LOANS (Tables)

12 Months Ended

Dec. 31, 2019

SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Abstract]

The following table presents the activity of the Company’s loan investments, including loans held for sale and excluding loans transferred or pledged to securitization vehicles, for the year ended December 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	2,905,112			589,530			890,042			4,384,684
Sales and transfers⁽¹⁾	(2,417,798		)	(1,085,230		)	(265,218		)	(3,768,246		)
Principal payments	(190,336		)	(166,801		)	(368,927		)	(726,064		)
Gains / (losses)	(6,130		)	(9,207		)	(5,498		)	(20,835		)
(Amortization) / accretion	(2,867		)	2,434			7,269			6,836
Ending balance December 31, 2019	$	1,647,787		$	669,713		$	2,144,850		$	4,462,350

⁽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 December 31, 2019 and 2018:



	December 31, 2019		December 31, 2018
	(dollars in thousands)
Fair value	$	4,246,161	$	2,454,637
Unpaid principal balance	$	4,133,149	$	2,425,657

Summary of Comprehensive Income (Loss)

The following table provides information regarding the line items and amounts recognized in the Consolidated Statements of Comprehensive Income (Loss) for December 31, 2019 and 2018 for these investments:



	For the Years Ended
	December 31, 2019			December 31, 2018
	(dollars in thousands)
Interest income	$	150,066		$	83,259
Net gains (losses) on disposal of investments	(18,619		)	(12,934		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	51,290			1,102
Total included in net income (loss)	$	182,737		$	71,427

Geographic Concentrations Based on Unpaid Principal Balances

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



Geographic Concentrations of Residential Mortgage Loans
December 31, 2019		December 31, 2018
Property location	% of Balance	Property location	% of Balance
California	52.1%	California	53.7%
New York	10.5%	Florida	7.1%
Florida	5.3%	New York	6.6%
All other (none individually greater than 5%)	32.1%	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 December 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)
California	$	1,270,650	38.7	%	California	$	34,578	45.9	%
Texas	478,048		14.5	%	Texas	10,116		13.4	%
New York	353,800		10.8	%	Illinois	7,055		9.4	%
Other ⁽¹⁾	1,184,587		36.0	%	Washington	3,880		5.1	%
					Other ⁽¹⁾	19,753		26.2	%
Total	$	3,287,085	100.0	%		$	75,382	100.0	%

⁽¹⁾

No individual state greater than 5%.

Residential Mortgage Loans

The following table provides additional data on the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, at December 31, 2019 and 2018:



	December 31, 2019		December 31, 2018
	Portfolio Range	Portfolio Weighted Average	Portfolio Range	Portfolio Weighted Average
	(dollars in thousands)
Unpaid principal balance	$1 - $3,448	$459	$0 - $3,500	$457
Interest rate	2.00% - 8.38%	4.94%	2.00% - 7.75%	4.72%
Maturity	1/1/2028 - 12/1/2059	12/29/2047	1/1/2028 - 11/1/2058	1/11/2046
FICO score at loan origination	505 - 829	758	505 - 823	752
Loan-to-value ratio at loan origination	8% - 105%	67%	8% - 111%	68%

Schedule of Commercial Mortgage Loans Held for Investment

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



	December 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	$	503,499	$	499,690	30.9	%	$	988,248	$	981,202	75.6	%
Senior securitized mortgages ⁽³⁾	940,546		936,378		57.8	%	—		—		—	%
Mezzanine loans	183,064		170,023		11.3	%	319,663		315,601		24.4	%
Total	$	1,627,109	$	1,606,091	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 December 31, 2019 and 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 December 31, 2019 and 2018:



December 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)	572,204			—			21,709			593,913
Principal payments	(16,785		)	(150,245		)	(149,633		)	(316,663		)
Transfers	(1,034,754		)	1,083,487			(8,675		)	40,058
Net (increase) decrease in origination fees	(4,200		)	—			(184		)	(4,384		)
Amortization of net origination fees	2,023			3,136			412			5,571
Allowance for loan losses	—			—			(9,207		)	(9,207		)
Net carrying value (December 31, 2019)	$	499,690		$	936,378		$	170,023		$	1,606,091



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

⁽¹⁾Assets of consolidated VIEs.

Schedule of Commercial Mortgage Loans Held for Investment Internal Ratings

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



December 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⁽³⁾		Total
(dollars in thousands)
Senior mortgages	$	503,499	30.9	%	$	94,711	$	253,069	$	112,619	$	43,100	$	—	$	—	$	503,499
Senior securitized mortgages⁽⁴⁾	940,546		57.8	%	429,209		333,942		127,395		50,000		—		—		940,546
Mezzanine loans	183,064		11.3	%	60,156		62,205		—		17,100		36,603		7,000		183,064
Total	$	1,627,109	100.0	%	$	584,076	$	649,216	$	240,014	$	110,200	$	36,603	7,000		$	1,627,109



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 three loans as of December 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 one loan as Doubtful and evaluated for impairment for which a loan loss allowance of $5.7 million was recognized for the year ended December 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 year ended December 31, 2018.


⁽³⁾	The Company transferred a loan from Doubtful to Loss during the year ended December 31, 2019.

⁽⁴⁾

Assets of consolidated VIEs.

Schedule of Industry and Rate Attributes of Corporate Loans

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



	Industry Dispersion
	December 31, 2019						December 31, 2018
	Fixed Rate		Floating Rate		Total		Fixed Rate		Floating Rate		Total
	(dollars in thousands)
Aircraft and parts	$	—	$	—	$	—	$	—	$	41,342	$	41,342
Arrangement of transportation of freight & cargo	—		—		—		—		21,632		21,632
Chemicals & Allied Products	—		15,002		15,002		—		—		—
Coating, engraving and allied services	—		47,249		47,249		—		57,223		57,223
Computer programming, data processing & other computer related services	—		394,193		394,193		—		242,185		242,185
Drugs	—		15,923		15,923		—		35,882		35,882
Electrical work	—		43,175		43,175		—		41,760		41,760
Electronic components & accessories	—		24,000		24,000		—		24,059		24,059
Engineering, architectural & surveying	—		124,201		124,201		—		80,748		80,748
Grocery stores	—		23,248		23,248		—		23,431		23,431
Home health care services	—		29,361		29,361		—		—		—
Insurance agents, brokers and services	—		75,410		75,410		—		48,942		48,942
Mailing, reproduction, commercial art and photography, and stenographic	—		14,755		14,755		—		14,843		14,843
Management and public relations services	—		339,179		339,179		—		487,046		487,046
Medical and dental laboratories	—		41,344		41,344		—		26,858		26,858
Metal cans & shipping containers	—		118,456		118,456		—		118,248		118,248
Miscellaneous business services	—		164,033		164,033		—		19,622		19,622
Miscellaneous equipment rental and leasing	—		49,776		49,776		—		49,552		49,552
Miscellaneous health and allied services, not elsewhere classified	—		78,908		78,908		—		56,003		56,003
Miscellaneous plastic products	—		10,000		10,000		—		9,953		9,953
Motor vehicles and motor vehicle equipment	—		—		—		—		16,563		16,563
Motor vehicles and motor vehicle parts and supplies	—		28,815		28,815		—		29,046		29,046
Nonferrous foundries (castings)	—		30,191		30,191		—		12,948		12,948
Offices and clinics of doctors of medicine	—		106,993		106,993		—		97,877		97,877
Offices of clinics and other health practitioners	—		10,098		10,098		—		21,100		21,100
Petroleum and petroleum products	—		24,923		24,923		—		—		—
Public warehousing and storage	—		107,029		107,029		—		84,278		84,278
Research, development and testing services	—		45,610		45,610		—		33,381		33,381
Schools and educational services, not elsewhere classified	—		19,586		19,586		—		19,805		19,805
Services allied with the exchange of securities	—		—		—		—		14,877		14,877
Surgical, medical, and dental instruments and supplies	—		102,182		102,182		—		96,607		96,607
Telephone communications	—		61,210		61,210		—		61,371		61,371
Total	$	—	$	2,144,850	$	2,144,850	$	—	$	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 December 31, 2019 and 2018.



	December 31, 2019		December 31, 2018
	(dollars in thousands)
First lien loans	$	1,396,140	$	1,346,356
Second lien loans	748,710		540,826
Total	$	2,144,850	$	1,887,182