LOANS (Tables)

3 Months Ended

Mar. 31, 2019

Mortgage Loans on Real Estate [Abstract]

The following table presents the activity of the Company’s loan investments, including loans held for sale, for the three months ended March 31, 2019:



	Residential			Commercial			Corporate			Total
	(dollars in thousands)
Beginning balance January 1, 2019	$	1,359,806		$	1,338,987		$	1,887,182		$	4,585,975
Purchases	425,488			165,258			125,351			716,097
Sales and transfers⁽¹⁾	(444,963		)	(733,922		)	(179,112		)	(1,357,997		)
Principal Payments	(32,676		)	(534		)	(33,545		)	(66,755		)
Gains / (losses)	4,460			(5,703		)	—			(1,243		)
Amortization / accretion	(395		)	911			2,731			3,247
Ending balance March 31, 2019	$	1,311,720		$	764,997		$	1,802,607		$	3,879,324
⁽¹⁾ Includes securitizations, syndications and transfers to securitization vehicles.

Fair Value and Unpaid Principal of Residential Mortgage Loan Portfolio

The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles, at March 31, 2019 and December 31, 2018:



	March 31, 2019		December 31, 2018
	(dollars in thousands)
Fair value	$	2,737,388	$	2,454,637
Unpaid principal balance	$	2,686,557	$	2,425,657

Summary of Comprehensive Income (Loss)

and 2018 for these investments:



	For the Three Months Ended
	March 31, 2019			March 31, 2018
	(dollars in thousands)
Interest income	$	29,991		$	13,495
Net gains (losses) on disposal of investments	(5,223		)	(1,758		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	17,821			(9,864		)
Total included in net income (loss)	$	42,589		$	1,873

Geographic Concentrations Based on Unpaid Principal Balances

The following table provides the geographic concentrations based on the unpaid principal balances at March 31, 2019 and December 31, 2018 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:



Geographic Concentrations of Residential Mortgage Loans
March 31, 2019		December 31, 2018
Property location	% of Balance	Property location	% of Balance
California	54.2%	California	53.7%
Florida	6.7%	Florida	7.1%
New York	6.1%	New York	6.6%
All other (none individually greater than 5%)	33.0%	All other (none individually greater than 5%)	32.6%
Total	100.0%		100.0%

The geographic concentrations of credit risk exceeding 5% of the total loan unpaid principal balances related to the Company’s VIEs, excluding the credit facility VIEs, OBX Trusts and CLO, at March 31, 2019 are as follows:

Securitized Loans at Fair Value Geographic Concentration of Credit Risk



Commercial Trusts					Residential Trusts
Property Location	Principal Balance		% of Balance		Property Location	Principal Balance		% of Balance
(dollars in thousands)
Texas	$	546,190	17.9	%	California	$	45,023	44.5	%
California	461,478		15.1	%	Texas	13,261		13.1	%
Maryland	407,266		13.4	%	Washington	7,466		7.4	%
Virginia	349,921		11.5	%	Illinois	7,197		7.1	%
Pennsylvania	280,201		9.2	%	Florida	5,165		5.1	%
Other⁽¹⁾	1,005,457		32.9	%	Other ⁽¹⁾	23,155		22.8	%
Total	$	3,050,513	100.0	%		$	101,267	100.0	%


⁽¹⁾	No individual state greater than 5%.

Residential Mortgage Loans

and December 31, 2018:



	March 31, 2019		December 31, 2018
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $3,448	$457	$0 - $3,500	$457
Interest rate	2.00% - 9.25%	4.85%	2.00% - 7.75%	4.72%
Maturity	1/1/2028 - 1/1/2059	6/24/2046	1/1/2028 - 11/1/2058	1/11/2046
FICO score at loan origination	505 - 823	752	505 - 823	752
Loan-to-value ratio at loan origination	8% - 111%	68%	8% - 111%	68%

Commercial Real Estate Investments Held for Investment

At March 31, 2019 and December 31, 2018, commercial real estate investments held for investment were comprised of the following:



	March 31, 2019						December 31, 2018
	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	$	405,968	$	403,497	27.6	%	$	988,248	$	981,202	75.6	%
Senior securitized mortgages ⁽³⁾	739,058		733,864		50.1	%	—		—		—	%
Mezzanine loans	329,262		319,465		22.3	%	319,663		315,601		24.4	%
Total	$	1,474,288	$	1,456,826	100.0	%	$	1,307,911	$	1,296,803	100.0	%


⁽¹⁾	Carrying value includes unamortized origination fees of $8.3 million and $7.6 million at March 31, 2019 and December 31, 2018, respectively.


⁽²⁾	Based on outstanding principal.


⁽³⁾	Assets of consolidated VIEs.

The following tables represent a rollforward of the activity for the Company’s commercial real estate investments held for investment at March 31, 2019 and December 31, 2018:



March 31, 2019
	Senior Mortgages			Senior Securitized Mortgages ⁽¹⁾			Mezzanine Loans			Total
	(dollars in thousands)
Net carrying value (January 1, 2019)	$	981,202		$	—		$	315,601		$	1,296,803
Originations & advances (principal)	148,341			739,058			18,274			905,673
Principal payments	(385		)	—			—			(385		)
Transfers	(730,235		)	—			(8,675		)	(738,910		)
Net (increase) decrease in origination fees	3,815			(5,488		)	(184		)	(1,857		)
Amortization of net origination fees	759			294			152			1,205
Allowance for loan losses	—			—			(5,703		)	(5,703		)
Net carrying value (March 31, 2019)	$	403,497		$	733,864		$	319,465		$	1,456,826



December 31, 2018
	Senior Mortgages			Mezzanine Loans			Preferred Equity			Total
	(dollars in thousands)
Net carrying value (January 1, 2018)	$	625,900		$	394,442		$	8,985		$	1,029,327
Originations & advances (principal)	575,953			52,224			—			628,177
Principal payments	(216,849		)	(127,575		)	(9,000		)	(353,424		)
Net (increase) decrease in origination fees	(6,624		)	(370		)	—			(6,994		)
Amortization of net origination fees	2,822			376			15			3,213
Allowance for loan losses	—			(3,496		)	—			(3,496		)
Net carrying value (December 31, 2018)	$	981,202		$	315,601		$	—		$	1,296,803

The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans. Additionally, the Company consolidates a collateralized financing entity that securitized prime adjustable-rate jumbo residential mortgage loans. The Company also consolidates securitization trusts in which it had purchased subordinated securities because it also has certain powers and rights to direct the activities of such trusts. Please refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated Residential Mortgage Loan Trusts.

Schedule of Commercial Mortgage Loans Held for Investment

The following table provides the internal loan risk ratings of commercial real estate investments held for investment as of March 31, 2019 and December 31, 2018.



March 31, 2019
					Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful ⁽²⁾		Loss		Total
(dollars in thousands)
Senior mortgages	$	405,968	27.6	%	$	276,479	$	65,099	$	—	$	64,390	$	—	$	—	$	405,968
Senior securitized mortgages⁽³⁾	739,058		50.1	%	466,258		217,800		55,000		—		—		—		739,058
Mezzanine loans	329,262		22.3	%	139,721		49,538		96,400		—		43,603		—		329,262
Total	$	1,474,288	100.0	%	$	882,458	$	332,437	$	151,400	$	64,390	$	43,603	—		$	1,474,288



December 31, 2018
					Internal Ratings
Investment Type	Outstanding Principal		Percentage of CRE Debt and Preferred Equity Portfolio		Performing		Performing - Closely Monitored		Performing - Special Mention		Substandard ⁽¹⁾		Doubtful ⁽²⁾		Loss		Total
(dollars in thousands)
Senior mortgages	$	988,248	75.6	%	$	653,066	$	215,792	$	55,000	$	64,390	$	—	$	—	$	988,248
Mezzanine loans	319,663		24.4	%	140,776		38,884		96,400		36,603		7,000		—		319,663
Total	$	1,307,911	100.0	%	$	793,842	$	254,676	$	151,400	$	100,993	$	7,000	$	—	$	1,307,911


⁽¹⁾	The Company rated one loan as of March 31, 2019 and two loans as of December 31, 2018 as Substandard. The Company evaluated whether an impairment exists and determined in each case that, based on quantitative and qualitative factors, the Company expects repayment of contractual amounts due.


⁽²⁾	The Company rated two loans as Doubtful and evaluated for impairment for which a loan loss allowance of $5.7 million was recognized for the three months ended March 31, 2019. The Company rated one loan as Doubtful and evaluated for impairment for which a loan loss allowance of $3.5 million was recognized for the three months ended December 31, 2018.


⁽³⁾	Assets of consolidated VIEs.

Schedule of Industry and Rate Attributes of Corporate Loans [Table Text Block]

The Company invests in corporate loans through its Annaly Middle Market Lending Group. The industry and rate attributes of the portfolio at March 31, 2019 and December 31, 2018 are as follows:



	Industry Dispersion
	March 31, 2019						December 31, 2018
	Fixed Rate		Floating Rate		Total		Fixed Rate		Floating Rate		Total
	(dollars in thousands)
Aircraft and parts	$	—	$	41,394	$	41,394	$	—	$	41,342	$	41,342
Arrangement of transportation of freight & cargo	—		21,715		21,715		—		21,632		21,632
Coating, engraving and allied services	—		54,532		54,532		—		57,223		57,223
Computer programming, data processing & other computer related services	—		282,060		282,060		—		242,185		242,185
Drugs	—		35,926		35,926		—		35,882		35,882
Electrical work	—		41,598		41,598		—		41,760		41,760
Electronic components & accessories	—		24,083		24,083		—		24,059		24,059
Engineering, architectural & surveying	—		109,823		109,823		—		80,748		80,748
Grocery stores	—		23,394		23,394		—		23,431		23,431
Insurance agents, brokers and services	—		48,661		48,661		—		48,942		48,942
Mailing, reproduction, commercial art and photography, and stenographic	—		14,819		14,819		—		14,843		14,843
Management and public relations services	—		312,807		312,807		—		487,046		487,046
Medical and dental laboratories	—		26,811		26,811		—		26,858		26,858
Metal cans & shipping containers	—		118,385		118,385		—		118,248		118,248
Miscellaneous business services	—		19,581		19,581		—		19,622		19,622
Miscellaneous equipment rental and leasing	—		49,674		49,674		—		49,552		49,552
Miscellaneous health and allied services, not elsewhere classified	—		69,217		69,217		—		56,003		56,003
Miscellaneous plastic products	—		10,037		10,037		—		9,953		9,953
Motor vehicles and motor vehicle equipment	—		16,417		16,417		—		16,563		16,563
Motor vehicles and motor vehicle parts and supplies	—		28,984		28,984		—		29,046		29,046
Nonferrous foundries (castings)	—		12,933		12,933		—		12,948		12,948
Offices and clinics of doctors of medicine	—		97,841		97,841		—		97,877		97,877
Offices of clinics and other health practitioners	—		21,051		21,051		—		21,100		21,100
Public warehousing and storage	—		97,245		97,245		—		84,278		84,278
Research, development and testing services	—		45,676		45,676		—		33,381		33,381
Schools and educational services, not elsewhere classified	—		19,809		19,809		—		19,805		19,805
Services allied with the exchange of securities	—		—		—		—		14,877		14,877
Surgical, medical, and dental instruments and supplies	—		96,768		96,768		—		96,607		96,607
Telephone communications	—		61,366		61,366		—		61,371		61,371
Total	$	—	$	1,802,607	$	1,802,607	$	—	$	1,887,182	$	1,887,182

Aggregate positions by Respective Place in the Capital Structure of the Borrowers

The table below reflects the Company’s aggregate positions by their respective place in the capital structure of the borrowers at March 31, 2019 and December 31, 2018.



	March 31, 2019		December 31, 2018
	(dollars in thousands)
First lien loans	$	1,232,524	$	1,346,356
Second lien loans	570,083		540,826
Total	$	1,802,607	$	1,887,182