Earnings at Annaly Capital (NLY) dropped nearly 63% to $445.6 million, or 46 cents a share, in the fourth quarter from $1.2 billion, or $1.94 a share, in the year-earlier period.

The real estate investment trust posted a $921.8 million, or 98 cents a share, loss in the third quarter.

For all of 2011, the company's earnings fell to $344.5 million, or 37 cents a share, from $1.3 billion, or $2.12 a share, in 2010.

Annaly, which invests in mortgage-backed securities, saw an annualized return on average equity of 11.23% in the fourth quarter, a sharp decline from 49.87% a year earlier. It's much better, however, than the 24.65% loss on returns in the third quarter.

Chief executive Michael Farrell said uncertain market and regulatory conditions make it "best to be conservative in our approach to risk and performance."

"It is intended not only to protect our portfolio but also to prepare us to take advantage of opportunities as they arise," Farrell said in a release.

The New York company disposed of significantly more Fannie Mae and Freddie Mac MBS and debentures, or unsecured debt obligations, in the fourth quarter, ridding $10.3 billion worth for a realized gain of $80.7 million. That's compared with $3.9 billion for $91.7 million in the third quarter, and $3.1 billion for $33.8 million in the year-earlier period.

Annaly disposed of $20.1 billion in Agency MBS and debentures for $206.8 million in all of 2011, compared with $10.6 billion for $181.8 million in 2010.

Fixed-rate MBS and GSE debentures made up 90% of the company's portfolio as of Dec. 31. Annaly held $109.6 billion in assets, down from $113.6 billion at the end of the third quarter and up from $83 billion a year earlier.