© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Third Quarter 2021 Financial Summary October 27, 2021
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. This presentation is issued by Annaly Capital Management, Inc. ("Annaly"), an internally managed, publicly traded company that has elected to be taxed as a real estate investment trust for federal income tax purposes, and is being furnished in connection with Annaly’s Third Quarter 2021 earnings release. This presentation is provided for investors in Annaly for informational purposes only and is not an offer to sell, or a solicitation of an offer to buy, any security or instrument. Forward-Looking Statements This presentation, other written or oral communications, and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward- looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, risks and uncertainties related to the COVID-19 pandemic, including as related to adverse economic conditions on real estate-related assets and financing conditions (and our outlook for our business in light of these conditions, which is uncertain); changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; operational risks or risk management failures by us or critical third parties, including cybersecurity incidents; our ability to grow our residential credit business; our ability to grow our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets and corporate debt; risks related to investments in MSR; our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; and our ability to maintain our exemption from registration under the Investment Company Act. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law. We routinely post important information for investors on our website, www.annaly.com. We intend to use this webpage as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. Annaly encourages investors, analysts, the media and others interested in Annaly to monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations, webcasts and other information we post from time to time on our website. To sign-up for email-notifications, please visit the “Email Alerts” section of our website, www.annaly.com, under the “Investors” section and enter the required information to enable notifications. The information contained on, or that may be accessed through, our webpage is not incorporated by reference into, and is not a part of, this document. Past performance is no guarantee of future results. There is no guarantee that any investment strategy referenced herein will work under all market conditions. Prior to making any investment decision, you should evaluate your ability to invest for the long-term, especially during periods of downturns in the market. You alone assume the responsibility of evaluating the merits and risks associated with any potential investment or investment strategy referenced herein. To the extent that this material contains reference to any past specific investment recommendations or strategies which were or would have been profitable to any person, it should not be assumed that recommendations made in the future will be profitable or will equal the performance of such past investment recommendations or strategies. The information contained herein is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations for Annaly or any of its affiliates. Regardless of source, information is believed to be reliable for purposes used herein, but Annaly makes no representation or warranty as to the accuracy or completeness thereof and does not take any responsibility for information obtained from sources outside of Annaly. Certain information contained in the presentation discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. 1 Important Notices
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Updates to Financial Disclosures Commencing with the Company’s financial results for the quarter ended June 30, 2021 and for subsequent reporting periods, the Company has relabeled “Core Earnings (excluding PAA)” as “Earnings Available for Distribution” (“EAD”). Earnings Available for Distribution, which is a non-GAAP financial measure intended to supplement the Company’s financial results computed in accordance with U.S. generally accepted accounting principles (“GAAP”), replaces the Company’s prior presentation of Core Earnings (excluding PAA). In addition, Core Earnings (excluding PAA) results from prior reporting periods have been relabeled Earnings Available for Distribution. In line with evolving industry practices, the Company believes the term Earnings Available for Distribution more accurately reflects the principal purpose of the measure than the term Core Earnings (excluding PAA) and serves as a useful indicator for investors in evaluating the Company’s performance and its ability to pay dividends. The definition of Earnings Available for Distribution is identical to the definition of Core Earning (excluding PAA) from prior reporting periods. As such, Earnings Available for Distribution is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) realized amortization of MSR, (d) other income (loss) (excluding depreciation expense related to commercial real estate and amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items) and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items) and excludes (g) the premium amortization adjustment ("PAA") representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities. Earnings Available for Distribution should not be considered a substitute for, or superior to, GAAP net income. Please refer to the "Non-GAAP Financial Measures" section for a detailed discussion of Earnings Available for Distribution. Beginning with the quarter ended June 30, 2021, the Company began classifying certain portfolio activity- or volume-related expenses (including but not limited to brokerage and commission fees, due diligence costs and securitization expenses) as Other income (loss) rather than Other general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss) to better reflect the nature of the items. As such, prior periods have been conformed to the current presentation. Divestiture of Commercial Real Estate Business During the third quarter 2021, the Company completed the economic transfer and substantially all of the legal ownership transfer of the previously announced sale of substantially all of the assets that comprise the Commercial Real Estate Business for $2.33 billion (the “Sale”). The remaining assets of the Sale are expected to be legally transferred by the end of the fourth quarter 2021 subject to regulatory approvals and the Company intends to sell nearly all of the remaining assets that are not included in the Sale. 2 Important Notices (continued)
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Portfolio Efficiency GAAP Key Statistics Income Statement Balance Sheet For the quarters ended 9/30/2021 6/30/2021 GAAP net income (loss) per average common share (1) $0.34 ($0.23) Earnings available for distribution per average common share *(1) $0.28 $0.30 Annualized GAAP return (loss) on average equity 15.25% (8.51%) Annualized EAD return on average equity* 12.81% 13.05% Book value per common share $8.39 $8.37 GAAP Leverage at period-end (2) 4.4x 4.7x Economic leverage at period-end *(2) 5.8x 5.8x GAAP capital ratio at period-end (3) 17.9% 16.6% Economic capital ratio at period-end *(3) 14.2% 14.3% Securities $65,622,352 $69,032,335 Loans, net 3,580,521 3,563,008 Mortgage servicing rights (4) 572,259 202,616 Interests in MSR (5) 57,530 49,035 Assets transferred or pledged to securitization vehicles 4,738,481 4,073,156 Assets of disposal group held for sale ** 238,042 3,302,001 Total residential and commercial investments $74,809,185 $80,222,151 Net interest margin (6) 2.01% 1.66% Average yield on interest earning assets (7) 2.29% 1.97% Average GAAP cost of interest bearing liabilities (8) 0.32% 0.35% Net interest spread 1.97% 1.62% Net interest margin (excluding PAA) *(6) 2.04% 2.09% Average yield on interest earning assets (excluding PAA) *(7) 2.63% 2.76% Average economic cost of interest bearing liabilities *(8) 0.66% 0.83% Net interest spread (excluding PAA) * 1.97% 1.93% Operating expenses to earnings available for distribution * 10.03% 11.86% Annualized operating expenses as a % of average total assets 0.22% 0.26% Annualized operating expenses as a % of average total equity 1.28% 1.55% Unaudited, dollars in thousands except per share amounts 3 Financial Snapshot Non-GAAP Key Statistics ______________ * Represents a non-GAAP financial measure. ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Portfolio- Related Data Unaudited, dollars in thousands 4 Portfolio Data For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Agency mortgage-backed securities $62,818,079 $66,468,519 $69,637,229 $74,067,059 $74,915,167 Residential credit risk transfer securities 787,235 827,328 930,983 532,403 411,538 Non-agency mortgage-backed securities 1,747,932 1,582,323 1,277,104 972,192 717,602 Commercial mortgage-backed securities 269,106 154,165 4,121 80,742 54,678 Total securities $65,622,352 $69,032,335 $71,849,437 $75,652,396 $76,098,985 Residential mortgage loans $1,686,268 $1,029,929 $528,868 $345,810 $152,959 Residential mortgage loan warehouse facility 1,431 — — — — Commercial real estate debt and preferred equity — — — 498,081 573,504 Corporate debt 1,890,709 2,066,709 2,074,475 2,239,930 2,061,878 Corporate debt, held for sale 2,113 466,370 — — — Total loans, net $3,580,521 $3,563,008 $2,603,343 $3,083,821 $2,788,341 Mortgage servicing rights $572,259 $202,616 $113,080 $100,895 $207,985 Interests in MSR $57,530 $49,035 $— $— $— Agency mortgage-backed securities transferred or pledged to securitization vehicles $597,923 $605,163 $598,118 $620,347 $623,650 Residential mortgage loans transferred or pledged to securitization vehicles 4,140,558 3,467,993 3,170,804 3,249,251 3,588,679 Commercial real estate debt investments transferred or pledged to securitization vehicles — — — 2,166,073 2,174,118 Commercial real estate debt and preferred equity transferred or pledged to securitization vehicles — — — 874,349 882,955 Assets transferred or pledged to securitization vehicles $4,738,481 $4,073,156 $3,768,922 $6,910,020 $7,269,402 Real estate, net $— $— $— $656,314 $790,597 Assets of disposal group held for sale ** $238,042 $3,302,001 $4,400,723 $— $— Total investment portfolio $74,809,185 $80,222,151 $82,735,505 $86,403,446 $87,155,310 Total assets $76,662,433 $82,376,305 $85,369,589 $88,455,103 $89,192,411 Average TBA contract and CMBX balances $22,739,226 $18,761,062 $21,865,969 $20,744,672 $20,429,935 ______________ ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Financing Data Key Capital and Hedging Metrics ______________ * Represents a non-GAAP financial measure. ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands except per share amounts 5 Financing and Capital Data For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Repurchase agreements $55,475,420 $60,221,067 $61,202,477 $64,825,239 $64,633,447 Other secured financing 729,555 909,655 922,605 917,876 861,373 Debt issued by securitization vehicles 3,935,410 3,315,087 3,044,725 5,652,982 6,027,576 Participations issued 641,006 315,810 180,527 39,198 — Mortgages payable — — — 426,256 507,934 Total debt $60,781,391 $64,761,619 $65,350,334 $71,861,551 $72,030,330 Liabilities of disposal group held for sale ** $159,508 $2,362,690 $3,319,414 $— $— Total liabilities $62,944,566 $68,737,129 $71,301,994 $74,433,307 $74,997,739 Cumulative redeemable preferred stock $1,536,569 $1,536,569 $1,536,569 $1,536,569 $1,982,026 Common equity(1) 12,161,233 12,080,546 12,519,238 12,471,747 12,200,180 Total Annaly stockholders' equity 13,697,802 13,617,115 14,055,807 14,008,316 14,182,206 Non-controlling interests 20,065 22,061 11,788 13,480 12,466 Total equity $13,717,867 $13,639,176 $14,067,595 $14,021,796 $14,194,672 Weighted average days to maturity of repurchase agreements 75 88 88 64 72 Weighted average rate on repurchase agreements, for the quarter(2)(3) 0.15% 0.18% 0.26% 0.35% 0.44% Weighted average rate on repurchase agreements, at period-end(3) 0.15% 0.16% 0.20% 0.32% 0.42% GAAP leverage at period-end 4.4x 4.7x 4.6x 5.1x 5.1x Economic leverage at period-end * 5.8x 5.8x 6.1x 6.2x 6.2x GAAP capital ratio at period-end 17.9% 16.6% 16.5% 15.9% 15.9% Economic capital ratio at period-end * 14.2% 14.3% 13.7% 13.6% 13.6% Book value per common share $8.39 $8.37 $8.95 $8.92 $8.70 Total common shares outstanding 1,449,935 1,444,156 1,398,503 1,398,241 1,402,928 Hedge ratio(4) 80% 75% 75% 61% 48% Weighted average pay rate on interest rate swaps, at period-end 0.60% 0.81% 0.80% 0.92% 0.91% Weighted average receive rate on interest rate swaps, at period-end 0.07% 0.34% 0.34% 0.37% 0.48% Weighted average net rate on interest rate swaps, at period-end 0.53% 0.47% 0.46% 0.55% 0.43%
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands except per share amounts 6 Income Statement Data For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Total interest income $412,972 $383,906 $763,378 $527,344 $562,443 Total interest expense 50,438 61,047 75,973 94,481 115,126 Net interest income $362,534 $322,859 $687,405 $432,863 $447,317 Total economic interest expense *(1) $104,849 $144,134 $155,720 $161,288 $177,655 Economic net interest income * $308,123 $239,772 $607,658 $366,056 $384,788 Total interest income (excluding PAA) * $473,698 $537,513 $548,808 $566,445 $596,322 Economic net interest income (excluding PAA) * $368,849 $393,379 $393,088 $405,157 $418,667 GAAP net income (loss) $521,534 ($294,848) $1,751,134 $878,635 $1,015,548 GAAP net income (loss) available (related) to common stockholders (2) $492,361 ($322,525) $1,723,930 $841,707 $980,165 GAAP net income (loss) per average common share (2) $0.34 ($0.23) $1.23 $0.60 $0.70 Earnings available for distribution * $437,471 $451,358 $439,519 $459,046 $482,323 Earnings available for distribution attributable to common stockholders *(2) $410,588 $424,475 $412,636 $423,537 $446,814 Earnings available for distribution per average common share *(2) $0.28 $0.30 $0.29 $0.30 $0.32 PAA cost (benefit) $60,726 $153,607 ($214,570) $39,101 $33,879 Weighted average experienced CPR for the period 23.1% 26.4% 23.9% 24.7% 22.9% Weighted average projected long-term CPR at period-end 12.7% 12.9% 11.8% 16.4% 17.1% Summary Income Statement
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Dividends declared per common share $0.22 $0.22 $0.22 $0.22 $0.22 Total common and preferred dividends declared (1) $346,651 $345,417 $335,229 $343,666 $344,684 Annualized GAAP return (loss) on average equity 15.25% (8.51%) 49.87% 24.91% 29.02% Annualized GAAP return (loss) on average equity per unit of GAAP leverage 3.47% (1.81%) 10.84% 4.88% 5.69% Net interest margin 2.01% 1.66% 3.39% 2.14% 2.15% Average yield on interest earning assets 2.29% 1.97% 3.76% 2.61% 2.70% Average GAAP cost of interest bearing liabilities 0.32% 0.35% 0.42% 0.51% 0.60% Net interest spread 1.97% 1.62% 3.34% 2.10% 2.10% Annualized EAD return on average equity * 12.81% 13.05% 12.53% 13.03% 13.79% Annualized EAD return on average equity per unit of economic leverage * 2.21% 2.25% 2.05% 2.10% 2.22% Net interest margin (excluding PAA) * 2.04% 2.09% 1.91% 1.98% 2.05% Average yield on interest earning assets (excluding PAA) * 2.63% 2.76% 2.71% 2.80% 2.86% Average economic cost of interest bearing liabilities * 0.66% 0.83% 0.87% 0.87% 0.93% Net interest spread (excluding PAA) * 1.97% 1.93% 1.84% 1.93% 1.93% Key GAAP Earnings Metrics ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands except per share amounts 7 Key Earnings Metrics Key Non-GAAP Earnings Metrics
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Economic Net Interest Income * ______________ * Represents a non-GAAP financial measure. Unaudited, dollars in thousands 8 Components of Economic Net Interest Income * For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Interest income: Agency Securities $299,898 $255,801 $627,654 $397,394 $428,088 Resi Credit Securities 20,774 19,477 16,980 14,000 11,414 Residential mortgage loans 45,801 38,963 37,109 37,323 42,508 Commercial investment portfolio 46,494 69,663 81,601 78,555 80,324 Reverse repurchase agreements 5 2 34 72 109 Total interest income $412,972 $383,906 $763,378 $527,344 $562,443 Economic interest expense: Repurchase agreements $22,397 $29,140 $42,585 $58,849 $75,386 Net interest component of interest rate swaps 54,411 83,087 79,747 66,807 62,529 Debt issued by securitization vehicles 18,740 23,216 26,276 29,235 32,491 Participations issued 2,578 1,739 597 78 — Other 6,723 6,952 6,515 6,319 7,249 Total economic interest expense * $104,849 $144,134 $155,720 $161,288 $177,655 Economic net interest income * $308,123 $239,772 $607,658 $366,056 $384,788 PAA cost (benefit) 60,726 153,607 (214,570) 39,101 33,879 Economic net interest income (excluding PAA) * $368,849 $393,379 $393,088 $405,157 $418,667
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. EAD* Reconciliation 9 GAAP Net Income to Earnings Available for Distribution* Reconciliation For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 GAAP net income (loss) $521,534 ($294,848) $1,751,134 $878,635 $1,015,548 Net income (loss) attributable to noncontrolling interests 2,290 794 321 1,419 (126) Net income (loss) attributable to Annaly 519,244 (295,642) 1,750,813 877,216 1,015,674 Adjustments to exclude reported realized and unrealized (gains) losses: Realized (gains) losses on termination or maturity of interest rate swaps 1,196,417 — — (2,092) 427 Unrealized (gains) losses on interest rate swaps (1,380,946) 141,067 (772,262) (258,236) (170,327) Net (gains) losses on disposal of investments and other (12,002) (16,223) 65,786 (9,363) (198,888) Net (gains) losses on other derivatives and financial instruments 45,168 357,808 (476,868) (209,647) (169,316) Net unrealized (gains) losses on instruments measured at fair value through earnings (90,817) (3,984) (104,191) (51,109) (121,255) Loan loss provision (reversal) (1) (6,771) 1,078 (144,870) 469 (21,818) Business divestiture-related (gains) losses ** 14,009 (1,527) 249,563 — — Other adjustments: Depreciation expense related to commercial real estate and amortization of intangibles (2) 1,122 5,635 7,324 11,097 11,363 Non-EAD (income) loss allocated to equity method investments (3) (2,046) 3,141 (9,680) 28 (1,151) Transaction expenses and non-recurring items (4) 2,201 1,150 695 172 2,801 Income tax effect of non-EAD income (loss) items (6,536) 7,147 4,334 (10,984) 13,890 TBA dollar roll income and CMBX coupon income (5) 115,586 111,592 98,933 99,027 114,092 MSR amortization (6) (17,884) (13,491) (15,488) (26,633) (27,048) Plus: Premium amortization adjustment cost (benefit) 60,726 153,607 (214,570) 39,101 33,879 Earnings available for distribution * 437,471 451,358 439,519 459,046 482,323 Dividends on preferred stock 26,883 26,883 26,883 35,509 35,509 Earnings available for distribution attributable to common stockholders * $410,588 $424,475 $412,636 $423,537 $446,814 ______________ * Represents a non-GAAP financial measure. Earnings Available for Distribution, or EAD, was previously labeled as Core Earnings (excluding PAA). ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Book Value Rollforward Net Interest Margin Unaudited 10 Quarter-Over-Quarter Changes in Key Metrics For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Book value per common share, beginning of period $8.37 $8.95 $8.92 $8.70 $8.39 Net income (loss) available (related) to common stockholders 0.34 (0.23) 1.23 0.60 0.70 Other comprehensive income (loss) attributable to common stockholders (0.10) (0.15) (0.98) (0.16) (0.18) Common dividends declared (0.22) (0.22) (0.22) (0.22) (0.22) Issuance / buyback of common stock / redemption of preferred stock — 0.02 — — 0.01 Book value per common share, end of period $8.39 $8.37 $8.95 $8.92 $8.70 Prior quarter net interest margin 1.66% 3.39% 2.14% 2.15% 1.89% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.01% (0.08%) (0.09%) (0.10%) (0.17%) Net amortization of premiums 0.31% (1.71%) 1.24% 0.01% 0.10% GAAP interest expense 0.03% 0.06% 0.10% 0.08% 0.33% Current quarter net interest margin 2.01% 1.66% 3.39% 2.14% 2.15% Prior quarter net interest spread 1.62% 3.34% 2.10% 2.10% 1.81% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.01% (0.08%) (0.09%) (0.10%) (0.17%) Net amortization of premiums 0.31% (1.71%) 1.24% 0.01% 0.10% GAAP interest expense 0.03% 0.07% 0.09% 0.09% 0.36% Current quarter net interest spread 1.97% 1.62% 3.34% 2.10% 2.10% Net Interest Spread
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Net Interest Margin (excluding PAA)* Unaudited 11 Quarter-Over-Quarter Changes in Key Metrics (continued) ______________ * Represents a non-GAAP financial measure. For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Prior quarter net interest margin (excluding PAA) * 2.09% 1.91% 1.98% 2.05% 1.88% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (including average TBA dollar roll and CMBX balances) (0.16%) 0.00% (0.09%) (0.11%) (0.20%) Net amortization of premiums (excluding PAA) (0.07%) 0.09% 0.00% 0.04% 0.03% TBA dollar roll income and CMBX coupon income 0.03% 0.08% (0.01%) (0.05%) 0.06% Interest expense and net interest component of interest rate swaps 0.15% 0.01% 0.03% 0.05% 0.28% Current quarter net interest margin (excluding PAA) * 2.04% 2.09% 1.91% 1.98% 2.05% Prior quarter net interest spread (excluding PAA) * 1.93% 1.84% 1.93% 1.93% 1.72% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.01% (0.08%) (0.09%) (0.10%) (0.17%) Net amortization of premiums (excluding PAA) (0.14%) 0.13% (0.01%) 0.04% 0.02% Interest expense and net interest component of interest rate swaps 0.17% 0.04% 0.01% 0.06% 0.36% Current quarter net interest spread (excluding PAA) * 1.97% 1.93% 1.84% 1.93% 1.93% Net Interest Spread (excluding PAA)*
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Annualized GAAP Return (Loss) on Average Equity Annualized EAD Return on Average Equity* ______________ * Represents a non-GAAP financial measure. ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited 12 Quarter-Over-Quarter Changes in Annualized Return on Average Equity For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Prior quarter annualized GAAP return (loss) on average equity (8.51%) 49.87% 24.91% 29.02% 25.84% Quarter-over-quarter changes in contribution: Coupon income (1.24%) (1.01%) (0.35%) (1.42%) (2.71%) Net amortization of premiums and accretion of discounts 2.23% (9.64%) 7.14% 0.30% 1.14% Interest expense and net interest component of interest rate swaps 1.10% 0.27% 0.14% 0.50% 2.49% Realized gains (losses) on termination or maturity of interest rate swaps (34.99%) 0.00% (0.06%) 0.07% 45.92% Unrealized gains (losses) on interest rate swaps 44.46% (26.07%) 14.67% 2.46% (40.24%) Realized and unrealized gains (losses) on investments and other derivatives 11.43% (24.42%) 7.02% (6.33%) (6.31%) Business divestiture-related (losses) gains ** (0.45%) 7.15% (7.11%) 0.00% 0.00% Loan loss provision 0.19% (3.99%) 4.02% (0.67%) 2.70% Other(1) 1.03% (0.67%) (0.51%) 0.98% 0.19% Current quarter annualized GAAP return (loss) on average equity 15.25% (8.51%) 49.87% 24.91% 29.02% Prior quarter annualized EAD return on average equity * 13.05% 12.53% 13.03% 13.79% 12.82% Quarter-over-quarter changes in contribution: Coupon income (1.24%) (1.01%) (0.35%) (1.42%) (2.71%) Net amortization of premiums (excluding PAA) (0.43%) 0.90% (0.08%) 0.45% 0.54% Interest expense and net interest component of interest rate swaps 1.10% 0.27% 0.14% 0.50% 2.49% TBA dollar roll income and CMBX coupon income 0.16% 0.41% 0.01% (0.45%) 0.32% Other(2) 0.17% (0.05%) (0.22%) 0.16% 0.33% Current quarter annualized EAD return on average equity * 12.81% 13.05% 12.53% 13.03% 13.79%
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 13 Residential & Other Investments Overview as of September 30, 2021 Agency Fixed-Rate Securities (Pools) Original Weighted Avg. Years to Maturity Current Face Value % (3) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value <=15 years (1) $3,019,983 5.3% 2.74% 101.5% 105.1% 18.5% $3,174,746 20 years 1,933,736 3.3% 3.12% 103.6% 106.1% 21.9% 2,051,681 >=30 years (2) 52,787,461 91.4% 3.47% 105.7% 108.4% 22.9% 57,245,893 Total/Weighted Avg. $57,741,180 100.0% 3.42% 105.4% 108.2% 22.8% $62,472,320 TBA Contracts Type Notional Value % (4) Weighted Avg. Coupon Implied Cost Basis Implied Market Value 15-year $1,163,000 5.0% 1.68% $1,186,861 $1,182,228 30-year 22,038,000 95.0% 2.33% 22,589,513 22,440,408 Total/Weighted Avg. $23,201,000 100.0% 2.29% $23,776,374 $23,622,636 Agency Adjustable-Rate Securities Weighted Avg. Months to Reset Current Face Value % (3) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value 0 - 24 months $320,561 86.7% 2.17% 100.6% 105.8% 30.9% $339,178 25 - 40 months 6,758 1.8% 2.61% 98.4% 104.1% 41.6% 7,033 41 - 60 months 42,297 11.5% 2.99% 101.0% 104.2% 56.7% 44,089 Total/Weighted Avg. $369,616 100.0% 2.27% 100.6% 105.6% 34.4% $390,300 Agency Interest-Only Collateralized Mortgage-Backed Obligations Type Current Notional Value % (4) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value Interest-only $761,726 14.9% 3.37% 17.0% 9.9% 24.7% $75,421 Inverse interest-only 1,329,875 26.1% 6.02% 26.6% 19.1% 28.5% 254,520 Multifamily interest-only $3,009,645 59.0% 1.08% 7.5% 7.4% —% $223,442 Total/Weighted Avg. $5,101,246 100.0% 2.71% 13.9% 10.8% 27.1% $553,383
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 14 Residential & Other Investments Overview as of September 30, 2021 (continued) Mortgage Servicing Rights Type Unpaid Principal Balance Servicing Fee Weighted Avg. Note Rate Valuation Discount Rate CPR Estimated Fair Value MSR held directly $42,836,044 0.26% 2.9% 112.4% 7.7% 9.0% $481,280 MSR of consolidated VIE (1) $10,091,630 0.25% 3.8% 90.2% 9.0% 17.6% $90,979 Interests in MSR $5,335,069 0.25% 2.9% 107.8% 7.9% 9.6% $57,530 MSR of limited partnership interest (2) $3,568,856 $31,949 Total/Weighted Avg. $61,831,599 0.26% 3.0% 108.1% 7.9% 10.5% $661,738 Residential Credit Portfolio Sector Current Face / Notional Value % (3) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Estimated Fair Value Residential credit risk transfer $780,039 9.4% 3.23% 99.6% 100.9% $787,235 Alt-A 66,805 0.6% 3.09% 74.8% 80.1% 53,541 Prime 343,013 3.4% 3.96% 98.2% 101.9% 279,737 Subprime 183,962 2.1% 2.08% 91.0% 95.9% 176,436 NPL/RPL 1,130,807 13.6% 3.26% 99.9% 100.6% 1,137,131 Prime jumbo 252,011 1.2% 3.84% 100.3% 100.1% 101,087 Residential mortgage loans 5,602,342 69.7% 4.25% 101.7% 104.0% 5,826,826 Total/Weighted Avg. $8,358,979 100.0% 3.95% $8,361,993 Other Credit Products Type Net Notional Range of Ratings Net Weighted Avg Coupon Implied Market Value CMBX (4) $425,000 AAA to A 1.1% $427,683 Type Current Face / Notional Value Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Estimated Fair Value Multifamily CRT $4,000 3.84% 97.4% 102.7% $4,106 CLO $265,000 1.26% 100.0% 100.0% $265,000
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 15 Residential Credit Securities Detail as of September 30, 2021 Product Estimated Fair Value Payment Structure Investment Characteristics Senior Subordinate Coupon Credit Enhancement 60+ Delinquencies 3M VPR Credit Risk Transfer $787,235 $— $787,235 3.23% 2.54% 4.06% 38.20% Alt-A 53,541 15,325 38,216 3.09% 9.21% 14.22% 30.98% Prime 279,737 60,307 219,430 3.96% 8.44% 4.36% 34.12% Subprime 176,436 99,701 76,735 2.08% 20.82% 12.92% 17.96% Re-Performing Loan Securitizations 724,672 297,458 427,214 3.79% 26.37% 24.76% 10.65% Non-Performing Loan Securitizations 412,459 387,156 25,303 2.33% 30.99% 63.08% 5.25% Prime Jumbo 101,087 795 100,292 3.84% 4.31% 13.36% 31.98% Total $2,535,167 $860,742 $1,674,425 3.26% 16.12% 20.80% 22.68% Product Bond Coupon Estimated Fair ValueARM Fixed Floater Interest Only Credit Risk Transfer $— $— $787,206 $29 $787,235 Alt-A 5,110 37,345 11,086 — 53,541 Prime 33,162 241,236 4,958 381 279,737 Subprime 7,252 73,063 95,938 183 176,436 Re-Performing Loan Securitizations — 724,672 — — 724,672 Non-Performing Loan Securitizations — 412,459 — — 412,459 Prime Jumbo — 100,292 — 795 101,087 Total $45,524 $1,589,067 $899,188 $1,388 $2,535,167
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands 16 Middle Market Lending Overview as of September 30, 2021 Industry Dispersion Industry Total (1) Computer Programming, Data Processing & Other Computer Related Services $435,210 Management and Public Relations Services 263,196 Industrial Inorganic Chemicals 156,483 Metal Cans & Shipping Containers 117,355 Public Warehousing and Storage 88,032 Surgical, Medical, and Dental Instruments and Supplies 81,160 Electronic Components & Accessories 78,452 Offices and Clinics of Doctors of Medicine 61,243 Telephone Communications 58,881 Specialty Outpatient Facilities, Not Elsewhere Classified 48,109 Research, Development and Testing Services 45,546 Insurance Agents, Brokers and Services 43,827 Electric Work 42,635 Engineering, Architectural, and Surveying 39,275 Miscellaneous Industrial and Commercial 33,074 Miscellaneous Equipment Rental and Leasing 32,332 Medical and Dental Laboratories 30,404 Schools and Educational Services, not elsewhere classified 29,186 Home Health Care Services 28,726 Metal Forgings and Stampings 27,449 Legal Services 26,392 Petroleum and Petroleum Products 21,471 Grocery Stores 19,632 Coating, Engraving and Allied Services 18,458 Chemicals & Allied Products 14,689 Mailing, Reproduction, Commercial Art and Photography, and Stenographic 12,311 Machinery, Equipment, and Supplies 11,370 Sanitary Services 10,743 Offices and Clinics of Other Health Practitioners 10,095 Miscellaneous Business Services 1,952 Drugs 1,756 Computer Integrated Systems Design 1,265 Total (2) $1,890,709 Size Dispersion Position Size Amount Percentage $0 - $20 million $200,972 10.7% $20 - $40 million 435,381 23.0% $40 - $60 million 389,526 20.6% Greater than $60 million 864,830 45.7% Total (2) $1,890,709 100.0% Tenor Dispersion Remaining Term Amount Percentage One year or less $19,528 1.1% One to three years 244,450 12.9% Three to five years 868,131 45.9% Greater than five years 758,600 40.1% Total (2) $1,890,709 100.0% Lien Position Amount Percentage First lien loans $1,302,441 68.9% Second lien loans (3) 588,268 31.1% Total (2) $1,890,709 100.0% ______________ Detailed endnotes are included within the Appendix at the end of this presentation.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. 17 Unaudited, dollars in thousands Hedging and Liabilities as of September 30, 2021 Principal Balance Weighted Average Rate Days to Maturity(5)At Period End For the Quarter Repurchase agreements $ 55,475,420 0.15 % 0.15 % 75 Other secured financing 729,555 2.85 % 3.34 % 1,561 Debt issued by securitization vehicles 3,858,270 2.20 % 1.90 % 11,519 Participations issued 617,276 3.11 % 2.23 % 11,145 Total indebtedness $ 60,680,521 Maturity Current Notional (1)(2) Weighted Avg. Pay Rate Weighted Avg. Receive Rate Weighted Avg. Years to Maturity(3) 0 to 3 years $ 31,311,750 0.24 % 0.06 % 1.30 > 3 to 6 years 2,780,000 0.21 % 0.06 % 3.72 > 6 to 10 years 9,131,000 1.43 % 0.10 % 9.29 Greater than 10 years 1,556,000 3.83 % 0.10 % 19.74 Total / Weighted Avg. $ 44,778,750 0.60 % 0.07 % 3.72 Type Current Underlying Notional Weighted Avg. Underlying Fixed Rate Weighted Avg. Underlying Floating Rate Weighted Avg. Underlying Years to Maturity Weighted Avg. Months to Expiration Long Pay $ 4,050,000 1.87 % 3M LIBOR 10.11 17.57 Long Receive $ 2,000,000 1.47 % 3M LIBOR 11.20 14.45 Type Long Contracts Short Contracts Net Positions Weighted Avg. Years to Maturity U.S. Treasury Futures - 2 year $ — $ (1,067,000) $ (1,067,000) 2.00 U.S. Treasury Futures - 5 year $ — $ (3,274,000) $ (3,274,000) 4.41 U.S. Treasury Futures - 10 year & Greater $ — $ (10,976,500) $ (10,976,500) 7.17 Total / Weighted Avg. $ — $ (15,317,500) $ (15,317,500) 6.22 Maturity Principal Balance Weighted Avg. Rate At Period End Within 30 days $ 24,079,879 0.11 % 30 to 59 days 4,082,709 0.18 % 60 to 89 days 3,226,323 0.17 % 90 to 119 days 10,197,130 0.18 % Over 120 days(4) 14,618,934 0.33 % Total / Weighted Avg. $ 56,204,975 0.19 % Interest Rate Swaps Interest Rate Swaptions Futures Positions Repurchase Agreements and Other Secured Financing Total Indebtedness
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited 18 Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity Assumptions: ▪ The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of September 30, 2021 and June 30, 2021 ▪ The interest rate sensitivity reflects instantaneous parallel shifts in rates ▪ The MBS spread sensitivity shifts MBS spreads instantaneously and reflects exposure to MBS basis risk ▪ All tables assume no active management of the portfolio in response to rate or spread changes Interest Rate Sensitivity (1) Interest Rate Change (bps) As of September 30, 2021 As of June 30, 2021 Estimated Percentage Change in Portfolio Market Value(2) Estimated Change as a % of NAV(2)(3) Estimated Percentage Change in Portfolio Market Value(2) Estimated Change as a % of NAV(2)(3) (75) (0.1%) (0.3%) (0.2%) (1.1%) (50) 0.1% 0.6% —% (0.2%) (25) 0.2% 0.9% 0.1% 0.3% 25 (0.3%) (1.7%) (0.1%) (0.6%) 50 (0.8%) (4.2%) (0.4%) (2.2%) 75 (1.3%) (7.5%) (0.8%) (4.5%) MBS Spread Sensitivity (1) MBS Spread Shock (bps) As of September 30, 2021 As of June 30, 2021 Estimated Change in Portfolio Market Value (2) Estimated Change as a % of NAV(2)(3) Estimated Change in Portfolio Market Value (2) Estimated Change as a % of NAV(2)(3) (25) 1.8% 10.1% 1.6% 9.2% (15) 1.1% 6.1% 1.0% 5.5% (5) 0.4% 2.0% 0.3% 1.8% 5 (0.4%) (2.0%) (0.3%) (1.8%) 15 (1.1%) (6.0%) (0.9%) (5.5%) 25 (1.8%) (10.0%) (1.6%) (9.0%)
Appendix
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Dollars in thousands, except per share data 20 Consolidated Statements of Financial Condition 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 (unaudited) (unaudited) (unaudited) (unaudited) Assets Cash and cash equivalents $ 1,046,300 $ 1,380,456 $ 1,122,793 $ 1,243,703 $ 1,239,982 Securities 65,622,352 69,032,335 71,849,437 75,652,396 76,098,985 Loans, net 3,580,521 3,563,008 2,603,343 3,083,821 2,788,341 Mortgage servicing rights 572,259 202,616 113,080 100,895 207,985 Interests in MSR 57,530 49,035 — — — Assets transferred or pledged to securitization vehicles 4,738,481 4,073,156 3,768,922 6,910,020 7,269,402 Real estate, net — — — 656,314 790,597 Assets of disposal group held for sale 238,042 3,302,001 4,400,723 — — Derivative assets 331,395 181,889 891,474 171,134 103,245 Receivable for unsettled trades 42,482 14,336 144,918 15,912 54,200 Principal and interest receivable 234,810 250,210 259,655 268,073 281,009 Goodwill and intangible assets, net 25,371 26,502 37,337 127,341 136,900 Other assets 172,890 300,761 177,907 225,494 221,765 Total assets $ 76,662,433 $ 82,376,305 $ 85,369,589 $ 88,455,103 $ 89,192,411 Liabilities and stockholders’ equity Liabilities Repurchase agreements $ 55,475,420 $ 60,221,067 $ 61,202,477 $ 64,825,239 $ 64,633,447 Other secured financing 729,555 909,655 922,605 917,876 861,373 Debt issued by securitization vehicles 3,935,410 3,315,087 3,044,725 5,652,982 6,027,576 Participations issued 641,006 315,810 180,527 39,198 — Mortgages payable — — — 426,256 507,934 Liabilities of disposal group held for sale 159,508 2,362,690 3,319,414 — — Derivative liabilities 912,134 900,259 939,622 1,033,345 1,182,681 Payable for unsettled trades 571,540 154,405 1,070,080 884,069 1,176,001 Interest payable 109,586 173,721 100,949 191,116 155,338 Dividends payable 318,986 317,714 307,671 307,613 308,644 Other liabilities 91,421 66,721 213,924 155,613 144,745 Total liabilities 62,944,566 68,737,129 71,301,994 74,433,307 74,997,739 Stockholders’ equity Preferred stock, par value $0.01 per share (2) 1,536,569 1,536,569 1,536,569 1,536,569 1,982,026 Common stock, par value $0.01 per share (3) 14,499 14,442 13,985 13,982 14,029 Additional paid-in capital 20,228,366 20,178,692 19,754,826 19,750,818 19,798,032 Accumulated other comprehensive income (loss) 1,638,638 1,780,275 2,002,231 3,374,335 3,589,056 Accumulated deficit (9,720,270) (9,892,863) (9,251,804) (10,667,388) (11,200,937) Total stockholders’ equity 13,697,802 13,617,115 14,055,807 14,008,316 14,182,206 Noncontrolling interests 20,065 22,061 11,788 13,480 12,466 Total equity 13,717,867 13,639,176 14,067,595 14,021,796 14,194,672 Total liabilities and equity $ 76,662,433 $ 82,376,305 $ 85,369,589 $ 88,455,103 $ 89,192,411 ______________ Detailed endnotes are included within the Appendix at the end of this presentation. (1)
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands, except per share data 21 Consolidated Statements of Comprehensive Income (Loss) For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Net interest income Interest income $ 412,972 $ 383,906 $ 763,378 $ 527,344 $ 562,443 Interest expense 50,438 61,047 75,973 94,481 115,126 Net interest income 362,534 322,859 687,405 432,863 447,317 Realized and unrealized gains (losses) Net interest component of interest rate swaps (54,411) (83,087) (79,747) (66,807) (62,529) Realized gains (losses) on termination or maturity of interest rate swaps (1,196,417) — — 2,092 (427) Unrealized gains (losses) on interest rate swaps 1,380,946 (141,067) 772,262 258,236 170,327 Subtotal 130,118 (224,154) 692,515 193,521 107,371 Net gains (losses) on disposal of investments and other 12,002 16,223 (65,786) 9,363 198,888 Net gains (losses) on other derivatives and financial instruments (45,168) (357,808) 476,868 209,647 169,316 Net unrealized gains (losses) on instruments measured at fair value through earnings 90,817 3,984 104,191 51,109 121,255 Loan loss (provision) reversal 6,134 (494) 139,620 (1,497) 21,993 Business divestiture-related gains (losses) (14,009) 1,527 (249,563) — — Subtotal 49,776 (336,568) 405,330 268,622 511,452 Total realized and unrealized gains (losses) 179,894 (560,722) 1,097,845 462,143 618,823 Other income (loss) 16,221 1,675 13,468 13,107 3,714 General and administrative expenses Compensation and management fee 27,859 32,013 31,518 24,628 29,196 Other general and administrative expenses 16,023 21,513 16,387 18,345 15,391 Total general and administrative expenses 43,882 53,526 47,905 42,973 44,587 Income (loss) before income taxes 514,767 (289,714) 1,750,813 865,140 1,025,267 Income taxes (6,767) 5,134 (321) (13,495) 9,719 Net income (loss) 521,534 (294,848) 1,751,134 878,635 1,015,548 Net income (loss) attributable to noncontrolling interests 2,290 794 321 1,419 (126) Net income (loss) attributable to Annaly 519,244 (295,642) 1,750,813 877,216 1,015,674 Dividends on preferred stock 26,883 26,883 26,883 35,509 35,509 Net income (loss) available (related) to common stockholders $ 492,361 $ (322,525) $ 1,723,930 $ 841,707 $ 980,165 Net income (loss) per share available (related) to common stockholders Basic $ 0.34 $ (0.23) $ 1.23 $ 0.60 $ 0.70 Diluted $ 0.34 $ (0.23) $ 1.23 $ 0.60 $ 0.70 Weighted average number of common shares outstanding Basic 1,445,315,914 1,410,239,138 1,399,210,925 1,399,809,722 1,404,202,695 Diluted 1,446,357,867 1,410,239,138 1,400,000,727 1,400,228,777 1,404,368,300 Other comprehensive income (loss) Net income (loss) $ 521,534 $ (294,848) $ 1,751,134 $ 878,635 $ 1,015,548 Unrealized gains (losses) on available-for-sale securities (113,451) (191,541) (1,428,927) (207,393) (140,671) Reclassification adjustment for net (gains) losses included in net income (loss) (28,186) (30,415) 56,823 (7,328) (112,347) Other comprehensive income (loss) (141,637) (221,956) (1,372,104) (214,721) (253,018) Comprehensive income (loss) 379,897 (516,804) 379,030 663,914 762,530 Comprehensive income (loss) attributable to noncontrolling interests 2,290 794 321 1,419 (126) Comprehensive income (loss) attributable to Annaly 377,607 (517,598) 378,709 662,495 762,656 Dividends on preferred stock 26,883 26,883 26,883 35,509 35,509 Comprehensive income (loss) attributable to common stockholders $ 350,724 $ (544,481) $ 351,826 $ 626,986 $ 727,147 ______________
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 22 Non-GAAP Reconciliations To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company provides non-GAAP financial measures. These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP. While intended to offer a fuller understanding of the Company’s results and operations, non-GAAP financial measures also have limitations. For example, the Company may calculate its non-GAAP metrics, such as Earnings available for distribution, or the PAA, differently than its peers making comparative analysis difficult. Additionally, in the case of non-GAAP measures that exclude the PAA, the amount of amortization expense excluding the PAA is not necessarily representative of the amount of future periodic amortization nor is it indicative of the term over which the Company will amortize the remaining unamortized premium. Changes to actual and estimated prepayments will impact the timing and amount of premium amortization and, as such, both GAAP and non-GAAP results. These non-GAAP measures provide additional detail to enhance investor understanding of the Company’s period-over-period operating performance and business trends, as well as for assessing the Company’s performance versus that of industry peers. Additional information pertaining to these non-GAAP financial measures and reconciliations to their most directly comparable GAAP results are provided on the following pages. A reconciliation of GAAP net income (loss) to non-GAAP Earnings available for distribution for the quarters ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, is provided on page 9 of this financial summary. Commencing with the Company’s financial results for the quarter ended June 30, 2021 and for subsequent reporting periods, the Company has relabeled “Core Earnings (excluding PAA)” as “Earnings Available for Distribution." Earnings Available for Distribution, which is a non-GAAP financial measure intended to supplement the Company’s financial results computed in accordance with U.S. generally accepted accounting principles, replaces the Company’s prior presentation of Core Earnings (excluding PAA). In addition, Core Earnings (excluding PAA) results from prior reporting periods have been relabeled Earnings Available for Distribution. In line with evolving industry practices, the Company believes the term Earnings Available for Distribution more accurately reflects the principal purpose of the measure than the term Core Earnings (excluding PAA) and serves as a useful indicator for investors in evaluating the Company’s performance and its ability to pay dividends. The definition of Earnings Available for Distribution is identical to the definition of Core Earning (excluding PAA) from prior reporting periods. As such, Earnings Available for Distribution is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) realized amortization of MSR, (d) other income (loss) (excluding depreciation expense related to commercial real estate and amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items) and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items) and excludes (g) the premium amortization adjustment representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands 23 Non-GAAP Reconciliations (continued) For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Economic leverage ratio reconciliation Repurchase agreements $55,475,420 $60,221,067 $61,202,477 $64,825,239 $64,633,447 Other secured financing 729,555 909,655 922,605 917,876 861,373 Debt issued by securitization vehicles 3,935,410 3,315,087 3,044,725 5,652,982 6,027,576 Participations issued 641,006 315,810 180,527 39,198 — Mortgages payable — — — 426,256 507,934 Debt included in liabilities of disposal group held for sale 113,362 2,306,633 3,260,788 — — Total GAAP debt $60,894,753 $67,068,252 $68,611,122 $71,861,551 $72,030,330 Less non-recourse debt: Credit facilities (1) ($729,555) ($909,655) ($922,605) ($887,455) ($828,530) Debt issued by securitization vehicles (3,935,410) (3,315,087) (3,044,725) (5,652,982) (6,027,576) Participations issued (641,006) (315,810) (180,527) (39,198) — Mortgages payable — — — (426,256) (507,934) Non-recourse debt included in liabilities of disposal group held for sale (113,362) (2,035,982) (2,968,620) — — Total recourse debt $55,475,420 $60,491,718 $61,494,645 $64,855,660 $64,666,290 Plus / (Less): Cost basis of TBA and CMBX derivatives $24,202,686 $18,107,549 $23,538,792 $20,780,913 $21,571,095 Payable for unsettled trades 571,540 154,405 1,070,080 884,069 1,176,001 Receivable for unsettled trades (42,482) (14,336) (144,918) (15,912) (54,200) Economic debt * $80,207,164 $78,739,336 $85,958,599 $86,504,730 $87,359,186 Total equity $13,717,867 $13,639,176 $14,067,595 $14,021,796 $14,194,672 Economic leverage ratio * 5.8x 5.8x 6.1x 6.2x 6.2x ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands 24 Non-GAAP Reconciliations (continued) For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Economic capital ratio reconciliation Total assets $76,662,433 $82,376,305 $85,369,589 $88,455,103 $89,192,411 Less: Gross unrealized gains on TBA derivatives (1) (1,776) (31,943) (17,404) (96,109) (38,656) Debt issued by securitization vehicles (2) (3,935,410) (4,925,196) (5,587,281) (5,652,982) (6,027,576) Plus: Implied market value of TBA derivatives 23,622,635 17,691,150 22,793,892 20,373,197 21,089,555 Total economic assets * $96,347,882 $95,110,316 $102,558,796 $103,079,209 $104,215,734 Total equity $13,717,867 $13,639,176 $14,067,595 $14,021,796 $14,194,672 Economic capital ratio *(3) 14.2% 14.3% 13.7% 13.6% 13.6% Premium Amortization Reconciliation Premium amortization expense $233,429 $320,108 ($11,891) $239,118 $248,718 Less: PAA cost (benefit) 60,726 153,607 (214,570) 39,101 33,879 Premium amortization expense (excluding PAA) $172,703 $166,501 $202,679 $200,017 $214,839 Interest Income (excluding PAA) Reconciliation GAAP interest income $412,972 $383,906 $763,378 $527,344 $562,443 PAA cost (benefit) 60,726 153,607 (214,570) 39,101 33,879 Interest income (excluding PAA) * $473,698 $537,513 $548,808 $566,445 $596,322 Economic Interest Expense Reconciliation GAAP interest expense $50,438 $61,047 $75,973 $94,481 $115,126 Add: Net interest component of interest rate swaps 54,411 83,087 79,747 66,807 62,529 Economic interest expense * $104,849 $144,134 $155,720 $161,288 $177,655 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $473,698 $537,513 $548,808 $566,445 $596,322 Less: Economic interest expense * 104,849 144,134 155,720 161,288 177,655 Economic net interest income (excluding PAA) * $368,849 $393,379 $393,088 $405,157 $418,667 ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands 25 Non-GAAP Reconciliations (continued) For the quarters ended 9/30/2021 6/30/2021 3/31/2021 12/31/2020 9/30/2020 Economic Metrics (excluding PAA) Average interest earning assets $72,145,283 $77,916,766 $81,121,340 $80,973,433 $83,286,119 Interest income (excluding PAA) * $473,698 $537,513 $548,808 $566,445 $596,322 Average yield on interest earning assets (excluding PAA) * 2.63% 2.76% 2.71% 2.80% 2.86% Average interest bearing liabilities $62,614,042 $68,469,413 $72,002,031 $72,233,239 $74,901,128 Economic interest expense * $104,849 $144,134 $155,720 $161,288 $177,655 Average economic cost of interest bearing liabilities * 0.66% 0.83% 0.87% 0.87% 0.93% Economic net interest income (excluding PAA)* $368,849 $393,379 $393,088 $405,157 $418,667 Net interest spread (excluding PAA) * 1.97% 1.93% 1.84% 1.93% 1.93% Interest income (excluding PAA) * $473,698 $537,513 $548,808 $566,445 $596,322 TBA dollar roll income and CMBX coupon income 115,586 111,592 98,933 99,027 114,092 Economic interest expense * (104,849) (144,134) (155,720) (161,288) (177,655) Subtotal $484,435 $504,971 $492,021 $504,184 $532,759 Average interest earning assets $72,145,283 $77,916,766 $81,121,340 $80,973,433 $83,286,119 Average TBA contract and CMBX balances 22,739,226 18,761,062 21,865,969 20,744,672 20,429,935 Subtotal $94,884,509 $96,677,828 $102,987,309 $101,718,105 $103,716,054 Net interest margin (excluding PAA) * 2.04% 2.09% 1.91% 1.98% 2.05% ______________ * Represents a non-GAAP financial measure.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 26 Endnotes Page 3 (1) Net of dividends on preferred stock. (2) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued and mortgages payable divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements and other secured financing (excluding certain non-recourse credit facilities). Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, participations issued, and mortgages payable are non- recourse to the Company and are excluded from economic leverage. (3) GAAP capital ratio is computed as total equity divided by total assets. Economic capital ratio is computed as total equity divided by total economic assets. Total economic assets include the implied market value of TBA derivatives and are net of debt issued by securitization vehicles. (4) There were no unsettled commitments as of September 30, 2021. Excludes $123.8 million of unsettled commitments as of June 30, 2021. (5) Excludes $31.9 million and $33.7 million related to a limited partnership interest in an MSR fund included in Other assets in the Company’s Consolidated Statements of Financial Condition as of September 30, 2021 and June 30, 2021, respectively. (6) Net interest margin represents interest income less interest expense divided by average interest earning assets. Net interest margin (excluding PAA) represents the sum of the Company's interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average TBA contract and CMBX balances. (7) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (8) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps. Page 5 (1) Consists of common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit. (2) Utilizes an actual/360 factor. Page 5 (continued) (3) The average and period-end rates are net of reverse repurchase agreements. Without netting reverse repurchase agreements, the average rate and the period-end rate was unchanged for each period. (4) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding receiver swaptions) and futures relative to repurchase agreements, other secured financing and cost basis of TBA derivatives outstanding; excludes MSR and the effects of term financing, both of which serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration differences in duration between assets and liabilities. Page 6 (1) Includes GAAP interest expense and the net interest component of interest rate swaps. (2) Net of dividends on preferred stock. Page 7 (1) Includes dividend equivalents on share-based awards. Page 9 (1) Includes a loan loss (reversal)/provision of ($0.6) million, $0.6 million, ($5.3) million, ($1.0) million and $0.2 million on the Company’s unfunded loan commitments for the quarters ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, respectively, which is reported in Other income (loss) in the Company’s Consolidated Statement of Comprehensive Income (Loss). (2) Amount includes depreciation and amortization expense related to equity method investments. (3) The Company excludes non-EAD (income) loss allocated to equity method investments, which represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other income (loss). (4) The quarters ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020 include costs incurred in connection with securitizations of residential whole loans. (5) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on other derivatives. CMBX coupon income totaled $1.2 million, $1.4 million, $1.5 million $1.5 million and $1.5 million for the quarters ended September 30, 2021, June 30, 2021, March 31, 2021, December 31, 2020 and September 30, 2020, respectively. (6) MSR amortization represents the portion of changes in fair value that is attributable to the realization of estimated cash flows on the Company’s MSR portfolio and is reported as a component of Net unrealized gains (losses) on instruments measured at fair value.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 27 Endnotes (continued) Page 12 (1) Includes other income (loss), general and administrative expenses and income taxes. (2) Includes other income (loss) (excluding non-EAD items), MSR amortization (a component of Net unrealized gains (losses) on instruments measured at fair value through earnings), general and administrative expenses (excluding transaction related expenses) and income taxes (excluding non-EAD income tax). Page 13 (1) Includes Agency-backed multifamily securities with an estimated fair value of $2.3 billion ($0.6 billion of which have been transferred or pledged to securitization vehicles). (2) Includes fixed-rate collateralized mortgage obligations with an estimated fair value of $129.2 million. (3) Weighted by current face value. (4) Weighted by current notional value. Page 14 (1) Includes $86mm of legacy Pingora MSR holdings that were agreed to be sold during the quarter and are expected to settle in Q4 2021. (2) Included in Other assets in the Company’s Consolidated Statements of Financial Condition. (3) Weighted by estimated fair value. (4) The Company sells/buys protection on CMBX tranches referencing baskets of Conduit CMBS bonds with various ratings. Positive net notional indicates selling protection and being long the exposure to the underlying CMBS. CMBX positions are accounted for as derivatives with changes in fair value presented in Net gains (losses) on other derivatives. Page 16 (1) All Middle Market Lending positions are floating rate. (2) Excludes assets classified as held for sale. (3) Includes mezzanine loans. Page 17 (1) Current notional is presented net of receiver swaps. (2) As of September 30, 2021, 19%, 54% and 27% of the Company's interest rate swaps were linked to LIBOR, the Federal funds rate and the Secured Overnight Financing Rate, respectively. (3) The weighted average years to maturity of payer interest rate swaps is offset by the weighted average years to maturity of receiver interest rate swaps. As such, the net weighted average years to maturity for each maturity bucket may fall outside of the range listed. (4) 1% of the total repurchase agreements and other secured financing have a remaining maturity over one year. (5) Determined based on estimated weighted average lives of the underlying debt instruments. Page 18 (1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction with internally derived inputs. Actual results could differ materially from these estimates. (2) Scenarios include Residential Investment Securities, residential mortgage loans, MSR and derivative instruments. (3) Net asset value (“NAV”) represents book value of common equity. Page 20 (1) Derived from the audited consolidated financial statements at December 31, 2020. (2) 7.50% Series D Cumulative Redeemable Preferred Stock - Includes 0 shares authorized, issued and outstanding at September 30, 2021, June 30, 2021 and March 31, 2021. Includes 18,400,000 shares authorized and 0 shares issued and outstanding at December 31, 2020. Includes 18,400,000 shares authorized, issued and outstanding at September 30, 2020. 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 28,800,000 shares authorized, issued and outstanding. 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 17,000,000 shares authorized, issued and outstanding at September 30, 2021, June 30, 2021 and March 31, 2021. Includes 19,550,000 shares authorized and 17,000,000 shares issued and outstanding at December 31, 2020 and September 30, 2020. 6.75% Series I Preferred Stock - Includes 17,700,000 shares authorized, issued and outstanding at September 30, 2021, June 30, 2021 and March 31, 2021. Includes 18,400,000 shares authorized and 17,700,000 issued and outstanding at December 31, 2020 and September 30, 2020. (3) Includes 2,936,500,000 shares authorized at September 30, 2021, June 30, 2021 and March 31, 2021; 2,914,850,000 shares authorized at December 31, 2020 and September 30, 2020. Includes 1,449,935,017 shares issued and outstanding at September 30, 2021; 1,444,156,029 shares issued and outstanding at June 30, 2021; 1,398,502,906 shares issued and outstanding at March 31, 2021; 1,398,240,618 shares issued and outstanding at December 31, 2020; 1,402,928,317 shares issued and outstanding at September 30, 2020. Page 23 (1) Included in Other secured financing in the Company's Consolidated Statements of Financial Condition. Page 24 (1) Included in Derivative assets in the Company’s Consolidated Statements of Financial Condition. (2) Includes debt issued by securitization vehicles reported in Liabilities of disposal group held for sale in the Company's Consolidated Statements of Financial Condition. (3) Economic capital ratio is computed as total equity divided by total economic assets.