Annaly Capital Management, one of the largest mortgage investing REITs in the U.S., posted net earnings of $120.8 million in 2Q11, compared to a loss of $218.2 million in 2Q10.

In the first quarter the REIT – whose forte is investing in agency MBS -- earned just shy of $700 million.

Company CEO Michael Farrell, cited “uncertainty surrounding sovereign credit risk, regulatory reform and tepid economic performance” as a factor in fluctuating asset values, but also said “the long-term implication of these conditions is that the very favorable operating environment in which we find ourselves is likely to persist for a significant period of time.”

Its asset base grew to $100 billion at mid-year, a handsome 37% increase from June 30, 2010.

Sandler O'Neill & Partners called Annaly's results “impressive,” saying “they were achieved with the lowest leverage among the pure play agency mortgage REITs. While we expect asset yields to compress over the next few quarters, we expect spreads to remain very attractive by historical standards and the company's low leverage give it the flexibility to offset spread compression by increasing leverage.”

On Wednesday, its stock was trading up slightly to $17.50, about $1 shy of its 52-week high. Annaly is headquartered in New York.

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