, including reviewing and establishing limits for credit exposure,

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Item 2. Management’s Discussion and Analysis

limiting transactions with specific counterparties, maintaining qualifying collateral and continually assessing the creditworthiness of counterparties, borrowers and issuers. We only originate or purchase commercial investments that meet our comprehensive underwriting process and credit standards and are approved by the appropriate committee. Once a commercial 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 of loss associated with each investment and determine the appropriate allocation of capital to apply to each investment under our capital policy. Our management will monitor the overall portfolio risk and determine estimates of provision for loss. Our portfolio composition as of March 31, 2015 and December 31, 2014 was as follows:

Asset Portfolio (using balance sheet values)
Category	March 31, 2015			December 31, 2014
Agency mortgage-backed securities(1)		93.9	%		96.2	%
Agency debentures		1.3	%		1.6	%
Agency CRT securities		0.1	%		0.0	%
Commercial real estate(2)		4.4	%		2.0	%
Corporate debt, held for investment		0.3	%		0.2	%
(1) Including TBAs held for delivery.
(2) Net of unamortized origination fees.

Our use of repurchase and derivative agreements create exposure to credit 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 Agency mortgage-backed securities are financed with repurchase agreements by pledging our agency securities as collateral to the lender. The collateral we pledge usually 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 to manage interest rate risk. Under these agreements, we pledge securities and cash as collateral 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 the amount of our securities or cash pledged exceeded the unrealized loss on the associated derivative and we were not able to recover the excess collateral.  Additionally, we would be exposed to a loss to a derivative counterparty to the extent that our unrealized gains on derivative instruments exceeds the amount of the counterparty’s securities or cash pledged to us. We monitor our exposure to counterparties across several dimensions including by type of arrangement, collateral type, counterparty type, ratings and geography. The following table summarizes our exposure to counterparties by geography as of March 31, 2015:

Country	Number of Counterparties		Repurchase Agreement Financing		Interest Rate Swaps at Fair Value			Exposure(1)
	(dollars in thousands)
North America		16	$	42,425,969	$	(1,481,018	)	$	2,963,916
Europe		10		14,372,052		(518,244	)		873,321
Asia (non-Japan)		1		389,828		-			25,945
Japan		4		3,289,529		-			216,143
Total		31	$	60,477,378	$	(1,999,262	)	$	4,079,325

(1) Represents the amount of cash and/or securities pledged as collateral to each counterparty less the aggregate of repurchase agreement financing and unrealized loss on swaps for each counterparty.

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Operational Risk Management   We are subject to operational risk in each of our business and support functions. Operational risk may arise from internal or external sources including human error, fraud, systems issues, process change, vendors, business interruptions and other external events. Model risk considers potential errors with a model’s results due to uncertainty in model parameters and inappropriate methodologies used. The result of these risks may include financial loss and reputational damage. We manage operational risk through a variety of tools including policies and procedures which cover topics such as business continuity, personal conduct and vendor management.  Other tools include training on topics such as cyber security awareness; testing, including disaster recovery testing; systems controls, including access controls; and monitoring, which includes the use of key risk indicators.  Employee level lines of defense against operational risk include proper segregation of incompatible duties, activity-level internal controls over financial reporting, the empowerment of business units to identify and mitigate operational risk sources, an independent operational risk group which reports to the Chief Risk Officer of our Manager, testing by our internal audit staff, and our overall governance framework.   
Compliance, Regulatory and Legal Risk Management
Our business is organized as a REIT and we plan to continue to meet the requirements for taxation as a REIT.  The determination that we are a REIT requires an analysis of various factual matters and circumstances.  Accordingly, we closely monitor our REIT status within our risk management program.  The financial services industry is highly regulated and continues to receive increasing attention from regulators which may impact both our company as well as our business strategy. We proactively monitor the potential impact regulation may have both directly and indirectly on us. We maintain a process to actively monitor both actual and potential legal action that may affect us.  Our risk management framework is designed to identify, monitor and manage these risks under the oversight of the Enterprise Risk Committee.
We currently rely on the exemption from registration provided by Section 3(c)(5)(C) of the Investment Company Act and  we plan to continue to meet the requirements for this exemption from registration.  The determination that we qualify for this exemption from registration depends on various factual matters and circumstances.  Accordingly, in conjunction with the legal department, we closely monitor our compliance with Section 3(c)(5)(C) within our risk management program.  The monitoring of this risk is also under the oversight of the Enterprise Risk Committee. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the U.S. Commodity Futures Trading Commission (or CFTC) gained jurisdiction over the regulation of interest rate swaps.  The CFTC has asserted that this causes the operators of mortgage real estate investment trusts that use swaps as part of their business model to fall within the statutory definition of Commodity Pool Operator (or CPO), and, absent relief from the Division or the Commission, to register as CPOs.  On December 7, 2012, as a result of numerous requests for no-action relief from the CPO registration requirement for operators of mortgage real estate investment trusts, the Division of Swap Dealer and Intermediary Oversight of the CFTC issued no-action relief entitled “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts” that permits a CPO to receive relief by filing a claim to perfect the use of the relief. A claim submitted by a CPO will be effective upon filing, so long as the claim is materially complete.  The conditions that must be met to claim the relief are that the mortgage real estate investment trust relate to initial margin and premiums requirements, net income derived annually from commodity interest positions that are not qualifying hedging transactions, marketing of interests in the mortgage real estate investment trust to the public, and identification of the entity as a mortgage real estate investment trust in its federal tax filings with the Internal Revenue Service.  While we disagree that the CFTC’s position that mortgage real estate investment trusts that use swaps as part of their business model fall within the statutory definition of a CPO, we have submitted a claim for the relief set forth in the no-action relief entitled “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts” and believe we meet the criteria for such relief set forth therein.

Critical Accounting Policies and Estimates
Our critical accounting policies which require us to make significant judgments or estimates are described below.  For more information on these critical accounting policies and other significant accounting policies, see “Significant Accounting Policies” in the Notes to the Consolidated Financial Statements.
Valuation of Financial Instruments
Investment Securities

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There is an active market for Agency mortgage-backed securities, Agency debentures and Agency CRT securities.  Since we primarily invest in securities that can be measured from actively quoted prices, there is a high degree of observable inputs and less subjectivity in measuring fair value.  Internal market values are determined using quoted prices from the To-Be-Announced (or TBA) security market, the Treasury curve and the underlying characteristics of the individual securities, which may include coupon, periodic and life caps, reset dates and the expected life of the security.  Prepayment rates are difficult to predict and are a significant estimate requiring judgment in the valuation of Agency mortgage-backed securities.  All internal market values are compared to external pricing sources and/or dealer quotes to determine reasonableness.  Additionally, securities used as collateral for repurchase agreements are priced daily by counterparties to ensure sufficient collateralization, providing additional verification of our internal pricing.
Interest rate swaps
We use the overnight indexed swap (or OIS) curve as an input to value substantially all of our interest rate swaps. We believe using the OIS curve, which reflects the interest rate typically paid on cash collateral, enables us to most accurately determine the fair value of interest rate swaps.  Consistent with market practice, we exchange collateral (also called margin) based on the fair values of our interest rate swaps. Through this margining process, we may be able to compare our recorded fair value with the fair value calculated by the counterparty or derivatives clearing organization, providing additional verification of our recorded fair value of the interest rate swaps.
Revenue Recognition
Interest income from coupon payments is accrued based on the outstanding principal amounts of the Investment Securities and their contractual terms. Premiums and discounts associated with the purchase of the Investment Securities are amortized or accreted into interest income over the projected lives of the securities using the interest method. We use a third-party supplied model to project prepayment speeds. Our prepayment speed projections incorporate underlying loan characteristics (e.g., coupon, term, original loan size, original loan to value, etc.) and market data, including interest rate and home price index forecasts and expert judgment. Prepayment speeds vary according to the type of investment, conditions in the financial markets and other factors and cannot be predicted with any certainty. Changes to model assumptions, including interest rates and other market data, as well as periodic revisions to the model will cause changes in the results. Adjustments are made for actual prepayment activity as it relates to calculating the effective yield. Gains or losses on sales of investment securities are recorded on trade date based on the average cost of the security.
Consolidation of Variable Interest Entities
Determining whether an entity has a controlling financial interest in a VIE requires significant judgment related to assessing the purpose and design of the VIE and determination of the activities that most significantly impact its economic performance.  We must also identify explicit and implicit variable interests in the entity and consider our involvement in both the design of the VIE and its ongoing activities.   To determine whether consolidation of the VIE is required, we must apply judgment to assess whether we have the power to direct the most significant activities of the VIE and whether we have either the rights to receive benefits or obligation to absorb losses that could be potentially significant to the VIE.

Use of Estimates
The use of GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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Glossary of Terms

A Adjustable-Rate Mortgage (ARM) A mortgage loan on which interest rates are adjusted at regular intervals according to predetermined criteria. An ARM’s interest rate is tied to an objective, published interest rate index.
Agency Refers to a federally chartered corporation, such as the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation, or an agency of the U.S. Government, such as the Government National Mortgage Association.
Agency Credit Risk Transfer (“CRT”) Securities The CRT sector is comprised of the risk sharing transactions issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. The securities issued in the CRT sector are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.
Agency Debentures Debt issued by a federal agency or a government-sponsored enterprise (GSE) for financing purposes. These types of debentures are not backed by collateral, but by the integrity and credit worthiness of the issuer.  Agency debentures issued by a GSE are backed only by that GSE's ability to pay.  The callable feature allows the Agency to repay the bond prior to maturity.
Agency Mortgage-Backed Securities Refers to residential mortgage-backed securities that are issued or guaranteed by an Agency.
Amortization Liquidation of a debt through installment payments.  Amortization also refers to the process of systematically reducing a recognized asset or liability (e.g., a purchase premium or discount for a debt security) with an offset to earnings.
Average Life On a mortgage-backed security, the average time to receipt of each dollar of principal, weighted by the amount of each principal prepayment, based on prepayment assumptions. B Basis Point (BPs) One hundredth of one percent, used in expressing differences in interest rates.  One basis point is 0.01% of yield. For example, a bond’s yield that changed from 3.00% to 3.50% would be said to have moved 50 basis points.
Benchmark A bond or an index referencing a basket of bonds whose terms are used for comparison with other bonds of similar maturity. The global financial market typically looks to U.S. Treasury securities as benchmarks.
Beneficial Owner One who benefits from owning a security, even if the security’s title of ownership is in the name of a broker or bank.
B-Note Subordinate mortgage notes and/or subordinate mortgage loan participations.
B-Piece The most subordinate commercial mortgage-backed security bond class.
Bond (1) The written evidence of debt, bearing a stated rate or stated rates of interest, or stating a formula for determining that rate, and maturing on a date certain, on which date and upon presentation a fixed sum of money plus interest (usually represented by interest coupons attached to the bond) is payable to the holder or owner. (2) For purposes of computations tied in to “per bond,” a $1,000 increment of an issue is used (no matter what the actual denominations are); (3) Bonds are long-term securities with an original maturity of greater than one year.
Book Value Per Share Calculated by summing common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit and dividing that number by the total common shares outstanding.
Broker Generic name for a securities firm engaged in both buying and selling securities on behalf of customers or its own account.

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C Capital Buffer Includes unencumbered financial assets which can be utilized as collateral to meet liquidity needs.
Capital Ratio Calculated as total stockholders’ equity divided by total assets inclusive of outstanding market value of TBA positons.
Carry The cost of borrowing funds to finance an underwriting or trading position. A positive carry happens when the rate on the securities being financed is greater than the rate on the funds borrowed. A negative carry is when the rate on the funds borrowed is greater than the rate on the securities that are being financed.
Collateral Securities, cash or property pledged by a borrower or party to a derivative contract to secure payment of a loan or derivative. If the borrower fails to repay the loan or defaults under the derivative contract, the secured party may take ownership of the collateral.
Collateralized Mortgage Obligation (CMO) A multiclass bond backed by a pool of mortgage pass-through securities or mortgage loans.
Commodity Futures Trading Commission (CFTC) An independent U.S. federal agency established by the Commodity Futures Trading Commission Act of 1974. The CFTC regulates the swaps, commodity futures and options markets. Its goals include the promotion of competitive and efficient futures markets and the protection of investors against manipulation, abusive trade practices and fraud.
Commercial Mortgage-Backed Security (CMBS) Securities collateralized by a pool of mortgages on commercial real estate in which all principal and interest from the mortgages flow to certificate holders in a defined sequence or manner.
Constant Prepayment Rate (CPR) The percentage of outstanding mortgage loan principal that prepays in one year, based on the annualization of the Single Monthly Mortality, which reflects the outstanding mortgage loan principal that prepays in one month.
Conventional Mortgage Loan A mortgage loan granted by a bank or thrift institution that is based solely on real estate as security and is not insured or guaranteed by a government agency. Convertible Securities Securities which may be converted into shares of another security under stated terms, often into the issuing company's common stock.
Convexity A measure of the change in a security’s duration with respect to changes in interest rates. The more convex a security is, the more its duration will change with interest rate changes.
Core Earnings and Core Earnings Per Basic Share Non-GAAP measure that 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 gains and losses on trading assets, impairment losses, net income (loss) attributable to noncontrolling interest and certain other non-recurring gains or losses
Corporate Debt Non-government debt instruments issued by corporations. Long-term corporate debt can be issued as bonds or loans.
Counterparty One of two entities in a transaction. For example, in the bond market a counterparty can be a state or local government, a broker-dealer or a corporation.
Coupon The interest rate on a bond that is used to compute the amount of interest due on a periodic basis.
Credit and Counterparty Risk Risk to earnings, capital or business, resulting from an obligor’s or counterparty's failure to meet the terms of any contract or otherwise failure to perform as agreed. Credit and counterparty risk is present in lending, investing, funding and hedging activities.
Current Face The current remaining monthly principal on a mortgage security. Current face is computed by multiplying the original face value of the security by the current principal balance factor.

D Dealer Person or organization that underwrites, trades and sells securities, e.g., a principal market-maker in securities.

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Default Risk Possibility that a bond issuer will fail to pay principal or interest when due.
Derivative A financial product that derives its value from the price, price fluctuations and price expectations of an underlying instrument (e.g. futures contracts, options, interest rate swaps, interest rate swaptions and certain to-be-announced securities).
Discount Price When the dollar price is below face value, it is said to be selling at a discount.
Duration The weighted maturity of a fixed-income investment’s cash flows, used in the estimation of the price sensitivity of fixed-income securities for a given change in interest rates.

E Economic Capital A measure of the risk a firm is subject to.  It is the amount of capital a firm needs as a buffer to protect against risk.  It is a probabilistic measure of potential future losses at a given confidence level over a given time horizon.
Economic Interest Expense Non-GAAP financial measure that is composed of GAAP interest expense adjusted for realized gains or losses on interest rate swaps.
Economic Leverage Ratio Calculated as the sum of debt, TBA derivative notional outstanding and net forward purchases divided by total equity.
Economic Net Interest Income Non-GAAP financial measure that is composed of GAAP net interest income adjusted for realized gains or losses on interest rate swaps.
Encumbered Assets Assets on the company’s balance sheet which have been pledged as collateral against an existing liability.

F Face Amount The par value (i.e., principal or maturity value) of a security appearing on the face of the instrument. Factor A decimal value reflecting the proportion of the outstanding principal balance of a mortgage security, which changes over time, in relation to its original principal value.
Fannie Mae Federal National Mortgage Association.
Federal Deposit Insurance Corporation (FDIC) An independent agency created by the U.S. Congress to maintain stability and public confidence in the nation's financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.
Federal Funds Rate The interest rate charged by banks on overnight loans of their excess reserve funds to other banks.
Fixed-Rate Mortgage A mortgage featuring level monthly payments, determined at the outset, which remain constant over the life of the mortgage.
Floating Rate Bond A bond for which the interest rate is adjusted periodically according to a predetermined formula, usually linked to an index.
Floating Rate CMO A CMO tranche which pays an adjustable rate of interest tied to a representative interest rate index such as the LIBOR, the Constant Maturity Treasury or the Cost of Funds Index.
Freddie Mac Federal Home Loan Mortgage Corporation.
Futures Contract A legally binding agreement to buy or sell a commodity or financial instrument in a designated future month at a price agreed upon at the initiation of the contract by the buyer and seller. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. A futures contract differs from an option in that an option gives one of the counterparties a right and the other an obligation to buy or sell, while a futures contract represents an obligation of both counterparties, one to deliver and the other to accept delivery. A futures contract is part of a class of financial instruments called derivatives.

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G GAAP Accounting principles generally accepted in the United States of America.
Ginnie Mae Government National Mortgage Association.

H Hedge An investment made with the intention of minimizing the impact of adverse movements in interest rates or securities prices.

I In-the-Money Description for an option that has intrinsic value and can be sold or exercised for a profit; a call option is in-the-money when the strike price (execution price) is below the market price of the underlying security.
Interest Bearing Liabilities Refers to repurchase agreements, convertible senior notes, securitized debt of consolidated VIE, participation sold, FHLB Des Moines advances, U.S. Treasury securities sold, not yet purchased and securities loaned. Average Interest Bearing Liabilities is based on daily balances.
Interest Earning Assets Refers to Investment Securities, securities borrowed, U.S. Treasury securities, reverse repurchase agreements, cash and cash equivalents, commercial real estate investments and commercial real estate debt and preferred equity interests.Average Interest Earning Assets is based on daily balances.
Interest Only (IO) Bond The interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments.
Interest Rate Risk The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. As market interest rates rise, the value of current fixed income investment holdings declines. Diversifying, deleveraging and hedging techniques are utilized to mitigate this risk. Interest rate risk is a form of market risk. Interest Rate Swap A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive a variable rate.
Interest Rate Swaption Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement at some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer.
Internal Capital Adequacy Assessment Program (ICAAP) The ongoing assessment and measurement of risks, and the amount of capital which is necessary to hold against those risks.  The objective is to ensure that a firm is appropriately capitalized relative to the risks in its business.
International Swaps and Derivatives Association (ISDA) Master Agreement Standardized contract developed by ISDA used as an umbrella under which bilateral derivatives contracts are entered into.
Inverse IO Bond An interest-only bond whose coupon is determined by a formula expressing an inverse relationship to a benchmark rate, such as LIBOR. As the benchmark rate changes, the IO coupon adjusts in the opposite direction. When the benchmark rate is relatively low, the IO pays a relatively high coupon payment, and vice versa.
Investment/Market Risk Risk to earnings, capital or business resulting in the decline in value of our assets caused from changes in market variables, such as interest rates, which affect the values of invested securities and other investment instruments.
Investment Securities Refers to Agency mortgage-backed securities, Agency debentures and Agency CRT securities.

L Leverage The use of borrowed money to increase investing power and economic returns.

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Leverage Ratio Calculated as total debt to total stockholders' equity. For purposes of calculating this ratio total debt includes repurchase agreements, Convertible Senior Notes and non-recourse securitized debt of consolidated VIE, loan participation sold and mortgages payable.
LIBOR (London Interbank Offered Rate) The rate banks charge each other for short-term Eurodollar loans. LIBOR is frequently used as the base for resetting rates on floating-rate securities and the floating-rate legs of interest rate swaps.

Liquidity Risk Risk to earnings, capital or business arising from our inability to meet our obligations when they come due without incurring unacceptable losses because of inability to liquidate assets or obtain adequate funding.
Long-Term Debt Debt which matures in more than one year.

M Master Netting Agreement An agreement between two counterparties who have multiple derivative contracts or repurchase / reverse repurchase agreements with each other that provides for the net settlement of all contracts, as well as cash collateral, through a single payment, in a single currency, in the event of default on or termination of any one contract.
Monetary Policy Action taken by the Board of Governors of the Federal Reserve System to influence the money supply or interest rates.
Mortgage-Backed Security (MBS) A security representing a direct interest in a pool of mortgage loans. The pass-through issuer or servicer collects the payments on the loans in the pool and "passes through" the principal and interest to the security holders on a pro rata basis.

N NAV Net asset value.
Net Equity Yield Calculated using GAAP net income, excluding depreciation and amortization expense, divided by average net equity. Net Interest Income Represents interest income earned on our portfolio investments, less interest expense paid for borrowings.
Net Interest Margin Represents annualized economic net interest income, inclusive of interest expense on interest rate swaps, plus TBA dollar roll income divided by the sum of its average Interest Earning Assets plus average outstanding TBA derivative balances.
Net Interest Spread Calculated by taking the average yield on interest earning assets minus the average cost of interest bearing liabilities, including the net interest payments on interest rate swaps.
Notional Amount A stated principal amount in a derivative contract on which the contract is based.

O Option Contract A contract in which the buyer has the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Buyers of call options bet that a security will be worth more than the price set by the option (the strike price), plus the price they pay for the option itself. Buyers of put options bet that the security’s price will drop below the price set by the option. An option is part of a class of financial instruments called derivatives, which means these financial instruments derive their value from the worth of an underlying investment.
Operational Risk Risk to earnings, capital, reputation or business arising from inadequate or failed internal processes or systems, human factors or external events.
Original Face The face value or original principal amount of a security on its issue date.
Out-of-the-Money Description for an option that has no intrinsic value and would be worthless if it expired today; for a call option, this situation occurs when the strike price is higher than the market price of the underlying security; for a put option, this situation occurs when the strike price is less than the market price of the underlying security.

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Over-The-Counter (OTC) Market A securities market that is conducted by dealers throughout the country through negotiation of price rather than through the use of an auction system as represented by a stock exchange.

P Pass Through Security The securitization structure where a GSE or other entity “passes” the amount collected from the borrowers every month to the investor, after deducting fees and expenses.
Principal and Interest The term used to refer to regularly scheduled payments or prepayments of principal and payments of interest on a mortgage or other security.
Par Price equal to the face amount of a security; 100%.
Par Amount The principal amount of a bond or note due at maturity. Also known as par value.
Pool A collection of mortgage loans assembled by an originator or master servicer as the basis for a security. In the case of Ginnie Mae, Fannie Mae, or Freddie Mac mortgage pass-through securities, pools are identified by a number assigned by the issuing agency.
Premium The amount by which the price of a security exceeds its principal amount. When the dollar price of a bond is above its face value, it is said to be selling at a premium.
Prepayment The unscheduled partial or complete payment of the principal amount outstanding on a mortgage loan or other debt before it is due.
Prepayment Risk The risk that falling interest rates will lead to heavy prepayments of mortgage or other loans, forcing the investor to reinvest at lower prevailing rates.
Prime Rate The indicative interest rate on loans that banks quote to their best commercial customers. R Rate Reset The adjustment of the interest rate on a floating-rate security according to a prescribed formula.
Real Estate Investment Trust (REIT) A special purpose investment vehicle that provides investors with the ability to participate directly in the ownership or financing of real-estate related assets by pooling their capital to purchase and manage mortgage loans and/or income property.
Reinvestment Risk The risk that interest income or principal repayments will have to be reinvested at lower rates in a declining rate environment.
Repurchase Agreement The sale of securities to investors with the agreement to buy them back at a higher price after a specified time period; a form of short-term borrowing. For the party on the other end of thetransaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.
Residual In a CMO, the residual is that tranche which collects any cash flow from the collateral that remains after obligations to the other tranches have been met.
Return on Average Equity Calculated by taking earnings divided by average stockholders' equity.
Reverse Repurchase Agreement Refer to Repurchase Agreement. From the customer's perspective, the customer provides a collateralized loan to the seller.
Risk Appetite Statement Defines the types and levels of risk we are willing to take in order to achieve our business objectives, and reflects our risk management philosophy.

S Secondary Market Ongoing market for bonds previously offered or sold in the primary market.
Settlement Date The date securities must be delivered and paid for to complete a transaction.

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Short-Term Debt Generally, debt which matures in one year or less. However, certain securities that mature in up to three years may be considered short-term debt.
Spread When buying or selling a bond through a brokerage firm, an individual investor will be charged a commission or spread, which is the difference between the market price and cost of purchase, and sometimes a service fee. Spreads differ based on several factors including liquidity.

T Target Assets Includes Agency mortgage-backed securities, to-be-announced forward contracts, Agency debentures, commercial real estate investments, other mortgage-backed securities and corporate debt.
To-Be-Announced Securities (TBAs) A contract for the purchase or sale of a mortgage-backed security to be delivered at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date but does not include a specified pool number and number of pools.
TBA Dollar Roll Income TBA dollar roll income is defined as the difference in price between two TBA contracts with the same terms but different settlement dates. TBA dollar roll income represents the equivalent of interest income on the underlying security less an implied cost of financing.
Total Return Investment performance measure over a stated time period which includes coupon interest, interest on interest, and any realized and unrealized gains or losses.
Total Return Swap A derivative instrument where one party makes payments at a predetermined rate (either fixed or variable) while receiving a return on a specific asset (generally an equity index, loan or bond) held by the counterparty.

U Unencumbered Assets Assets on our balance sheet which have not been pledged as collateral against an existing liability. U.S. Government-Sponsored Enterprise (GSE) Obligations Obligations of Agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress, such as Fannie Mae and Freddie Mac; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.

V Value-at-Risk (VaR) A statistical technique which measures the potential loss in value of an asset or portfolio over a defined period for a given confidence interval.

Variable Interest Entity (VIE) An entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.
Volatility A statistical measure of the variance of price or yield over time. Volatility is low if the price does not change very much over a short period of time, and high if there is a greater change.

W Warehouse Lending A line of credit extended to a loan originator to fund mortgages extended by the loan originators to property purchasers. The loan typically lasts from the time the mortgage is originated to when the mortgage is sold into the secondary market, whether directly or through a securitization.  Warehouse lending can provide liquidity to the loan origination market.
Weighted Average Coupon The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.
Weighted Average Life (WAL) The assumed weighted average amount of time that will elapse from the date of a security’s issuance until each dollar of principal is repaid to the investor. The WAL will change as the security ages and depending on the actual realized rate at which principal, scheduled

67

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 2. Management’s Discussion and Analysis

and unscheduled, is paid on the loans underlying the MBS.

Y

Yield-to-Maturity

The expected rate of return of a bond if it is held to its maturity date; calculated by taking into account the current market price, stated redemption value, coupon payments and time to maturity and assuming all coupons are reinvested at the same rate; equivalent to the internal rate of return.

68

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Quantitative and qualitative disclosures about market risk are contained within the section titled “Risk Management” of Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 4.      CONTROLS AND PROCEDURES

Our management, including our Chief Executive Officer (the CEO) and Chief Financial Officer (the CFO), reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act) as of the end of the period covered by this quarterly report.  Based on that review and evaluation, the CEO and CFO have concluded that our current disclosure controls and procedures, as designed and implemented, (1) were effective in ensuring that information regarding the Company and its subsidiaries is accumulated and communicated to our management, including our CEO and CFO, by our employees, as appropriate to allow timely decisions regarding required disclosure and (2) were effective in providing reasonable assurance that information the Company must disclose in its periodic reports under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by the SEC’s rules and forms. There have been no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

PART II – OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

From time-to-time, we are involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on our consolidated financial statements.

ITEM 1A.   RISK FACTORS

There have been no material changes to the risk factors disclosed in Item 1A – Risk Factors of our most recent annual report on Form 10-K. The materialization of any risks and uncertainties identified in our Special Note Regarding Forward-Looking Statements contained in this report together with those previously disclosed in our most recent annual report on Form 10-K or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Special Note Regarding Forward-Looking Statements” in this quarterly report or our most recent annual report on Form 10-K.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 6. Exhibits

ITEM 6.    EXHIBITS

Exhibits:

The exhibits required by this item are set forth on the Exhibit Index attached hereto.

Exhibit Number	Exhibit Description
3.1	Articles of Amendment and Restatement of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-11 (Registration No. 333-32913) filed with the Securities and Exchange Commission on August 5, 1997).
3.2	Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-3 (Registration Statement 333-74618) filed with the Securities and Exchange Commission on June 12, 2002).
3.3  3.4	Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Form 8-K (filed with the Securities and Exchange Commission on August 3, 2006)). Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.4 of the Registrant's Form 10-Q (filed with the Securities and Exchange Commission on May 7, 2008)).
3.5	Articles of Amendment of the Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant's Form 8-K (filed with the Securities and Exchange Commission on June 23, 2011)).
3.6	Form of Articles Supplementary designating the Registrant’s 7.875% Series A Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.3 to the Registrant’s 8-A filed April 1, 2004).
3.7	Articles Supplementary of the Registrant’s designating an additional 2,750,000 shares of the Company’s 7.875% Series A Cumulative Redeemable Preferred Stock, as filed with the State Department of Assessments and Taxation of Maryland on October 15, 2004 (incorporated by reference to Exhibit 3.2 to the Registrant’s 8-K filed October 4, 2004).
3.8	Articles Supplementary designating the Registrant’s 6% Series B Cumulative Convertible Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.1 to the Registrant’s 8-K filed April 10, 2006).
3.9	Articles Supplementary designating the Registrant’s 7.625% Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed May 16, 2012).
3.10	Articles Supplementary designating the Registrant’s 7.50% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed September 13, 2012).
3.11	Amended and Restated Bylaws of the Registrant, as amended (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K (filed with the Securities and Exchange Commission on March 22, 2011)).
3.12	Amendment to the Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.12 of the Registrant’s Quarterly Report on Form 10-Q filed on August 8, 2013).
4.1	Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-11 (Registration No. 333-32913) filed with the Securities and Exchange Commission on September 17, 1997).

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Item 6. Exhibits

4.2	Specimen Preferred Stock Certificate (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-3 (Registration No. 333-74618) filed with the Securities and Exchange Commission on December 5, 2001).
4.3	Specimen Series A Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant's Registration Statement on Form 8-A filed with the SEC on April 1, 2004).
4.4	Specimen Series B Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on April 10, 2006).
4.5	Specimen Series C Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 16, 2012).
4.6	Specimen Series D Preferred Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on September 13, 2012).
4.7	Indenture, dated as of February 12, 2010, between the Registrant and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 12, 2010).
4.8	Supplemental Indenture, dated as of February 12, 2010, between the Registrant and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on February 12, 2010).
4.9	Form of 4.00% Convertible Senior Note due 2015 (included in Exhibit 4.8).
4.10	Second Supplemental Indenture, dated as of May 14, 2012, between the Registrant and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed with the Securities and Exchange Commission on May 14, 2012).
4.11	Form of 5.00% Convertible Senior Note due 2015 (included in Exhibit 4.10).
31.1	Certification of Wellington J. Denahan, Chairman and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Glenn A. Votek, Chief Financial Officer (Principal Financial Officer) of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Wellington J. Denahan, Chairman and Chief Executive Officer of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Glenn A. Votek, Chief Financial Officer (Principal Financial Officer) of the Registrant, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS XBRL	Instance Document †
Exhibit 101.SCH XBRL	Taxonomy Extension Schema Document †
Exhibit 101.CAL XBRL	Taxonomy Extension Calculation Linkbase Document †
Exhibit 101.DEF XBRL	Additional Taxonomy Extension Definition Linkbase Document Created†
Exhibit 101.LAB XBRL	Taxonomy Extension Label Linkbase Document †
Exhibit 101.PRE XBRL	Taxonomy Extension Presentation Linkbase Document †

*  Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Financial Condition at March 31, 2015 (Unaudited) and December 31, 2014 (Derived from the audited Consolidated Statement of Financial Condition at December 31, 2014); (ii) Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the quarters ended March 31, 2015 and 2014; (iii) Consolidated Statements of Stockholders' Equity (Unaudited) for the quarters ended March 31, 2015 and 2014; (iv) Consolidated Statements of Cash Flows (Unaudited) for the quarters ended March 31, 2015 and 2014; and (v) Notes to Consolidated Financial Statements (Unaudited).  Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Signatures

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, State of New York.

		ANNALY CAPITAL MANAGEMENT, INC.
Dated: May 7, 2015	By:	/s/ Wellington J. Denahan Wellington J. Denahan (Chief Executive Officer, and authorized officer of the registrant)
Dated: May 7, 2015	By:	/s/ Glenn A. Votek Glenn A. Votek (Chief Financial Officer and principal financial officer of the registrant)

73

EX-31.1

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Exhibit 31.1

CERTIFICATIONS

I, Wellington J. Denahan, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Annaly Capital Management, Inc.;
2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.		The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2015

/s/Wellington J. Denahan

Chairman and Chief Executive Officer

EX-31.2

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Exhibit 31.2

CERTIFICATIONS

I, Glenn A. Votek, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Annaly Capital Management, Inc.;
2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.		The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2015

/s/Glenn A. Votek

Chief Financial Officer (Principal Financial Officer)

EX-32.1

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Exhibit 32.1

ANNALY CAPITAL MANAGEMENT, INC.

1211 AVENUE OF THE AMERICAS

NEW YORK, NEW YORK 10036

CERTIFICATION

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of Annaly Capital Management, Inc. (the “Company”) for the period ended March 31, 2015 to be filed with Securities and Exchange Commission on or about the date hereof (the “Report”), I, Wellington J. Denahan, Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

/s/ Wellington J. Denahan

Wellington J. Denahan

Chairman and Chief Executive Officer

May 7, 2015

EX-32.2

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

Exhibit 32.2

ANNALY CAPITAL MANAGEMENT, INC.

1211 AVENUE OF THE AMERICAS

NEW YORK, NEW YORK 10036

CERTIFICATION

PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350

In connection with the quarterly report on Form 10-Q of Annaly Capital Management, Inc. (the “Company”) for the period ended March 31, 2015 to be filed with Securities and Exchange Commission on or about the date hereof (the “Report”), I, Glenn A. Votek, Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates of, and for the periods covered by, the Report.

It is not intended that this statement be deemed to be filed for purposes of the Securities Exchange Act of 1934.

/s/ Glenn A. Votek

Glenn A. Votek

Chief Financial Officer (Principal Financial Officer)

May 7, 2015

XML

Organization and Significant Accounting Policies - Narrative (Detail) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Schedule Of Significant Accounting Policies [Line Items]
Allowance for loan losses	$ 0	$ 0
Interest Rate Swaps
Schedule Of Significant Accounting Policies [Line Items]
Cash on margin with counterparty to interest rate swaps	$ 1,800,000,000	$ 1,600,000,000

XML

Total Real Estate Held for Investment (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Real estate held for investment, at amortized cost
Real estate held for investment, at amortized cost	$ 214,256		$ 214,256
Less: accumulated depreciation	(7,047)		(4,224)
Total real estate held for investment at amortized cost, net	207,209		210,032
Real estate held for sale at fair value	0		0
Total investment in commercial real estate, net	207,209		210,032	[1]
Net carrying value of CRE Debt and Preferred Equity Investments	1,498,406	[2]	1,518,165	[1],[2]
Total commercial real estate investments	1,705,615		1,728,197
Land
Real estate held for investment, at amortized cost
Real estate held for investment, at amortized cost	38,117		38,117
Building Improvements
Real estate held for investment, at amortized cost
Real estate held for investment, at amortized cost	$ 176,139		$ 176,139

[1] Derived from the audited consolidated financial statements at December 31, 2014.

[2] Includes senior securitized commercial mortgage loans of a consolidated VIE with a carrying value of $361.2 million and $398.6 million carried at amortized cost, net of an allowance for losses of $0 and $0, at March 31, 2015 and December 31, 2014, respectively. .

XML

CRE Debt and Preferred Equity Investments -Based on Outstanding Principal (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015		Dec. 31, 2014
Transaction to Real Estate Investments [Line Items]
Beginning balance	$ 1,518,165		$ 1,583,969
Originations & advances (principal)	63,688		249,854
Principal payments	(82,409)		(316,082)
Sales (principal)	0		0
Amortization & accretion of (premium) discounts	(42)		(1,472)
Net (increase) decrease in origination fees	(2,186)		(3,021)
Amortization of net origination fees	1,190		4,917
Allowance for loan losses	0		0
Net carrying value	1,498,406		1,518,165
Preferred Equity Interests
Transaction to Real Estate Investments [Line Items]
Beginning balance	212,905		247,160
Principal payments	(1,441)		(35,116)
Sales (principal)	0		0
Amortization & accretion of (premium) discounts	25		108
Amortization of net origination fees	105		753
Allowance for loan losses	0		0
Net carrying value	211,594		212,905
Commercial Mortgage
Transaction to Real Estate Investments [Line Items]
Net carrying value	1,498,406	[1]	1,518,165	[1]
Commercial Mortgage | Mezzanine Loans
Transaction to Real Estate Investments [Line Items]
Beginning balance	522,731		628,102
Originations & advances (principal)	16,043		122,742
Principal payments	(43,212)		(227,151)
Sales (principal)	0		0
Amortization & accretion of (premium) discounts	(31)		(1,093)
Net (increase) decrease in origination fees	(236)		(478)
Amortization of net origination fees	110		609
Allowance for loan losses	0		0
Net carrying value	495,405	[1]	522,731	[1]
Commercial Mortgage | Senior Mortgages
Transaction to Real Estate Investments [Line Items]
Beginning balance	383,895	[2]	667,299
Originations & advances (principal)	47,645	[2]	127,112
Principal payments	(76)	[2]	(12,756)
Sales (principal)	0	[2]	0
Amortization & accretion of (premium) discounts	(36)	[2]	(138)
Net (increase) decrease in origination fees	(1,950)	[2]	(2,427)
Amortization of net origination fees	750	[2]	2,783
Transfers			(397,978)
Allowance for loan losses	0	[2]	0
Net carrying value	430,228	[1],[2]	383,895	[1]
Commercial Mortgage | Senior Securitized Mortgages
Transaction to Real Estate Investments [Line Items]
Beginning balance	398,634
Principal payments	(37,680)
Sales (principal)	0		0	[2]
Net (increase) decrease in origination fees			(116)	[2]
Amortization of net origination fees	225		772	[2]
Transfers			397,978	[2]
Allowance for loan losses	0		0	[2]
Net carrying value	361,179	[1],[2]	398,634	[1],[2]
Commercial Mortgage | Subordinated Notes
Transaction to Real Estate Investments [Line Items]
Beginning balance			41,408
Principal payments			(41,059)
Sales (principal)			0
Amortization & accretion of (premium) discounts			(349)
Allowance for loan losses			0
Commercial Mortgage | Preferred Equity Interests
Transaction to Real Estate Investments [Line Items]
Net carrying value	$ 211,594	[1]	$ 212,905	[1]

[1] Carrying value includes unamortized origination fees of $4.4 million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively.

[2] Assets of consolidated VIE.

XML

Summary of Characteristics of Interest Rate Swaptions (Detail) (Interest Rate Swaption, USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Long
Derivative Instruments:
Current Underlying Notional	$ 1,000,000	$ 1,750,000
Underlying Pay Rate	2.61%	2.88%
Underlying Receive Rate	3M LIBOR
Years to Maturity	8 years 2 months 9 days	9 years 2 months 1 day
Months to Expiration	2 years 1 month 24 days	3 years 7 months 2 days
Short
Derivative Instruments:
Underlying Receive Rate	-

XML

Minimum Future Rentals to be Received on Noncancelable Operating Leases (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015
Operating Leased Assets [Line Items]
2015 (remaining)	$ 15,495
2016	18,684
2017	15,977
2018	13,620
2019	11,301
Later years	51,241
Operating Leases, Future Minimum Payments Receivable, Total	$ 126,318

XML

Components of Company's Interest Income and Interest Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Interest income:
Investment Securities	$ 478,239		$ 614,419
Commercial investment portfolio	40,336	[1]	39,486	[1]
U.S. Treasury securities			1,329
Securities loaned			114
Reverse repurchase agreements	539		500
Other	58		53
Total interest income	519,172		655,901
Interest expense:
Repurchase agreements	102,748		103,131
Convertible Senior Notes	23,627		18,897
U.S. Treasury securities sold, not yet purchased			1,076
Securities borrowed			95
Securitized debt of consolidated VIE	2,882		1,611
Participation sold	159		161
Other	4
Total interest expense	129,420		124,971
Net interest income	$ 389,752		$ 530,930

[1] Includes commercial real estate debt, preferred equity and corporate debt.

XML

CRE Debt and Preferred Equity Investments (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Transaction to Real Estate Investments [Line Items]
Carrying Value	$ 1,498,406		$ 1,518,165
Preferred Equity Interests
Transaction to Real Estate Investments [Line Items]
Carrying Value	211,594		212,905
Commercial Mortgage
Transaction to Real Estate Investments [Line Items]
Outstanding Principal	1,502,251		1,520,972
Carrying Value	1,498,406	[1]	1,518,165	[1]
Percentage of Loan Portfolio	100.00%	[2]	100.00%	[2]
Commercial Mortgage | Senior Mortgages
Transaction to Real Estate Investments [Line Items]
Outstanding Principal	431,872		384,304
Carrying Value	430,228	[1],[3]	383,895	[1]
Percentage of Loan Portfolio	28.70%	[2]	25.20%	[2]
Commercial Mortgage | Senior Securitized Mortgages
Transaction to Real Estate Investments [Line Items]
Outstanding Principal	361,861	[3]	399,541	[3]
Carrying Value	361,179	[1],[3]	398,634	[1],[3]
Percentage of Loan Portfolio	24.10%	[2],[3]	26.30%	[2],[3]
Commercial Mortgage | Preferred Equity Interests
Transaction to Real Estate Investments [Line Items]
Outstanding Principal	213,213		214,653
Carrying Value	211,594	[1]	212,905	[1]
Percentage of Loan Portfolio	14.20%	[2]	14.10%	[2]
Commercial Mortgage | Mezzanine Loans
Transaction to Real Estate Investments [Line Items]
Outstanding Principal	495,305		522,474
Carrying Value	$ 495,405	[1]	$ 522,731	[1]
Percentage of Loan Portfolio	33.00%	[2]	34.40%	[2]

[1] Carrying value includes unamortized origination fees of $4.4 million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively.

[2] Based on outstanding principal.

[3] Assets of consolidated VIE.

XML

SECURED FINANCING (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of Repurchase Agreements Remaining Maturity and Weighted Average Rates

At March 31, 2015 and December 31, 2014, the repurchase agreements had the following remaining maturities and weighted average rates:

	March 31, 2015					December 31, 2014
	Repurchase Agreements		Weighted Average Rate			Repurchase Agreements		Weighted Average Rate
1 day	$	7,658,440		0.64	%	$	-		0.00	%
2 to 29 days		16,080,033		0.39	%		28,354,167		0.35	%
30 to 59 days		7,326,177		0.40	%		17,336,469		0.43	%
60 to 89 days		9,534,614		0.40	%		4,040,677		0.38	%
90 to 119 days		4,677,222		0.50	%		2,945,495		0.50	%
Over 120 days(1)		15,200,892		1.45	%		18,685,118		1.24	%
Total	$	60,477,378		0.70	%	$	71,361,926		0.61	%
(1) Approximately 18% and 16% of the total repurchase agreements had a remaining maturity over 1 year as of March 31, 2015 and December 31, 2014, respectively.

Summary of Gross Amounts, Amounts Offset and net Amounts of Repurchase Agreement and Reverse Repurchase Agreement

The following table summarizes the gross amounts of reverse repurchase agreements and repurchase agreements, amounts offset in accordance with netting arrangements and net amounts of repurchase agreements and reverse repurchase agreements as presented in the Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014.

	March 31, 2015						December 31, 2014
	Reverse Repurchase Agreements			Repurchase Agreements			Reverse Repurchase Agreements			Repurchase Agreements
	(dollars in thousands)
Gross Amounts	$	1,700,000		$	62,077,378		$	700,000		$	71,961,926
Amounts Offset		(1,600,000	)		(1,600,000	)		(600,000	)		(600,000	)
Netted Amounts	$	100,000		$	60,477,378		$	100,000		$	71,361,926

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Goodwill - Additional Information (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Goodwill and Intangible Assets Disclosure [Line Items]
Goodwill	$ 94,781	$ 94,781	[1]

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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Derivative Instruments - Effect of Interest Rate Swaps on Consolidated Statements of Comprehensive Income Loss (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Effect of Derivatives on Statement of Operations and Comprehensive Income:
Realized gains (losses) on interest rate swaps	$ (158,239)	[1],[2]	$ (260,435)	[1],[2]
Realized gain (losses) on termination of interest rate swaps	(226,462)		(6,842)
Unrealized gains (losses) on interest rate swaps	$ (466,202)		$ (348,942)

[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 (Loss).

[2] Consists of interest expense on interest rate swaps.

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Future Mortgage Loan Principal Payments (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Schedule Of Long Term Debt Maturities [Line Items]
2015 (remaining)	$ 291
2016	399
2017	18,346
2018	0
2019	23,375
Later years	103,950
Mortgage Principal	$ 146,361	$ 146,430

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Convertible Senior Notes - Narrative (Detail) (USD $)	3 Months Ended	0 Months Ended	1 Months Ended		12 Months Ended
	Mar. 31, 2015	May 31, 2012	May 31, 2012	Feb. 28, 2015	Dec. 31, 2010	Dec. 31, 2014
Convertible Senior Notes:
Issued convertible senior notes, aggregate principal amount	$ 146,670,000					$ 146,553,000
Repayment of convertible senior notes	107,541,000
Convertible Senior Notes 5.00 Percent Due 2015
Convertible Senior Notes:
Issued convertible senior notes, aggregate principal amount		750,000,000	750,000,000
Issued convertible senior notes, interest rate		5.00%	5.00%
Issued convertible senior notes, net proceeds following underwriting expenses			727,500,000
Senior debt maturity date			May 15, 2015
Issued convertible senior notes, frequency of interest payments per year	Semi-annually
Convertible senior notes convertible into common stock, initial conversion rate, number of shares	52.7969
Convertible senior notes, principal amount applicable for conversion rate			1,000
Convertible senior notes convertible into common stock, initial conversion price	$ 18.94
Convertible senior notes, contingent beneficial conversion feature		11,700,000
Convertible senior notes, unamortized discount	500,000					1,500,000
Convertible Senior Notes 4.00 Percent Due 2015
Convertible Senior Notes:
Issued convertible senior notes, aggregate principal amount					600,000,000
Senior debt maturity date					2015-02
Issued convertible senior notes, interest rate					4.00%
Issued convertible senior notes, net proceeds following underwriting expenses					582,000,000
Repurchase of Convertible senior notes	492,500,000
Repayment of convertible senior notes				$ 107,500,000

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Lease Commitments And Contingencies (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015
Lease Commitments and Contingencies:
Lease Commitment - 2015 remaining	$ 1,159
Lease Commitment - 2016	3,591
Lease Commitment - 2017	3,565
Lease Commitment - 2018	3,565
Lease Commitment - 2019	3,565
Lease Commitment - Later years	21,994
Aggregate future minimum lease payments	$ 37,439

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Net Income Per Common Share - Narrative (Detail) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net Income Per Common Share:
Options to purchase common stock outstanding that would be considered anti-dilutive	2.3	3.2

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RCap Regulatory Requirements - Narrative (Detail) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015
RCAP Regulatory Requirements:
Minimum net capital requirement	$ 0.3
Regulatory net capital	399.9
Regulatory net capital, excess net capital	$ 399.6

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Common Stock and Preferred Stock - Narrative (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Class of Stock [Line Items]
Common Stock, par value	$ 0.01		$ 0.01	[1]
Common Stock, shares authorized	1,956,937,500		1,956,937,500	[1]
Common Stock, shares issued	947,698,431		947,643,079	[1]
Common Stock, shares outstanding	947,698,431		947,643,079	[1]
Options exercised under incentive plans, shares	0	0
Direct purchase and dividend reinvestment program - value raised	$ 570	$ 607
Direct purchase and dividend reinvestment program - issued shares	53,000	56,000
Description of common stock equity distribution agreement	In March 2012, the Company entered into six separate Distribution Agency Agreements ("Distribution Agency Agreements") with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and RCap Securities, Inc. (together, the Agents).
Date of Distribution Agency Agreement with six separate Agents	March 2012
Number of common shares authorized for issuance under the Distribution Agency Agreement	125,000,000	125,000,000
Common stock - dividend declared	284,310	284,247
Dividends payable, date to be paid	Apr. 30, 2015	Apr. 30, 2014
Dividends Declared Per Share of Common Stock	$ 0.30	$ 0.30
7.875% Series A Cumulative Redeemable Preferred Stock
Class of Stock [Line Items]
Preferred Stock, shares authorized	7,412,500		7,412,500	[1]
Preferred Stock, shares issued	7,412,500		7,412,500	[1]
Preferred Stock, shares outstanding	7,412,500		7,412,500	[1]
Preferred Stock, par value	$ 0.01		$ 0.01
Preferred Stock liquidation preference, per share	$ 25.00		$ 25.00
Preferred Stock dividend rate, percentage	7.875%		7.875%
Preferred Stock redeemable price, per share	$ 25.00		$ 25.00
Preferred Stock redemption date	Apr. 05, 2009
Preferred dividends declared	3,600	3,600
Preferred series dividends declared, per share	$ 0.492	$ 0.492
6.00% Series B Cumulative Convertible Preferred Stock
Class of Stock [Line Items]
Preferred Stock, shares authorized	4,600,000
7.625% Series C Cumulative Redeemable Preferred Stock
Class of Stock [Line Items]
Preferred Stock, shares authorized	12,650,000		12,650,000	[1]
Preferred Stock, shares issued	12,000,000		12,000,000	[1]
Preferred Stock, shares outstanding	12,000,000		12,000,000	[1]
Preferred Stock, par value	$ 0.01		$ 0.01
Preferred Stock liquidation preference, per share	$ 25.00		$ 25.00
Preferred Stock dividend rate, percentage	7.625%		7.625%
Preferred Stock redeemable price, per share	$ 25.00		$ 25.00
Preferred Stock redemption date	May 16, 2017
Preferred dividends declared	5,700	5,700
Preferred series dividends declared, per share	$ 0.477	$ 0.477
7.50% Series D Cumulative Redeemable Preferred Stock
Class of Stock [Line Items]
Preferred Stock, shares authorized	18,400,000		18,400,000	[1]
Preferred Stock, shares issued	18,400,000		18,400,000	[1]
Preferred Stock, shares outstanding	18,400,000		18,400,000	[1]
Preferred Stock, par value	$ 0.01		$ 0.01
Preferred Stock liquidation preference, per share	$ 25.00		$ 25.00
Preferred Stock dividend rate, percentage	7.50%		7.50%
Preferred Stock redeemable price, per share	$ 25.00		$ 25.00
Preferred Stock redemption date	Sep. 13, 2017
Preferred dividends declared	$ 8,600	$ 8,600
Preferred series dividends declared, per share	$ 0.469	$ 0.469

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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Summary of Characteristics of TBA Derivatives (Detail) (TBA Derivatives, USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Derivative Instruments:
Notional	$ 13,750,000	$ (375,000)
Implied Cost Basis	14,279,766	(375,430)
Implied Market Value	14,392,695	(379,688)
Carrying Value	112,929	(4,258)
Purchase Contracts
Derivative Instruments:
Notional	13,750,000
Implied Cost Basis	14,279,766
Implied Market Value	14,392,695
Carrying Value	112,929
Sales Contracts
Derivative Instruments:
Notional		(375,000)
Implied Cost Basis		(375,430)
Implied Market Value		(379,688)
Carrying Value		$ (4,258)

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RCAP REGULATORY REQUIREMENTS

3 Months Ended

Mar. 31, 2015

RCAP REGULATORY REQUIREMENTS

18.           RCAP REGULATORY REQUIREMENTS

RCap is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees. 

As a self-clearing, registered broker dealer, RCap is required to maintain minimum net capital by FINRA.  As of March 31, 2015 RCap had a minimum net capital requirement of $0.3 million. RCap consistently operates with capital in excess of its regulatory capital requirements. RCap’s regulatory net capital as defined by SEC Rule 15c3-1, as of March 31, 2015 was $399.9 million with excess net capital of $399.6 million.

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Internal CRE Debt and Preferred Equity Ratings (Parenthetical) (Detail) (USD $) In Millions, unless otherwise specified	Mar. 31, 2015
Transaction to Real Estate Investments [Line Items]
Loan outstanding principal amount expected full recovery	$ 230

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Agency Mortgage-Backed Securities - Portfolio (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Mortgage-Backed Securities Portfolio:
Estimated fair value	$ 69,388,001	$ 81,565,256	[1]
Agency Mortgage Backed Securities
Mortgage-Backed Securities Portfolio:
Principal outstanding	63,969,715	75,982,999
Unamortized premium	4,692,058	5,368,726
Unamortized discount	(15,385)	(18,200)
Amortized cost	68,646,388	81,333,525
Gross unrealized gains	1,113,768	982,001
Gross unrealized losses	(372,155)	(750,270)
Estimated fair value	69,388,001	81,565,256
Total amortized cost	68,646,388	81,333,525
Agency Mortgage Backed Securities | Fixed Rate
Mortgage-Backed Securities Portfolio:
Amortized cost	65,176,426	78,250,313
Gross unrealized gains	971,043	847,615
Gross unrealized losses	(355,330)	(732,533)
Estimated fair value	65,792,139	78,365,395
Total amortized cost	65,176,426	78,250,313
Agency Mortgage Backed Securities | Adjustable Rate
Mortgage-Backed Securities Portfolio:
Amortized cost	3,469,962	3,083,212
Gross unrealized gains	142,725	134,386
Gross unrealized losses	(16,825)	(17,737)
Estimated fair value	3,595,862	3,199,861
Total amortized cost	3,469,962	3,083,212
Agency Mortgage Backed Securities | Freddie Mac
Mortgage-Backed Securities Portfolio:
Principal outstanding	23,214,759	27,906,221
Unamortized premium	1,814,818	1,951,798
Unamortized discount	(7,489)	(8,985)
Amortized cost	25,022,088	29,849,034
Gross unrealized gains	345,566	313,761
Gross unrealized losses	(160,483)	(322,094)
Estimated fair value	25,207,171	29,840,701
Total amortized cost	25,022,088	29,849,034
Agency Mortgage Backed Securities | Fannie Mae
Mortgage-Backed Securities Portfolio:
Principal outstanding	40,662,639	47,979,778
Unamortized premium	2,857,467	3,396,368
Unamortized discount	(7,549)	(8,857)
Amortized cost	43,512,557	51,367,289
Gross unrealized gains	759,828	660,230
Gross unrealized losses	(208,764)	(424,800)
Estimated fair value	44,063,621	51,602,719
Total amortized cost	43,512,557	51,367,289
Agency Mortgage Backed Securities | Ginnie Mae
Mortgage-Backed Securities Portfolio:
Principal outstanding	92,317	97,000
Unamortized premium	19,773	20,560
Unamortized discount	(347)	(358)
Amortized cost	111,743	117,202
Gross unrealized gains	8,374	8,010
Gross unrealized losses	(2,908)	(3,376)
Estimated fair value	117,209	121,836
Total amortized cost	$ 111,743	$ 117,202

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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Derivative Instruments - Narrative (Detail) (USD $) In Billions, unless otherwise specified	Mar. 31, 2015
Derivative Instruments:
Derivative instruments, net liability position, aggregate fair value	$ 1.9

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LONG-TERM STOCK INCENTIVE PLAN (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of Issued and Outstanding Stock Options

The following table sets forth activity related to the Company’s stock options awarded under the Plan:

	For the Quarter Ended
	March 31, 2015					March 31, 2014
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Options outstanding at the beginning of period		2,259,335		$	15.35		3,581,752		$	15.44
Granted		-		$	-		-		$	-
Exercised		-		$	-		-		$	-
Forfeited		(8,799	)	$	14.80		(353,417	)	$	14.94
Expired		-		$	-		-		$	-
Options outstanding at the end of period		2,250,536		$	15.35		3,228,335		$	15.49
Options exercisable at the end of the period		2,250,536		$	15.35		3,228,335		$	15.49

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Summary of Acquisitions of Real Estate Held for Investment (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Transaction to Real Estate Investments [Line Items]
Purchase Price	$ 190,743
TENNESSEE
Transaction to Real Estate Investments [Line Items]
Purchase Price	19,000
TENNESSEE | Single Tenant Properties [Member]
Transaction to Real Estate Investments [Line Items]
Date of Acquisition	Apr. 30, 2014
Purchase Price	19,000
Remaining Lease Term (Years)	8 years
VIRGINIA
Transaction to Real Estate Investments [Line Items]
Purchase Price	17,743
VIRGINIA | Multi Tenant Properties [Member]
Transaction to Real Estate Investments [Line Items]
Date of Acquisition	Jun. 30, 2014
Purchase Price	17,743
Remaining Lease Term (Years)	7 years
New York, Ohio and Georgia [Member] | Multi Tenant Properties [Member]
Transaction to Real Estate Investments [Line Items]
Date of Acquisition	Nov. 30, 2014
Purchase Price	$ 154,000
Remaining Lease Term (Years)	4 years 7 months 6 days

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Summary of Fair Value Information about Derivative Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Derivatives, Fair Value [Line Items]
Interest rate swaps, at fair value	$ 25,908	$ 75,225	[1]
Other derivatives, at fair value	113,503	5,499	[1]
Derivative assets	139,411	80,724
Other derivatives, at fair value	61,778	8,027	[1]
Interest rate swaps, at fair value	2,025,170	1,608,286	[1]
Derivative liabilities	2,086,948	1,616,313
Future
Derivatives, Fair Value [Line Items]
Other derivatives, at fair value		117
Other derivatives, at fair value	61,778	3,769
Interest Rate Swaption
Derivatives, Fair Value [Line Items]
Other derivatives, at fair value	574	5,382
TBA Derivatives
Derivatives, Fair Value [Line Items]
Other derivatives, at fair value	112,929
Other derivatives, at fair value		$ 4,258

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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Fair Value Measurements (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Assets:
Agency mortgage-backed securities	$ 69,388,001		$ 81,565,256
Agency debentures	995,408		1,368,350
Agency CRT securities	108,337
Commercial real estate debt investments	1,515,903	[1]
Investment in affiliates	141,246		143,045
Interest rate swaps	25,908		75,225	[2]
Other derivatives	113,503		5,499
Total Assets	72,288,306		83,157,375
Liabilities:
Securitized debt of consolidated VIEs	1,268,809		0	[2]
Interest rate swaps	2,025,170		1,608,286	[2]
Other derivatives	61,778		8,027
Total Liabilities	3,355,757		1,616,313
Level 1
Assets:
Investment in affiliates	141,246		143,045
Other derivatives			117
Total Assets	141,246		143,162
Liabilities:
Other derivatives	61,778		3,769
Total Liabilities	61,778		3,769
Level 2
Assets:
Agency mortgage-backed securities	69,388,001		81,565,256
Agency debentures	995,408		1,368,350
Agency CRT securities	108,337
Commercial real estate debt investments	1,515,903
Interest rate swaps	25,908		75,225
Other derivatives	113,503		5,382
Total Assets	72,147,060		83,014,213
Liabilities:
Securitized debt of consolidated VIEs	1,268,809
Interest rate swaps	2,025,170		1,608,286
Other derivatives			4,258
Total Liabilities	$ 3,293,979		$ 1,612,544

[1] Includes senior securitized commercial mortgage loans of a consolidated VIE carried at fair value of $1.4 billion and $0 at March 31, 2015 and December 31, 2014, respectively.

[2] Derived from the audited consolidated financial statements at December 31, 2014.

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CRE Debt and Preferred Equity Investments (Parenthetical) (Detail) (Commercial Mortgage, USD $) In Millions, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Commercial Mortgage
Transaction to Real Estate Investments [Line Items]
Net origination fees	$ 4.0	$ 3.0

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BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2015

BASIS OF PRESENTATION

2. BASIS OF PRESENTATION

The accompanying consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

The accompanying consolidated financial statements and related notes are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s most recent annual report on Form 10-K. The consolidated financial information as of December 31, 2014 has been derived from audited consolidated financial statements not included herein.

In the opinion of management, all normal, recurring adjustments have been included for a fair presentation of this interim financial information. Interim period operating results may not be indicative of the operating results for a full year.

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Estimated Fair Value for All Financial Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014		Jan. 31, 2014
Financial assets:
Agency mortgage-backed securities	$ 69,388,001		$ 81,565,256
Agency debentures	995,408		1,368,350
Agency CRT securities	108,337
Commercial real estate debt investments	1,515,903	[1]
Investment in affiliates	141,246		143,045
Interest rate swaps	139,411		80,724
Other derivatives	113,503		5,499
Financial liabilities:
Securitized debt of consolidated VIE	1,491,829	[2]	260,700	[2],[3]	260,700
Interest rate swaps	2,086,948		1,616,313
Other derivatives	61,778		8,027
Level 1
Financial assets:
Investment in affiliates	141,246		143,045
Other derivatives			117
Financial liabilities:
Other derivatives	61,778		3,769
Level 2
Financial assets:
Agency mortgage-backed securities	69,388,001		81,565,256
Agency debentures	995,408		1,368,350
Agency CRT securities	108,337
Commercial real estate debt investments	1,515,903
Other derivatives	113,503		5,382
Financial liabilities:
Other derivatives			4,258
Estimate of Fair Value, Fair Value Disclosure | Level 1
Financial assets:
Cash and cash equivalents	1,920,326		1,741,244
Reverse repurchase agreements	100,000		100,000
Investment in affiliates	141,246		143,045
Financial liabilities:
Convertible Senior Notes	752,325		863,470
Estimate of Fair Value, Fair Value Disclosure | Level 2
Financial assets:
Agency mortgage-backed securities	69,388,001		81,565,256
Agency debentures	995,408		1,368,350
Agency CRT securities	108,337
Commercial real estate debt investments	1,515,903
Corporate debt	228,012		166,056
Interest rate swaps	25,908		75,225
Financial liabilities:
Securitized debt of consolidated VIE	1,492,102		262,061
Mortgages payable	150,765		146,611
Interest rate swaps	2,025,170		1,608,286
Estimate of Fair Value, Fair Value Disclosure | Level 3
Financial assets:
Commercial real estate debt and preferred equity	1,513,878		1,528,444
Financial liabilities:
Participation sold	13,620		13,655
Estimate of Fair Value, Fair Value Disclosure | Level 1, Level 2
Financial assets:
Other derivatives	113,503		5,499
Financial liabilities:
Repurchase agreements	60,691,054		71,587,222
Other derivatives	61,778		8,027
Carrying (Reported) Amount, Fair Value Disclosure | Level 1
Financial assets:
Cash and cash equivalents	1,920,326		1,741,244
Reverse repurchase agreements	100,000		100,000
Investment in affiliates	141,246		143,045
Financial liabilities:
Convertible Senior Notes	749,512		845,295
Carrying (Reported) Amount, Fair Value Disclosure | Level 2
Financial assets:
Agency mortgage-backed securities	69,388,001		81,565,256
Agency debentures	995,408		1,368,350
Agency CRT securities	108,337
Commercial real estate debt investments	1,515,903
Corporate debt	227,830		166,464
Interest rate swaps	25,908		75,225
Financial liabilities:
Securitized debt of consolidated VIE	1,491,829		260,700
Mortgages payable	146,470		146,553
Interest rate swaps	2,025,170		1,608,286
Carrying (Reported) Amount, Fair Value Disclosure | Level 3
Financial assets:
Commercial real estate debt and preferred equity	1,498,406		1,518,165
Financial liabilities:
Participation sold	13,589		13,693
Carrying (Reported) Amount, Fair Value Disclosure | Level 1, Level 2
Financial assets:
Other derivatives	113,503		5,499
Financial liabilities:
Repurchase agreements	60,477,378		71,361,926
Other derivatives	$ 61,778		$ 8,027

[1] Includes senior securitized commercial mortgage loans of a consolidated VIE carried at fair value of $1.4 billion and $0 at March 31, 2015 and December 31, 2014, respectively.

[2] Includes securitized debt of a consolidated VIE carried at fair value of $1.3 billion and $0 at March 31, 2015 and December 31, 2014, respectively.

[3] Derived from the audited consolidated financial statements at December 31, 2014.

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Agency Mortgage-Backed Securities - Weighted Average Life (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Fair Value of Agency Mortgage-Backed Securities according to their estimated weighted-average life:
Total	$ 69,388,001	$ 81,565,256	[1]
Agency Mortgage Backed Securities
Fair Value of Agency Mortgage-Backed Securities according to their estimated weighted-average life:
Less than one year	27,752	43,248
Greater than one year through five years	46,648,676	42,222,114
Greater than five years through ten years	22,520,713	39,018,833
Greater than ten years	190,860	281,061
Total	69,388,001	81,565,256
Amortized Cost of Agency Mortgage-Backed Securities according to their estimated weighted-average life:
Less than one year	27,847	42,831
Greater than one year through five years	46,120,064	41,908,586
Greater than five years through ten years	22,308,291	39,098,352
Greater than ten years	190,186	283,756
Total	$ 68,646,388	$ 81,333,525

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2015

Recent Accounting Pronouncements

The following table provides a brief description of recent accounting pronouncements that could potentially impact the Company’s consolidated financial statements:

Standard	Description	Date of Adoption	Effect on the financial statements or other significant matters
Standards that are not yet adopted
ASU 2015-05 - Customer's Accounting for Fees Paid in a Cloud Computing Arrangement	This update clarifies that customers should determine whether a cloud computing arrangement includes the license of software by applying the same guidance cloud service providers use. The guidance also eliminates the current requirement that customers analogized to the leasing standard when determining the asset acquired in a software licensing arrangement.	January 1, 2016 (early adoption permitted)	Not expected to have a significant impact on the consolidated financial statements
ASU 2015-03 Interest - Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs	This ASU requires that debt issue costs are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement of debt issue costs are not affected.	January 1, 2016 (early adoption permitted)	Will presentation only and will not have a significant impact on the consolidated financial statements.
ASU 2015-02 Consolidation (Topic 810) Amendments to the Consolidation Analysis	This update affects the following areas of the consolidation analysis: limited partnerships and similar entities, evaluation of fees paid to a decision maker or service provider as a variable interest and in determination of the primary beneficiary, effect of related parties on the primary beneficiary determination and for certain investment funds.	January 1, 2016 (early adoption permitted)	Not expected to have a significant impact on the consolidated financial statements
ASU 2015-01 Income Statement - Extraordinary and Unusual Items (Subtopic 225-20)	This update eliminates from GAAP the concept of extraordinary items.	January 1, 2016 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-16 Derivatives and Hedging (Topic 815) Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or Equity	This ASU provides additional guidance for evaluating whether conversion rights, redemption rights, voting rights, liquidation rights and dividend payment preferences and other features embedded in a share, including preferred stock, contain embedded derivatives requiring bifurcation. The update requires that an entity determine the nature of the host contract by considering all stated and implied terms and features in a hybrid instrument.	January 1, 2016 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern	This ASU requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.	January 1, 2017 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-09, Revenue from Contracts with Customers	This guidance applies to contracts with customers to transfer goods or services and contracts to transfer nonfinancial assets unless those contracts are within the scope of other standards (for example, lease transactions).	January 1, 2017	Not expected to have a significant impact on the consolidated financial statements.
Standards that were adopted
ASU 2014-17 Business Combinations (Topic 805): Pushdown Accounting	This amendment provides an acquired entity with the option to apply push down accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.	November 18, 2014	Did not have a significant impact on the consolidated financial statements.
ASU 2014-13, Consolidation (Topic 810) Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.	This Update provides a practical expedient to measure the fair value of the financial assets and financial liabilities of a consolidated collateralized financing entity, which the reporting entity has elected to or is required to measure on a fair value basis.	January 1, 2015 (early adoption permitted)	The Company early adopted this ASU [and applied the guidance to a commercial mortgage backed securitization transaction. See Footnote #X Commercial Real Estate Investments for further disclosure.]
ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosure.	This update makes limited amendments to the guidance in ASC 860 on accounting for certain repurchase agreements.	January 1, 2015, except for the disclosure requirements for transactions accounted for as secured borrowings, which are required to be presented for interim periods beginning after March 15, 2015	Impacts disclosures only and does not have a significant impact on the consolidated financial statements.
ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity	This ASU raises the threshold for a disposal to be treated as discontinued operations.	January 1, 2015 (early adoption permitted)	Did not have a significant impact on the consolidated financial statements.
ASU 2014-04 Receivables–Troubled Debt Restructurings by Creditors, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure	This Update clarifies that an in substance repossession or foreclosure has occurred, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, when the creditor obtains legal title to the property upon completion of a foreclosure or the borrower conveys all interest in the property to the creditor through a deed in lieu of foreclosure or similar arrangement	January 1, 2015	Did not have a significant impact on the consolidated financial statements.
ASU 2013-02, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income	This update requires the provision of information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, it requires presentation of significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period	January 1, 2014	Did not have a significant impact on the consolidated financial statements.
ASU 2011-11, Balance Sheet: Disclosures about Offsetting Assets and Liabilities	Under this update, the Company is required to disclose both gross and net information about both instruments and transactions eligible for offset in the Company’s Consolidated Statements of Financial Condition and transactions subject to an agreement similar to a master netting arrangement. The scope includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements and securities borrowing and securities lending arrangements.	January 1, 2014	Did not have a significant impact on the consolidated financial statements.

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SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2015

Principles of Consolidation

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and consolidated variable interest entities. All intercompany balances and transactions have been eliminated in consolidation.

The Company has evaluated all of its investments in legal entities in order to determine if they are variable interests in Variable Interest Entities ("VIEs"). A VIE is defined as an entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A variable interest is an investment or other interest that will absorb portions of a VIE's expected losses or receive portions of the entity’s expected residual returns. A VIE is required to be consolidated by its primary beneficiary, which is defined as the party that (i) has the power to control the activities that most significantly impact the VIE’s economic performance and (ii) has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including the Company’s role in establishing the VIE and the Company’s ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company applies significant judgment and considers all of its economic interests, including debt and equity investments and other arrangements deemed to be variable interests, both explicit and implicit, in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

Cash and Cash Equivalents

Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, cash held in money market funds on an overnight basis and cash pledged as collateral with counterparties. Cash and securities deposited with clearing organizations are carried at cost, which approximates fair value. The Company also maintains collateral in the form of cash on margin with counterparties to its interest rate swaps and other derivatives. RCap is a member of various clearing organizations with which it maintains cash required to conduct its day-to-day clearance activities. Cash and securities deposited with clearing organizations and collateral held in the form of cash on margin with counterparties to its interest rate swaps and other derivatives totaled approximately $1.8 billion and $1.6 billion at March 31, 2015 and December 31, 2014, respectively.

Fair Value Measurements

Fair Value Measurements – The Company reports various financial instruments at fair value.  A complete discussion of the methodology utilized by the Company to estimate the fair value of certain financial instruments is included in these Notes to Consolidated Financial Statements.

Revenue Recognition

Revenue Recognition – The revenue recognition policy by asset class is discussed below.

Agency Mortgage-Backed Securities, Agency Debentures and Agency Credit Risk Transfer Securities – The Company invests primarily in mortgage pass-through certificates, collateralized mortgage obligations and other mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans and certificates 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”). These 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”). The Company also invests in Agency debentures issued by the Federal Home Loan Banks, Freddie Mac and Fannie Mae and securities in the Agency credit risk transfer (“CRT”) sector. The CRT sector is comprised of the risk sharing transactions issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. The securities issued in the CRT sector are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.

Agency mortgage-backed securities, Agency debentures and Agency CRT securities are referred to herein as “Investment Securities.” Although the Company generally intends to hold most of its Investment Securities until maturity, it may, from time to time, sell any of its Investment Securities as part of its overall management of its portfolio. Investment Securities are classified as available-for-sale and are reported at fair values estimated by management that are compared to independent sources for reasonableness, with unrealized gains and losses reported as a component of other comprehensive income (loss). Investment Securities transactions are recorded on trade date, including TBA securities that meet the regular-way securities scope exception from derivative accounting. Realized gains and losses on sales of Investment Securities are determined using the average cost method.

The Company elected the fair value option for Agency interest-only mortgage-backed securities. Interest-only securities and inverse interest-only securities are collectively referred to as “interest-only securities.” These Agency interest-only mortgage-backed securities represent the Company’s right to receive a specified proportion of the contractual interest flows of specific Agency mortgage-backed securities. Agency interest-only mortgage-backed securities are measured at fair value with changes in fair value recorded as Net unrealized gains (losses) on interest-only Agency mortgage-backed securities in the Company’s Consolidated Statements of Comprehensive Income (Loss). The interest-only securities are included in Agency mortgage-backed securities at fair value on the accompanying Consolidated Statements of Financial Condition.

Interest income from coupon payments is accrued based on the outstanding principal amounts of the Investment Securities and their contractual terms. Premiums and discounts associated with the purchase of the Investment Securities are amortized or accreted into interest income over the projected lives of the securities using the interest method. The Company uses a third-party supplied model to project prepayment speeds related to Investment Securities. The Company’s prepayment speed projections incorporate underlying loan characteristics (e.g., coupon, term, original loan size, original loan to value, etc.) and market data, including interest rate and home price index forecasts. Changes to model assumptions, including interest rates and other market data, as well as periodic revisions to the model will cause changes in the results. Adjustments are made for actual prepayment activity.

Corporate Debt

Corporate Debt– The Company’s investments in corporate debt are designated as held for investment, and are carried at their principal balance outstanding plus any premiums or discounts less allowances for loan losses. No allowance for loan losses was deemed necessary as of March 31, 2015 and December 31, 2014.

Equity Securities

Equity Securities– The Company may invest in equity securities that are classified as available-for-sale or trading.  Equity securities classified as available-for-sale are reported at fair value, based on market quotes, with unrealized gains and losses reported as a component of other comprehensive income (loss). Equity securities classified as trading are reported at fair value, based on market quotes, with unrealized gains and losses reported in the Consolidated Statements of Comprehensive Income (Loss) as Net gains (losses) on trading assets.  Dividends are recorded in earnings based on the declaration date.

Derivative Instruments

Derivative Instruments – The Company may use a variety of derivative instruments to economically hedge some of its exposure to market risks, including interest rate and prepayment risk. These instruments include, but are not limited to, interest rate swaps, options to enter into interest rate swaps (“swaptions”), TBA securities with the intent to net settle (“TBA derivatives”), options on TBA securities (“MBS options”) and U.S. Treasury and Eurodollar futures contracts. The Company may also invest in other types of mortgage derivatives such as interest-only securities and synthetic total return swaps, such as the Markit IOS Synthetic Total Return Swap Index. Derivatives are accounted for in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, which requires recognition of all derivatives as either assets or liabilities at fair value in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). None of the Company’s derivative transactions have been designated as hedging instruments for accounting purposes.

Some derivative agreements contain provisions that allow for netting or setting off by counterparty; however, the Company elected to present related assets and liabilities on a gross basis in the Consolidated Statements of Financial Condition.

Interest rate swap agreements - Interest rate swaps are the primary instrument used to mitigate interest rate risk. In particular, the Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. Swap agreements may or may not be cleared through a derivatives clearing organization (“DCO”). Uncleared swaps are fair valued using internal pricing models and compared to the counterparty market values. Centrally cleared swaps are fair valued using internal pricing models and compared to the DCO’s market values.

Interest rate swaptions - Interest rate swaptions are purchased/sold to mitigate the potential impact of increases or decreases in interest rates. Interest rate swaptions provide the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. They are not centrally cleared. The premium paid/received for interest rate swaptions is reported as an asset/liability in the Consolidated Statement of Financial Condition. The difference between the premium and the fair value of the swaption is reported in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss). If a swaption expires unexercised, the realized gain (loss) on the swaption would be equal to the premium received/paid. If the Company sells or exercises a swaption, the realized gain or loss on the swaption would be equal to the difference between the cash received or the fair value of the underlying interest rate swap received and the premium paid.

The fair value of interest rate swaptions is estimated using internal pricing models and compared to the counterparty market value.

TBA Dollar Rolls - TBA dollar roll transactions are accounted for as a series of derivative transactions. The fair value of TBA derivatives is based on similar methods used to value Agency mortgage-backed securities with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss).

MBS Options – MBS options are generally options on TBA contracts, which help manage mortgage market risks and volatility while providing the potential to enhance returns. MBS options are over-the-counter traded instruments and those written on current-coupon mortgage-backed securities are typically the most liquid. MBS options are fair valued using internal pricing models and compared to the counterparty market value at the valuation date with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss).

Futures Contracts- Futures contracts are derivatives that track the prices of specific assets. Short sales of futures contracts help mitigate the potential impact of changes in interest rates on the portfolio performance. The Company maintains margin accounts which are settled daily with Futures Commission Merchants (“FCMs”). The margin requirement varies based on the market value of the open positions and the equity retained in the account. Futures contracts are fair valued based on exchange pricing with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss).

Other-Than-Temporary Impairment

Other-Than-Temporary Impairment – Management evaluates available-for-sale securities for other-than-temporary 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), while the balance of losses related to other factors will be recognized as a component of other comprehensive income (loss).  There was no other-than-temporary impairment recognized for the quarters ended March 31, 2015 and 2014.

Loan Loss Reserves

Loan Loss Reserves – To determine if loan loss allowances are required on investments in corporate debt, the Company reviews the monthly and/or quarterly financial statements of the borrowers to verify they meet the covenants of the loan documents.  If based on the financial review it is deemed probable that the Company will be unable to collect contractual principal and interest amounts (e.g. financial performance and delinquencies), a loan loss provision would be recorded. No allowance for loan losses was deemed necessary as of March 31, 2015 and December 31, 2014.

Repurchase Agreements

Repurchase Agreements – The Company finances the acquisition of a significant portion of its Agency mortgage-backed securities with repurchase agreements. The Company examines each of the specified criteria in ASC 860, Transfers and Servicing, at the inception of each transaction and has determined that each of the financings meet the specified criteria in this guidance.

Reverse repurchase agreements and repurchase agreements with the same counterparty and the same maturity are presented net in the Consolidated Statements of Financial Condition when the terms of the agreements meet the criteria to permit netting. The Company reports cash flows on repurchase agreements as financing activities in the Consolidated Statements of Cash Flows. The Company reports cash flows on reverse repurchase and repurchase agreements entered into by RCap as operating activities in the Consolidated Statements of Cash Flows.

Goodwill and Intangible Assets

Goodwill and Intangible Assets–The Company’s acquisitions of FIDAC and CreXus were accounted for using the acquisition method. Under the acquisition method, net assets and results of operations of acquired companies are included in the consolidated financial statements from the date of acquisition. The purchase prices of FIDAC and CreXus were allocated to the assets acquired, including identifiable intangible assets, and the liabilities assumed based on their estimated fair values at the date of acquisition. The excess of purchase price over the fair value of the net assets acquired was recognized as goodwill.

The Company tests goodwill for impairment on an annual basis and at interim periods when events or circumstances may make it more likely than not that an impairment has occurred. If a qualitative analysis indicates that there may be an impairment, a quantitative analysis is performed. The quantitative impairment test for goodwill utilizes a two-step approach, whereby the Company compares the carrying value of each identified reporting unit to its fair value. If the carrying value of the reporting unit is greater than its fair value, the second step is performed, where the implied fair value of goodwill is compared to its carrying value. The Company recognizes an impairment charge for the amount by which the carrying amount of goodwill exceeds its fair value.

Intangible assets with an estimated useful life are amortized over their expected useful lives.

Convertible Senior Notes

Convertible Senior Notes – The Company records the 4% Convertible Senior Notes and 5% Convertible Senior Notes (collectively, the “Convertible Senior Notes”) at their contractual amounts, adjusted by the effects of a beneficial conversion feature and a contingent beneficial conversion feature (collectively, the “Conversion Features”).  The Conversion Features’ intrinsic value is included in “Additional paid-in capital” on the Company’s Consolidated Statements of Financial Condition and reduces the recorded liability amount associated with the Convertible Senior Notes. A Conversion Feature may be recognized as a result of adjustments to the conversion price for dividends declared to common stockholders.

Stock Based Compensation

Stock Based Compensation – The Company is required to measure and recognize in the consolidated financial statements the compensation cost relating to share-based payment transactions. The Company recognizes compensation expense on a straight-line basis over the requisite service period for the entire award.

Income Taxes

Income Taxes – The Company has elected to be taxed as a REIT and intends to comply with the provisions of the Code, with respect thereto.  Accordingly, the Company will not be subject to federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and stock ownership tests are met.  The Company and certain of its direct and indirect subsidiaries, including FIDAC, RCap and certain subsidiaries of ACREG, have made separate joint elections to treat these subsidiaries as taxable REIT subsidiaries (“TRSs”).  As such, each of these TRSs is taxable as a domestic C corporation and subject to federal, state and local income taxes based upon their taxable income.

The provisions of ASC 740, Income Taxes, (“ASC 740”) clarify the accounting for uncertainty in income taxes recognized in financial statements and prescribe a recognition threshold and measurement attribute for uncertain tax positions taken or expected to be taken on a tax return. ASC 740 also requires that interest and penalties related to unrecognized tax benefits be recognized in the financial statements. The Company does not have any unrecognized tax benefits that would affect its financial position.  Thus, no accruals for penalties and interest were necessary as of March 31, 2015 and December 31, 2014.

Use of Estimates

Use of Estimates–The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Commercial Real Estate Investments

Commercial Real Estate Investments

Commercial Real Estate Loans – The Company's commercial real estate loans are comprised of fixed-rate and adjustable-rate loans. Commercial real estate loans are designated as held for investment and are originated or purchased by the Company and carried at their outstanding principal balance, net of unamortized origination fees and costs, premiums or discounts, less a reserve for estimated losses if necessary. The difference between the principal amount of a loan and proceeds at acquisition is recorded as either a discount or premium. Origination fees and costs, premiums and discounts are amortized or accreted into interest income over the estimated life of the loan. The Company has also elected the fair value option for multi-family mortgage loans held in a securitization trust that it was required to consolidate. Interest income is recognized as earned determined by the stated coupon and outstanding principal balance. See “Commercial Real Estate Investments” footnote for additional information.

Preferred Equity Interests Held for Investment – Preferred equity interests are designated as held for investment and are carried at their outstanding principal balance, net of unamortized origination fees and costs, premiums or discounts, less a reserve for estimated losses if necessary. Origination fees and costs, premiums and discounts are amortized or accreted into interest income over the estimated life of the investment.

Allowance for Losses–The Company evaluates the need for a loss reserve on its commercial real estate loans and preferred equity interests held for investment (collectively referred to as “CRE Debt and Preferred Equity Investments”). A provision for losses related to CRE Debt and Preferred Equity Investments, including those accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, may be established when it is probable the Company will not collect amounts contractually due or all amounts previously estimated to be collectable. Management assesses the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. Depending on the expected recovery of its investment, the Company considers the estimated net recoverable value of the CRE Debt and Preferred Equity Investments as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive landscape where the borrower conducts business. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date.

The Company may be exposed to various levels of credit risk depending on the nature of its investments and the nature of the assets underlying the investments and credit enhancements, if any, supporting its assets. The Company’s core investment process includes procedures related to the initial approval and periodic monitoring of credit risk and other risks associated with each investment. The Company’s investment underwriting procedures include evaluation of the underlying borrowers’ ability to manage and operate their respective properties. Management reviews loan-to-value metrics upon either the origination or the acquisition of a new investment but generally does not update the loan-to-value metrics in the course of quarterly surveillance. Management generally reviews the most recent financial information produced by the borrower, which may include, but is not limited to, net operating income (“NOI”), debt service coverage ratios, property debt yields (net cash flow or NOI divided by the amount of outstanding indebtedness), loan per unit and rent rolls relating to each of the Company’s CRE Debt and Preferred Equity Investments, and may consider other factors management deems important. Management also reviews market pricing to determine each borrower’s ability to refinance their respective assets at the maturity of each loan. Management also reviews economic trends, both macro as well as those directly affecting the property, and the supply and demand of competing projects in the sub-market in which each subject property is located.

In connection with the quarterly surveillance review process, loans are assigned an internal rating of “Performing”, “Watch List”, “Defaulted-Recovery” or “Impaired”. Loans that are deemed to be Performing meet all present contractual obligations and do not qualify for Watch List designation. Watch List loans are defined as Performing loans that are significantly lagging expectations and/or default may be considered probable. Defaulted–Recovery loans are currently in default; however full recovery of contractual principal and interest is expected. Impaired loans may or may not be in default, impairment is anticipated, and a loan loss provision has been recognized to reflect expected losses.

Investments in Commercial Real Estate– Investments in commercial real estate are carried at historical cost less accumulated depreciation. Historical cost includes all costs necessary to bring the asset to the condition and location necessary for its intended use, including financing during the construction period. Costs directly related to acquisitions deemed to be business combinations are expensed. Ordinary repairs and maintenance which are not reimbursed by tenants are expensed as incurred. Major replacements and improvements that extend the useful life of the asset are capitalized and depreciated over their useful life.

Investments in commercial real estate are depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category                   Term

Building                     31-40 years

Site improvements     1-10 years

The Company follows the acquisition method of accounting for acquisitions of operating real estate held for investment, where the purchase price of operating real estate is allocated to tangible assets such as land, building, site improvements and other identified intangibles such as above/below market and in-place leases.

The Company evaluates whether real estate acquired in connection with a foreclosure (“REO”) or UCC/deed in lieu of foreclosure (herein collectively referred to as a foreclosure) constitutes a business and whether business combination accounting is applicable. Upon foreclosure of a property, the excess of the carrying value of a loan, if any, over the estimated fair value of the property, less estimated costs to sell, is charged to provision for loan losses.

Investments in commercial real estate, including REO, which do not meet the criteria to be classified as held for sale, are separately presented in the Consolidated Statements of Financial Condition as held for investment. Real estate held for sale is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. Once a property is determined to be held for sale, depreciation is no longer recorded. In addition, if considered material to the overall consolidated financial statements, the results of operations are reclassified to income (loss) from discontinued operations in the Consolidated Statements of Comprehensive Income (Loss).

The Company's real estate portfolio (REO and real estate held for investment) is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property's value is considered impaired if the Company's estimate of the aggregate future undiscounted cash flows to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers U.S. macroeconomic factors, including real estate sector conditions, together with asset specific and other factors. To the extent impairment has occurred and is considered to be other than temporary, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property.

Revenue Recognition – Commercial Real Estate Investments - Interest income is accrued based on the outstanding principal amount of the CRE Debt and Preferred Equity Investments and their contractual terms. Premiums and discounts associated with the purchase of CRE Debt and Preferred Equity Investments are amortized or accreted into interest income over the projected lives of the CRE Debt and Preferred Equity Investments using the interest method.

Broker Dealer Activities

Broker Dealer Activities

In January 2014, RCap ceased its trading activity in U.S. Treasury securities, derivatives and securities borrowed and loaned transactions.

Reverse Repurchase Agreements

Reverse Repurchase Agreements – RCap enters into reverse repurchase agreements as part of its matched book trading activity. Reverse repurchase agreements are recorded on settlement date at the contract amount and are collateralized by mortgage-backed or other securities. Margin calls are made by RCap as necessary based on the daily valuation of the underlying collateral as compared to the contract price. RCap generates income from the spread between what is earned on the reverse repurchase agreements and what is paid on the matched repurchase agreements. RCap’s policy is to obtain possession of collateral with a market value in excess of the principal amount loaned under reverse repurchase agreements. To ensure that the market value of the underlying collateral remains sufficient, collateral is valued daily, and RCap will require counterparties to deposit additional collateral, when necessary. All reverse repurchase activities are transacted under master repurchase agreements that give RCap the right, in the event of default, to liquidate collateral held and in some instances, to offset receivables and payables with the same counterparty.

Securities Borrowed and Loaned Transactions

Securities Borrowed and Loaned Transactions – RCap recorded securities borrowed and loaned transactions as collateralized financings.   Securities borrowed transactions required RCap to provide the counterparty with collateral in the form of cash, or other securities. RCap received collateral in the form of cash or other securities for securities loaned transactions.  RCap monitored the fair value of the securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary.  Securities borrowed and securities loaned transactions were recorded at contract value.  For these transactions, the rebates accrued by RCap were recorded as interest income or expense.

U.S. Treasury Securities

U.S. Treasury Securities – RCap traded in U.S. Treasury securities for its proprietary portfolio, which consisted of long and short positions on U.S Treasury notes and bonds. U.S. Treasury securities were classified as trading investments and were recorded on the trade date at cost. Changes in fair value were reflected in Net gains (losses) on trading assets in the Company’s Consolidated Statement of Comprehensive Income (Loss). Interest income or expense on U.S. Treasury notes and bonds was accrued based on the outstanding principal amount of those investments and their stated terms.

Derivatives- RCap entered primarily into U.S. Treasury, Eurodollar, federal funds, German government and U.S. equity index and currency futures and options contracts. RCap maintained a margin account which was settled daily with FCMs. Changes in the unrealized gains or losses on the futures and options contracts as well as any foreign exchange gains and losses were reflected in Net gains (losses) on trading assets in the Company’s Consolidated Statements of Comprehensive Income (Loss).  Unrealized gains (losses) were excluded from net income (loss) in arriving at cash flows from operating activities in the Consolidated Statements of Cash Flows.

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Mortgage Loans Payable (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015		Dec. 31, 2014
Mortgage Loans on Real Estate [Line Items]
Mortgage Carrying Value	$ 146,670		$ 146,553
Mortgage Principal	146,361		146,430
Joint Venture [Member]
Mortgage Loans on Real Estate [Line Items]
Mortgage Carrying Value	104,079		103,950
Mortgage Principal	103,950		103,950
Interest rate	4.03%		4.03%
Fixed/Floating Rate	Fixed
Maturity Date	Dec. 06, 2024		Dec. 06, 2024
Priority	First liens
Three Thousand One Hundred South Mall [Member]
Mortgage Loans on Real Estate [Line Items]
Mortgage Carrying Value	12,365		12,350
Mortgage Principal	12,350		12,350
Interest rate	4.01%		4.01%
Fixed/Floating Rate	Fixed
Maturity Date	Jun. 06, 2019		Jun. 06, 2019
Priority	First liens
Twelve Thousand One Hundred Fifty-One Jefferson [Member]
Mortgage Loans on Real Estate [Line Items]
Mortgage Carrying Value	11,074		11,025
Mortgage Principal	11,025		11,025
Interest rate	3.58%		3.58%
Fixed/Floating Rate	Fixed
Maturity Date	Sep. 06, 2019		Sep. 06, 2019
Priority	First liens
ARIZONA
Mortgage Loans on Real Estate [Line Items]
Mortgage Carrying Value	16,649		16,709
Mortgage Principal	16,548		16,600
Interest rate	3.50%		3.50%
Fixed/Floating Rate	Fixed
Maturity Date	Jan. 01, 2017		Jan. 01, 2017
Priority	First liens
NEVADA
Mortgage Loans on Real Estate [Line Items]
Mortgage Carrying Value	2,503		2,519
Mortgage Principal	$ 2,488		$ 2,505
Interest rate	3.45%		3.45%
Fixed/Floating Rate	Floating	[1]
Maturity Date	Mar. 29, 2017		Mar. 29, 2017
Priority	First liens

[1] Rate is fixed via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).

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Agency Mortgage-Backed Securities - Unrealized Loss Position (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015 Securities	Dec. 31, 2014 Securities
Unrealized Loss Position For:
Estimated Fair Value		$ 39,788,793
Gross Unrealized Losses		(750,270)
Number of Securities	439	507
Available For Sale Securities, Continuous Unrealized Loss Positions, Less Than 12 Months
Unrealized Loss Position For:
Estimated Fair Value		4,613,599
Gross Unrealized Losses		(36,959)
Number of Securities	207	205
Available For Sale Securities, Continuous Unrealized Loss Positions, Greater Than 12 Months
Unrealized Loss Position For:
Estimated Fair Value		35,175,194
Gross Unrealized Losses		$ (713,311)
Number of Securities	232	302

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AGENCY MORTGAGE-BACKED SECURITIES (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of Available-for-sale Securities Reconciliation

The following tables present the Company’s available-for-sale Agency mortgage-backed securities portfolio as of March 31, 2015 and December 31, 2014, which were carried at their fair value:

March 31, 2015	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)
Principal outstanding	$	23,214,759		$	40,662,639		$	92,317		$	63,969,715
Unamortized premium		1,814,818			2,857,467			19,773			4,692,058
Unamortized discount		(7,489	)		(7,549	)		(347	)		(15,385	)
Amortized cost		25,022,088			43,512,557			111,743			68,646,388
Gross unrealized gains		345,566			759,828			8,374			1,113,768
Gross unrealized losses		(160,483	)		(208,764	)		(2,908	)		(372,155	)
Estimated fair value	$	25,207,171		$	44,063,621		$	117,209		$	69,388,001
	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	65,176,426		$	3,469,962			68,646,388
Gross unrealized gains		971,043			142,725			1,113,768
Gross unrealized losses		(355,330	)		(16,825	)		(372,155	)
Estimated fair value	$	65,792,139		$	3,595,862		$	69,388,001
December 31, 2014	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)
Principal outstanding	$	27,906,221		$	47,979,778		$	97,000		$	75,982,999
Unamortized premium		1,951,798			3,396,368			20,560			5,368,726
Unamortized discount		(8,985	)		(8,857	)		(358	)		(18,200	)
Amortized cost		29,849,034			51,367,289			117,202			81,333,525
Gross unrealized gains		313,761			660,230			8,010			982,001
Gross unrealized losses		(322,094	)		(424,800	)		(3,376	)		(750,270	)
Estimated fair value	$	29,840,701		$	51,602,719		$	121,836		$	81,565,256
	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	78,250,313		$	3,083,212		$	81,333,525
Gross unrealized gains		847,615			134,386			982,001
Gross unrealized losses		(732,533	)		(17,737	)		(750,270	)
Estimated fair value	$	78,365,395		$	3,199,861		$	81,565,256

Schedule of Agency Mortgage Backed Securities by Estimated Weighted Average Life Classification

The following table summarizes the Company’s Agency mortgage-backed securities as of March 31, 2015 and December 31, 2014, according to their estimated weighted average life classifications:

	March 31, 2015				December 31, 2014
Weighted Average Life	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
	(dollars in thousands)
Less than one year	$	27,752	$	27,847	$	43,248	$	42,831
Greater than one year through five years		46,648,676		46,120,064		42,222,114		41,908,586
Greater than five years through ten years		22,520,713		22,308,291		39,018,833		39,098,352
Greater than ten years		190,860		190,186		281,061		283,756
Total	$	69,388,001	$	68,646,388	$	81,565,256	$	81,333,525

Schedule of Continuous Unrealized Loss Position

The following table presents the gross unrealized losses and estimated fair value of the Company’s Agency mortgage-backed securities by length of time that such securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014.

	March 31, 2015							December 31, 2014
	Estimated Fair Value		Gross Unrealized Losses			Number of Securities		Estimated Fair Value		Gross Unrealized Losses			Number of Securities
	(dollars in thousands)
Less than 12 Months		2,595,905		(54,883	)		207		4,613,599		(36,959	)		205
12 Months or More		25,474,816		(317,272	)		232		35,175,194		(713,311	)		302
Total		28,070,721		(372,155	)		439		39,788,793		(750,270	)		507

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COMMERCIAL REAL ESTATE INVESTMENTS (Tables)

3 Months Ended

Mar. 31, 2015

Commercial Real Estate Investments

At March 31, 2015 and December 31, 2014, commercial real estate investments held for investment were composed of the following:

CRE Debt and Preferred Equity Investments

	March 31, 2015							December 31, 2014
	Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)			Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)
	(dollars in thousands)
Senior mortgages		431,872		430,228		28.7	%		384,304		383,895		25.2	%
Senior securitized mortgages(3)		361,861		361,179		24.1	%		399,541		398,634		26.3	%
Mezzanine loans		495,305		495,405		33.0	%		522,474		522,731		34.4	%
Preferred equity		213,213		211,594		14.2	%		214,653		212,905		14.1	%
Total	$	1,502,251	$	1,498,406		100.0	%	$	1,520,972	$	1,518,165		100.0	%

  (1) Carrying value includes unamortized origination fees of $4.0 million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively.

  (2) Based on outstanding principal.

  (3) Assets of consolidated VIEs.

	March 31, 2015
	Senior Mortgages			Senior Securitized Mortgages(1)			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Beginning balance	$	383,895		$	398,634		$	522,731		$	212,905		$	1,518,165
Originations & advances (principal)		47,645			-			16,043			-			63,688
Principal payments		(76	)		(37,680	)		(43,212	)		(1,441	)		(82,409	)
Sales (principal)		-			-			-			-			-
Amortization & accretion of (premium) discounts		(36	)		-			(31	)		25			(42	)
Net (increase) decrease in origination fees		(1,950	)		-			(236	)		-			(2,186	)
Amortization of net origination fees		750			225			110			105			1,190
Transfers		-			-			-			-			-
Allowance for loan losses		-			-			-			-			-
Net carrying value	$	430,228		$	361,179		$	495,405		$	211,594		$	1,498,406
(1) Assets of consolidated VIE.

	December 31, 2014
	Senior Mortgages			Senior Securitized Mortgages(1)			Subordinate Notes			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Beginning balance	$	667,299		$	-		$	41,408		$	628,102		$	247,160		$	1,583,969
Originations & advances (principal)		127,112			-			-			122,742			-			249,854
Principal payments		(12,756	)		-			(41,059	)		(227,151	)		(35,116	)		(316,082	)
Sales (principal)		-			-			-			-			-			-
Amortization & accretion of (premium) discounts		(138	)		-			(349	)		(1,093	)		108			(1,472	)
Net (increase) decrease in origination fees		(2,427	)		(116	)		-			(478	)		-			(3,021	)
Amortization of net origination fees		2,783			772			-			609			753			4,917
Transfers		(397,978	)		397,978			-			-			-			-
Allowance for loan losses		-			-			-			-			-			-
Net carrying value	$	383,895		$	398,634		$	-		$	522,731		$	212,905		$	1,518,165
(1) Assets of consolidated VIE.

Internal Loan and Preferred Equity Ratings

Internal CRE Debt and Preferred Equity Investment Ratings

	March 31, 2015
			Percentage of CRE Debt and			Internal Ratings
Investment Type	Outstanding Principal		Preferred Equity Portfolio			Performing		Watch List(2)		Defaulted-Recovery(3)			Impaired
	(dollars in thousands)
Senior mortgages	$	431,872		28.7	%	$	188,899	$	230,000	$	12,973		$	-
Senior securitized mortgages(1)		361,861		24.1	%		352,611		9,250		-			-
Mezzanine loans		495,305		33.0	%		495,305		-		-			-
Preferred equity		213,213		14.2	%		162,213		51,000		-			-
	$	1,502,251		100.0	%	$	1,199,028	$	290,250	$	12,973		$	-
(1) Assets of consolidated VIE
(2) Includes a $230.0 million loan maturing on June 30, 2015 with a risk that the borrower will be  unable to refinance the outstanding principal amount before the maturity date, but full recovery is expected.
(3) Related to one loan on non-accrual status.
	December 31, 2014
			Percentage of CRE Debt and			Internal Ratings
Investment Type	Outstanding Principal		Preferred Equity Portfolio			Performing		Watch List		Defaulted-Recovery			Impaired
	(dollars in thousands)
Senior mortgages	$	384,304		25.2	%	$	371,331	$	-	$	12,973	(2)	$	-
Senior securitized mortgages(1)		399,541		26.3	%		390,291		9,250		-			-
Subordinate notes		-		0.0	%		-		-		-			-
Mezzanine loans		522,474		34.4	%		522,474		-		-			-
Preferred equity		214,653		14.1	%		214,653		-		-			-
	$	1,520,972		100.0	%	$	1,498,749	$	9,250	$	12,973		$	-
(1) Assets of consolidated VIE.
(2) Relates to one loan on nonaccrual status.

Summary of Acquisitions of Real Estate Held for Investment

The following table summarizes acquisitions of real estate held for investment in 2014:

Date of Acquisition	Type	Location	Purchase Price		Remaining Lease Term (Years) (1)
(dollars in thousands)
April 2014	Single-tenant retail	Tennessee	$	19,000		8
June 2014	Multi-tenant retail	Virginia	$	17,743		7
November 2014	Multi-tenant retail	New York, Ohio, Georgia	$	154,000		4.6

Aggregate Allocation of Purchase Price

The following table presents the aggregate allocation of the purchase price:

	Tennessee			Virginia			Joint Venture			Total
	(dollars in thousands)
Purchase Price Allocation:
Land	$	3,503		$	6,394		$	21,581		$	31,478
Buildings		11,960			10,862			97,133			119,955
Site improvements		1,349			1,184			12,952			15,485
Tenant Improvements		-			-			9,601			9,601
Real estate held for investment		16,812			18,440			141,267			176,519
Intangible assets (liabilities):
Leasehold intangible assets		4,288			3,218			22,555			30,061
Above market lease		-			-			5,463			5,463
Below market lease value		(2,100	)		(3,915	)		(15,285	)		(21,300	)
Total purchase price	$	19,000		$	17,743		$	154,000		$	190,743

Total Commercial Real Estate Held for Investment

Total Commercial Real Estate Investment at amortized cost

	March 31, 2015			December 31, 2014
	(dollars in thousands)
Real estate held for investment, at amortized cost
Land	$	38,117		$	38,117
Buildings and improvements		176,139			176,139
Subtotal		214,256			214,256
Less: accumulated depreciation		(7,047	)		(4,224	)
Total real estate held for investment at amortized cost, net		207,209			210,032
Total investment in commercial real estate, net		207,209			210,032
Net carrying value of CRE Debt and Preferred Equity Investments		1,498,406			1,518,165
Total commercial real estate investments, at amortized cost	$	1,705,615		$	1,728,197

Minimum Future Rentals on Noncancelable Leases

Approximate future minimum rents to be received over the next five years and thereafter for non-cancelable operating leases in effect at March 31, 2015 for the consolidated properties, including consolidated joint venture properties are as follows (in thousands):

	March 31, 2015
	(dollars in thousands)
2015 (remaining)	$	15,495
2016		18,684
2017		15,977
2018		13,620
2019		11,301
Later years		51,241
	$	126,318

Mortgage loans payable

Mortgage loans payable as of March 31, 2015 and December 31, 2014, were as follows:

March 31, 2015
Property	Mortgage Carrying Value		Mortgage Principal		Interest Rate			Fixed/Floating Rate	Maturity Date	Priority
			(dollars in thousands)
Joint Venture	$	103,950	$	103,950		4.03	%	Fixed	12/6/2024	First liens
Tennessee		12,350		12,350		4.01	%	Fixed	6/6/2019	First liens
Virginia		11,025		11,025		3.58	%	Fixed	9/6/2019	First liens
Arizona		16,644		16,548		3.50	%	Fixed	1/1/2017	First liens
Nevada		2,501		2,488		3.45	%	Floating (1)	3/29/2017	First liens
	$	146,470	$	146,361
(1) Rate is fixed via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).

December 31, 2014
Property	Mortgage Carrying Value		Mortgage Principal		Interest Rate			Fixed/Floating Rate	Maturity Date	Priority
			(dollars in thousands)
Joint Venture	$	103,950	$	103,950		4.03	%	Fixed	12/6/2024	First liens
Tennessee		12,350		12,350		4.01	%	Fixed	6/6/2019	First liens
Virginia		11,025		11,025		3.58	%	Fixed	9/6/2019	First liens
Arizona		16,709		16,600		3.50	%	Fixed	1/1/2017	First liens
Nevada		2,519		2,505		3.45	%	Floating (1)	3/29/2017	First liens
	$	146,553	$	146,430
(1) Rate is fixed via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).

Future Mortgage Loan Principal Payments

The following table details future mortgage loan principal payments as of March 31, 2015:

	Mortgage Loan Principal Payments
	(dollars in thousands)
2015 (remaining)	$	291
2016		399
2017		18,346
2018		-
2019		23,375
Later years		103,950
	$	146,361

Geographic Concentrations of Credit Risk Exceeding 5% of Total Loan Balances

The geographic concentrations of credit risk exceeding 5% of the total loan balances related to the trusts as of March 31, 2015 follows:

Securitized loans at fair value Geographic Concentration of Credit Risk
Property Location	Principal Balance		% of Balance
	(dollars in thousands)
North Carolina	$	516,150		37.9	%
Texas		339,014		24.9	%
Ohio		197,455		14.5	%
Florida		156,836		11.5	%

FREMF Trust

Statement of financial condition of FREMF Trust Reflected the Consolidated Statements of Financial Condition

The statement of financial condition of the FREMF Trust that is reflected in the Company’s Consolidated Statements of Financial Condition at March 31, 2015 follows:

	March 31, 2015
	(dollars in thousands)
Securitized loans at fair value	$	1,370,903
Accrued interest receivable		2,431
Total assets	$	1,373,334
Liabilities and equity
Securitized debt (non-recourse) at fair value	$	1,268,809
Accrued interest payable		2,204
	$	1,271,013
Equity		102,321
Total liabilities and equity	$	1,373,334

Statement of Comprehensive Income (Loss) of FREMF Trust Reflected the Consolidated Statements of Comprehensive Income (Loss)

The statement of comprehensive income (loss) of the FREMF Trust that is reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss) at March 31, 2015 follows:

	For the period February 25, 2015 to March 31, 2015
	(dollars in thousands)
Net interest income:
Interest income	$	2,742
Interest expense		(1,606	)
Net interest income		1,136
Other income:
Unrealized gain (loss) on financial instruments at fair value (1)		3
Transaction and acquistion expenses		810
Other income		813
General and administration expenses		96
Net income	$	227
(1) Included in Other income (loss).

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DESCRIPTION OF BUSINESS

3 Months Ended

Mar. 31, 2015

DESCRIPTION OF BUSINESS

1. DESCRIPTION OF BUSINESS

Annaly Capital Management, Inc. (the “Company” or “Annaly”) is a Maryland corporation that commenced operations on February 18, 1997. The Company owns a portfolio of real estate related investments, including mortgage pass-through certificates, collateralized mortgage obligations, Agency debentures, other securities representing interests in or obligations backed by pools of mortgage loans, commercial real estate assets and corporate loans. The Company’s principal business objective is to generate net income for distribution to its stockholders from its investments. The Company is externally managed by Annaly Management Company LLC (the “Manager”).

The Company’s business operations are primarily comprised of the following:

– Annaly, the parent company, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments.

– Annaly Commercial Real Estate Group, Inc. (“ACREG,” formerly known as CreXus Investment Corp. (“CreXus”)), a wholly-owned subsidiary that was acquired during the second quarter of 2013 which specializes in acquiring, financing and managing commercial real estate loans and other commercial real estate debt, commercial mortgage-backed securities and other commercial real estate-related assets.

– RCap Securities, Inc. (“RCap”), a wholly-owned subsidiary which operates as a broker-dealer, and is a member of the Financial Industry Regulatory Authority (“FINRA”).

– Fixed Income Discount Advisory Company (“FIDAC”), a wholly-owned subsidiary which manages an affiliated real estate investment trust (“REIT”) for which it earns fee income.

– Annaly Middle Market Lending LLC (“MML”) (formerly known as Charlesfort Capital Management LLC), a wholly-owned subsidiary which engages in corporate middle market lending transactions.

The Company has elected to be taxed as a REIT as defined under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder (the “Code”).

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FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

The following table presents the estimated fair values of financial instruments measured at fair value on a recurring basis.

	Level 1		Level 2		Level 3		Total
March 31, 2015	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	69,388,001	$	-	$	69,388,001
Agency debentures		-		995,408		-		995,408
Agency CRT securities		-		108,337		-		108,337
Commercial real estate debt investments		-		1,515,903		-		1,515,903
Investment in affiliate		141,246		-		-		141,246
Interest rate swaps		-		25,908		-		25,908
Other derivatives		-		113,503		-		113,503
Total Assets	$	141,246	$	72,147,060	$	-	$	72,288,306
Liabilities:
Securitized debt of consolidated VIEs	$	-	$	1,268,809	$	-	$	1,268,809
Interest rate swaps		-		2,025,170		-		2,025,170
Other derivatives		61,778		-		-		61,778
Total Liabilities	$	61,778	$	3,293,979	$	-	$	3,355,757
	Level 1		Level 2		Level 3		Total
December 31, 2014	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	81,565,256	$	-	$	81,565,256
Agency debentures		-		1,368,350		-		1,368,350
Investment in affiliate		143,045		-		-		143,045
Interest rate swaps		-		75,225		-		75,225
Other derivatives		117		5,382		-		5,499
Total Assets	$	143,162	$	83,014,213	$	-	$	83,157,375
Liabilities:
Interest rate swaps	$	-	$	1,608,286	$	-	$	1,608,286
Other derivatives		3,769		4,258		-		8,027
Total Liabilities	$	3,769	$	1,612,544	$	-	$	1,616,313

Schedule of Estimated Fair Value for All Financial Assets and Liabilities

The following table summarizes the estimated fair value for financial assets and liabilities as of March 31, 2015 and December 31, 2014.

		March 31, 2015				December 31, 2014
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:	(dollars in thousands)
Cash and cash equivalents	1	$	1,920,326	$	1,920,326	$	1,741,244	$	1,741,244
Reverse repurchase agreements	1		100,000		100,000		100,000		100,000
Agency mortgage-backed securities	2		69,388,001		69,388,001		81,565,256		81,565,256
Agency debentures	2		995,408		995,408		1,368,350		1,368,350
Agency CRT securities	2		108,337		108,337		-		-
Commercial real estate debt investments, at fair value	2		1,515,903		1,515,903		-		-
Investment in affiliate	1		141,246		141,246		143,045		143,045
Commercial real estate debt and preferred equity, held for investment	3		1,498,406		1,513,878		1,518,165		1,528,444
Corporate debt	2		227,830		228,012		166,464		166,056
Interest rate swaps	2		25,908		25,908		75,225		75,225
Other derivatives	1,2		113,503		113,503		5,499		5,499
Financial liabilities:
Repurchase agreements	1,2	$	60,477,378	$	60,691,054	$	71,361,926	$	71,587,222
Convertible Senior Notes	1		749,512		752,325		845,295		863,470
Securitized debt of consolidated VIE	2		1,491,829		1,492,102		260,700		262,061
Mortgages payable	2		146,470		150,765		146,553		146,611
Participation sold	3		13,589		13,620		13,693		13,655
Interest rate swaps	2		2,025,170		2,025,170		1,608,286		1,608,286
Other derivatives	1,2		61,778		61,778		8,027		8,027

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Issued and Outstanding Stock Options (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Long-Term Stock Incentive Plans:
Options outstanding at the beginning of period	2,259,335	3,581,752
Granted	0	0
Exercised	0	0
Forfeited	(8,799)	(353,417)
Expired	0	0
Options outstanding at the end of period	2,250,536	3,228,335
Options exercisable at the end of the period	2,250,536	3,228,335
Options outstanding at the beginning of period, weighted average exercise price	$ 15.35	$ 15.44
Granted	$ 0	$ 0
Exercised	$ 0	$ 0
Forfeited	$ 14.80	$ 14.94
Expired	$ 0	$ 0
Options outstanding at the end of period, weighted average exercise price	$ 15.35	$ 15.49
Options exercisable at the end of the period, exercise price	$ 15.35	$ 15.49

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Summary of Estimated Useful Lives of Assets (Detail)	3 Months Ended
	Mar. 31, 2015
Building | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful lives of assets	31 years
Building | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful lives of assets	40 years
Site Improvements | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful lives of assets	1 year
Site Improvements | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful lives of assets	10 years

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Aggregate Allocation of Purchase Price (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
Transaction to Real Estate Investments [Line Items]
Total purchase price	$ 190,743
Real Estate Investment
Transaction to Real Estate Investments [Line Items]
Total purchase price	176,519
TENNESSEE
Transaction to Real Estate Investments [Line Items]
Total purchase price	19,000
TENNESSEE | Real Estate Investment
Transaction to Real Estate Investments [Line Items]
Total purchase price	16,812
VIRGINIA
Transaction to Real Estate Investments [Line Items]
Total purchase price	17,743
VIRGINIA | Real Estate Investment
Transaction to Real Estate Investments [Line Items]
Total purchase price	18,440
Land
Transaction to Real Estate Investments [Line Items]
Total purchase price	31,478
Land | TENNESSEE
Transaction to Real Estate Investments [Line Items]
Total purchase price	3,503
Land | VIRGINIA
Transaction to Real Estate Investments [Line Items]
Total purchase price	6,394
Building
Transaction to Real Estate Investments [Line Items]
Total purchase price	119,955
Building | TENNESSEE
Transaction to Real Estate Investments [Line Items]
Total purchase price	11,960
Building | VIRGINIA
Transaction to Real Estate Investments [Line Items]
Total purchase price	10,862
Site Improvements
Transaction to Real Estate Investments [Line Items]
Total purchase price	15,485
Site Improvements | TENNESSEE
Transaction to Real Estate Investments [Line Items]
Total purchase price	1,349
Site Improvements | VIRGINIA
Transaction to Real Estate Investments [Line Items]
Total purchase price	1,184
Tenant Improvements [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	9,601
Leaseholds and Leasehold Improvements [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	30,061
Leaseholds and Leasehold Improvements [Member] | TENNESSEE
Transaction to Real Estate Investments [Line Items]
Total purchase price	4,288
Leaseholds and Leasehold Improvements [Member] | VIRGINIA
Transaction to Real Estate Investments [Line Items]
Total purchase price	3,218
Above Market Lease [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	5,463
Below Market Lease Liabilities [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	21,300
Below Market Lease Liabilities [Member] | TENNESSEE
Transaction to Real Estate Investments [Line Items]
Total purchase price	2,100
Below Market Lease Liabilities [Member] | VIRGINIA
Transaction to Real Estate Investments [Line Items]
Total purchase price	3,915
Joint Venture Agreement [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	154,000
Joint Venture Agreement [Member] | Real Estate Investment
Transaction to Real Estate Investments [Line Items]
Total purchase price	141,267
Joint Venture Agreement [Member] | Land
Transaction to Real Estate Investments [Line Items]
Total purchase price	21,581
Joint Venture Agreement [Member] | Building
Transaction to Real Estate Investments [Line Items]
Total purchase price	97,133
Joint Venture Agreement [Member] | Site Improvements
Transaction to Real Estate Investments [Line Items]
Total purchase price	12,952
Joint Venture Agreement [Member] | Tenant Improvements [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	9,601
Joint Venture Agreement [Member] | Leaseholds and Leasehold Improvements [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	22,555
Joint Venture Agreement [Member] | Above Market Lease [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	5,463
Joint Venture Agreement [Member] | Below Market Lease Liabilities [Member]
Transaction to Real Estate Investments [Line Items]
Total purchase price	$ 15,285

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Offsetting of Derivative Assets and Liabilities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Offsetting Assets [Line Items]
Gross Amounts, Liabilities	$ 61,778	$ 8,027	[1]
Future
Offsetting Assets [Line Items]
Gross Amounts, Assets		117
Amounts Eligible for Offset -Financial Instruments, Assets		(117)
Amounts Eligible for Offset-Cash Collateral, Assets		0
Gross Amounts, Liabilities	61,778	3,769
Amounts Eligible for Offset-Financial Instruments, Liabilities		(117)
Amounts Eligible for Offset -Cash Collateral, Liabilities	(61,778)
Net Amounts, Liabilities		3,652
Interest Rate Swaps
Offsetting Assets [Line Items]
Gross Amounts, Assets	25,908	75,225
Amounts Eligible for Offset -Financial Instruments, Assets	(24,782)	(66,180)
Amounts Eligible for Offset-Cash Collateral, Assets	0	0
Net Amounts, Assets	1,126	9,045
Gross Amounts, Liabilities	2,025,170	1,608,286
Amounts Eligible for Offset-Financial Instruments, Liabilities	24,782	(66,180)
Amounts Eligible for Offset -Cash Collateral, Liabilities	(1,111,199)	(869,302)
Net Amounts, Liabilities	889,189	672,804
TBA Derivatives
Offsetting Assets [Line Items]
Gross Amounts, Assets	112,929
Amounts Eligible for Offset-Cash Collateral, Assets	0
Net Amounts, Assets	112,929
Gross Amounts, Liabilities		4,258
Net Amounts, Liabilities		4,258
Interest Rate Swaption
Offsetting Assets [Line Items]
Gross Amounts, Assets	574	5,382
Amounts Eligible for Offset-Cash Collateral, Assets	0	0
Net Amounts, Assets	$ 574	$ 5,382

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
ASSETS
Cash and cash equivalents (including cash pledged as collateral of $1,819,173 and $1,584,701, respectively)	$ 1,920,326		$ 1,741,244	[1]
Reverse repurchase agreements	100,000		100,000	[1]
Investments, at fair value:
Agency mortgage-backed securities (including pledged assets of $63,865,632 and $74,006,480, respectively)	69,388,001		81,565,256	[1]
Agency debentures (including pledged assets of $691,716 and $1,368,350, respectively)	995,408		1,368,350	[1]
Agency CRT securities	108,337
Commercial real estate debt investments (including pledged assets of $104,000 and $0, respectively)	1,515,903	[2]
Investment in affiliates	141,246		143,045	[1]
Commercial real estate debt and preferred equity, held for investment (including pledged assets of $72,750 and $0, respectively)	1,498,406	[3]	1,518,165	[1],[3]
Investments in commercial real estate	207,209		210,032	[1]
Corporate debt, held for investment	227,830		166,464	[1]
Receivable for investments sold	2,009,937		1,010,094	[1]
Accrued interest and dividends receivable	247,801		278,489	[1]
Receivable for investment advisory income (including from affiliates of $10,268 and $10,402, respectively)	10,268		10,402	[1]
Goodwill	94,781		94,781	[1]
Interest rate swaps, at fair value	25,908		75,225	[1]
Other derivatives, at fair value	113,503		5,499	[1]
Other assets	70,813		68,321	[1]
Total assets	78,675,677		88,355,367	[1]
Liabilities:
Repurchase agreements	60,477,378		71,361,926	[1]
Payable for investments purchased	5,205		264,984	[1]
Convertible Senior Notes	749,512		845,295	[1]
Securitized debt of consolidated VIEs	1,491,829	[4]	260,700	[1],[4]
Mortgages payable	146,470		146,553	[1]
Participation sold	13,589		13,693	[1]
Accrued interest payable	155,072		180,501	[1]
Dividends payable	284,310		284,293	[1]
Interest rate swaps, at fair value	2,025,170		1,608,286	[1]
Other derivatives, at fair value	61,778		8,027	[1]
Accounts payable and other liabilities	140,774		47,328	[1]
Total liabilities	65,551,087		75,021,586	[1]
Stockholders' Equity:
Common stock, par value $0.01 per share, 1,956,937,500 authorized, 947,698,431 and 947,643,079 issued and outstanding, respectively	9,477		9,476	[1]
Additional paid-in capital	14,787,117		14,786,509	[1]
Accumulated other comprehensive income (loss)	773,999		204,883	[1]
Accumulated deficit	(3,364,147)		(2,585,436)	[1]
Total stockholders' equity	13,119,505		13,328,491	[1]
Noncontrolling interest	5,085		5,290	[1]
Total equity	13,124,590		13,333,781	[1]
Total liabilities and equity	78,675,677		88,355,367	[1]
7.875% Series A Cumulative Redeemable Preferred Stock
Stockholders' Equity:
Cumulative Redeemable Preferred Stock	177,088		177,088	[1]
7.625% Series C Cumulative Redeemable Preferred Stock
Stockholders' Equity:
Cumulative Redeemable Preferred Stock	290,514		290,514	[1]
7.50% Series D Cumulative Redeemable Preferred Stock
Stockholders' Equity:
Cumulative Redeemable Preferred Stock	$ 445,457		$ 445,457	[1]

[1] Derived from the audited consolidated financial statements at December 31, 2014.

[2] Includes senior securitized commercial mortgage loans of a consolidated VIE carried at fair value of $1.4 billion and $0 at March 31, 2015 and December 31, 2014, respectively.

[3] Includes senior securitized commercial mortgage loans of a consolidated VIE with a carrying value of $361.2 million and $398.6 million carried at amortized cost, net of an allowance for losses of $0 and $0, at March 31, 2015 and December 31, 2014, respectively. .

[4] Includes securitized debt of a consolidated VIE carried at fair value of $1.3 billion and $0 at March 31, 2015 and December 31, 2014, respectively.

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Agency Mortgage-Backed Securities - Narrative (Detail) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014	Dec. 31, 2013
Mortgage-Backed Securities Sold:
Mortgage-Backed securities sold, carrying value	$ 14,500,000,000	$ 4,300,000,000
Mortgage-Backed securities sold, realized gain	65,300,000	129,500,000
Interest-only securities
Mortgage-Backed Securities Sold:
Amortized cost			1,400,000,000	1,200,000,000
Accumulated Other Comprehensive Income (Loss) | Interest-only securities
Mortgage-Backed Securities Sold:
Unrealized gains (Losses)			$ (41,600,000)	$ (8,000,000)

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Dividends Declared Per Share of Common Stock	$ 0.30	$ 0.30
7.875% Series A Cumulative Redeemable Preferred Stock
Preferred series dividends declared, per share	$ 0.492	$ 0.492
7.625% Series C Cumulative Redeemable Preferred Stock
Preferred series dividends declared, per share	$ 0.477	$ 0.477
7.50% Series D Cumulative Redeemable Preferred Stock
Preferred series dividends declared, per share	$ 0.469	$ 0.469

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Statement of Comprehensive Income (Loss) of FREMF Trust Reflected the Consolidated Statements of Comprehensive Income (Loss) (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Net interest income:
Interest income	$ 519,172,000		$ 655,901,000
Interest expense	(129,420,000)		(124,971,000)
Net interest income	389,752,000		530,930,000
Other Income:
Other income	815,299,000		682,902,000
General & Administration cost	50,938,000		47,378,000
Net Income	(476,499,000)		(203,351,000)
FREMF Trust
Net interest income:
Interest income	2,742,000
Interest expense	(1,606,000)
Net interest income	1,136,000
Other Income:
Unrealized gain(loss) on financial instruments at fair value	3,000	[1]
Transaction & Acquistion costs	810,000
Other income	813,000
General & Administration cost	96,000
Net Income	$ 227,000

[1] Included in Other income (loss).

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INTEREST INCOME AND INTEREST EXPENSE (Tables)

3 Months Ended

Mar. 31, 2015

Components of Company's Interest Income and Interest Expense

The table below presents the components of the Company’s interest income and interest expense for the quarters ended March 31, 2015 and 2014.

	Quarter Ended March 31,
	2015		2014
Interest income:	(dollars in thousands)
Investment Securities	$	478,239	$	614,419
Commercial investment portfolio(1)		40,336		39,486
U.S. Treasury securities		-		1,329
Securities loaned		-		114
Reverse repurchase agreements		539		500
Other		58		53
Total interest income		519,172		655,901
Interest expense:
Repurchase agreements		102,748		103,131
Convertible Senior Notes		23,627		18,897
U.S. Treasury securities sold, not yet purchased		-		1,076
Securities borrowed		-		95
Securitized debt of consolidated VIE		2,882		1,611
Participation sold		159		161
Other		4		-
Total interest expense		129,420		124,971
Net interest income	$	389,752	$	530,930
(1) Includes commercial real estate debt, preferred equity and corporate debt.

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Repurchase Agreements - Remaining Maturities (Parenthetical) (Detail)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Repurchase Agreements:
Percentage of repurchase agreement	18.00%	16.00%

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INCOME TAXES

3 Months Ended

Mar. 31, 2015

INCOME TAXES

15.        INCOME TAXES

For the quarter ended March 31, 2015 the Company was qualified to be taxed as a REIT under Code Sections 856 through 860. As a REIT, the Company is not subject to federal income tax to the extent that it distributes its taxable income to its stockholders.  To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements such as assets it may hold, income it may generate and its stockholder composition. It is generally the Company’s policy to distribute 100% of its REIT taxable income. To the extent there is any undistributed REIT taxable income at the end of a year, the Company distributes such shortfall within the next year as permitted by the Code. For years prior to 2013, the Company retained the amount of taxable income attributable to certain employee remuneration deductions disallowed for tax purposes pursuant to Section 162(m) of the Code (“Section 162(m)”). As a result of the externalization of management effective as of July 1, 2013, the Company was not subject to the Section 162(m) disallowance for the 2014 tax year.
 

The state and local tax jurisdictions for which the Company is subject to tax-filing obligations recognize the Company’s status as a REIT, and therefore, the Company generally does not pay income tax in such jurisdictions. The Company may, however, be subject to certain minimum state and local tax filing fees as well as certain excise, franchise or business taxes. The Company’s TRSs are subject to federal, state and local taxes.

During the quarter ended March 31, 2015, the Company recorded $14 thousand of income tax expense for income attributable to its TRSs.  During the quarter ended March 31, 2014, the Company’s TRSs recorded $4.0 million of income tax expense for income attributable to those subsidiaries, and the portion of earnings retained based on Code Section 162(m) limitations.

The Company’s 2013, 2012 and 2011 federal, state and local tax returns remain open for examination.

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NET INCOME (LOSS) PER COMMON SHARE (Tables)

3 Months Ended

Mar. 31, 2015

Schedule of Net Income (Loss) Per Share Reconciliation

The following table presents a reconciliation of net income (loss) and shares used in calculating basic and diluted net income (loss) per share for the quarters ended March 31, 2015 and 2014.

	For the Quarter Ended
	March 31, 2015			March 31, 2014
	(dollars in thousands, except per share data)
Net income (loss) attributable to Annaly	$	(476,409	)	$	(203,351	)
Less: Preferred stock dividends		17,992			17,992
Net income (loss) per share available (related) to common stockholders, prior to adjustment for dilutive potential common shares, if necessary		(494,401	)		(221,343	)
Add:  Interest on Convertible Senior Notes, if dilutive		-			-
Net income (loss) available to common stockholders, as adjusted		(494,401	)		(221,343	)
Weighted average shares of common stock outstanding-basic		947,669,831			947,458,813
Add:  Effect of stock awards and Convertible Senior Notes, if dilutive		-			-
Weighted average shares of common  stock outstanding-diluted		947,669,831			947,458,813
Net income (loss) per share available (related) to common share:
Basic	$	(0.52	)	$	(0.23	)
Diluted	$	(0.52	)	$	(0.23	)

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RISK MANAGEMENT

3 Months Ended

Mar. 31, 2015

RISK MANAGEMENT

17. RISK MANAGEMENT

The primary risks to the Company are liquidity and investment/market risk. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the Company’s control. Changes in the general level of interest rates can affect net interest income, which is the difference between the interest income earned on interest earning assets and the interest expense incurred in connection with the interest bearing liabilities, by affecting the spread between the interest earning assets and interest bearing liabilities. Changes in the level of interest rates can also affect the value of the interest earning assets and the Company’s ability to realize gains from the sale of these assets. A decline in the value of the interest earning assets pledged as collateral for borrowings under repurchase agreements and derivative contracts could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels.

The Company may seek to mitigate the potential financial impact by entering into interest rate agreements such as interest rate swaps, interest rate swaptions and other hedges.

Weakness in the mortgage market, the shape of the yield curve and changes in the expectations for the volatility of future interest rates may adversely affect the performance and market value of the Company’s investments. This could negatively impact the Company’s book value. Furthermore, if many of the Company’s lenders are unwilling or unable to provide additional financing, the Company could be forced to sell its Investment Securities at an inopportune time when prices are depressed. The Company has established policies and procedures for mitigating risks, including conducting scenario analyses and utilizing a range of hedging strategies.

The payment of principal and interest on the Freddie Mac and Fannie Mae Agency mortgage-backed securities, excluding Agency CRT securities, are guaranteed by those respective agencies and the payment of principal and interest on Ginnie Mae Agency mortgage-backed securities are backed by the full faith and credit of the U.S. government. Principal and interest on Agency debentures are guaranteed by the Agency issuing the debenture. Substantially all of the Company’s Investment Securities have an actual or implied “AAA” rating.

The Company faces credit risk on the portions of its portfolio which are not guaranteed by the respective Agency or by the full faith and credit of the U.S. government. The Company is exposed to credit risk on CRE Debt and Preferred Equity Investments, investments in commercial real estate, commercial mortgage-backed securities, Agency CRT securities and corporate debt. The Company is exposed to risk of loss if an issuer, borrower, tenant or counterparty fails to perform its obligations under contractual terms. The Company has established policies and procedures for mitigating credit risk, including reviewing and establishing limits for credit exposure, limiting transactions with specific counterparties, maintaining qualifying collateral and continually assessing the creditworthiness of issuers, borrowers, tenants and counterparties.

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Summary of Characteristics of Interest Rate Swaps (Detail) (Interest Rate Swaps, USD $) In Thousands, unless otherwise specified	3 Months Ended		12 Months Ended
	Mar. 31, 2015		Dec. 31, 2014
Derivative Instruments:
Current Notional	$ 28,059,988	[1]	$ 31,461,505	[1]
Weighted Average Pay Rate	2.37%	[2],[3]	2.49%	[2],[3]
Weighted Average Receive Rate	0.35%	[2]	0.22%	[2]
Average Years to Maturity	8 years 1 month 2 days	[2]	8 years 4 months 17 days	[2]
0 - 3 years
Derivative Instruments:
Derivative Instruments minimum maturity period	0 years		0 years
Derivative Instruments maximum maturity period	3 years		3 years
Current Notional	2,852,488	[1]	2,502,505	[1]
Weighted Average Pay Rate	1.78%	[2],[3]	1.63%	[2],[3]
Weighted Average Receive Rate	0.18%	[2]	0.17%	[2]
Average Years to Maturity	2 years 5 months 12 days	[2]	2 years 7 months 21 days	[2]
3 - 6 years
Derivative Instruments:
Derivative Instruments minimum maturity period	3 years		3 years
Derivative Instruments maximum maturity period	6 years		6 years
Current Notional	10,463,000	[1]	11,138,000	[1]
Weighted Average Pay Rate	1.85%	[2],[3]	2.06%	[2],[3]
Weighted Average Receive Rate	0.41%	[2]	0.22%	[2]
Average Years to Maturity	4 years 11 months 27 days	[2]	5 years 2 months 5 days	[2]
6 - 10 years
Derivative Instruments:
Derivative Instruments minimum maturity period	6 years		6 years
Derivative Instruments maximum maturity period	10 years		10 years
Current Notional	11,110,100	[1]	13,069,200	[1]
Weighted Average Pay Rate	2.60%	[2],[3]	2.67%	[2],[3]
Weighted Average Receive Rate	0.37%	[2]	0.23%	[2]
Average Years to Maturity	8 years 7 months 21 days	[2]	8 years 6 months 26 days	[2]
Greater than 10 years
Derivative Instruments:
Derivative Instruments minimum maturity period	10 years		10 years
Current Notional	$ 3,634,400	[1]	$ 4,751,800	[1]
Weighted Average Pay Rate	3.70%	[2],[3]	3.58%	[2],[3]
Weighted Average Receive Rate	0.22%	[2]	0.20%	[2]
Average Years to Maturity	20 years 1 month 13 days	[2]	19 years 6 months 11 days	[2]

[1] Notional amount includes $3.0 billion and $500.0 million in forward starting pay fixed swaps as of March 31, 2015 and December 31, 2014, respectively.

[2] Excludes forward starting swaps.

[3] Weighted average fixed rate on forward starting pay fixed swaps was 1.88% and 3.25% as of March 31, 2015 and December 31, 2014, respectively.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Cash flows from operating activities:
Net income (loss)	$ (476,499)		$ (203,351)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Amortization of Investment Securities premiums and discounts, net	284,777		118,988
Amortization of commercial real estate investment premiums and discounts, net	(160)		792
Amortization of intangibles	1,195		99
Amortization of deferred financing costs	2,914		2,813
Amortization of net origination fees and costs, net	(1,190)		(973)
Amortization of contingent beneficial conversion feature and equity component of Convertible Senior Notes	11,758		6,410
Depreciation expense	2,823		292
Net gain on sale of commercial real estate			(1,213)
Net (gains) losses on sales of Investment Securities	(62,356)		(80,718)
Stock compensation expense	39
Unrealized (gains) losses on interest rate swaps	466,202		348,942
Net unrealized (gains) losses on interest-only Agency mortgage-backed securities	33,546		20,793
Net (gains) losses on trading assets	6,906		146,228
Proceeds from repurchase agreements of RCap	386,000,000		329,649,937
Payments on repurchase agreements of RCap	(391,250,000)		(324,602,992)
Proceeds from reverse repurchase agreements	15,325,000		35,181,890
Payments on reverse repurchase agreements	(15,325,000)		(35,526,265)
Proceeds from securities borrowed			19,993,580
Payments on securities borrowed			(17,924,187)
Proceeds from securities loaned			37,178,735
Payments on securities loaned			(39,192,893)
Proceeds from U.S. Treasury securities			3,159,253
Payments on U.S. Treasury securities			(3,920,425)
Net payments on derivatives	(66,604)		(90,440)
Net change in:
Due to / from brokers			8,596
Other assets	(2,627)		3,439
Accrued interest and dividends receivable	28,886		(16,035)
Receivable for investment advisory income	134		341
Accrued interest payable	(25,425)		25,032
Accounts payable and other liabilities	3,709		13,801
Net cash provided by (used in) operating activities	(5,041,972)		4,300,469
Cash flows from investing activities:
Payments on purchases of Agency mortgage-backed securities and debentures	(5,065,764)		(9,367,034)
Proceeds from sales of Agency mortgage-backed securities and debentures	13,973,224		6,155,091
Principal payments on Agency mortgage-backed securities	2,596,964		1,675,575
Payments on purchases of corporate debt	(63,015)		(28,705)
Principal payments on corporate debt	1,733		1,051
Purchases of commercial real estate debt investments	(185,925)
Sales of commercial real estate debt investments	41,016
Purchase of securitized loans at fair value	(1,370,011)
Origination of commercial real estate investments, net	(61,502)		(125,949)
Proceeds from sales of commercial real estate held for sale			20,740
Principal payments on commercial real estate investments	82,408		69,795
Purchase of investments in real estate	(3,602)
Net cash provided by (used in) investing activities	9,945,526		(1,599,436)
Cash flows from financing activities:
Proceeds from repurchase agreements	57,776,249		49,726,537
Principal payments on repurchase agreements	(63,410,797)		(52,010,534)
Payments on maturity of convertible senior notes	(107,541)
Proceeds from other secured financing	90,000
Proceeds from issuance of securitized debt	1,267,914		260,700
Principal repayments on securitized debt	(37,680)
Payment of deferred financing cost	(641)		(4,288)
Net proceeds from direct purchases and dividend reinvestments	569		607
Principal payments on participation sold	(76)		(72)
Principal payments on mortgages payable	(69)
Distributions to noncontrolling interests	(115)
Dividends paid	(302,285)		(302,222)
Net cash provided by (used in) financing activities	(4,724,472)		(2,329,272)
Net (decrease) increase in cash and cash equivalents	179,082		371,761
Cash and cash equivalents, beginning of period	1,741,244	[1]	552,436
Cash and cash equivalents, end of period	1,920,326		924,197
Supplemental disclosure of cash flow information:
Interest received	815,765		769,627
Dividends received	4,048		13,045
Investment advisory income received	10,992		6,464
Interest paid (excluding interest paid on interest rate swaps)	124,673		118,131
Net interest paid on interest rate swaps	176,395		250,571
Taxes paid	643		2,137
Noncash investing activities:
Receivable for investments sold	2,009,937		19,116
Payable for investments purchased	5,205		1,898,507
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment	569,116		660,454
Noncash financing activities:
Dividends declared, not yet paid	284,310		284,247
Convertible Senior Notes 5.00 Percent Due 2015
Noncash financing activities:
Contingent beneficial conversion feature on 4% Convertible Senior Notes			$ 4,186

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Parenthetical) (USD $)	Mar. 31, 2015		Dec. 31, 2014
Cash pledged as collateral	$ 1,819,173,000		$ 1,584,701,000	[1]
Agency mortgage-backed securities, pledged assets	63,865,632,000		74,006,480,000	[1]
Agency debentures, pledged assets	691,716,000		1,368,350,000	[1]
Commerical real estate debt investments, pledged assets	104,000,000		0	[1]
Commercial real estate debt and preferred equity, held for investment, pledged assets	72,750,000	[2]	72,750,000	[1],[2]
Receivable for investment advisory income, from affiliates	10,268,000		10,402,000	[1]
Common Stock, par value	$ 0.01		$ 0.01	[1]
Common Stock, shares authorized	1,956,937,500		1,956,937,500	[1]
Common Stock, shares issued	947,698,431		947,643,079	[1]
Common Stock, shares outstanding	947,698,431		947,643,079	[1]
Senior Secured mortgages of Consolidated VIE, carrying value	361,200,000		398,600,000	[1]
Subordinated Secured mortgages of Consolidated VIE, fair value	1,400,000,000		0	[1]
Commercial real estate debt and preferred equity, held for investment, allowance for losses	0		0	[1]
Securitized debt of a consolidated VIE	$ 1,268,809,000		$ 0	[1]
7.875% Series A Cumulative Redeemable Preferred Stock
Preferred Stock, shares authorized	7,412,500		7,412,500	[1]
Preferred Stock, shares issued	7,412,500		7,412,500	[1]
Preferred Stock, shares outstanding	7,412,500		7,412,500	[1]
7.625% Series C Cumulative Redeemable Preferred Stock
Preferred Stock, shares authorized	12,650,000		12,650,000	[1]
Preferred Stock, shares issued	12,000,000		12,000,000	[1]
Preferred Stock, shares outstanding	12,000,000		12,000,000	[1]
7.50% Series D Cumulative Redeemable Preferred Stock
Preferred Stock, shares authorized	18,400,000		18,400,000	[1]
Preferred Stock, shares issued	18,400,000		18,400,000	[1]
Preferred Stock, shares outstanding	18,400,000		18,400,000	[1]

[1] Derived from the audited consolidated financial statements at December 31, 2014.

[2] Includes senior securitized commercial mortgage loans of a consolidated VIE carried at fair value of $1.4 billion and $0 at March 31, 2015 and December 31, 2014, respectively.

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COMMON STOCK AND PREFERRED STOCK

3 Months Ended

Mar. 31, 2015

COMMON STOCK AND PREFERRED STOCK

10. COMMON STOCK AND PREFERRED STOCK

The Company’s authorized shares of capital stock, par value of $0.01 per share, consists of 1,956,937,500 shares classified as common stock, 7,412,500 shares classified as 7.875% Series A Cumulative Redeemable Preferred Stock, 4,600,000 shares classified as 6.00% Series B Cumulative Convertible Preferred Stock, 12,650,000 shares classified as 7.625% Series C Cumulative Redeemable Preferred Stock and 18,400,000 shares classified as 7.50% Series D Cumulative Redeemable Preferred Stock.

(A) Common Stock

At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 947,698,431 and 947,643,079 shares of common stock, with a par value of $0.01 per share.

No options were exercised during the quarters ended March 31, 2015 and 2014.

During the quarter ended March 31, 2015, the Company raised $0.6 million, by issuing 53,000 shares, through the Direct Purchase and Dividend Reinvestment Program. During the quarter ended March 31, 2014, the Company raised $0.6 million, by issuing 56,000 shares, through the Direct Purchase and Dividend Reinvestment Program.

In March 2012, the Company entered into six separate Distribution Agency Agreements (“Distribution Agency Agreements”) with each of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and RCap Securities, Inc. (together, the Agents). Pursuant to the terms of the Distribution Agency Agreements, the Company may sell from time to time through the Agents, as its sales agents, up to 125,000,000 shares of the Company’s common stock. The Company did not make any sales under the Distribution Agency Agreements during the quarters ended March 31, 2015 and 2014.

(B) Preferred Stock

At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 7,412,500 shares of Series A Cumulative Redeemable Preferred Stock (“Series A Preferred Stock”), with a par value of $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series A Preferred Stock is entitled to a dividend at a rate of 7.875% per year based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series A Preferred Stock is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company's option commencing on April 5, 2009 (subject to the Company's right under limited circumstances to redeem the Series A Preferred Stock earlier in order to preserve its qualification as a REIT). Through March 31, 2015, the Company had declared and paid all required quarterly dividends on the Series A Preferred Stock.

At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 12,000,000 shares of Series C Preferred Stock, with a par value of $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series C Preferred Stock is entitled to a dividend at a rate of 7.625% per year based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series C Preferred Stock is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company’s option commencing on May 16, 2017 (subject to the Company’s right under limited circumstances to redeem the Series C Preferred Stock earlier in order to preserve its qualification as a REIT or under limited circumstances related to a change of control of the Company). Through March 31, 2015, the Company had declared and paid all required quarterly dividends on the Series C Preferred Stock.

At March 31, 2015 and December 31, 2014, the Company had issued and outstanding 18,400,000 shares of Series D Preferred Stock, with a par value of $0.01 per share and a liquidation preference of $25.00 per share plus accrued and unpaid dividends (whether or not declared). The Series D Preferred Stock is entitled to a dividend at a rate of 7.50% per year based on the $25.00 liquidation preference before the common stock is entitled to receive any dividends. The Series D Preferred Stock is redeemable at $25.00 per share plus accrued and unpaid dividends (whether or not declared) exclusively at the Company’s option commencing on September 13, 2017 (subject to the Company’s right under limited circumstances to redeem the Series D Preferred Stock earlier in order to preserve its qualification as a REIT or under limited circumstances related to a change of control of the Company). Through March 31, 2015, the Company had declared and paid all required quarterly dividends on the Series D Preferred Stock.

The 7.875% Series A Cumulative Redeemable Preferred Stock, 7.625% Series C Cumulative Redeemable Preferred Stock and 7.50% Series D Cumulative Redeemable Preferred Stock rank senior to the common stock of the Company.

(C) Distributions to Stockholders

During the quarter ended March 31, 2015, the Company declared dividends to common stockholders totaling $284.3 million, or $0.30 per common share which was paid to common stockholders on April 30, 2015. During the quarter ended March 31, 2015, the Company declared and paid dividends to Series A Preferred Stock stockholders totaling approximately $3.6 million, or $0.492 per preferred share, Series C Preferred Stock stockholders totaling approximately $5.7 million, or $0.477 per preferred share and Series D Preferred Stock stockholders totaling approximately $8.6 million, or $0.469 per preferred share.

During the quarter ended March 31, 2014, the Company declared dividends to common stockholders totaling $284.2 million, or $0.30 per common share, paid to common stockholders on April 30, 2014. During the quarter ended March 31, 2014, the Company declared and paid dividends to Series A Preferred stockholders totaling approximately $3.6 million, or $0.492 per preferred share, Series C Preferred stockholders totaling approximately $5.7 million, or $0.477 per preferred share, Series D Preferred stockholders totaling approximately $8.6 million, or $0.469 per preferred share.

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015	Apr. 30, 2015
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Trading Symbol	NLY
Entity Registrant Name	ANNALY CAPITAL MANAGEMENT INC
Entity Central Index Key	0001043219
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		947,710,129

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INTEREST INCOME AND INTEREST EXPENSE

3 Months Ended

Mar. 31, 2015

INTEREST INCOME AND INTEREST EXPENSE

11.           INTEREST INCOME AND INTEREST EXPENSE

The table below presents the components of the Company’s interest income and interest expense for the quarters ended March 31, 2015 and 2014.

	Quarter Ended March 31,
	2015		2014
Interest income:	(dollars in thousands)
Investment Securities	$	478,239	$	614,419
Commercial investment portfolio(1)		40,336		39,486
U.S. Treasury securities		-		1,329
Securities loaned		-		114
Reverse repurchase agreements		539		500
Other		58		53
Total interest income		519,172		655,901
Interest expense:
Repurchase agreements		102,748		103,131
Convertible Senior Notes		23,627		18,897
U.S. Treasury securities sold, not yet purchased		-		1,076
Securities borrowed		-		95
Securitized debt of consolidated VIE		2,882		1,611
Participation sold		159		161
Other		4		-
Total interest expense		129,420		124,971
Net interest income	$	389,752	$	530,930
(1) Includes commercial real estate debt, preferred equity and corporate debt.

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Schedule of Net Income (Loss) Per Share Reconciliation (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net Income Per Common Share:
Net income (loss) attributable to Annaly	$ (476,409)	$ (203,351)
Less: Preferred stock dividends	17,992	17,992
Net income (loss) per share available (related) to common stockholders, prior to adjustment for dilutive potential common shares, if necessary	(494,401)	(221,343)
Add: Interest on Convertible Senior Notes, if dilutive	0	0
Net income (loss) available to common stockholders, as adjusted	(494,401)	(221,343)
Weighted average shares of common stock outstanding-basic	947,669,831	947,458,813
Add: Effect of stock awards and Convertible Senior Notes, if dilutive	0	0
Weighted average shares of common stock outstanding-diluted	947,669,831	947,458,813
Net income (loss) per share available (related) to common share:
Basic	$ (0.52)	$ (0.23)
Diluted	$ (0.52)	$ (0.23)
Parent
Net Income Per Common Share:
Net income (loss) attributable to Annaly	$ (476,409)	$ (203,351)

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Net interest income:
Interest income	$ 519,172		$ 655,901
Interest expense	129,420		124,971
Net interest income	389,752		530,930
Other income (loss):
Realized gains (losses) on interest rate swaps	(158,239)	[1],[2]	(260,435)	[1],[2]
Realized gains (losses) on termination of interest rate swaps	(226,462)		(6,842)
Unrealized gains (losses) on interest rate swaps	(466,202)		(348,942)
Subtotal	(850,903)		(616,219)
Investment advisory income	10,464		6,123
Net gains (losses) on disposal of investments	62,356		79,710
Dividend income from affiliates	4,318		13,045
Net gains (losses) on trading assets	(6,906)		(146,228)
Net unrealized gains (losses) on interest-only Agency mortgage-backed securities	(33,546)		(20,793)
Other income (loss)	(1,082)		1,460
Subtotal	35,604		(66,683)
Total other income (loss)	(815,299)		(682,902)
General and administrative expenses:
Compensation and management fee	38,629		38,521
Other general and administrative expenses	12,309		8,857
Total general and administrative expenses	50,938		47,378
Income (loss) before income taxes	(476,485)		(199,350)
Income taxes	14		4,001
Net Income	(476,499)		(203,351)
Net income (loss) attributable to noncontrolling interest	(90)
Net income (loss) attributable to Annaly	(476,409)		(203,351)
Dividends on preferred stock	17,992		17,992
Net income (loss) available (related) to common stockholders	(494,401)		(221,343)
Net income (loss) per share available (related) to common stockholders:
Basic	$ (0.52)		$ (0.23)
Diluted	$ (0.52)		$ (0.23)
Weighted average number of common shares outstanding:
Basic	947,669,831		947,458,813
Diluted	947,669,831		947,458,813
Dividends Declared Per Share of Common Stock	$ 0.30		$ 0.30
Net income (loss)	(476,499)		(203,351)
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities	631,472		741,172
Reclassification adjustment for net (gains) losses included in net income (loss)	(62,356)		(80,718)
Other comprehensive income (loss)	569,116		660,454
Comprehensive income (loss)	92,617		457,103
Comprehensive income (loss) attributable to noncontrolling interest	(90)
Comprehensive income (loss) attributable to Annaly	$ 92,707		$ 457,103

[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 (Loss).

[2] Consists of interest expense on interest rate swaps.

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COMMERCIAL REAL ESTATE INVESTMENTS

3 Months Ended

Mar. 31, 2015

COMMERCIAL REAL ESTATE INVESTMENTS

5.   COMMERCIAL REAL ESTATE INVESTMENTS

At March 31, 2015 and December 31, 2014, commercial real estate investments held for investment were composed of the following:

CRE Debt and Preferred Equity Investments

	March 31, 2015							December 31, 2014
	Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)			Outstanding Principal		Carrying Value(1)		Percentage of Loan Portfolio(2)
	(dollars in thousands)
Senior mortgages		431,872		430,228		28.7	%		384,304		383,895		25.2	%
Senior securitized mortgages(3)		361,861		361,179		24.1	%		399,541		398,634		26.3	%
Mezzanine loans		495,305		495,405		33.0	%		522,474		522,731		34.4	%
Preferred equity		213,213		211,594		14.2	%		214,653		212,905		14.1	%
Total	$	1,502,251	$	1,498,406		100.0	%	$	1,520,972	$	1,518,165		100.0	%

  (1) Carrying value includes unamortized origination fees of $4.0 million and $3.0 million as of March 31, 2015 and December 31, 2014, respectively.

  (2) Based on outstanding principal.

  (3) Assets of consolidated VIEs.

	March 31, 2015
	Senior Mortgages			Senior Securitized Mortgages(1)			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Beginning balance	$	383,895		$	398,634		$	522,731		$	212,905		$	1,518,165
Originations & advances (principal)		47,645			-			16,043			-			63,688
Principal payments		(76	)		(37,680	)		(43,212	)		(1,441	)		(82,409	)
Sales (principal)		-			-			-			-			-
Amortization & accretion of (premium) discounts		(36	)		-			(31	)		25			(42	)
Net (increase) decrease in origination fees		(1,950	)		-			(236	)		-			(2,186	)
Amortization of net origination fees		750			225			110			105			1,190
Transfers		-			-			-			-			-
Allowance for loan losses		-			-			-			-			-
Net carrying value	$	430,228		$	361,179		$	495,405		$	211,594		$	1,498,406
(1) Assets of consolidated VIE.

	December 31, 2014
	Senior Mortgages			Senior Securitized Mortgages(1)			Subordinate Notes			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Beginning balance	$	667,299		$	-		$	41,408		$	628,102		$	247,160		$	1,583,969
Originations & advances (principal)		127,112			-			-			122,742			-			249,854
Principal payments		(12,756	)		-			(41,059	)		(227,151	)		(35,116	)		(316,082	)
Sales (principal)		-			-			-			-			-			-
Amortization & accretion of (premium) discounts		(138	)		-			(349	)		(1,093	)		108			(1,472	)
Net (increase) decrease in origination fees		(2,427	)		(116	)		-			(478	)		-			(3,021	)
Amortization of net origination fees		2,783			772			-			609			753			4,917
Transfers		(397,978	)		397,978			-			-			-			-
Allowance for loan losses		-			-			-			-			-			-
Net carrying value	$	383,895		$	398,634		$	-		$	522,731		$	212,905		$	1,518,165
(1) Assets of consolidated VIE.

Internal CRE Debt and Preferred Equity Investment Ratings

	March 31, 2015
			Percentage of CRE Debt and			Internal Ratings
Investment Type	Outstanding Principal		Preferred Equity Portfolio			Performing		Watch List(2)		Defaulted-Recovery(3)			Impaired
	(dollars in thousands)
Senior mortgages	$	431,872		28.7	%	$	188,899	$	230,000	$	12,973		$	-
Senior securitized mortgages(1)		361,861		24.1	%		352,611		9,250		-			-
Mezzanine loans		495,305		33.0	%		495,305		-		-			-
Preferred equity		213,213		14.2	%		162,213		51,000		-			-
	$	1,502,251		100.0	%	$	1,199,028	$	290,250	$	12,973		$	-
(1) Assets of consolidated VIE
(2) Includes a $230.0 million loan maturing on June 30, 2015 with a risk that the borrower will be  unable to refinance the outstanding principal amount before the maturity date, but full recovery is expected.
(3) Related to one loan on non-accrual status.
	December 31, 2014
			Percentage of CRE Debt and			Internal Ratings
Investment Type	Outstanding Principal		Preferred Equity Portfolio			Performing		Watch List		Defaulted-Recovery			Impaired
	(dollars in thousands)
Senior mortgages	$	384,304		25.2	%	$	371,331	$	-	$	12,973	(2)	$	-
Senior securitized mortgages(1)		399,541		26.3	%		390,291		9,250		-			-
Subordinate notes		-		0.0	%		-		-		-			-
Mezzanine loans		522,474		34.4	%		522,474		-		-			-
Preferred equity		214,653		14.1	%		214,653		-		-			-
	$	1,520,972		100.0	%	$	1,498,749	$	9,250	$	12,973		$	-
(1) Assets of consolidated VIE.
(2) Relates to one loan on nonaccrual status.

Real Estate Acquisitions

In November 2014, a joint venture, in which the Company has a 90% interest, acquired eleven retail properties located in New York, Ohio and Georgia. The purchase price was funded with cash and a new $104.0 million, ten-year, 4.03% fixed-rate interest-only mortgage loan.

There were no acquisitions of real estate during the quarter ended March 31, 2015. The following table summarizes acquisitions of real estate held for investment in 2014:

Date of Acquisition	Type	Location	Purchase Price	Remaining Lease Term (Years) (1)
(dollars in thousands)
April 2014	Single-tenant retail	Tennessee	$ 19,000	8
June 2014	Multi-tenant retail	Virginia	$ 17,743	7
November 2014	Multi-tenant retail	New York, Ohio, Georgia	$ 154,000	4.6
(1) Does not include extension options.

The aforementioned acquisitions were accounted for using the acquisition method of accounting. No additional real estate acquisition costs were expensed during the period ended March 31, 2015.

The following table presents the aggregate allocation of the purchase price:

	Tennessee			Virginia			Joint Venture			Total
	(dollars in thousands)
Purchase Price Allocation:
Land	$	3,503		$	6,394		$	21,581		$	31,478
Buildings		11,960			10,862			97,133			119,955
Site improvements		1,349			1,184			12,952			15,485
Tenant Improvements		-			-			9,601			9,601
Real estate held for investment		16,812			18,440			141,267			176,519
Intangible assets (liabilities):
Leasehold intangible assets		4,288			3,218			22,555			30,061
Above market lease		-			-			5,463			5,463
Below market lease value		(2,100	)		(3,915	)		(15,285	)		(21,300	)
Total purchase price	$	19,000		$	17,743		$	154,000		$	190,743

The weighted average amortization period for intangible assets and liabilities is 3.7 years. Above market leases and leasehold intangible assets are included in Other assets and below market leases are included in Accounts payable and other liabilities in the Consolidated Statements of Financial Conditi the joint venture at the acquisition date was $15.4 million. The fair value of the acquisition and the related non-controlling interest was determined based on the purchase price.on. The fair value of the 10% non-controlling interest in

Total Commercial Real Estate Investment at amortized cost

	March 31, 2015			December 31, 2014
	(dollars in thousands)
Real estate held for investment, at amortized cost
Land	$	38,117		$	38,117
Buildings and improvements		176,139			176,139
Subtotal		214,256			214,256
Less: accumulated depreciation		(7,047	)		(4,224	)
Total real estate held for investment at amortized cost, net		207,209			210,032
Total investment in commercial real estate, net		207,209			210,032
Net carrying value of CRE Debt and Preferred Equity Investments		1,498,406			1,518,165
Total commercial real estate investments, at amortized cost	$	1,705,615		$	1,728,197

Depreciation expense was $2.8 million and $0.3 million for the quarters ended March 31, 2015 and 2014, respectively, and is included in Other income (loss) in the Consolidated Statements of Comprehensive Income (Loss). The table below presents the minimum future rentals on noncancelable leases of the Company’s commercial real estate investments as of March 31, 2015.

Rental Income

The minimum rental amounts due under the leases are generally either subject to scheduled fixed increases or adjustments. The leases generally also require that the tenants reimburse us for certain operating costs. Approximate future minimum rents to be received over the next five years and thereafter for non-cancelable operating leases in effect at March 31, 2015 for the consolidated properties, including consolidated joint venture properties are as follows (in thousands):

	March 31, 2015
	(dollars in thousands)
2015 (remaining)	$	15,495
2016		18,684
2017		15,977
2018		13,620
2019		11,301
Later years		51,241
	$	126,318

Mortgage loans payable as of March 31, 2015 and December 31, 2014, were as follows:

March 31, 2015
Property	Mortgage Carrying Value		Mortgage Principal		Interest Rate			Fixed/Floating Rate	Maturity Date	Priority
			(dollars in thousands)
Joint Venture	$	103,950	$	103,950		4.03	%	Fixed	12/6/2024	First liens
Tennessee		12,350		12,350		4.01	%	Fixed	6/6/2019	First liens
Virginia		11,025		11,025		3.58	%	Fixed	9/6/2019	First liens
Arizona		16,644		16,548		3.50	%	Fixed	1/1/2017	First liens
Nevada		2,501		2,488		3.45	%	Floating (1)	3/29/2017	First liens
	$	146,470	$	146,361
(1) Rate is fixed via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).

December 31, 2014
Property	Mortgage Carrying Value		Mortgage Principal		Interest Rate			Fixed/Floating Rate	Maturity Date	Priority
			(dollars in thousands)
Joint Venture	$	103,950	$	103,950		4.03	%	Fixed	12/6/2024	First liens
Tennessee		12,350		12,350		4.01	%	Fixed	6/6/2019	First liens
Virginia		11,025		11,025		3.58	%	Fixed	9/6/2019	First liens
Arizona		16,709		16,600		3.50	%	Fixed	1/1/2017	First liens
Nevada		2,519		2,505		3.45	%	Floating (1)	3/29/2017	First liens
	$	146,553	$	146,430
(1) Rate is fixed via an interest rate swap (pay fixed 3.45%, receive floating rate of L+200).

The following table details future mortgage loan principal payments as of March 31, 2015:

	Mortgage Loan Principal Payments
	(dollars in thousands)
2015 (remaining)	$	291
2016		399
2017		18,346
2018		-
2019		23,375
Later years		103,950
	$	146,361

VIEs

Securitizations

In January 2014, the Company closed NLY Commercial Mortgage Trust 2014-FL1 (the “Trust”), a $399.5 million securitization financing transaction which provides permanent, non-recourse financing collateralized by floating-rate first mortgage debt investments originated or co-originated by the Company and is not subject to margin calls. A total of $260.7 million of investment grade bonds were issued by the Trust, representing an advance rate of 65.3% at a weighted average coupon of LIBOR plus 1.74% at closing. The Company is using the proceeds to originate commercial real estate investments. The Company retained bonds rated below investment grade and the only interest-only bond issued by the Trust, which are referred to as the subordinate bonds.

The Company incurred approximately $4.3 million of costs in connection with the securitization that have been capitalized and are being amortized to interest expense. Deferred financing costs are included in Other assets in the accompanying Consolidated Statements of Financial Condition.

The Trust is structured as a pass-through entity that receives principal and interest on the underlying collateral and distributes those payments to the certificate holders. The Trust is a VIE and the Company is the primary beneficiary as a result of its ability to replace the special servicer without cause through its ownership interest in the subordinate bonds. The Company’s exposure to the obligations of the VIE is generally limited to the Company’s investment in the Trust. Assets of the Trust may only be used to settle obligations of the Trust. Creditors of the Trust 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 Trust. No gain or loss was recognized upon initial consolidation of the Trust.

As of March 31, 2015 the carrying value of the Trust’s assets was $361.2 million, net of $0.7 million of unamortized origination fees, which are included in Commercial real estate debt and preferred equity in the accompanying Consolidated Statements of Financial Condition. As of March 31, 2015, the carrying value of the Trust’s liabilities was $223.0 million, classified as Securitized debt in the accompanying Consolidated Statements of Financial Condition.

In February 2015, the Company purchased the junior-most tranche, Class C Certificates of the Freddie Mac securitization, FREMF Mortgage Trust 2015-KLSF (the “FREMF Trust”) for $102.1 million. The underlying portfolio is a pool of 11 floating rate multifamily mortgage loans with a cut-off principal balance of $1.4 billion. The Company was required to consolidate the FREMF Trust’s assets and liabilities of $1.4 billion and $1.3 billion, respectively, at March 31, 2015.

The FREMF Trust is structured as a pass-through entity that receives principal and interest on the underlying collateral and distributes those payments to the certificate holders. The FREMF Trust is a VIE and the Company is the primary beneficiary as a result of its ability to replace the special servicer without cause through its ownership of the Class C Certificates and its current designation as the directing certificate holder. The Company’s exposure to the obligations of the VIE is generally limited to the Company’s investment in the FREMF Trust of $102.1 million. Assets of the FREMF Trust may only be used to settle obligations of the FREMF Trust. Creditors of the FREMF Trust 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 FREMF Trust. A nominal loss was recognized upon initial consolidation of the FREMF Trust and $0.6 million of related costs were expensed.

Upon consolidation, the Company elected the fair value option for the financial assets and liabilities of the FREMF Trust in order to avoid an accounting mismatch, and to more faithfully represent the economics of its interest in the entity. The fair value option requires that changes in fair value be reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss). The Company has early adopted ASU 2014-13 and applied the fair value measurement practical expedient whereby the Company determines whether the fair value of the financial assets or financial liabilities is more observable as a basis for measuring the less observable financial instruments.The Company has determined that the fair value of the financial liabilities of the FREMF Trust are more observable, since the prices for these liabilities are primarily available from third-party pricing services utilized for multifamily mortgage-backed securities, while the individual assets of the trusts are inherently less capable of precise measurement given their illiquid nature and the limitations on available information related to these assets. Given that the Company’s methodology for valuing the financial assets of the FREMF Trust is an aggregate fair value derived from the fair value of the financial liabilities, the Company has determined that the fair value of each of the financial assets in their entirety should be classified in Level 2 of the fair value measurement hierarchy.

The statement of financial condition of the FREMF Trust that is reflected in the Company’s Consolidated Statements of Financial Condition at March 31, 2015 follows:

	March 31, 2015
	(dollars in thousands)
Securitized loans at fair value	$	1,370,903
Accrued interest receivable		2,431
Total assets	$	1,373,334
Liabilities and equity
Securitized debt (non-recourse) at fair value	$	1,268,809
Accrued interest payable		2,204
	$	1,271,013
Equity		102,321
Total liabilities and equity	$	1,373,334

The FREMF Trust mortgage loans had an unpaid principal balance of $1.4 billion, at March 31, 2015. As of March 31, 2015 there are no loans 90 days or more past due or on nonaccrual status. There is no gain or loss attributable to instrument-specific credit risk of the underlying loans or securitized debt securities as of March 31, 2015 based upon theCompany’s process of monitoring events of default on the underlying mortgage loans.

The statement of comprehensive income (loss) of the FREMF Trust that is reflected in the Company’s Consolidated Statements of Comprehensive Income (Loss) at March 31, 2015 follows:

	For the period February 25, 2015 to March 31, 2015
	(dollars in thousands)
Net interest income:
Interest income	$	2,742
Interest expense		(1,606	)
Net interest income		1,136
Other income:
Unrealized gain (loss) on financial instruments at fair value (1)		3
Transaction and acquistion expenses		810
Other income		813
General and administration expenses		96
Net income	$	227
(1) Included in Other income (loss).

The geographic concentrations of credit risk exceeding 5% of the total loan balances related to the trusts as of March 31, 2015 follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk
Property Location	Principal Balance		% of Balance
	(dollars in thousands)
North Carolina	$	516,150		37.9	%
Texas		339,014		24.9	%
Ohio		197,455		14.5	%
Florida		156,836		11.5	%

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AGENCY MORTGAGE-BACKED SECURITIES

3 Months Ended

Mar. 31, 2015

AGENCY MORTGAGE-BACKED SECURITIES

4.   AGENCY MORTGAGE-BACKED SECURITIES

The following tables present the Company’s available-for-sale Agency mortgage-backed securities portfolio as of March 31, 2015 and December 31, 2014, which were carried at their fair value:

March 31, 2015	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)
Principal outstanding	$	23,214,759		$	40,662,639		$	92,317		$	63,969,715
Unamortized premium		1,814,818			2,857,467			19,773			4,692,058
Unamortized discount		(7,489	)		(7,549	)		(347	)		(15,385	)
Amortized cost		25,022,088			43,512,557			111,743			68,646,388
Gross unrealized gains		345,566			759,828			8,374			1,113,768
Gross unrealized losses		(160,483	)		(208,764	)		(2,908	)		(372,155	)
Estimated fair value	$	25,207,171		$	44,063,621		$	117,209		$	69,388,001
	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	65,176,426		$	3,469,962			68,646,388
Gross unrealized gains		971,043			142,725			1,113,768
Gross unrealized losses		(355,330	)		(16,825	)		(372,155	)
Estimated fair value	$	65,792,139		$	3,595,862		$	69,388,001
December 31, 2014	Freddie Mac			Fannie Mae			Ginnie Mae			Total
	(dollars in thousands)
Principal outstanding	$	27,906,221		$	47,979,778		$	97,000		$	75,982,999
Unamortized premium		1,951,798			3,396,368			20,560			5,368,726
Unamortized discount		(8,985	)		(8,857	)		(358	)		(18,200	)
Amortized cost		29,849,034			51,367,289			117,202			81,333,525
Gross unrealized gains		313,761			660,230			8,010			982,001
Gross unrealized losses		(322,094	)		(424,800	)		(3,376	)		(750,270	)
Estimated fair value	$	29,840,701		$	51,602,719		$	121,836		$	81,565,256
	Fixed Rate			Adjustable Rate			Total
	(dollars in thousands)
Amortized cost	$	78,250,313		$	3,083,212		$	81,333,525
Gross unrealized gains		847,615			134,386			982,001
Gross unrealized losses		(732,533	)		(17,737	)		(750,270	)
Estimated fair value	$	78,365,395		$	3,199,861		$	81,565,256

Actual maturities of Agency mortgage-backed securities are generally shorter than stated contractual maturities because actual maturities of Agency mortgage-backed securities are affected by periodic payments and prepayments of principal on the underlying mortgages.

The following table summarizes the Company’s Agency mortgage-backed securities as of March 31, 2015 and December 31, 2014, according to their estimated weighted average life classifications:

	March 31, 2015				December 31, 2014
Weighted Average Life	Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost
	(dollars in thousands)
Less than one year	$	27,752	$	27,847	$	43,248	$	42,831
Greater than one year through five years		46,648,676		46,120,064		42,222,114		41,908,586
Greater than five years through ten years		22,520,713		22,308,291		39,018,833		39,098,352
Greater than ten years		190,860		190,186		281,061		283,756
Total	$	69,388,001	$	68,646,388	$	81,565,256	$	81,333,525

The weighted average lives of the Agency mortgage-backed securities at March 31, 2015 and December 31, 2014 in the table above are based upon projected principal prepayment rates. The actual weighted average lives of the Agency mortgage-backed 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 by length of time that such securities have been in a continuous unrealized loss position at March 31, 2015 and December 31, 2014.

	March 31, 2015							December 31, 2014
	Estimated Fair Value		Gross Unrealized Losses			Number of Securities		Estimated Fair Value		Gross Unrealized Losses			Number of Securities
	(dollars in thousands)
Less than 12 Months		2,595,905		(54,883	)		207		4,613,599		(36,959	)		205
12 Months or More		25,474,816		(317,272	)		232		35,175,194		(713,311	)		302
Total		28,070,721		(372,155	)		439		39,788,793		(750,270	)		507

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 are “AAA” rated or carry an implied “AAA” rating. The investments are not considered to be other-than-temporarily impaired because the Company currently has the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that the Company will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. Also, the Company is guaranteed payment of the principal amount of the securities by the respective issuing Agency.

During the quarter ended March 31, 2015, the Company disposed of $14.5 billion of Agency mortgage-backed securities, resulting in a net realized gain of $65.3 million. During the quarter ended March 31, 2014, the Company disposed of $4.3 billion of Agency mortgage-backed securities, resulting in a net realized gain of $129.5 million. Average cost is used as the basis on which the realized gain or loss on sale is determined.

Agency interest-only mortgage-backed securities represent the right to receive a specified portion of the contractual interest flows of the underlying outstanding principal balance of specific Agency mortgage-backed securities. Agency interest-only mortgage-backed securities in the Company’s portfolio as of March 31, 2015 and December 31, 2014 had net unrealized gains (losses) of $(41.6) million and $(8.0) million and an amortized cost of $1.4 billion and $1.2 billion, respectively.

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LEASE COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2015

LEASE COMMITMENTS AND CONTINGENCIES

16. LEASE COMMITMENTS AND CONTINGENCIES

Commitments

The Company had a non-cancelable lease for office space which commenced in May 2002 and expired in December 2014. In June 2014, the Company entered into a non-cancelable lease for office space which commenced in July 2014 and expires in September 2025. FIDAC has a lease for office space which commenced in October 2010 and expires in February 2016. The lease expense for the quarters ended March 31, 2015 and 2014 was $0.6 million and $0.4 million, respectively. The Company’s aggregate future minimum lease payments total $37.4 million. The following table details the lease payments.

Years Ending December 31,	Lease Commitments
	(dollars in thousands)
2015 (remaining)	$	1,159
2016		3,591
2017		3,565
2018		3,565
2019		3,565
Later years		21,994
	$	37,439

The Company had no material unfunded loan commitments as of March 31, 2015 and December 31, 2014.

Contingencies

From time to time, the Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on the Company’s consolidated financial statements. There were no material contingencies as of March 31, 2015 and December 31, 2014.

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GOODWILL

3 Months Ended

Mar. 31, 2015

GOODWILL

12.           GOODWILL

At March 31, 2015 and December 31, 2014, goodwill totaled $94.8 million.

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Income Taxes - Narrative (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Income Taxes:
Income tax expense for income and the portion of earnings retained based on Section 162(m) limitations		$ 4,000
Years federal and state tax returns remain open for examination	2013, 2012 and 2011
Real Estate Investment Trust
Income Taxes:
REIT Taxable income distributed	100.00%
Income tax expense for income and the portion of earnings retained based on Section 162(m) limitations	14

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DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2015

DERIVATIVE INSTRUMENTS

8. DERIVATIVE INSTRUMENTS

In connection with the Company’s investment/market rate risk management strategy, the Company economically hedges a portion of its interest rate risk by entering into derivative financial instrument contracts, which include interest rate swaps, swaptions and futures contracts. The Company may also enter into TBA derivatives, MBS options and eurodollar futures contracts to economically hedge its exposure to market risks. The purpose of using derivatives is to manage overall portfolio risk with the potential to generate additional income for distribution to stockholders. These derivatives are subject to changes in market values resulting from changes in interest rates, volatility, Agency mortgage-backed security spreads to U.S. Treasuries and market liquidity. The use of derivatives also creates exposure to credit risk relating to potential losses that could be recognized if the counterparties to these instruments fail to perform their obligations under the stated contract. Additionally, the Company may have to pledge cash or assets as collateral for the derivative transactions, the amount of which may vary based on the market value, notional amount and remaining term of the derivative contract. In the event of a default by the counterparty, the Company could have difficulty obtaining its Investment Securities pledged as collateral as well as receiving payments in accordance with the terms of the derivative contracts.

The table below summarizes fair value information about our derivative assets and liabilities as of March 31, 2015 and December 31, 2014:

Derivatives Instruments	Balance Sheet Location	March 31, 2015		December 31, 2014
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	25,908	$	75,225
Interest rate swaptions	Other derivative contracts, at fair value		574		5,382
TBA derivatives	Other derivative contracts, at fair value		112,929		-
Futures contracts	Other derivative contracts, at fair value		-		117
		$	139,411	$	80,724
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	2,025,170	$	1,608,286
TBA derivatives	Other derivative contracts, at fair value		-		4,258
Futures contracts	Other derivative contracts, at fair value		61,778		3,769
		$	2,086,948	$	1,616,313

The following table summarizes certain characteristics of the Company’s interest rate swaps at March 31, 2015 and December 31, 2014:

March 31, 2015
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate (2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	2,852,488		1.78	%		0.18	%		2.45
3 - 6 years		10,463,000		1.85	%		0.41	%		4.99
6 - 10 years		11,110,100		2.60	%		0.37	%		8.64
Greater than 10 years		3,634,400		3.70	%		0.22	%		20.12
Total / Weighted Average	$	28,059,988		2.37	%		0.35	%		8.09
December 31, 2014
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate (2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	2,502,505		1.63	%		0.17	%		2.64
3 - 6 years		11,138,000		2.06	%		0.22	%		5.18
6 - 10 years		13,069,200		2.67	%		0.23	%		8.57
Greater than 10 years		4,751,800		3.58	%		0.20	%		19.53
Total / Weighted Average	$	31,461,505		2.49	%		0.22	%		8.38

(1) Notional amount includes $3.0 billion and $500.0 million in forward starting pay fixed swaps as of March 31, 2015 and December 31, 2014, respectively.

(2) Excludes forward starting swaps.

(3) Weighted average fixed rate on forward starting pay fixed swaps was 1.88% and 3.25% as of March 31, 2015 and December 31, 2014, respectively.

The following table summarizes certain characteristics of the Company’s interest rate swaptions at March 31, 2015 and December 31, 2014:

March 31, 2015	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	$	1,000,000	2.61%	3M LIBOR	8.19	2.15
December 31, 2014	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	$	1,750,000	2.88%	3M LIBOR	9.17	3.59

The following table summarizes certain characteristics of the Company’s TBA derivatives as of March 31, 2015 and December 31, 2014:

March 31, 2015
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	13,750,000		$	14,279,766		$	14,392,695		$	112,929
Sale contracts		-			-			-			-
Net TBA derivatives	$	13,750,000		$	14,279,766		$	14,392,695		$	112,929
December 31, 2014
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	-		$	-		$	-		$	-
Sale contracts		(375,000	)		(375,430	)		(379,688	)		(4,258	)
Net TBA derivatives	$	(375,000	)	$	(375,430	)	$	(379,688	)	$	(4,258	)

The Company presents derivative contracts on a gross basis on the Consolidated Statements of Financial Condition. Derivative contracts may contain legally enforceable provisions that allow for netting or setting off receivables and payables with each counterparty.

The following tables present information about derivative assets and liabilities that are subject to such provisions and can potentially be offset on our Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014, respectively.

March 31, 2015			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	25,908	$	(24,782	)	$	-		$	1,126
Interest rate swaptions, at fair value		574		-			-			574
TBA derivatives, at fair value		112,929		-			-			112,929
Liabilities:
Interest rate swaps, at fair value	$	2,025,170	$	(24,782	)	$	(1,111,199	)	$	889,189
Futures contracts, at fair value		61,778		-			(61,778	)		-
December 31, 2014			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	75,225	$	(66,180	)	$	-		$	9,045
Interest rate swaptions, at fair value		5,382		-			-			5,382
Futures contracts, at fair value		117		(117	)		-			-
Liabilities:
Interest rate swaps, at fair value	$	1,608,286	$	(66,180	)	$	(869,302	)	$	672,804
TBA derivatives, at fair value		4,258		-			-			4,258
Futures contracts, at fair value		3,769		(117	)		-			3,652

The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:

	Location on Consolidated Statements of Comprehensive Income (Loss)
	Realized Gains (Losses) on Interest Rate Swaps(1)			Realized Gains (Losses) on Termination of Interest Rate Swaps			Unrealized Gains (Losses) on Interest Rate Swaps
	(dollars in thousands)
Quarter Ended:
March 31, 2015	$	(158,239	)	$	(226,462	)	$	(466,202	)
March 31, 2014	$	(260,435	)	$	(6,842	)	$	(348,942	)

(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 (Loss).

The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:

Quarter Ended March 31, 2015
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	(55,644	)	$	117,188		$	61,544
Net interest rate swaptions	$	(21,891	)	$	17,083		$	(4,808	)
Futures	$	(5,506	)	$	(58,126	)	$	(63,632	)
							$	(6,896	)
Quarter Ended March 31, 2014
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	(37,837	)	$	(11,410	)	$	(49,247	)
Net interest rate swaptions	$	(40,943	)	$	(52,917	)	$	(93,860	)
Futures	$	(5,669	)	$	(3,048	)	$	(8,717	)
							$	(151,824	)

(1) Includes options on TBA securities.

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Geographic Concentrations of Credit Risk Exceeding 5% of Total Loan Balances (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015
NORTH CAROLINA
Concentration Risk [Line Items]
Principal Balance	516,150
NORTH CAROLINA | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Percentage Balance	37.90%
TEXAS
Concentration Risk [Line Items]
Principal Balance	339,014
TEXAS | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Percentage Balance	24.90%
OHIO
Concentration Risk [Line Items]
Principal Balance	197,455
OHIO | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Percentage Balance	14.50%
FLORIDA
Concentration Risk [Line Items]
Principal Balance	156,836
FLORIDA | Credit Concentration Risk [Member]
Concentration Risk [Line Items]
Percentage Balance	11.50%

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FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2015

FAIR VALUE MEASUREMENTS

6. FAIR VALUE MEASUREMENTS

The Company follows fair value guidance in accordance with GAAP to account for its financial instruments. The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

GAAP requires classification of financial instruments into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded at fair value on the Consolidated Statements of Financial Condition or disclosed in the related notes are categorized based on the inputs to the valuation techniques as follows:

Level 1– inputs to the valuation methodology are quoted prices (unadjusted) for identical assets and liabilities in active markets.

Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – inputs to the valuation methodology are unobservable and significant to overall fair value.

The Company designates its financial instruments as available for sale or trading depending upon the type of instrument and the Company’s intent and ability to hold such instrument to maturity. Instruments classified as available for sale and trading are reported at fair value on a recurring basis.

The following is a description of the valuation methodologies used for instruments carried at fair value. These methodologies are applied to assets and liabilities across the three level fair value hierarchy, with the observability of inputs determining the appropriate level.

U.S. Treasury securities, futures contracts and investment in affiliate are valued using quoted prices for identical instruments in active markets. Investment Securities, interest rate swaps, swaptions and other derivatives are valued using quoted prices or internally estimated prices for similar assets using internal models. The Company incorporates common market pricing methods, including a spread measurement to the Treasury curve as well as underlying characteristics of the particular security including coupon, prepayment speeds, periodic and life caps, rate reset period and expected life of the security in its estimates of fair value. Management reviews and indirectly corroborates its estimates of the fair value derived using internal models by comparing its results to independent prices provided by dealers in the securities and/or third party pricing services. Certain liquid asset classes, such as Agency fixed-rate pass-throughs, may be priced using independent sources such as quoted prices for TBA securities.

The Investment Securities, interest rate swap and swaption markets are considered to be active markets such that participants transact with sufficient frequency and volume to provide transparent pricing information on an ongoing basis. The liquidity of the Investment Securities, interest rate swaps, swaptions, TBA derivatives and MBS options markets and the similarity of the Company’s securities to those actively traded enable the Company to observe quoted prices in the market and utilize those prices as a basis for formulating fair value measurements. Consequently, the Company has classified Investment Securities, interest rate swaps, swaptions, TBA derivatives and MBS options as Level 2 inputs in the fair value hierarchy. Additionally, as discussed in the "Commercial Real Estate Investments" footnote, Commercial real estate debt investments are classified as Level 2.

The following table presents the estimated fair values of financial instruments measured at fair value on a recurring basis.

	Level 1		Level 2		Level 3		Total
March 31, 2015	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	69,388,001	$	-	$	69,388,001
Agency debentures		-		995,408		-		995,408
Agency CRT securities		-		108,337		-		108,337
Commercial real estate debt investments		-		1,515,903		-		1,515,903
Investment in affiliate		141,246		-		-		141,246
Interest rate swaps		-		25,908		-		25,908
Other derivatives		-		113,503		-		113,503
Total Assets	$	141,246	$	72,147,060	$	-	$	72,288,306
Liabilities:
Securitized debt of consolidated VIEs	$	-	$	1,268,809	$	-	$	1,268,809
Interest rate swaps		-		2,025,170		-		2,025,170
Other derivatives		61,778		-		-		61,778
Total Liabilities	$	61,778	$	3,293,979	$	-	$	3,355,757
	Level 1		Level 2		Level 3		Total
December 31, 2014	(dollars in thousands)
Assets:
Agency mortgage-backed securities	$	-	$	81,565,256	$	-	$	81,565,256
Agency debentures		-		1,368,350		-		1,368,350
Investment in affiliate		143,045		-		-		143,045
Interest rate swaps		-		75,225		-		75,225
Other derivatives		117		5,382		-		5,499
Total Assets	$	143,162	$	83,014,213	$	-	$	83,157,375
Liabilities:
Interest rate swaps	$	-	$	1,608,286	$	-	$	1,608,286
Other derivatives		3,769		4,258		-		8,027
Total Liabilities	$	3,769	$	1,612,544	$	-	$	1,616,313

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon discounted cash flows using market yields, methodologies that incorporate market-based transactions or other valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, fair values are not necessarily indicative of the amount the Company would realize on disposition of the financial instruments. The use of different market assumptions or estimation methodologies could have a material effect on the estimated fair value amounts.

The carrying value of short term instruments, including cash and cash equivalents, reverse repurchase agreements and repurchase agreements whose term is less than twelve months, generally approximates fair value due to the short term nature of the instruments.

The estimated fair value of commercial real estate debt and preferred equity investments takes into consideration changes in credit spreads and interest rates from the date of origination or purchase to the reporting date. The fair value also reflects consideration of asset-specific maturity dates and other items that could have an impact on the fair value as of the reporting date.

Estimates of fair value of corporate debt require the use of judgments and inputs including, but not limited to, the enterprise value of the borrower (i.e., an estimate of the total fair value of the borrower's debt and equity), the nature and realizable value of any collateral, the borrower’s ability to make payments when due and its earnings history. Management also considers factors that affect the macro and local economic markets in which the borrower operates.

The fair value of repurchase agreements with remaining maturities greater than one year or with embedded optionality are valued as structured notes, with term to maturity, LIBOR rates and the Treasury curve being primary determinants of estimated fair value.

The fair value of mortgages payable is calculated using the estimated yield of a new par loan to value the remaining terms in place. A par loan is created using the identical terms of the existing loan; however, the coupon is derived by using the original spread against the interpolated Treasury. The fair value of mortgages payable also reflects consideration of the value of the underlying collateral and changes in credit risk from the time the debt was originated.

The carrying value of participation sold is based on the loan’s amortized cost. The fair value of participation sold is based on the fair value of the underlying related commercial loan.

The fair value of convertible senior notes is determined using end of day quoted prices in active markets.

The fair value of securitized debt of consolidated VIEs is determined using the average of external vendor pricing services.

The following table summarizes the estimated fair value for financial assets and liabilities as of March 31, 2015 and December 31, 2014.

		March 31, 2015				December 31, 2014
	Level in Fair Value Hierarchy	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets:	(dollars in thousands)
Cash and cash equivalents	1	$	1,920,326	$	1,920,326	$	1,741,244	$	1,741,244
Reverse repurchase agreements	1		100,000		100,000		100,000		100,000
Agency mortgage-backed securities	2		69,388,001		69,388,001		81,565,256		81,565,256
Agency debentures	2		995,408		995,408		1,368,350		1,368,350
Agency CRT securities	2		108,337		108,337		-		-
Commercial real estate debt investments, at fair value	2		1,515,903		1,515,903		-		-
Investment in affiliate	1		141,246		141,246		143,045		143,045
Commercial real estate debt and preferred equity, held for investment	3		1,498,406		1,513,878		1,518,165		1,528,444
Corporate debt	2		227,830		228,012		166,464		166,056
Interest rate swaps	2		25,908		25,908		75,225		75,225
Other derivatives	1,2		113,503		113,503		5,499		5,499
Financial liabilities:
Repurchase agreements	1,2	$	60,477,378	$	60,691,054	$	71,361,926	$	71,587,222
Convertible Senior Notes	1		749,512		752,325		845,295		863,470
Securitized debt of consolidated VIE	2		1,491,829		1,492,102		260,700		262,061
Mortgages payable	2		146,470		150,765		146,553		146,611
Participation sold	3		13,589		13,620		13,693		13,655
Interest rate swaps	2		2,025,170		2,025,170		1,608,286		1,608,286
Other derivatives	1,2		61,778		61,778		8,027		8,027

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SECURED FINANCING

3 Months Ended

Mar. 31, 2015

SECURED FINANCING

7. SECURED FINANCING

The Company had outstanding $60.5 billion and $71.4 billion of repurchase agreements with weighted average borrowing rates of 1.74% and 1.62%, after giving effect to the Company’s interest rate swaps, and weighted average remaining maturities of 149 days and 141 days as of March 31, 2015 and December 31, 2014, respectively.

At March 31, 2015 and December 31, 2014, the repurchase agreements had the following remaining maturities and weighted average rates:

	March 31, 2015					December 31, 2014
	Repurchase Agreements		Weighted Average Rate			Repurchase Agreements		Weighted Average Rate
1 day	$	7,658,440		0.64	%	$	-		0.00	%
2 to 29 days		16,080,033		0.39	%		28,354,167		0.35	%
30 to 59 days		7,326,177		0.40	%		17,336,469		0.43	%
60 to 89 days		9,534,614		0.40	%		4,040,677		0.38	%
90 to 119 days		4,677,222		0.50	%		2,945,495		0.50	%
Over 120 days(1)		15,200,892		1.45	%		18,685,118		1.24	%
Total	$	60,477,378		0.70	%	$	71,361,926		0.61	%
(1) Approximately 18% and 16% of the total repurchase agreements had a remaining maturity over 1 year as of March 31, 2015 and December 31, 2014, respectively.

Repurchase agreements and reverse repurchase agreements with the same counterparty and the same maturity are presented net in the Consolidated Statements of Financial Condition when the terms of the agreements permit netting. The following table summarizes the gross amounts of reverse repurchase agreements and repurchase agreements, amounts offset in accordance with netting arrangements and net amounts of repurchase agreements and reverse repurchase agreements as presented in the Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014. Refer to “Derivative Instruments” footnote for information related to the effect of netting arrangements on the Company’s derivative instruments.

	March 31, 2015						December 31, 2014
	Reverse Repurchase Agreements			Repurchase Agreements			Reverse Repurchase Agreements			Repurchase Agreements
	(dollars in thousands)
Gross Amounts	$	1,700,000		$	62,077,378		$	700,000		$	71,961,926
Amounts Offset		(1,600,000	)		(1,600,000	)		(600,000	)		(600,000	)
Netted Amounts	$	100,000		$	60,477,378		$	100,000		$	71,361,926

Investment Securities pledged as collateral under these secured financings and interest rate swaps had an estimated fair value and accrued interest of $64.6 billion and $189.9 million, respectively, at March 31, 2015 and $75.4 billion and $226.6 million, respectively, at December 31, 2014.

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CONVERTIBLE SENIOR NOTES

3 Months Ended

Mar. 31, 2015

CONVERTIBLE SENIOR NOTES

9. CONVERTIBLE SENIOR NOTES

In 2010, the Company issued $600.0 million in aggregate principal amount of its 4% convertible senior notes (“4% Convertible Senior Notes”) for net proceeds of approximately $582.0 million. In 2012, the Company repurchased $492.5 million in aggregate principal amount of its 4% Convertible Senior Notes. In February 2015, the 4% Convertible Senior Notes matured and the Company repaid the remaining 4% convertible senior notes for the face amount of $107.5 million.

In May 2012, the Company issued $750.0 million in aggregate principal amount of its 5% convertible senior notes due 2015 (“5% Convertible Senior Notes”) for net proceeds of approximately $727.5 million. Interest on the 5% Convertible Senior Notes is paid semi-annually at a rate of 5% per year and the 5% Convertible Senior Notes will mature on May 15, 2015 unless repurchased or converted earlier. The 5% Convertible Senior Notes are convertible into shares of Common Stock at a conversion rate for each $1,000 principal amount of 5% Convertible Senior Notes. The initial conversion rate and conversion rate at March 31, 2015 was 52.7969, which was equivalent to an initial conversion price of approximately $18.94 per share of Common Stock, subject to adjustment in certain circumstances. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Common Stock or a combination of cash and shares of Common Stock, at the Company’s sole discretion. There is no limit on the total number of shares of Common Stock that the Company would be required to issue upon a conversion.

At issuance, the Company determined that the 5% Convertible Senior Notes included an equity component of $11.7 million, which is reflected in Additional paid-in capital on the Company’s Consolidated Statements of Financial Condition, and reduces the recorded liability on the 5% Convertible Senior Notes. The $11.7 million discount to the principal amount of the Convertible Senior Notes is recognized in interest expense over the remaining life of the notes. At March 31, 2015 and December 31, 2014, $0.5 million and $1.5 million, respectively, of the unamortized discount had not been reflected in interest expense.

The 5% Convertible Senior Notes due 2015 are a general corporate obligation and therefore rank junior to collateralized debt of the Company with respect to secured collateral.

The 5% Convertible Senior Notes rank senior to the 7.875% Series A Cumulative Redeemable Preferred Stock, 7.625% Series C Cumulative Redeemable Preferred Stock and 7.50% Series D Cumulative Redeemable Preferred Stock. The 7.875% Series A Cumulative Redeemable Preferred Stock, 7.625% Series C Cumulative Redeemable Preferred Stock and 7.50% Series D Cumulative Redeemable Preferred Stock rank pari-passu with each other.

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Repurchase Agreements - Remaining Maturities (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Repurchase Agreements:
Repurchase agreements	$ 60,477,378		$ 71,361,926	[1]
Weighted average rate	0.70%		0.61%
1 day
Repurchase Agreements:
Repurchase agreements	7,658,440
Weighted average rate	0.64%		0.00%
2 to 29 days
Repurchase Agreements:
Repurchase agreements	16,080,033		28,354,167
Weighted average rate	0.39%		0.35%
30 to 59 days
Repurchase Agreements:
Repurchase agreements	7,326,177		17,336,469
Weighted average rate	0.40%		0.43%
60 to 89 days
Repurchase Agreements:
Repurchase agreements	9,534,614		4,040,677
Weighted average rate	0.40%		0.38%
90 to 119 days
Repurchase Agreements:
Repurchase agreements	4,677,222		2,945,495
Weighted average rate	0.50%		0.50%
Over 120 days
Repurchase Agreements:
Repurchase agreements	$ 15,200,892	[2]	$ 18,685,118	[2]
Weighted average rate	1.45%	[2]	1.24%	[2]

[1] Derived from the audited consolidated financial statements at December 31, 2014.

[2] Approximately 18% and 16% of the total repurchase agreements had a remaining maturity over 1 year as of March 31, 2015 and December 31, 2014, respectively.

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Lease Commitments And Contingencies - Narrative (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Lease Commitments and Contingencies:
Aggregate future net minimum lease payments	$ 37.4
Lease expense	$ 0.6	$ 0.4

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Summary of Gross Amounts, Amounts Offset and net Amounts of Repurchase Agreement and Reverse Repurchase Agreement (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Repurchase Agreements:
Gross amounts -reverse repurchase agreements	$ 1,700,000	$ 700,000
Amounts offset - reverse repurchase agreement	(1,600,000)	(600,000)
Netted amounts -reverse repurchase	100,000	100,000	[1]
Gross amounts -repurchase agreement	62,077,378	71,961,926
Amounts offset -repurchase agreement	(1,600,000)	(600,000)
Netted amounts -repurchase agreement	$ 60,477,378	$ 71,361,926	[1]

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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Repurchase Agreements - Narrative (Detail) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Repurchase Agreements:
Repurchase agreements - outstanding	$ 60,477,378,000	$ 71,361,926,000	[1]
Repurchase agreements - weighted average borrowing rates	1.74%	1.62%
Repurchase agreements - weighted average remaining maturities (in days)	149 days	141 days
Secured financings and interest rate swaps - collateral held, estimated fair value	64,600,000,000	75,400,000,000
Secured financings and interest rate swaps - collateral held, accrued interest	$ 189,900,000	$ 226,600,000

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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DERIVATIVE INSTRUMENTS (Tables)

3 Months Ended

Mar. 31, 2015

Summarizes Fair Value Information about Derivative Assets Liabilities

The table below summarizes fair value information about our derivative assets and liabilities as of March 31, 2015 and December 31, 2014:

Derivatives Instruments	Balance Sheet Location	March 31, 2015		December 31, 2014
Assets:		(dollars in thousands)
Interest rate swaps	Interest rate swaps, at fair value	$	25,908	$	75,225
Interest rate swaptions	Other derivative contracts, at fair value		574		5,382
TBA derivatives	Other derivative contracts, at fair value		112,929		-
Futures contracts	Other derivative contracts, at fair value		-		117
		$	139,411	$	80,724
Liabilities:
Interest rate swaps	Interest rate swaps, at fair value	$	2,025,170	$	1,608,286
TBA derivatives	Other derivative contracts, at fair value		-		4,258
Futures contracts	Other derivative contracts, at fair value		61,778		3,769
		$	2,086,948	$	1,616,313

Offsetting of Derivative Assets and Liabilities

The following tables present information about derivative assets and liabilities that are subject to such provisions and can potentially be offset on our Consolidated Statements of Financial Condition as of March 31, 2015 and December 31, 2014, respectively.

March 31, 2015			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	25,908	$	(24,782	)	$	-		$	1,126
Interest rate swaptions, at fair value		574		-			-			574
TBA derivatives, at fair value		112,929		-			-			112,929
Liabilities:
Interest rate swaps, at fair value	$	2,025,170	$	(24,782	)	$	(1,111,199	)	$	889,189
Futures contracts, at fair value		61,778		-			(61,778	)		-
December 31, 2014			Amounts Eligible for Offset
	Gross Amounts		Financial Instruments			Cash Collateral			Net Amounts
Assets:	(dollars in thousands)
Interest rate swaps, at fair value	$	75,225	$	(66,180	)	$	-		$	9,045
Interest rate swaptions, at fair value		5,382		-			-			5,382
Futures contracts, at fair value		117		(117	)		-			-
Liabilities:
Interest rate swaps, at fair value	$	1,608,286	$	(66,180	)	$	(869,302	)	$	672,804
TBA derivatives, at fair value		4,258		-			-			4,258
Futures contracts, at fair value		3,769		(117	)		-			3,652

Schedule of Derivative Instruments in Statement of Operations and Comprehensive Income Loss

The effect of interest rate swaps on the Consolidated Statements of Comprehensive Income (Loss) is as follows:

	Location on Consolidated Statements of Comprehensive Income (Loss)
	Realized Gains (Losses) on Interest Rate Swaps(1)			Realized Gains (Losses) on Termination of Interest Rate Swaps			Unrealized Gains (Losses) on Interest Rate Swaps
	(dollars in thousands)
Quarter Ended:
March 31, 2015	$	(158,239	)	$	(226,462	)	$	(466,202	)
March 31, 2014	$	(260,435	)	$	(6,842	)	$	(348,942	)

(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 (Loss).

Effect of Other Derivative Contracts on the Consolidated Statements of Operations and Comprehensive Income (Loss)

The effect of other derivative contracts on the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:

Quarter Ended March 31, 2015
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	(55,644	)	$	117,188		$	61,544
Net interest rate swaptions	$	(21,891	)	$	17,083		$	(4,808	)
Futures	$	(5,506	)	$	(58,126	)	$	(63,632	)
							$	(6,896	)
Quarter Ended March 31, 2014
Derivative Instruments	Realized Gain (Loss)			Unrealized Gain (Loss)			Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets
(dollars in thousands)
Net TBA derivatives (1)	$	(37,837	)	$	(11,410	)	$	(49,247	)
Net interest rate swaptions	$	(40,943	)	$	(52,917	)	$	(93,860	)
Futures	$	(5,669	)	$	(3,048	)	$	(8,717	)
							$	(151,824	)

(1) Includes options on TBA securities.

Interest Rate Swaption

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s interest rate swaptions at March 31, 2015 and December 31, 2014:

March 31, 2015	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	$	1,000,000		2.61	%	3M LIBOR			8.19		2.15
Short	$	-		-			-		-		-
December 31, 2014	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	$	1,750,000		2.88	%	3M LIBOR			9.17		3.59
Short	$	-		-			-		-		-

Interest Rate Swaps

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s interest rate swaps at March 31, 2015 and December 31, 2014:

March 31, 2015
Maturity	Current Notional (1)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate (2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	2,852,488		1.78	%		0.18	%		2.45
3 - 6 years		10,463,000		1.85	%		0.41	%		4.99
6 - 10 years		11,110,100		2.60	%		0.37	%		8.64
Greater than 10 years		3,634,400		3.70	%		0.22	%		20.12
Total / Weighted Average	$	28,059,988		2.37	%		0.35	%		8.09
December 31, 2014
Maturity	Current Notional (4)		Weighted Average Pay Rate (2) (3)			Weighted Average Receive Rate (2)			Weighted Average Years to Maturity (2)
(dollars in thousands)
0 - 3 years	$	2,502,505		1.63	%		0.17	%		2.64
3 - 6 years		11,138,000		2.06	%		0.22	%		5.18
6 - 10 years		13,069,200		2.67	%		0.23	%		8.57
Greater than 10 years		4,751,800		3.58	%		0.20	%		19.53
Total / Weighted Average	$	31,461,505		2.49	%		0.22	%		8.38

(1)   Notional amount includes $3.0 billion and $500.0 million in forward starting pay fixed swaps as of March 31, 2015 and December 31, 2014, respectively.

(2)   Excludes forward starting swaps.

(3)   Weighted average fixed rate on forward starting pay fixed swaps was 1.88% and 3.25% as of March 31, 2015 and December 31, 2014, respectively.

TBA Derivatives

Summary of Certain Characteristics of Derivatives

The following table summarizes certain characteristics of the Company’s TBA derivatives as of March 31, 2015 and December 31, 2014:

March 31, 2015
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	13,750,000		$	14,279,766		$	14,392,695		$	112,929
Sale contracts		-			-			-			-
Net TBA derivatives	$	13,750,000		$	14,279,766		$	14,392,695		$	112,929
December 31, 2014
Purchase and sale contracts for derivative TBAs	Notional			Implied Cost Basis			Implied Market Value			Net Carrying Value
(dollars in thousands)
Purchase contracts	$	-		$	-		$	-		$	-
Sale contracts		(375,000	)		(375,430	)		(379,688	)		(4,258	)
Net TBA derivatives	$	(375,000	)	$	(375,430	)	$	(379,688	)	$	(4,258	)

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Commercial Real Estate Investments - Additional Information (Detail) (USD $)	1 Months Ended		3 Months Ended			1 Months Ended
	Nov. 30, 2014 Property	Jan. 31, 2014	Mar. 31, 2015		Mar. 31, 2014	Feb. 28, 2015	Dec. 31, 2014
Real Estate Properties [Line Items]
Percentage of ownership interest in joint venture	90.00%
Number of retail property Acquired	11
Principal amount of mortgage loan			$ 146,361,000				$ 146,430,000
Weighted average amortization period for intangible assets and liabilities			3 years 8 months 12 days
Percentage of non-controlling interest			10.00%
Fair value of non-controlling interest at acquisition date			15,400,000
Depreciation expense			2,823,000		292,000
Securitization financing transaction, purchase		399,500,000
Securitization financing transaction, total		260,700,000	1,491,829,000	[1]			260,700,000	[1],[2]
Securitization financing transaction, weighted average rate		65.30%
Securitization financing transaction, variable interest rate		1.74%
Securitization financing transaction, variable interest rate description			LIBOR plus 1.74% at closing
Senior Secured mortgages of Consolidated VIE			361,200,000				398,600,000	[2]
Unamortized origination fees			700,000
General and Administrative Expense [Member]
Real Estate Properties [Line Items]
Transaction costs related to acquisitions			0
Depreciation expense			2,800,000		300,000
FREMF Trust
Real Estate Properties [Line Items]
Transaction costs related to acquisitions			(810,000)
Exposure to the obligations of the VIE limited to the amount of investment						102,100,000
Gain (Loss) recognized upon initial consolidation						0
Debt issue costs expensed						600,000
Variable interest entity, consolidated, carrying amount, assets			1,400,000
Variable interest entity, consolidated, carrying amount, liabilities			1,300,000
Mortgage loans held and securitized debt obligations, unpaid principal balance			1,400,000,000
Loans 90 days or more past due or on nonaccrual status			0
Gain (Loss) attributable to instrument- specific credit risk			0
Freddie Mac | Floating Rate Multifamily Mortgage Loans
Real Estate Properties [Line Items]
Number of loans in the underlying portfolio						11
Principal balance						1,400,000,000
Ten Year Four Point Zero Three Percent Fixed Rate Interest Only Mortgage Loan[Member]
Real Estate Properties [Line Items]
Principal amount of mortgage loan	104,000,000
Debt term	10 years
Debt instrument, interest rate	4.03%
Other Assets
Real Estate Properties [Line Items]
Securitization cost		$ 4,300,000

[1] Includes securitized debt of a consolidated VIE carried at fair value of $1.3 billion and $0 at March 31, 2015 and December 31, 2014, respectively.

[2] Derived from the audited consolidated financial statements at December 31, 2014.

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LONG-TERM STOCK INCENTIVE PLAN

3 Months Ended

Mar. 31, 2015

LONG-TERM STOCK INCENTIVE PLAN

14. LONG-TERM STOCK INCENTIVE PLAN

The Company adopted the 2010 Equity Incentive Plan (the “Plan”), which authorizes the Compensation Committee of the Board of Directors to grant options, stock appreciation rights, dividend equivalent rights, or other share-based awards, including restricted shares up to an aggregate of 25,000,000 shares, subject to adjustments as provided in the 2010 Equity Incentive Plan. The Company had previously adopted a long term stock incentive plan for executive officers, key employees and non-employee directors (the “Prior Plan”). The Prior Plan authorized the Compensation Committee of the Board of Directors to grant awards, including non-qualified options as well as incentive stock options as defined under Section 422 of the Code. The Prior Plan authorized the granting of options or other awards for an aggregate of the greater of 500,000 shares or 9.5% of the diluted outstanding shares of the Company’s common stock, up to a ceiling of 8,932,921 shares. No further awards will be made under the Prior Plan, although existing awards remain effective.

Stock options were issued at the market price on the date of grant, subject to an immediate or four year vesting in four equal installments with a contractual term of 5 or 10 years.

The following table sets forth activity related to the Company’s stock options awarded under the Plan:

	For the Quarter Ended
	March 31, 2015					March 31, 2014
	Number of Shares			Weighted Average Exercise Price		Number of Shares			Weighted Average Exercise Price
Options outstanding at the beginning of period		2,259,335		$	15.35		3,581,752		$	15.44
Granted		-		$	-		-		$	-
Exercised		-		$	-		-		$	-
Forfeited		(8,799	)	$	14.80		(353,417	)	$	14.94
Expired		-		$	-		-		$	-
Options outstanding at the end of period		2,250,536		$	15.35		3,228,335		$	15.49
Options exercisable at the end of the period		2,250,536		$	15.35		3,228,335		$	15.49

The weighted average remaining contractual term was approximately 2.8 years and 3.5 years for stock options outstanding and exercisable as of March 31, 2015 and 2014, respectively.

As of March 31, 2015 and 2014, there was no unrecognized compensation cost related to nonvested share-based compensation awards.

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2015

RELATED PARTY TRANSACTIONS

19. RELATED PARTY TRANSACTIONS

Investment in Affiliate, Available-For-Sale Equity Security

At March 31, 2015, the Company’s available-for-sale equity securities represented shares of Chimera Investment Corporation (“Chimera”), which are reported at fair value. The Company owned approximately 45.0 million shares of Chimera at a fair value of approximately $141.2 million at March 31, 2015 and approximately 45.0 million shares of Chimera at a fair value of approximately $143.0 million at December 31, 2014. At March 31, 2015 and December 31, 2014, the investment in Chimera had an unrealized gain of $2.4 million and $4.2 million, respectively.

Advisory fees

For the quarter ended March 31, 2015, the Company recorded advisory fees from Chimera totaling $10.5 million. In August 2014, the management agreement between FIDAC and Chimera was amended and restated to amend certain of the terms and conditions of the prior agreement. Among other amendments to the terms of the prior agreement, effective August 8, 2014, the management fee was increased from 0.75% to 1.20% of Chimera’s gross stockholders’ equity (as defined in the amended and restated management agreement). For the quarter ended March 31, 2014, the Company recorded advisory fees from Chimera totaling $6.1 million. At March 31, 2015 and December 31, 2014, the Company had amounts receivable from Chimera of $10.3 million and $10.4 million, respectively.

Management Agreement

The Company and the Manager have entered into a management agreement pursuant to which the Company’s management is conducted by the Manager through the authority delegated to it in the Management Agreement and pursuant to the policies established by the Board of Directors (the “Externalization”). The management agreement was effective as of July 1, 2013 and applicable for the entire 2013 calendar year and was amended on November 5, 2014 (the management agreement, as amended, is referred to as “Management Agreement”).

Pursuant to the terms of the Management Agreement, the Company pays the Manager a monthly management fee in an amount equal to 1/12th of 1.05% of stockholders’ equity, as defined in the Management Agreement, for its management services.

The Management Agreement provides for a two year term ending December 31, 2016 with automatic two-year renewals unless at least two-thirds of the Company’s independent directors or the holders of a majority of the Company’s outstanding shares of common stock elect to terminate the agreement in their sole discretion and for any or no reason. At any time during the term or any renewal term the Company may deliver to the Manager written notice of the Company’s intention to terminate the Management Agreement. The Company must designate a date not less than one year from the date of the notice on which the Management Agreement will terminate. The Management Agreement also provides that the Manager may terminate the Management Agreement by providing to the Company prior written notice of its intention to terminate the Management Agreement no less than one year prior to the date designated by the Manager on which the Manager would cease to provide services or such earlier date as determined by the Company in its sole discretion.

Effective July 1, 2013, a majority of the Company’s employees were terminated by the Company and were hired by the Manager. The Company has a limited number of employees following the Externalization, all of whom are employees of the Company’s subsidiaries for regulatory or corporate efficiency reasons. All compensation expenses associated with such retained employees reduce the amount paid to the Manager.

The Management Agreement may be amended or modified by agreement between the Company and the Manager. There is no termination fee for a termination of the Management Agreement by either the Company or the Manager.

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Internal CRE Debt and Preferred Equity Ratings (Detail) (Commercial Mortgage, USD $) In Thousands, unless otherwise specified	Mar. 31, 2015		Dec. 31, 2014
Transaction to Real Estate Investments [Line Items]
Performing Loans	$ 1,199,028		$ 1,498,749
Internal Ratings Watch List	290,250	[1]	9,250
Defaulted-Recovery	12,973	[2]	12,973
Impaired	0		0
Senior Mortgages
Transaction to Real Estate Investments [Line Items]
Performing Loans	188,899		371,331
Internal Ratings Watch List	230,000	[1]
Defaulted-Recovery	12,973	[2]	12,973	[2]
Impaired	0		0
Senior Securitized Mortgages
Transaction to Real Estate Investments [Line Items]
Performing Loans	352,611	[3]	390,291	[3]
Internal Ratings Watch List	9,250	[1],[3]	9,250	[3]
Impaired	0	[3]	0	[3]
Subordinated Notes
Transaction to Real Estate Investments [Line Items]
Impaired			0
Preferred Equity Interests
Transaction to Real Estate Investments [Line Items]
Performing Loans	162,213		214,653
Internal Ratings Watch List	51,000	[1]
Impaired	0		0
Mezzanine Loans
Transaction to Real Estate Investments [Line Items]
Performing Loans	495,305		522,474
Impaired	$ 0		$ 0

[1] Includes a $230.0 million loan maturing on June 30, 2015 with a risk that the borrower will be unable to refinance the outstanding principal amount before the maturity date, but full recovery is expected.

[2] Related to one loan on non-accrual status.

[3] Assets of consolidated VIE.

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Recent Accounting Pronouncements (Detail)	3 Months Ended
	Mar. 31, 2015
Accounting Standards Update 2015-05
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2015-05 - Customer's Accounting for Fees Paid in a Cloud Computing Arrangement
Description	This update clarifies that customers should determine whether a cloud computing arrangement includes the license of software by applying the same guidance cloud service providers use. The guidance also eliminates the current requirement that customers analogized to the leasing standard when determining the asset acquired in a software licensing arrangement.
Date of Adoption	January 1, 2016 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2015-03
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2015-03 Interest - Imputation of Interest Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs
Description	This ASU requires that debt issue costs are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition and measurement of debt issue costs are not affected.
Date of Adoption	January 1, 2016 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2015-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2015-02 Consolidation (Topic 810) Amendments to the Consolidation Analysis
Description	This update affects the following areas of the consolidation analysis: limited partnerships and similar entities, evaluation of fees paid to a decision maker or service provider as a variable interest and in determination of the primary beneficiary, effect of related parties on the primary beneficiary determination and for certain investment funds.
Date of Adoption	January 1, 2016 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2015-01
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2015-01 Income Statement - Extraordinary and Unusual Items (Subtopic 225-20)
Description	This update eliminates from GAAP the concept of extraordinary items.
Date of Adoption	January 1, 2016 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2014-16
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-16 Derivatives and Hedging (Topic 815) Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or Equity
Description	This ASU provides additional guidance for evaluating whether conversion rights, redemption rights, voting rights, liquidation rights and dividend payment preferences and other features embedded in a share, including preferred stock, contain embedded derivatives requiring bifurcation. The update requires that an entity determine the nature of the host contract by considering all stated and implied terms and features in a hybrid instrument.
Date of Adoption	January 1, 2016 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2014-15
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
Description	This ASU requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern within one year after the date the financial statements are issued.
Date of Adoption	January 1, 2017 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2014-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-09, Revenue from Contracts with Customers
Description	This guidance applies to contracts with customers to transfer goods or services and contracts to transfer nonfinancial assets unless those contracts are within the scope of other standards (for example, lease transactions).
Date of Adoption	January 1, 2017
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2014-17
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-17 Business Combinations (Topic 805): Pushdown Accounting
Description	ted This amendment provides an acquired entity with the option to apply push down accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.
Date of Adoption	November 18, 2014
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2014-13
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-13, Consolidation (Topic 810) Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.
Description	This Update provides a practical expedient to measure the fair value of the financial assets and financial liabilities of a consolidated collateralized financing entity, which the reporting entity has elected to or is required to measure on a fair value basis.
Date of Adoption	January 1, 2015 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2014-11
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosure.
Description	This update makes limited amendments to the guidance in ASC 860 on accounting for certain repurchase agreements.
Date of Adoption	January 1, 2015, except for the disclosure requirements for transactions accounted for as secured borrowings, which are required to be presented for interim periods beginning after March 15, 2015
Effect on the financial statements or other significant matters	Yes
Accounting Standards Update 2014-08
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosure.
Description	This ASU raises the threshold for a disposal to be treated as discontinued operations.
Date of Adoption	January 1, 2015 (early adoption permitted)
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2014-04
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2014-04 Receivables–Troubled Debt Restructurings by Creditors, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure
Description	This Update clarifies that an in substance repossession or foreclosure has occurred, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, when the creditor obtains legal title to the property upon completion of a foreclosure or the borrower conveys all interest in the property to the creditor through a deed in lieu of foreclosure or similar arrangement
Date of Adoption	January 1, 2015
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2013-02
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2013-02, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income
Description	This update requires the provision of information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, it requires presentation of significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period
Date of Adoption	January 1, 2014
Effect on the financial statements or other significant matters	No
Accounting Standards Update 2011-11
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Standard	ASU 2011-11, Balance Sheet: Disclosures about Offsetting Assets and Liabilities
Description	Under this update, the Company is required to disclose both gross and net information about both instruments and transactions eligible for offset in the Company's Consolidated Statements of Financial Condition and transactions subject to an agreement similar to a master netting arrangement. The scope includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements and securities borrowing and securities lending arrangements.
Date of Adoption	January 1, 2014
Effect on the financial statements or other significant matters	No

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $) In Thousands	Total		7.875% Series A Cumulative Redeemable Preferred Stock	7.625% Series C Cumulative Redeemable Preferred Stock	7.50% Series D Cumulative Redeemable Preferred Stock	Common Stock Par Value	Additional Paid-In Capital	Accumulated Other Comprehensive Income (Loss)	Accumulated Deficit	Accumulated Deficit 7.875% Series A Cumulative Redeemable Preferred Stock	Accumulated Deficit 7.625% Series C Cumulative Redeemable Preferred Stock	Accumulated Deficit 7.50% Series D Cumulative Redeemable Preferred Stock	Total stockholders' equity	Total stockholders' equity 7.875% Series A Cumulative Redeemable Preferred Stock	Total stockholders' equity 7.625% Series C Cumulative Redeemable Preferred Stock	Total stockholders' equity 7.50% Series D Cumulative Redeemable Preferred Stock	Noncontrolling Interest	7.875% Series A Cumulative Redeemable Preferred Stock	7.625% Series C Cumulative Redeemable Preferred Stock	7.50% Series D Cumulative Redeemable Preferred Stock
Beginning balance at Dec. 31, 2013	$ 12,405,055					$ 9,474	$ 14,765,761	$ (2,748,933)	$ (534,306)				$ 12,405,055					$ 177,088	$ 290,514	$ 445,457
Net income (loss)	(203,351)								(203,351)				(203,351)
Unrealized gains (losses) on available-for-sale securities	741,172							741,172					741,172
Reclassification adjustment for net (gains) losses included in net income (loss)	(80,718)							(80,718)					(80,718)
Net proceeds from direct purchase and dividend reinvestment	607					1	606						607
Contingent beneficial conversion feature on 4% Convertible Senior Notes	4,186						4,186						4,186
Preferred dividends declared			(3,648)	(5,719)	(8,625)					(3,648)	(5,719)	(8,625)		(3,648)	(5,719)	(8,625)
Common dividends declared, $0.90 and $1.20 Per share for 2015 and 2014 respectively	(284,247)								(284,247)				(284,247)
Ending balance at Mar. 31, 2014	12,564,712					9,475	14,770,553	(2,088,479)	(1,039,896)				12,564,712					177,088	290,514	445,457
Beginning balance at Dec. 31, 2014	13,333,781	[1]				9,476	14,786,509	204,883	(2,585,436)				13,328,491				5,290	177,088	290,514	445,457
Net income (loss)	(476,409)								(476,409)				(476,409)
Net income (loss) attributable to noncontrolling interest	(90)																(90)
Unrealized gains (losses) on available-for-sale securities	631,472							631,472					631,472
Reclassification adjustment for net (gains) losses included in net income (loss)	(62,356)							(62,356)					(62,356)
Stock compensation expense	39						39						39
Net proceeds from direct purchase and dividend reinvestment	570					1	569						570
Equity contributions from (distributions to) noncontrolling interest	(115)																(115)
Preferred dividends declared			(3,648)	(5,719)	(8,625)					(3,648)	(5,719)	(8,625)		(3,648)	(5,719)	(8,625)
Common dividends declared, $0.90 and $1.20 Per share for 2015 and 2014 respectively	(284,310)								(284,310)				(284,310)
Ending balance at Mar. 31, 2015	$ 13,124,590					$ 9,477	$ 14,787,117	$ 773,999	$ (3,364,147)				$ 13,119,505				$ 5,085	$ 177,088	$ 290,514	$ 445,457

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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Related Party Transactions (Detail) (USD $) Share data in Millions, unless otherwise specified	3 Months Ended	12 Months Ended		3 Months Ended	0 Months Ended
	Mar. 31, 2015	Dec. 31, 2014		Mar. 31, 2014	Nov. 05, 2014	Aug. 31, 2014
Effective date	August 8, 2014
Management fee percentage						75.00%
Receivable for advisory and service fees, from affiliates	$ 10,268,000	$ 10,402,000	[1]
Maximum
Management fee percentage						120.00%
Chimera
Investments with affiliate, available-for-sale equity securities - shares	45.0	45.0
Investments with affiliate, available-for-sale equity securities - fair value	141,200,000	143,000,000
Investments with affiliate, available-for-sale equity securities - unrealized gains	2,400,000	4,200,000
Advisory fees from affiliate	10,500,000
Receivable for advisory and service fees, from affiliates	10,300,000	10,400,000
Chimera and CreXus
Advisory fees from affiliate				$ 6,100,000
Amendment Agreement
Basis for management fee	Amount equal to 1/12th of 1.05% of stockholders' equity,
Management Agreement, term					2 years
Term of management agreement expiration date					Dec. 31, 2016
Renewal term					2 years
Management agreement, termination, description	At least two-thirds of the Company's independent directors or the holders of a majority of the Company's outstanding shares of common stock elect to terminate the agreement in their sole discretion and for any or no reason.
Amendment Agreement | Minimum
Management agreement, required period to terminate from the date of the notice					1 year

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2015

SIGNIFICANT ACCOUNTING POLICIES

3. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries and consolidated variable interest entities. All intercompany balances and transactions have been eliminated in consolidation.

The Company has evaluated all of its investments in legal entities in order to determine if they are variable interests in Variable Interest Entities ("VIEs"). A VIE is defined as an entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A variable interest is an investment or other interest that will absorb portions of a VIE's expected losses or receive portions of the entity’s expected residual returns. A VIE is required to be consolidated by its primary beneficiary, which is defined as the party that (i) has the power to control the activities that most significantly impact the VIE’s economic performance and (ii) has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.

To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, the Company considers all facts and circumstances, including the Company’s role in establishing the VIE and the Company’s ongoing rights and responsibilities. This assessment includes first, identifying the activities that most significantly impact the VIE’s economic performance; and second, identifying which party, if any, has power over those activities. In general, the parties that make the most significant decisions affecting the VIE or have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.

To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, the Company applies significant judgment and considers all of its economic interests, including debt and equity investments and other arrangements deemed to be variable interests, both explicit and implicit, in the VIE. This assessment requires that the Company applies judgment in determining whether these interests, in the aggregate, are considered potentially significant to the VIE. Factors considered in assessing significance include: the design of the VIE, including its capitalization structure; subordination of interests; payment priority; relative share of interests held across various classes within the VIE’s capital structure; and the reasons why the interests are held by the Company.

The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE causes the Company’s consolidation conclusion regarding the VIE to change.

Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, cash held in money market funds on an overnight basis and cash pledged as collateral with counterparties. Cash and securities deposited with clearing organizations are carried at cost, which approximates fair value. The Company also maintains collateral in the form of cash on margin with counterparties to its interest rate swaps and other derivatives. RCap is a member of various clearing organizations with which it maintains cash required to conduct its day-to-day clearance activities. Cash and securities deposited with clearing organizations and collateral held in the form of cash on margin with counterparties to its interest rate swaps and other derivatives totaled approximately $1.8 billion and $1.6 billion at March 31, 2015 and December 31, 2014, respectively.

Fair Value Measurements – The Company reports various financial instruments at fair value. A complete discussion of the methodology utilized by the Company to estimate the fair value of certain financial instruments is included in these Notes to Consolidated Financial Statements.

Revenue Recognition – The revenue recognition policy by asset class is discussed below.

Agency Mortgage-Backed Securities, Agency Debentures and Agency Credit Risk Transfer Securities – The Company invests primarily in mortgage pass-through certificates, collateralized mortgage obligations and other mortgage-backed securities representing interests in or obligations backed by pools of mortgage loans and certificates 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”). These 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”). The Company also invests in Agency debentures issued by the Federal Home Loan Banks, Freddie Mac and Fannie Mae and securities in the Agency credit risk transfer (“CRT”) sector. The CRT sector is comprised of the risk sharing transactions issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. The securities issued in the CRT sector are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.

Agency mortgage-backed securities, Agency debentures and Agency CRT securities are referred to herein as “Investment Securities.” Although the Company generally intends to hold most of its Investment Securities until maturity, it may, from time to time, sell any of its Investment Securities as part of its overall management of its portfolio. Investment Securities are classified as available-for-sale and are reported at fair values estimated by management that are compared to independent sources for reasonableness, with unrealized gains and losses reported as a component of other comprehensive income (loss). Investment Securities transactions are recorded on trade date, including TBA securities that meet the regular-way securities scope exception from derivative accounting. Realized gains and losses on sales of Investment Securities are determined using the average cost method.

The Company elected the fair value option for Agency interest-only mortgage-backed securities. Interest-only securities and inverse interest-only securities are collectively referred to as “interest-only securities.” These Agency interest-only mortgage-backed securities represent the Company’s right to receive a specified proportion of the contractual interest flows of specific Agency mortgage-backed securities. Agency interest-only mortgage-backed securities are measured at fair value with changes in fair value recorded as Net unrealized gains (losses) on interest-only Agency mortgage-backed securities in the Company’s Consolidated Statements of Comprehensive Income (Loss). The interest-only securities are included in Agency mortgage-backed securities at fair value on the accompanying Consolidated Statements of Financial Condition.

Interest income from coupon payments is accrued based on the outstanding principal amounts of the Investment Securities and their contractual terms. Premiums and discounts associated with the purchase of the Investment Securities are amortized or accreted into interest income over the projected lives of the securities using the interest method. The Company uses a third-party supplied model to project prepayment speeds related to Investment Securities. The Company’s prepayment speed projections incorporate underlying loan characteristics (e.g., coupon, term, original loan size, original loan to value, etc.) and market data, including interest rate and home price index forecasts. Changes to model assumptions, including interest rates and other market data, as well as periodic revisions to the model will cause changes in the results. Adjustments are made for actual prepayment activity.  

Corporate Debt– The Company’s investments in corporate debt are designated as held for investment, and are carried at their principal balance outstanding plus any premiums or discounts less allowances for loan losses. No allowance for loan losses was deemed necessary as of March 31, 2015 and December 31, 2014.

Equity Securities– The Company may invest in equity securities that are classified as available-for-sale or trading. Equity securities classified as available-for-sale are reported at fair value, based on market quotes, with unrealized gains and losses reported as a component of other comprehensive income (loss). Equity securities classified as trading are reported at fair value, based on market quotes, with unrealized gains and losses reported in the Consolidated Statements of Comprehensive Income (Loss) as Net gains (losses) on trading assets. Dividends are recorded in earnings based on the declaration date.

Derivative Instruments – The Company may use a variety of derivative instruments to economically hedge some of its exposure to market risks, including interest rate and prepayment risk. These instruments include, but are not limited to, interest rate swaps, options to enter into interest rate swaps (“swaptions”), TBA securities with the intent to net settle (“TBA derivatives”), options on TBA securities (“MBS options”) and U.S. Treasury and Eurodollar futures contracts. The Company may also invest in other types of mortgage derivatives such as interest-only securities and synthetic total return swaps, such as the Markit IOS Synthetic Total Return Swap Index. Derivatives are accounted for in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, which requires recognition of all derivatives as either assets or liabilities at fair value in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). None of the Company’s derivative transactions have been designated as hedging instruments for accounting purposes.

Some derivative agreements contain provisions that allow for netting or setting off by counterparty; however, the Company elected to present related assets and liabilities on a gross basis in the Consolidated Statements of Financial Condition.

Interest rate swap agreements - Interest rate swaps are the primary instrument used to mitigate interest rate risk. In particular, the Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. Swap agreements may or may not be cleared through a derivatives clearing organization (“DCO”). Uncleared swaps are fair valued using internal pricing models and compared to the counterparty market values. Centrally cleared swaps are fair valued using internal pricing models and compared to the DCO’s market values.

Interest rate swaptions - Interest rate swaptions are purchased/sold to mitigate the potential impact of increases or decreases in interest rates. Interest rate swaptions provide the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. They are not centrally cleared. The premium paid/received for interest rate swaptions is reported as an asset/liability in the Consolidated Statement of Financial Condition. The difference between the premium and the fair value of the swaption is reported in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss). If a swaption expires unexercised, the realized gain (loss) on the swaption would be equal to the premium received/paid. If the Company sells or exercises a swaption, the realized gain or loss on the swaption would be equal to the difference between the cash received or the fair value of the underlying interest rate swap received and the premium paid.

The fair value of interest rate swaptions is estimated using internal pricing models and compared to the counterparty market value.

TBA Dollar Rolls - TBA dollar roll transactions are accounted for as a series of derivative transactions. The fair value of TBA derivatives is based on similar methods used to value Agency mortgage-backed securities with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss).

MBS Options – MBS options are generally options on TBA contracts, which help manage mortgage market risks and volatility while providing the potential to enhance returns. MBS options are over-the-counter traded instruments and those written on current-coupon mortgage-backed securities are typically the most liquid. MBS options are fair valued using internal pricing models and compared to the counterparty market value at the valuation date with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss).

Futures Contracts- Futures contracts are derivatives that track the prices of specific assets. Short sales of futures contracts help mitigate the potential impact of changes in interest rates on the portfolio performance. The Company maintains margin accounts which are settled daily with Futures Commission Merchants (“FCMs”). The margin requirement varies based on the market value of the open positions and the equity retained in the account. Futures contracts are fair valued based on exchange pricing with gains and losses recorded in Net gains (losses) on trading assets in the Consolidated Statements of Comprehensive Income (Loss).

Other-Than-Temporary Impairment – Management evaluates available-for-sale securities for other-than-temporary 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), while the balance of losses related to other factors will be recognized as a component of other comprehensive income (loss). There was no other-than-temporary impairment recognized for the quarters ended March 31, 2015 and 2014.

Loan Loss Reserves – To determine if loan loss allowances are required on investments in corporate debt, the Company reviews the monthly and/or quarterly financial statements of the borrowers to verify they meet the covenants of the loan documents. If based on the financial review it is deemed probable that the Company will be unable to collect contractual principal and interest amounts (e.g. financial performance and delinquencies), a loan loss provision would be recorded. No allowance for loan losses was deemed necessary as of March 31, 2015 and December 31, 2014.

Repurchase Agreements – The Company finances the acquisition of a significant portion of its Agency mortgage-backed securities with repurchase agreements. The Company examines each of the specified criteria in ASC 860, Transfers and Servicing, at the inception of each transaction and has determined that each of the financings meet the specified criteria in this guidance.

Reverse repurchase agreements and repurchase agreements with the same counterparty and the same maturity are presented net in the Consolidated Statements of Financial Condition when the terms of the agreements meet the criteria to permit netting. The Company reports cash flows on repurchase agreements as financing activities in the Consolidated Statements of Cash Flows. The Company reports cash flows on reverse repurchase and repurchase agreements entered into by RCap as operating activities in the Consolidated Statements of Cash Flows.

Goodwill and Intangible Assets–The Company’s acquisitions of FIDAC and CreXus were accounted for using the acquisition method. Under the acquisition method, net assets and results of operations of acquired companies are included in the consolidated financial statements from the date of acquisition. The purchase prices of FIDAC and CreXus were allocated to the assets acquired, including identifiable intangible assets, and the liabilities assumed based on their estimated fair values at the date of acquisition. The excess of purchase price over the fair value of the net assets acquired was recognized as goodwill.

The Company tests goodwill for impairment on an annual basis and at interim periods when events or circumstances may make it more likely than not that an impairment has occurred. If a qualitative analysis indicates that there may be an impairment, a quantitative analysis is performed. The quantitative impairment test for goodwill utilizes a two-step approach, whereby the Company compares the carrying value of each identified reporting unit to its fair value. If the carrying value of the reporting unit is greater than its fair value, the second step is performed, where the implied fair value of goodwill is compared to its carrying value. The Company recognizes an impairment charge for the amount by which the carrying amount of goodwill exceeds its fair value.

Intangible assets with an estimated useful life are amortized over their expected useful lives.

Convertible Senior Notes – The Company records the 4% Convertible Senior Notes and 5% Convertible Senior Notes (collectively, the “Convertible Senior Notes”) at their contractual amounts, adjusted by the effects of a beneficial conversion feature and a contingent beneficial conversion feature (collectively, the “Conversion Features”). The Conversion Features’ intrinsic value is included in “Additional paid-in capital” on the Company’s Consolidated Statements of Financial Condition and reduces the recorded liability amount associated with the Convertible Senior Notes. A Conversion Feature may be recognized as a result of adjustments to the conversion price for dividends declared to common stockholders.

Stock Based Compensation – The Company is required to measure and recognize in the consolidated financial statements the compensation cost relating to share-based payment transactions. The Company recognizes compensation expense on a straight-line basis over the requisite service period for the entire award. Income Taxes – The Company has elected to be taxed as a REIT and intends to comply with the provisions of the Code, with respect thereto. Accordingly, the Company will not be subject to federal income tax to the extent of its distributions to stockholders and as long as certain asset, income and stock ownership tests are met. The Company and certain of its direct and indirect subsidiaries, including FIDAC, RCap and certain subsidiaries of ACREG, have made separate joint elections to treat these subsidiaries as taxable REIT subsidiaries (“TRSs”). As such, each of these TRSs is taxable as a domestic C corporation and subject to federal, state and local income taxes based upon their taxable income.

The provisions of ASC 740, Income Taxes, (“ASC 740”) clarify the accounting for uncertainty in income taxes recognized in financial statements and prescribe a recognition threshold and measurement attribute for uncertain tax positions taken or expected to be taken on a tax return. ASC 740 also requires that interest and penalties related to unrecognized tax benefits be recognized in the financial statements. The Company does not have any unrecognized tax benefits that would affect its financial position. Thus, no accruals for penalties and interest were necessary as of March 31, 2015 and December 31, 2014.

Use of Estimates–The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Commercial Real Estate Investments

Commercial Real Estate Loans – The Company's commercial real estate loans are comprised of fixed-rate and adjustable-rate loans. Commercial real estate loans are designated as held for investment and are originated or purchased by the Company and carried at their outstanding principal balance, net of unamortized origination fees and costs, premiums or discounts, less a reserve for estimated losses if necessary. The difference between the principal amount of a loan and proceeds at acquisition is recorded as either a discount or premium. Origination fees and costs, premiums and discounts are amortized or accreted into interest income over the estimated life of the loan. The Company has also elected the fair value option for multi-family mortgage loans held in a securitization trust that it was required to consolidate. Interest income is recognized as earned determined by the stated coupon and outstanding principal balance. See “Commercial Real Estate Investments” footnote for additional information.

Preferred Equity Interests Held for Investment – Preferred equity interests are designated as held for investment and are carried at their outstanding principal balance, net of unamortized origination fees and costs, premiums or discounts, less a reserve for estimated losses if necessary. Origination fees and costs, premiums and discounts are amortized or accreted into interest income over the estimated life of the investment.

Allowance for Losses–The Company evaluates the need for a loss reserve on its commercial real estate loans and preferred equity interests held for investment (collectively referred to as “CRE Debt and Preferred Equity Investments”). A provision for losses related to CRE Debt and Preferred Equity Investments, including those accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, may be established when it is probable the Company will not collect amounts contractually due or all amounts previously estimated to be collectable. Management assesses the credit quality of the portfolio and adequacy of loan loss reserves on a quarterly basis, or more frequently as necessary. Significant judgment is required in this analysis. Depending on the expected recovery of its investment, the Company considers the estimated net recoverable value of the CRE Debt and Preferred Equity Investments as well as other factors, including but not limited to the fair value of any collateral, the amount and the status of any senior debt, the prospects for the borrower and the competitive landscape where the borrower conducts business. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized may differ materially from the carrying value as of the reporting date.

The Company may be exposed to various levels of credit risk depending on the nature of its investments and the nature of the assets underlying the investments and credit enhancements, if any, supporting its assets. The Company’s core investment process includes procedures related to the initial approval and periodic monitoring of credit risk and other risks associated with each investment. The Company’s investment underwriting procedures include evaluation of the underlying borrowers’ ability to manage and operate their respective properties. Management reviews loan-to-value metrics upon either the origination or the acquisition of a new investment but generally does not update the loan-to-value metrics in the course of quarterly surveillance. Management generally reviews the most recent financial information produced by the borrower, which may include, but is not limited to, net operating income (“NOI”), debt service coverage ratios, property debt yields (net cash flow or NOI divided by the amount of outstanding indebtedness), loan per unit and rent rolls relating to each of the Company’s CRE Debt and Preferred Equity Investments, and may consider other factors management deems important. Management also reviews market pricing to determine each borrower’s ability to refinance their respective assets at the maturity of each loan. Management also reviews economic trends, both macro as well as those directly affecting the property, and the supply and demand of competing projects in the sub-market in which each subject property is located.

In connection with the quarterly surveillance review process, loans are assigned an internal rating of “Performing”, “Watch List”, “Defaulted-Recovery” or “Impaired”. Loans that are deemed to be Performing meet all present contractual obligations and do not qualify for Watch List designation. Watch List loans are defined as Performing loans that are significantly lagging expectations and/or for which there is an increased potential for default. Defaulted–Recovery loans are currently in default; however full recovery of contractual principal and interest is expected. Impaired loans may or may not be in default, impairment is anticipated, and a loan loss provision has been recognized to reflect expected losses.

Investments in Commercial Real Estate– Investments in commercial real estate are carried at historical cost less accumulated depreciation. Historical cost includes all costs necessary to bring the asset to the condition and location necessary for its intended use, including financing during the construction period. Costs directly related to acquisitions deemed to be business combinations are expensed. Ordinary repairs and maintenance which are not reimbursed by tenants are expensed as incurred. Major replacements and improvements that extend the useful life of the asset are capitalized and depreciated over their useful life.

Investments in commercial real estate are depreciated using the straight-line method over the estimated useful lives of the assets, summarized as follows:

Category                   Term

Building                     31-40 years

Site improvements     1-10 years

The Company follows the acquisition method of accounting for acquisitions of operating real estate held for investment, where the purchase price of operating real estate is allocated to tangible assets such as land, building, site improvements and other identified intangibles such as above/below market and in-place leases.

The Company evaluates whether real estate acquired in connection with a foreclosure (“REO”) or UCC/deed in lieu of foreclosure (herein collectively referred to as a foreclosure) constitutes a business and whether business combination accounting is applicable. Upon foreclosure of a property, the excess of the carrying value of a loan, if any, over the estimated fair value of the property, less estimated costs to sell, is charged to provision for loan losses.

Investments in commercial real estate, including REO, which do not meet the criteria to be classified as held for sale, are separately presented in the Consolidated Statements of Financial Condition as held for investment. Real estate held for sale is reported at the lower of its carrying value or its estimated fair value less estimated costs to sell. Once a property is determined to be held for sale, depreciation is no longer recorded. In addition, if considered material to the overall consolidated financial statements, the results of operations are reclassified to income (loss) from discontinued operations in the Consolidated Statements of Comprehensive Income (Loss).

The Company's real estate portfolio (REO and real estate held for investment) is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property's value is considered impaired if the Company's estimate of the aggregate future undiscounted cash flows to be generated by the property is less than the carrying value of the property. In conducting this review, the Company considers U.S. macroeconomic factors, including real estate sector conditions, together with asset specific and other factors. To the extent impairment has occurred and is considered to be other than temporary, the loss will be measured as the excess of the carrying amount of the property over the calculated fair value of the property.

Revenue Recognition – Commercial Real Estate Investments - Interest income is accrued based on the outstanding principal amount of the CRE Debt and Preferred Equity Investments and their contractual terms. Premiums and discounts associated with the purchase of CRE Debt and Preferred Equity Investments are amortized or accreted into interest income over the projected lives of the CRE Debt and Preferred Equity Investments using the interest method.

Broker Dealer Activities

In January 2014, RCap ceased its trading activity in U.S. Treasury securities, derivatives and securities borrowed and loaned transactions.

Reverse Repurchase Agreements – RCap enters into reverse repurchase agreements as part of its matched book trading activity. Reverse repurchase agreements are recorded on settlement date at the contract amount and are collateralized by mortgage-backed or other securities. Margin calls are made by RCap as necessary based on the daily valuation of the underlying collateral as compared to the contract price. RCap generates income from the spread between what is earned on the reverse repurchase agreements and what is paid on the matched repurchase agreements. RCap’s policy is to obtain possession of collateral with a market value in excess of the principal amount loaned under reverse repurchase agreements. To ensure that the market value of the underlying collateral remains sufficient, collateral is valued daily, and RCap will require counterparties to deposit additional collateral, when necessary. All reverse repurchase activities are transacted under master repurchase agreements that give RCap the right, in the event of default, to liquidate collateral held and in some instances, to offset receivables and payables with the same counterparty.

Securities Borrowed and Loaned Transactions – RCap recorded securities borrowed and loaned transactions as collateralized financings. Securities borrowed transactions required RCap to provide the counterparty with collateral in the form of cash, or other securities. RCap received collateral in the form of cash or other securities for securities loaned transactions. RCap monitored the fair value of the securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded as necessary. Securities borrowed and securities loaned transactions were recorded at contract value. For these transactions, the rebates accrued by RCap were recorded as interest income or expense.

U.S. Treasury Securities – RCap traded in U.S. Treasury securities for its proprietary portfolio, which consisted of long and short positions on U.S Treasury notes and bonds. U.S. Treasury securities were classified as trading investments and were recorded on the trade date at cost. Changes in fair value were reflected in Net gains (losses) on trading assets in the Company’s Consolidated Statement of Comprehensive Income (Loss). Interest income or expense on U.S. Treasury notes and bonds was accrued based on the outstanding principal amount of those investments and their stated terms.

Derivatives- RCap entered primarily into U.S. Treasury, Eurodollar, federal funds, German government and U.S. equity index and currency futures and options contracts. RCap maintained a margin account which was settled daily with FCMs. Changes in the unrealized gains or losses on the futures and options contracts as well as any foreign exchange gains and losses were reflected in Net gains (losses) on trading assets in the Company’s Consolidated Statements of Comprehensive Income (Loss). Unrealized gains (losses) were excluded from net income (loss) in arriving at cash flows from operating activities in the Consolidated Statements of Cash Flows.

Recent Accounting Pronouncements

The following table provides a brief description of recent accounting pronouncements that could potentially impact the Company’s consolidated financial statements:

Standard	Description	Date of Adoption	Effect on the financial statements or other significant matters
Standards that are not yet adopted
ASU 2015-05 - Customer's Accounting for Fees Paid in a Cloud Computing Arrangement	This update clarifies that customers should determine whether a cloud computing arrangement includes the license of software by applying the same guidance cloud service providers use. The guidance also eliminates the current requirement that customers analogized to the leasing standard when determining the asset acquired in a software licensing arrangement.		Not expected to have a significant impact on the consolidated financial statements
ASU 2015-03 Interest -Imputation of Interest (Subtopic 835-30) Simplifying the Presentation of Debt Issuance Costs	This ASU requires that debt issue costs are presented in the balance sheet as a direct deduction from the carrying amount of that debt liability.  The recognition and measurement of debt issue costs are not affected.	January 1, 2016 (early adoption permitted)	Impacts presentation only and will not have a significant impact on the consolidated financial statements.
ASU 2015-02 Consolidation (Topic 810) Amendments to the Consolidation Analysis	This update affects the following areas of the consolidation analysis: limited partnerships and similar entities, evaluation of fees paid to a decision maker or service provider as a variable interest and in determination of the primary beneficiary, effect of related parties on the primary beneficiary determination and for certain investment funds.		Not expected to have a significant impact on the consolidated financial statements
ASU 2015-01 Income Statement - Extraordinary and Unusual Items (Subtopic 225-20)	This update eliminates from GAAP the concept of extraordinary items.	January 1, 2016 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-16 Derivatives and Hedging (Topic 815) Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share is More Akin to Debt or Equity	This ASU provides additional guidance for evaluating whether conversion rights, redemption rights, voting rights, liquidation rights and dividend payment preferences and other features embedded in a share, including preferred stock, contain embedded derivatives requiring bifurcation.  The update requires that an entity determine the nature of the host contract by considering all stated and implied terms and features in a hybrid instrument.	January 1, 2016 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-04) Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern	This ASU requires management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.	January 1, 2017 (early adoption permitted)	Not expected to have an impact on the consolidated financial statements.
ASU 2014-09, Revenue from Contracts with Customers	This guidance applies to contracts with customers to transfer goods or services and contracts to transfer nonfinancial assets unless those contracts are within the scope of other standards (for example, lease transactions).	January 1, 2017	Not expected to have a significant impact on the consolidated financial statements.
Standards that were adopted
ASU 2014-17 Business Combinations (Topic 805): Pushdown Accounting	This amendment provides an acquired entity with the option to apply push down accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.	November 18, 2014	Did not have a significant impact on the consolidated financial statements.
ASU 2014-13, Consolidation (Topic 810) Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity.	This Update provides a practical expedient to measure the fair value of the financial assets and financial liabilities of a consolidated collateralized financing entity, which the reporting entity has elected to or is required to measure on a fair value basis.	January 1, 2015 (early adoption permitted)	The Company early adopted this ASU and applied the guidance to a commercial mortgage backed securitization transaction.  See "Commercial Real Estate Investments" footnote for further disclosure.
ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosure.	This update makes limited amendments to the guidance in ASC 860 on accounting for certain repurchase agreements.	January 1, 2015, except for the disclosure requirements for transactions accounted for as secured borrowings, which are required to be presented for interim periods beginning after March 15, 2015	Impacts disclosures only and does not have a significant impact on the consolidated financial statements.
ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360) Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity	This ASU raises the threshold for a disposal to be treated as discontinued operations.	January 1, 2015 (early adoption permitted)	Did not have a significant impact on the consolidated financial statements.
ASU 2014-04  Receivables–Troubled Debt Restructurings by Creditors, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure	This update clarifies that an in substance repossession or foreclosure has occurred, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, when the creditor obtains legal title to the property upon completion of a foreclosure or the borrower conveys all interest in the property to the creditor through a deed in lieu of foreclosure or similar arrangement	January 1, 2015	Did not have a significant impact on the consolidated financial statements.
ASU 2013-02, Comprehensive Income: Reporting of Amounts Reclassified  Out of Accumulated Other Comprehensive Income	This update requires the provision of information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, it requires presentation of significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period	January 1, 2014	Did not have a significant impact on the consolidated financial statements.
ASU 2011-11, Balance Sheet: Disclosures about Offsetting Assets and Liabilities	Under this update, the Company is required to disclose both gross and net information about both instruments and transactions eligible for offset in the Company’s Consolidated Statements of Financial Condition and transactions subject to an agreement similar to a master netting arrangement.  The scope includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements and securities borrowing and securities lending arrangements.	January 1, 2014	Did not have a significant impact on the consolidated financial statements.

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Statement of financial condition of FREMF Trust Reflected the Consolidated Statements of Financial Condition (Detail) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Variable Interest Entity [Line Items]
Total assets	$ 78,675,677	$ 88,355,367	[1]
Liabilities and Equity
Accrued Interest Payables	155,072	180,501	[1]
Total liabilities	65,551,087	75,021,586	[1]
Equity	13,119,505	13,328,491	[1]
Total liabilities and equity	78,675,677	88,355,367	[1]
FREMF Trust
Variable Interest Entity [Line Items]
Securitized loans at Fair value	1,370,903
Accrued Interest Receivables	2,431
Total assets	1,373,334
Liabilities and Equity
Securitized debt (non-recourse) at fair value	1,268,809
Accrued Interest Payables	2,204
Total liabilities	1,271,013
Equity	102,321
Total liabilities and equity	$ 1,373,334

[1] Derived from the audited consolidated financial statements at December 31, 2014.

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Long-Term Stock Incentive Plans - Narrative (Detail) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Long-Term Stock Incentive Plans:
Weighted average remaining contractual term of stock options outstanding, years	2 years 9 months 18 days	3 years 6 months
Weighted average remaining contractual term of stock options exercisable, years	2 years 9 months 18 days	3 years 6 months
Unrecognized compensation cost	$ 0	$ 0
The Prior Plan | Minimum
Long-Term Stock Incentive Plans:
Long-term stock compensation - ceiling shares	500,000
Long-term stock compensation - granting of options authorized, percent of diluted outstanding common stock	9.50%
The Prior Plan | Maximum
Long-Term Stock Incentive Plans:
Long-term stock compensation - ceiling shares	8,932,921
Stock Options
Long-Term Stock Incentive Plans:
Long-term stock compensation - vesting period	4 years
Long-term stock compensation - vesting installments	4 years
Long-term stock compensation - minimum contractual term	5 years
Long-term stock compensation - maximum contractual term	10 years
Equity Incentive Plan 2010
Long-Term Stock Incentive Plans:
Long-term stock compensation - ceiling shares	25,000,000

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Summary of Characteristics of Interest Rate Swaps (Parenthetical) (Detail) (Forward Starting Pay Fixed Swaps, USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Dec. 31, 2014
Forward Starting Pay Fixed Swaps
Derivative Instruments:
Notional amount	$ 3,000,000	$ 500,000
Weighted average fixed rate	1.88%	3.25%

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SUBSEQUENT EVENTS

3 Months Ended

Mar. 31, 2015

SUBSEQUENT EVENTS

21.           SUBSEQUENT EVENTS (PENDING)

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Effect of Other Derivative Contracts on the Consolidated Statements of Operations and Comprehensive Income (Loss) (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2015		Mar. 31, 2014
Derivative Instruments:
Unrealized Gain (Loss)	$ (466,202)		$ (348,942)
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets	(6,896)		(151,824)
Future
Derivative Instruments:
Realized Gain (Loss)	(5,506)		(5,669)
Unrealized Gain (Loss)	(58,126)		(3,048)
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets	(63,632)		(8,717)
TBA Derivatives
Derivative Instruments:
Realized Gain (Loss)	(55,644)	[1]	(37,837)	[1]
Unrealized Gain (Loss)	117,188	[1]	(11,410)	[1]
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets	61,544	[1]	(49,247)	[1]
Interest Rate Swaption
Derivative Instruments:
Realized Gain (Loss)	(21,891)		(40,943)
Unrealized Gain (Loss)	17,083		(52,917)
Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Trading Assets	$ (4,808)		$ (93,860)

[1] Includes options on TBA securities.

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LEASE COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2015

Lease Commitments and Contingencies

The following table details the lease payments.

Years Ending December 31,	Lease Commitments
	(dollars in thousands)
2015 (remaining)	$	1,159
2016		3,591
2017		3,565
2018		3,565
2019		3,565
Later years		21,994
	$	37,439

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NET INCOME (LOSS) PER COMMON SHARE

3 Months Ended

Mar. 31, 2015

NET INCOME (LOSS) PER COMMON SHARE

13.           NET INCOME (LOSS) PER COMMON SHARE

The following table presents a reconciliation of net income (loss) and shares used in calculating basic and diluted net income (loss) per share for the quarters ended March 31, 2015 and 2014.

	For the Quarter Ended
	March 31, 2015			March 31, 2014
	(dollars in thousands, except per share data)
Net income (loss) attributable to Annaly	$	(476,409	)	$	(203,351	)
Less: Preferred stock dividends		17,992			17,992
Net income (loss) per share available (related) to common stockholders, prior to adjustment for dilutive potential common shares, if necessary		(494,401	)		(221,343	)
Add:  Interest on Convertible Senior Notes, if dilutive		-			-
Net income (loss) available to common stockholders, as adjusted		(494,401	)		(221,343	)
Weighted average shares of common stock outstanding-basic		947,669,831			947,458,813
Add:  Effect of stock awards and Convertible Senior Notes, if dilutive		-			-
Weighted average shares of common  stock outstanding-diluted		947,669,831			947,458,813
Net income (loss) per share available (related) to common share:
Basic	$	(0.52	)	$	(0.23	)
Diluted	$	(0.52	)	$	(0.23	)

Options to purchase 2.3 million and 3.2 million shares of common stock were outstanding and considered anti-dilutive as their exercise price and option expense exceeded the average stock price for the quarters ended March 31, 2015 and 2014, respectively.