Re: |
Annaly Capital Management, Inc.
Form 10-K Filed February 23, 2017 File No. 001-13447 |
1. |
Please expand your disclosure in future filings to include an enhanced discussion of TBA dollar roll income. Please include the following in your revised disclosure:
|
· |
a discussion of why you believe dollar roll income represents the equivalent of interest income on the underlying security less an implied cost of financing.
|
· |
an explanation of how you calculate the portion of the gain/loss from derivative instruments that is reflected as TBA dollar roll income.
|
· |
a discussion of the methodology used to account for TBA securities in accordance with US GAAP and how that differs from the technique used to determine TBA dollar roll income.
|
2. |
We note your disclosure that you will not make an adjustment to GAAP net income (loss) in future periods to exclude the PAA. Please tell us whether you intend to make similar adjustments to other non-GAAP measures in future periods (i.e. core interest income and economic core net interest income).
|
3. |
Based on your disclosure, it appears that the difference between the maturity gap and the interest rate sensitivity gap is caused by interest rate swaps and other hedges. However, it does not appear the difference between the two amounts reconciles to the swap maturity schedule in the footnotes to your financial statements. Please provide us with a reconciliation of the difference between the maturity gap and interest rate sensitivity gap. Additionally, please tell us what consideration you have given to expanding your table to provide a similar reconciliation.
|
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
|
$
|
1,539,746
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,539,746
|
||||||||||
Agency mortgage-backed securities (principal)
|
-
|
-
|
1,214,607
|
70,197,819
|
71,412,426
|
|||||||||||||||
Credit risk transfer securities (principal)
|
-
|
15,000
|
18,000
|
657,491
|
690,491
|
|||||||||||||||
Non-Agency mortgage-backed securities (principal)
|
-
|
52,055
|
225,360
|
1,241,107
|
1,518,522
|
|||||||||||||||
Residential mortgage loans (principal)
|
-
|
-
|
-
|
338,323
|
338,323
|
|||||||||||||||
Commercial real estate debt investments (principal)
|
-
|
-
|
-
|
4,295,107
|
4,295,107
|
|||||||||||||||
Corporate debt (principal)
|
-
|
-
|
17,136
|
756,138
|
773,274
|
|||||||||||||||
Commercial real estate debt and preferred equity (principal)
|
70,576
|
318,598
|
471,435
|
114,406
|
975,015
|
|||||||||||||||
Commercial loans held for sale (principal)
|
-
|
-
|
115,000
|
-
|
115,000
|
|||||||||||||||
Total financial assets - maturity
|
1,610,322
|
385,653
|
2,061,538
|
77,600,391
|
81,657,904
|
|||||||||||||||
Effect of utilizing reset dates (1)
|
7,648,230
|
2,383,179
|
3,011,803
|
(13,043,212
|
)
|
|||||||||||||||
Total financial assets - interest rate sensitive
|
$
|
9,258,552
|
$
|
2,768,832
|
$
|
5,073,341
|
$
|
64,557,179
|
$
|
81,657,904
|
||||||||||
Financial Liabilities:
|
||||||||||||||||||||
Repurchase agreements
|
$
|
49,171,074
|
$
|
11,189,869
|
$
|
4,854,867
|
$
|
-
|
$
|
65,215,810
|
||||||||||
Other secured financing
|
-
|
-
|
3,825
|
3,880,883
|
3,884,708
|
|||||||||||||||
Securitized debt of consolidated VIE (principal)
|
-
|
-
|
-
|
3,621,760
|
3,621,760
|
|||||||||||||||
Participation sold (principal)
|
84
|
12,743
|
-
|
-
|
12,827
|
|||||||||||||||
Total financial liabilities - maturity
|
49,171,158
|
11,202,612
|
4,858,692
|
7,502,643
|
72,735,105
|
|||||||||||||||
Effect of utilizing reset dates (1)(2)
|
(16,554,736
|
)
|
(7,619,672
|
)
|
(542,517
|
)
|
24,716,925
|
|||||||||||||
Total financial liabilities - interest rate sensitive
|
$
|
32,616,422
|
$
|
3,582,940
|
$
|
4,316,175
|
$
|
32,219,568
|
$
|
72,735,105
|
||||||||||
Maturity gap
|
$
|
(47,560,836
|
)
|
$
|
(10,816,959
|
)
|
$
|
(2,797,154
|
)
|
$
|
70,097,748
|
$
|
8,922,799
|
|||||||
Cumulative maturity gap
|
$
|
(47,560,836
|
)
|
$
|
(58,377,795
|
)
|
$
|
(61,174,949
|
)
|
$
|
8,922,799
|
|||||||||
Interest rate sensitivity gap
|
$
|
(23,357,870
|
)
|
$
|
(814,108
|
)
|
$
|
757,166
|
$
|
32,337,611
|
$
|
8,922,799
|
||||||||
Cumulative rate sensitivity gap
|
$
|
(23,357,870
|
)
|
$
|
(24,171,978
|
)
|
$
|
(23,414,812
|
)
|
$
|
8,922,799
|
|||||||||
(1) Maturity gap utilizes stated maturities, or prepayment expectations for assets that exhibit prepayment characteristics, while interest rate sensitivity gap utilizes reset dates, if applicable.
|
||||||||||||||||||||
(2) Includes effect of interest rate swaps.
|
|
Sincerely,
/s/ Glenn A. Votek Glenn A. Votek Chief Financial Officer |
cc:
|
Anthony C. Green, Annaly Capital Management, Inc.
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