First Quarter 2022 Financial Summary April 27, 2022
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 First Quarter 2022 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; the sale of 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
Updates to Financial Disclosures Beginning with the quarter ended March 31, 2022, in light of the continued growth of its mortgage servicing rights portfolio, the Company enhanced its financial disclosures by separately reporting servicing income and servicing expense in its Consolidated Statements of Comprehensive Income (Loss). Servicing income and servicing expense were previously included within Other income (loss). As a result of this change, prior periods have been adjusted to conform to the current presentation. In addition, the Company consolidated certain line items in its Consolidated Statements of Comprehensive Income (Loss) in an effort to streamline and simplify its financial presentation. Amounts previously reported under Net interest component of interest rate swaps, Realized gains (losses) on termination or maturity of interest rate swaps, Unrealized gains (losses) on interest rate swaps and Net gains (losses) on other derivatives are combined into a single line item titled Net gains (losses) on derivatives. Similarly, amounts previously reported under Net gains (losses) on disposal of investments and other and Net unrealized gains (losses) on instruments measured at fair value through earnings are combined into a single line item titled Net gains (losses) on investments and other. As a result of these changes, prior periods have been adjusted to conform to the current presentation. 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) net servicing income less 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 were legally transferred in the first quarter 2022 and the Company intends to sell nearly all of the remaining assets that are not included in the Sale. 2 Important Notices (continued)
Portfolio Efficiency GAAP Key Statistics Income Statement Balance Sheet For the quarters ended 3/31/2022 12/31/2021 GAAP net income (loss) per average common share (1) $1.37 $0.27 Earnings available for distribution per average common share *(1) $0.28 $0.28 Annualized GAAP return (loss) on average equity 65.62% 12.44% Annualized EAD return on average equity* 14.01% 13.10% Book value per common share $6.77 $7.97 GAAP Leverage at period-end (2) 5.3x 4.7x Economic leverage at period-end *(2) 6.4x 5.7x GAAP capital ratio at period-end (3) 15.1% 17.2% Economic capital ratio at period-end *(3) 13.1% 14.4% Securities $60,727,637 $63,655,674 Loans, net 3,617,818 4,242,043 Mortgage servicing rights (4) 1,108,937 544,562 Interests in MSR (5) 85,653 69,316 Assets transferred or pledged to securitization vehicles 7,809,307 6,086,308 Assets of disposal group held for sale ** — 194,138 Total residential and commercial investments $73,349,352 $74,792,041 Net interest margin (6) 3.20% 1.97% Average yield on interest earning assets (7) 3.61% 2.31% Average GAAP cost of interest bearing liabilities (8) 0.48% 0.38% Net interest spread 3.13% 1.93% Net interest margin (excluding PAA) *(6) 2.04% 2.03% Average yield on interest earning assets (excluding PAA) *(7) 2.62% 2.63% Average economic cost of interest bearing liabilities *(8) 0.89% 0.75% Net interest spread (excluding PAA) * 1.73% 1.88% Operating expenses to earnings available for distribution * 10.63% 9.25% Annualized operating expenses as a % of average total assets 0.24% 0.21% Annualized operating expenses as a % of average total equity 1.48% 1.21% 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.
Portfolio- Related Data Unaudited, dollars in thousands 4 Portfolio Data For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Agency mortgage-backed securities $57,787,141 $60,525,605 $62,818,079 $66,468,519 $69,637,229 Residential credit risk transfer securities 845,809 936,228 787,235 827,328 930,983 Non-agency mortgage-backed securities 1,737,333 1,663,336 1,747,932 1,582,323 1,277,104 Commercial mortgage-backed securities 357,354 530,505 269,106 154,165 4,121 Total securities $60,727,637 $63,655,674 $65,622,352 $69,032,335 $71,849,437 Residential mortgage loans $1,650,151 $2,272,072 $1,686,268 $1,029,929 $528,868 Residential mortgage loan warehouse facility — 980 1,431 — — Corporate debt 1,967,667 1,968,991 1,890,709 2,066,709 2,074,475 Corporate debt, held for sale — — 2,113 466,370 — Total loans, net $3,617,818 $4,242,043 $3,580,521 $3,563,008 $2,603,343 Mortgage servicing rights $1,108,937 $544,562 $572,259 $202,616 $113,080 Interests in MSR $85,653 $69,316 $57,530 $49,035 $— Agency mortgage-backed securities transferred or pledged to securitization vehicles $544,991 $589,873 $597,923 $605,163 $598,118 Residential mortgage loans transferred or pledged to securitization vehicles 7,264,316 5,496,435 4,140,558 3,467,993 3,170,804 Assets transferred or pledged to securitization vehicles $7,809,307 $6,086,308 $4,738,481 $4,073,156 $3,768,922 Assets of disposal group held for sale ** $— $194,138 $238,042 $3,302,001 $4,400,723 Total investment portfolio $73,349,352 $74,792,041 $74,809,185 $80,222,151 $82,735,505 Total assets $76,185,134 $76,764,064 $76,662,433 $82,376,305 $85,369,589 Average TBA contract and CMBX balances $19,229,537 $21,159,120 $22,739,226 $18,761,062 $21,865,969 ______________ ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2.
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 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Repurchase agreements $52,626,503 $54,769,643 $55,475,420 $60,221,067 $61,202,477 Other secured financing 914,255 903,255 729,555 909,655 922,605 Debt issued by securitization vehicles 6,711,953 5,155,633 3,935,410 3,315,087 3,044,725 Participations issued 775,432 1,049,066 641,006 315,810 180,527 Total debt $61,028,143 $61,877,597 $60,781,391 $64,761,619 $65,350,334 Liabilities of disposal group held for sale ** $— $154,956 $159,508 $2,362,690 $3,319,414 Total liabilities $64,706,364 $63,568,739 $62,944,566 $68,737,129 $71,301,994 Cumulative redeemable preferred stock $1,536,569 $1,536,569 $1,536,569 $1,536,569 $1,536,569 Common equity(1) 9,890,673 11,633,257 12,161,233 12,080,546 12,519,238 Total Annaly stockholders' equity 11,427,242 13,169,826 13,697,802 13,617,115 14,055,807 Non-controlling interests 51,528 25,499 20,065 22,061 11,788 Total equity $11,478,770 $13,195,325 $13,717,867 $13,639,176 $14,067,595 Weighted average days to maturity of repurchase agreements 68 52 75 88 88 Weighted average rate on repurchase agreements, for the quarter(2)(3) 0.20% 0.16% 0.15% 0.18% 0.26% Weighted average rate on repurchase agreements, at period-end(3) 0.41% 0.17% 0.15% 0.16% 0.20% GAAP leverage at period-end 5.3x 4.7x 4.4x 4.7x 4.6x Economic leverage at period-end * 6.4x 5.7x 5.8x 5.8x 6.1x GAAP capital ratio at period-end 15.1% 17.2% 17.9% 16.6% 16.5% Economic capital ratio at period-end * 13.1% 14.4% 14.2% 14.3% 13.7% Book value per common share $6.77 $7.97 $8.39 $8.37 $8.95 Total common shares outstanding 1,461,012 1,459,736 1,449,935 1,444,156 1,398,503 Hedge ratio(4) 109% 95% 80% 75% 75% Weighted average pay rate on interest rate swaps, at period-end 0.70% 0.59% 0.60% 0.81% 0.80% Weighted average receive rate on interest rate swaps, at period-end 0.50% 0.08% 0.07% 0.34% 0.34% Weighted average net rate on interest rate swaps, at period-end 0.20% 0.51% 0.53% 0.47% 0.46%
______________ * 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 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Total interest income $655,850 $422,780 $412,972 $383,906 $763,378 Total interest expense 74,922 61,785 50,438 61,047 75,973 Net interest income $580,928 $360,995 $362,534 $322,859 $687,405 Total economic interest expense *(1) $137,463 $120,682 $104,849 $144,134 $155,720 Economic net interest income * $518,387 $302,098 $308,123 $239,772 $607,658 Total interest income (excluding PAA) * $476,334 $480,175 $473,698 $537,513 $548,808 Economic net interest income (excluding PAA) * $338,871 $359,493 $368,849 $393,379 $393,088 GAAP net income (loss) $2,023,894 $418,460 $521,534 ($294,848) $1,751,134 GAAP net income (loss) available (related) to common stockholders (2) $1,995,372 $388,598 $492,361 ($322,525) $1,723,930 GAAP net income (loss) per average common share (2) $1.37 $0.27 $0.34 ($0.23) $1.23 Earnings available for distribution * $430,631 $440,043 $437,471 $451,358 $439,519 Earnings available for distribution attributable to common stockholders *(2) $403,748 $413,160 $410,588 $424,475 $412,636 Earnings available for distribution per average common share *(2) $0.28 $0.28 $0.28 $0.30 $0.29 PAA cost (benefit) ($179,516) $57,395 $60,726 $153,607 ($214,570) Weighted average experienced CPR for the period 16.7% 21.4% 23.1% 26.4% 23.9% Weighted average projected long-term CPR at period-end 9.5% 12.7% 12.7% 12.9% 11.8% Summary Income Statement
For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Dividends declared per common share $0.22 $0.22 $0.22 $0.22 $0.22 Total common and preferred dividends declared (1) $349,080 $348,793 $346,651 $345,417 $335,229 Annualized GAAP return (loss) on average equity 65.62% 12.44% 15.25% (8.51%) 49.87% Annualized GAAP return (loss) on average equity per unit of GAAP leverage 12.38% 2.65% 3.47% (1.81%) 10.84% Net interest margin 3.20% 1.97% 2.01% 1.66% 3.39% Average yield on interest earning assets 3.61% 2.31% 2.29% 1.97% 3.76% Average GAAP cost of interest bearing liabilities 0.48% 0.38% 0.32% 0.35% 0.42% Net interest spread 3.13% 1.93% 1.97% 1.62% 3.34% Annualized EAD return on average equity * 14.01% 13.10% 12.81% 13.05% 12.53% Annualized EAD return on average equity per unit of economic leverage * 2.19% 2.30% 2.21% 2.25% 2.05% Net interest margin (excluding PAA) * 2.04% 2.03% 2.04% 2.09% 1.91% Average yield on interest earning assets (excluding PAA) * 2.62% 2.63% 2.63% 2.76% 2.71% Average economic cost of interest bearing liabilities * 0.89% 0.75% 0.66% 0.83% 0.87% Net interest spread (excluding PAA) * 1.73% 1.88% 1.97% 1.93% 1.84% 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
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 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Interest income: Agency Securities $522,951 $301,001 $299,898 $255,801 $627,654 Resi Credit Securities 22,122 21,450 20,774 19,477 16,980 Residential mortgage loans 73,488 60,486 45,801 38,963 37,109 Commercial investment portfolio 37,283 39,839 46,494 69,663 81,601 Reverse repurchase agreements 6 4 5 2 34 Total interest income $655,850 $422,780 $412,972 $383,906 $763,378 Economic interest expense: Repurchase agreements $26,879 $22,852 $22,397 $29,140 $42,585 Net interest component of interest rate swaps 62,541 58,897 54,411 83,087 79,747 Debt issued by securitization vehicles 34,625 24,774 18,740 23,216 26,276 Participations issued 5,852 7,157 2,578 1,739 597 Other 7,566 7,002 6,723 6,952 6,515 Total economic interest expense * $137,463 $120,682 $104,849 $144,134 $155,720 Economic net interest income * $518,387 $302,098 $308,123 $239,772 $607,658 PAA cost (benefit) (179,516) 57,395 60,726 153,607 (214,570) Economic net interest income (excluding PAA) * $338,871 $359,493 $368,849 $393,379 $393,088
EAD* Reconciliation 9 GAAP Net Income to Earnings Available for Distribution* Reconciliation For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 GAAP net income (loss) $2,023,894 $418,460 $521,534 ($294,848) $1,751,134 Net income (loss) attributable to noncontrolling interests 1,639 2,979 2,290 794 321 Net income (loss) attributable to Annaly 2,022,255 415,481 519,244 (295,642) 1,750,813 Adjustments to exclude reported realized and unrealized (gains) losses: Net (gains) losses on investments and other 159,804 40,473 (102,819) (20,207) (38,405) Net (gains) losses on derivatives (1) (1,704,569) (194,256) (139,361) 498,875 (1,249,130) Loan loss provision (reversal) (2) 812 1,931 (6,771) 1,078 (144,870) Business divestiture-related (gains) losses ** 354 16,514 14,009 (1,527) 249,563 Other adjustments: Depreciation expense related to commercial real estate and amortization of intangibles (3) 1,130 1,144 1,122 5,635 7,324 Non-EAD (income) loss allocated to equity method investments (4) (9,920) (2,345) (2,046) 3,141 (9,680) Transaction expenses and non-recurring items (5) 3,350 1,533 2,201 1,150 695 Income tax effect of non-EAD income (loss) items 27,091 8,380 (6,536) 7,147 4,334 TBA dollar roll income and CMBX coupon income (6) 129,492 119,657 115,586 111,592 98,933 MSR amortization (7) (19,652) (25,864) (17,884) (13,491) (15,488) Plus: Premium amortization adjustment cost (benefit) (179,516) 57,395 60,726 153,607 (214,570) Earnings available for distribution * 430,631 440,043 437,471 451,358 439,519 Dividends on preferred stock 26,883 26,883 26,883 26,883 26,883 Earnings available for distribution attributable to common stockholders * $403,748 $413,160 $410,588 $424,475 $412,636 ______________ * 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
Book Value Rollforward Net Interest Margin Unaudited 10 Quarter-Over-Quarter Changes in Key Metrics For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Book value per common share, beginning of period $7.97 $8.39 $8.37 $8.95 $8.92 Net income (loss) available (related) to common stockholders 1.37 0.27 0.34 (0.23) 1.23 Other comprehensive income (loss) attributable to common stockholders (2.35) (0.47) (0.10) (0.15) (0.98) Common dividends declared (0.22) (0.22) (0.22) (0.22) (0.22) Issuance / buyback of common stock / redemption of preferred stock — — — 0.02 — Book value per common share, end of period $6.77 $7.97 $8.39 $8.37 $8.95 Prior quarter net interest margin 1.97% 2.01% 1.66% 3.39% 2.14% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.01%) (0.08%) 0.01% (0.08%) (0.09%) Net amortization of premiums 1.31% 0.10% 0.31% (1.71%) 1.24% GAAP interest expense (0.07%) (0.06%) 0.03% 0.06% 0.10% Current quarter net interest margin 3.20% 1.97% 2.01% 1.66% 3.39% Prior quarter net interest spread 1.93% 1.97% 1.62% 3.34% 2.10% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.01%) (0.08%) 0.01% (0.08%) (0.09%) Net amortization of premiums 1.31% 0.10% 0.31% (1.71%) 1.24% GAAP interest expense (0.10%) (0.06%) 0.03% 0.07% 0.09% Current quarter net interest spread 3.13% 1.93% 1.97% 1.62% 3.34% Net Interest Spread
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 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Prior quarter net interest margin (excluding PAA) * 2.03% 2.04% 2.09% 1.91% 1.98% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (including average TBA dollar roll and CMBX balances) 0.04% (0.01%) (0.16%) 0.00% (0.09%) Net amortization of premiums (excluding PAA) 0.00% 0.05% (0.07%) 0.09% 0.00% TBA dollar roll income and CMBX coupon income 0.06% 0.02% 0.03% 0.08% (0.01%) Interest expense and net interest component of interest rate swaps (0.09%) (0.07%) 0.15% 0.01% 0.03% Current quarter net interest margin (excluding PAA) * 2.04% 2.03% 2.04% 2.09% 1.91% Prior quarter net interest spread (excluding PAA) * 1.88% 1.97% 1.93% 1.84% 1.93% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.02%) (0.08%) 0.01% (0.08%) (0.09%) Net amortization of premiums (excluding PAA) 0.01% 0.08% (0.14%) 0.13% (0.01%) Interest expense and net interest component of interest rate swaps (0.14%) (0.09%) 0.17% 0.04% 0.01% Current quarter net interest spread (excluding PAA) * 1.73% 1.88% 1.97% 1.93% 1.84% Net Interest Spread (excluding PAA)*
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 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Prior quarter annualized GAAP return (loss) on average equity 12.44% 15.25% (8.51%) 49.87% 24.91% Quarter-over-quarter changes in contribution: Coupon income 1.52% 0.15% (1.24%) (1.01%) (0.35%) Net amortization of premiums and accretion of discounts 7.17% 0.34% 2.23% (9.64%) 7.14% GAAP interest expense (0.59%) (0.36%) 0.29% 0.40% 0.52% Net servicing income 0.20% 0.36% 0.21% 0.03% (0.18%) Net gains (losses) on investments and other (3.98%) (4.21%) 2.42% (0.51%) (0.62%) Net gains (losses) on derivatives 49.22% 1.54% 19.29% (50.11%) 21.87% Business divestiture-related (losses) gains ** 0.48% (0.08%) (0.45%) 7.15% (7.11%) Loan loss provision (0.01%) (0.19%) 0.19% (3.99%) 4.02% Other(1) (0.83%) (0.36%) 0.82% (0.70%) (0.33%) Current quarter annualized GAAP return (loss) on average equity 65.62% 12.44% 15.25% (8.51%) 49.87% Prior quarter annualized EAD return on average equity * 13.10% 12.81% 13.05% 12.53% 13.03% Quarter-over-quarter changes in contribution: Coupon income 1.52% 0.15% (1.24%) (1.01%) (0.35%) Net amortization of premiums (excluding PAA) (0.32%) 0.27% (0.43%) 0.90% (0.08%) Interest expense and net interest component of interest rate swaps (0.88%) (0.52%) 1.10% 0.27% 0.14% Net servicing income 0.20% 0.36% 0.21% 0.03% (0.18%) TBA dollar roll income and CMBX coupon income 0.65% 0.18% 0.16% 0.41% 0.01% Other(2) (0.26%) (0.15%) (0.04%) (0.08%) (0.04%) Current quarter annualized EAD return on average equity * 14.01% 13.10% 12.81% 13.05% 12.53%
______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 13 Residential & Other Investments Overview as of March 31, 2022 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) $2,941,181 5.2% 3.01% 101.0% 99.9% 17.7% $2,937,695 20 years 1,678,352 2.9% 3.11% 103.8% 100.3% 16.7% 1,682,641 >=30 years (2) 52,381,230 91.9% 3.35% 105.5% 101.0% 16.5% 52,886,792 Total/Weighted Avg. $57,000,763 100.0% 3.33% 105.2% 100.9% 16.5% $57,507,128 TBA Contracts Type Notional Value % (4) Weighted Avg. Coupon Implied Cost Basis Implied Market Value 15-year $513,000 2.7% 2.39% $511,828 $505,537 30-year 18,372,000 97.3% 2.78% 18,084,335 17,779,171 Total/Weighted Avg. $18,885,000 100.0% 2.77% $18,596,163 $18,284,708 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 $284,431 89.6% 2.16% 102.6% 104.6% 17.5% $297,556 25 - 40 months 1,491 0.5% 3.00% 102.6% 100.1% 57.3% 1,493 41 - 60 months 31,365 9.9% 3.01% 102.7% 100.3% 35.4% 31,452 Total/Weighted Avg. $317,287 100.0% 2.25% 102.6% 104.2% 19.6% $330,501 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 $651,919 9.2% 3.36% 17.5% 10.5% 19.5% $68,744 Inverse interest-only 1,132,614 16.0% 5.67% 28.3% 15.4% 23.4% 174,270 Multifamily interest-only 5,294,605 74.8% 0.70% 5.1% 4.7% —% 251,489 Total/Weighted Avg. $7,079,138 100.0% 1.74% 10.0% 7.0% 22.0% $494,503
______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 14 Residential & Other Investments Overview as of March 31, 2022 (continued) Mortgage Servicing Rights Type Unpaid Principal Balance Servicing Fee Weighted Avg. Note Rate Valuation Discount Rate CPR Estimated Fair Value MSR held directly $80,017,631 0.26% 2.9% 137.4% 7.5% 6.2% $1,099,836 MSR of consolidated VIE 879,169 0.25% 3.5% 103.5% 9.0% 9.2% 9,101 Interests in MSR 6,655,952 0.25% 2.9% 128.7% 7.1% 7.3% 85,653 MSR of limited partnership interest (1) 3,127,350 38,881 Total/Weighted Avg. $90,680,102 0.26% 2.9% 136.4% 7.5% 6.3% $1,233,471 Residential Credit Portfolio Sector Current Face / Notional Value % (2) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Estimated Fair Value Residential credit risk transfer $848,990 7.4% 3.89% 100.7% 99.6% $845,809 Alt-A 81,711 0.6% 3.46% 79.3% 79.0% 64,578 Prime 299,044 2.1% 3.91% 98.2% 93.0% 249,812 Subprime 158,423 1.3% 2.20% 90.5% 91.2% 144,525 NPL/RPL 1,097,310 9.3% 3.10% 99.8% 98.0% 1,075,008 Prime jumbo 1,391,118 1.8% 4.28% 99.3% 93.0% 203,410 Residential mortgage loans 9,097,860 77.5% 4.02% 101.5% 98.0% 8,914,467 Total/Weighted Avg. $12,974,456 100.0% 3.90% $11,497,609 Other Credit Products Type Net Notional Range of Ratings Net Weighted Avg Coupon Implied Market Value CMBX (3) $410,000 AAA to AA 1.0% $407,115 Type Current Face / Notional Value Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Estimated Fair Value Multifamily CRT $9,000 4.17% 98.9% 96.5% $8,688 CLO $354,046 1.54% 100.0% 98.5% $348,666
______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 15 Residential Credit Securities Detail as of March 31, 2022 Product Estimated Fair Value Payment Structure Investment Characteristics Senior Subordinate Coupon Credit Enhancement 60+ Delinquencies 3M VPR Credit Risk Transfer $845,809 $— $845,809 3.89% 2.64% 2.32% 26.05% Alt-A 64,578 12,293 52,285 3.46% 8.10% 10.63% 25.48% Prime 249,812 42,059 207,753 3.91% 9.21% 2.80% 16.59% Subprime 144,525 80,769 63,756 2.20% 22.00% 11.94% 8.22% Re-Performing Loan Securitizations 641,352 246,056 395,296 3.58% 25.87% 26.79% 10.68% Non-Performing Loan Securitizations 433,656 415,207 18,449 2.38% 30.64% 71.40% 10.22% Prime Jumbo 203,410 8,419 194,991 4.28% 2.98% 1.79% 7.48% Total $2,583,142 $804,803 $1,778,339 3.48% 14.97% 20.60% 16.87% Product Bond Coupon Estimated Fair ValueARM Fixed Floater Interest Only Credit Risk Transfer $— $— $845,808 $1 $845,809 Alt-A 4,500 51,418 8,660 — 64,578 Prime 27,991 216,921 4,678 222 249,812 Subprime 2,989 60,005 81,379 152 144,525 Re-Performing Loan Securitizations — 641,352 — — 641,352 Non-Performing Loan Securitizations — 433,656 — — 433,656 Prime Jumbo — 154,113 40,878 8,419 203,410 Total $35,480 $1,557,465 $981,403 $8,794 $2,583,142
Unaudited, dollars in thousands 16 Middle Market Lending Overview as of March 31, 2022 Industry Dispersion Industry Total (1) Computer Programming, Data Processing & Other Computer Related Services $464,921 Management & Public Relations Services 229,097 Industrial Inorganic Chemicals 155,728 Miscellaneous Industrial & Commercial 96,789 Miscellaneous Health & Allied Services, not elsewhere classified 96,104 Public Warehousing & Storage 95,037 Electronic Components & Accessories 92,166 Surgical, Medical & Dental Instruments & Supplies 80,391 Drugs 67,244 Research, Development & Testing Services 62,689 Engineering, Architectural & Surveying 50,023 Offices & Clinics of Doctors of Medicine 49,910 Medical & Dental Laboratories 48,603 Insurance Agents, Brokers & Service 43,360 Telephone Communications 42,651 Electrical Work 42,611 Miscellaneous Equipment Rental & Leasing 32,367 Home Health Care Services 28,600 Metal Forgings & Stampings 27,514 Legal Services 26,146 Petroleum & Petroleum Products 20,705 Sanitary Services 20,410 Grocery Stores 19,646 Coating, Engraving & Allied Services 17,742 Chemicals & Allied Products 14,626 Mailing, Reproduction, Commercial Art & Photography & Stenographic 12,431 Machinery, Equipment & Supplies 10,323 Offices & Clinics of Other Health Practitioners 10,068 Schools & Educational Services, not elsewhere classified 9,765 Total $1,967,667 Size Dispersion Position Size Amount Percentage $0 - $20 million $151,360 7.7% $20 - $40 million 420,911 21.4% $40 - $60 million 445,432 22.6% Greater than $60 million 949,964 48.3% Total $1,967,667 100.0% Tenor Dispersion Remaining Term Amount Percentage One year or less $— —% One to three years 296,471 15.1% Three to five years 977,128 49.6% Greater than five years 694,068 35.3% Total $1,967,667 100.0% Lien Position Amount Percentage First lien loans $1,471,546 74.8% Second lien loans (2) 496,121 25.2% Total $1,967,667 100.0% ______________ Detailed endnotes are included within the Appendix at the end of this presentation.
______________ Detailed endnotes are included within the Appendix at the end of this presentation. 17 Unaudited, dollars in thousands Hedging and Liabilities as of March 31, 2022 Principal Balance Weighted Average Rate Days to Maturity(5)At Period End For the Quarter Repurchase agreements $ 52,626,503 0.41 % 0.20 % 68 Other secured financing 914,255 3.37 % 3.34 % 1,374 Debt issued by securitization vehicles 7,000,487 2.47 % 2.27 % 11,766 Participations issued 791,614 3.72 % 2.59 % 11,131 Total indebtedness $ 61,332,859 Maturity Current Notional (1)(2) Weighted Avg. Pay Rate Weighted Avg. Receive Rate Weighted Avg. Years to Maturity(3) 0 to 3 years $ 29,179,850 0.36 % 0.53 % 0.75 > 3 to 6 years 4,343,000 0.83 % 0.32 % 3.83 > 6 to 10 years 11,042,400 1.54 % 0.47 % 9.01 Greater than 10 years 1,915,000 3.45 % 0.34 % 16.90 Total / Weighted Avg. $ 46,480,250 0.70 % 0.50 % 3.66 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 2.00 % 3M LIBOR 9.40 16.50 Long Receive $ 1,000,000 1.49 % 3M LIBOR 11.45 17.49 Type Long Contracts Short Contracts Net Positions Weighted Avg. Years to Maturity U.S. Treasury Futures - 2 year $ — $ (7,477,200) $ (7,477,200) 1.98 U.S. Treasury Futures - 5 year $ — $ (5,240,900) $ (5,240,900) 4.40 U.S. Treasury Futures - 10 year & Greater $ — $ (15,028,000) $ (15,028,000) 6.94 Total / Weighted Avg. $ — $ (27,746,100) $ (27,746,100) 5.12 Maturity Principal Balance Weighted Avg. Rate At Period End Within 30 days $ 27,427,939 0.31 % 30 to 59 days 6,123,697 0.38 % 60 to 89 days 10,337,224 0.53 % 90 to 119 days 421,684 0.32 % Over 120 days(4) 9,230,214 0.91 % Total / Weighted Avg. $ 53,540,758 0.46 % Interest Rate Swaps Interest Rate Swaptions Futures Positions Repurchase Agreements and Other Secured Financing Total Indebtedness
______________ 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 March 31, 2022 and December 31, 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 March 31, 2022 As of December 31, 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) 0.3% 1.7% (0.5%) (2.6%) (50) 0.3% 1.8% (0.2%) (1.0%) (25) 0.2% 1.2% —% (0.1%) 25 (0.3%) (1.8%) (0.2%) (0.9%) 50 (0.6%) (4.1%) (0.4%) (2.5%) 75 (1.0%) (6.8%) (0.9%) (5.0%) MBS Spread Sensitivity (1) MBS Spread Shock (bps) As of March 31, 2022 As of December 31, 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) 1.9% 12.3% 1.7% 9.6% (15) 1.1% 7.4% 1.0% 5.7% (5) 0.4% 2.4% 0.3% 1.9% 5 (0.4%) (2.4%) (0.3%) (1.9%) 15 (1.1%) (7.3%) (1.0%) (5.6%) 25 (1.8%) (12.0%) (1.6%) (9.4%)
Appendix
Dollars in thousands, except per share data 20 Consolidated Statements of Financial Condition 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 (unaudited) (unaudited) (unaudited) (unaudited) Assets Cash and cash equivalents $ 955,840 $ 1,342,090 $ 1,046,300 $ 1,380,456 $ 1,122,793 Securities 60,727,637 63,655,674 65,622,352 69,032,335 71,849,437 Loans, net 3,617,818 4,242,043 3,580,521 3,563,008 2,603,343 Mortgage servicing rights 1,108,937 544,562 572,259 202,616 113,080 Interests in MSR 85,653 69,316 57,530 49,035 — Assets transferred or pledged to securitization vehicles 7,809,307 6,086,308 4,738,481 4,073,156 3,768,922 Assets of disposal group held for sale — 194,138 238,042 3,302,001 4,400,723 Derivative assets 964,075 170,370 331,395 181,889 891,474 Receivable for unsettled trades 407,225 2,656 42,482 14,336 144,918 Principal and interest receivable 246,739 234,983 234,810 250,210 259,655 Goodwill and intangible assets, net 23,110 24,241 25,371 26,502 37,337 Other assets 238,793 197,683 172,890 300,761 177,907 Total assets $ 76,185,134 $ 76,764,064 $ 76,662,433 $ 82,376,305 $ 85,369,589 Liabilities and stockholders’ equity Liabilities Repurchase agreements $ 52,626,503 $ 54,769,643 $ 55,475,420 $ 60,221,067 $ 61,202,477 Other secured financing 914,255 903,255 729,555 909,655 922,605 Debt issued by securitization vehicles 6,711,953 5,155,633 3,935,410 3,315,087 3,044,725 Participations issued 775,432 1,049,066 641,006 315,810 180,527 Liabilities of disposal group held for sale — 154,956 159,508 2,362,690 3,319,414 Derivative liabilities 826,972 881,537 912,134 900,259 939,622 Payable for unsettled trades 1,992,568 147,908 571,540 154,405 1,070,080 Interest payable 80,870 91,176 109,586 173,721 100,949 Dividends payable 321,423 321,142 318,986 317,714 307,671 Other liabilities 456,388 94,423 91,421 66,721 213,924 Total liabilities 64,706,364 63,568,739 62,944,566 68,737,129 71,301,994 Stockholders’ equity Preferred stock, par value $0.01 per share (2) 1,536,569 1,536,569 1,536,569 1,536,569 1,536,569 Common stock, par value $0.01 per share (3) 14,610 14,597 14,499 14,442 13,985 Additional paid-in capital 20,321,952 20,313,832 20,228,366 20,178,692 19,754,826 Accumulated other comprehensive income (loss) (2,465,482) 958,410 1,638,638 1,780,275 2,002,231 Accumulated deficit (7,980,407) (9,653,582) (9,720,270) (9,892,863) (9,251,804) Total stockholders’ equity 11,427,242 13,169,826 13,697,802 13,617,115 14,055,807 Noncontrolling interests 51,528 25,499 20,065 22,061 11,788 Total equity 11,478,770 13,195,325 13,717,867 13,639,176 14,067,595 Total liabilities and equity $ 76,185,134 $ 76,764,064 $ 76,662,433 $ 82,376,305 $ 85,369,589 ______________ Detailed endnotes are included within the Appendix at the end of this presentation. (1)
Unaudited, dollars in thousands, except per share data 21 Consolidated Statements of Comprehensive Income (Loss) For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Net interest income Interest income $ 655,850 $ 422,780 $ 412,972 $ 383,906 $ 763,378 Interest expense 74,922 61,785 50,438 61,047 75,973 Net interest income 580,928 360,995 362,534 322,859 687,405 Net servicing income Servicing and related income 34,715 31,322 17,948 10,519 9,229 Servicing and related expense 3,757 4,290 3,012 2,603 2,297 Net servicing income 30,958 27,032 14,936 7,916 6,932 Other income (loss) Net gains (losses) on investments and other (159,804) (40,473) 102,819 20,207 38,405 Net gains (losses) on derivatives 1,642,028 135,359 84,950 (581,962) 1,169,383 Loan loss (provision) reversal (608) (194) 6,134 (494) 139,620 Business divestiture-related gains (losses) (354) (16,514) (14,009) 1,527 (249,563) Other, net 3,058 (415) 1,285 (6,241) 6,536 Total other income (loss) 1,484,320 77,763 181,179 (566,963) 1,104,381 General and administrative expenses Compensation and management fee 33,002 27,061 27,859 32,013 31,518 Other general and administrative expenses 12,762 13,640 16,023 21,513 16,387 Total general and administrative expenses 45,764 40,701 43,882 53,526 47,905 Income (loss) before income taxes 2,050,442 425,089 514,767 (289,714) 1,750,813 Income taxes 26,548 6,629 (6,767) 5,134 (321) Net income (loss) 2,023,894 418,460 521,534 (294,848) 1,751,134 Net income (loss) attributable to noncontrolling interests 1,639 2,979 2,290 794 321 Net income (loss) attributable to Annaly 2,022,255 415,481 519,244 (295,642) 1,750,813 Dividends on preferred stock 26,883 26,883 26,883 26,883 26,883 Net income (loss) available (related) to common stockholders $ 1,995,372 $ 388,598 $ 492,361 $ (322,525) $ 1,723,930 Net income (loss) per share available (related) to common stockholders Basic $ 1.37 $ 0.27 $ 0.34 $ (0.23) $ 1.23 Diluted $ 1.36 $ 0.27 $ 0.34 $ (0.23) $ 1.23 Weighted average number of common shares outstanding Basic 1,461,363,637 1,454,138,154 1,445,315,914 1,410,239,138 1,399,210,925 Diluted 1,462,451,965 1,455,411,503 1,446,357,867 1,410,239,138 1,400,000,727 Other comprehensive income (loss) Net income (loss) $ 2,023,894 $ 418,460 $ 521,534 $ (294,848) $ 1,751,134 Unrealized gains (losses) on available-for-sale securities (3,568,679) (685,699) (113,451) (191,541) (1,428,927) Reclassification adjustment for net (gains) losses included in net income (loss) 144,787 5,471 (28,186) (30,415) 56,823 Other comprehensive income (loss) (3,423,892) (680,228) (141,637) (221,956) (1,372,104) Comprehensive income (loss) (1,399,998) (261,768) 379,897 (516,804) 379,030 Comprehensive income (loss) attributable to noncontrolling interests 1,639 2,979 2,290 794 321 Comprehensive income (loss) attributable to Annaly (1,401,637) (264,747) 377,607 (517,598) 378,709 Dividends on preferred stock 26,883 26,883 26,883 26,883 26,883 Comprehensive income (loss) attributable to common stockholders $ (1,428,520) $ (291,630) $ 350,724 $ (544,481) $ 351,826
Unaudited, dollars in thousands 22 Income Statement Gains (Losses) Detail For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Net gains (losses) on disposal of investments and other ($144,224) ($25,144) $12,002 $16,223 ($65,786) Net unrealized gains (losses) on instruments measured at fair value through earnings (15,580) (15,329) 90,817 3,984 104,191 Net gains (losses) on investments and other ($159,804) ($40,473) $102,819 $20,207 $38,405 Net interest component of interest rate swaps ($62,541) ($58,897) ($54,411) ($83,087) ($79,747) Realized gains (losses) on termination or maturity of interest rate swaps — (39,932) (1,196,417) — — Unrealized gains (losses) on interest rate swaps 1,323,439 186,345 1,380,946 (141,067) 772,262 Net gains (losses) on other derivatives 381,130 47,843 (45,168) (357,808) 476,868 Net gains (losses) on derivatives $1,642,028 $135,359 $84,950 ($581,962) $1,169,383 Other Income Statement Details
23 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 March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, 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) net servicing income less 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.
Unaudited, dollars in thousands 24 Non-GAAP Reconciliations (continued) For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Economic leverage ratio reconciliation Repurchase agreements $52,626,503 $54,769,643 $55,475,420 $60,221,067 $61,202,477 Other secured financing 914,255 903,255 729,555 909,655 922,605 Debt issued by securitization vehicles 6,711,953 5,155,633 3,935,410 3,315,087 3,044,725 Participations issued 775,432 1,049,066 641,006 315,810 180,527 Debt included in liabilities of disposal group held for sale — 112,144 113,362 2,306,633 3,260,788 Total GAAP debt $61,028,143 $61,989,741 $60,894,753 $67,068,252 $68,611,122 Less non-recourse debt: Credit facilities (1) ($914,255) ($903,255) ($729,555) ($909,655) ($922,605) Debt issued by securitization vehicles (6,711,953) (5,155,633) (3,935,410) (3,315,087) (3,044,725) Participations issued (775,432) (1,049,066) (641,006) (315,810) (180,527) Non-recourse debt included in liabilities of disposal group held for sale — (112,144) (113,362) (2,035,982) (2,968,620) Total recourse debt $52,626,503 $54,769,643 $55,475,420 $60,491,718 $61,494,645 Plus / (Less): Cost basis of TBA and CMBX derivatives $19,006,949 $20,690,768 $24,202,686 $18,107,549 $23,538,792 Payable for unsettled trades 1,992,568 147,908 571,540 154,405 1,070,080 Receivable for unsettled trades (407,225) (2,656) (42,482) (14,336) (144,918) Economic debt * $73,218,795 $75,605,663 $80,207,164 $78,739,336 $85,958,599 Total equity $11,478,770 $13,195,325 $13,717,867 $13,639,176 $14,067,595 Economic leverage ratio * 6.4x 5.7x 5.8x 5.8x 6.1x ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation.
Unaudited, dollars in thousands 25 Non-GAAP Reconciliations (continued) For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Economic capital ratio reconciliation Total GAAP assets $76,185,134 $76,764,064 $76,662,433 $82,376,305 $85,369,589 Less: Gross unrealized gains on TBA derivatives (1) (24,757) (52,693) (1,776) (31,943) (17,404) Debt issued by securitization vehicles (2) (6,711,953) (5,155,633) (3,935,410) (4,925,196) (5,587,281) Plus: Implied market value of TBA derivatives 18,284,708 20,338,633 23,622,635 17,691,150 22,793,892 Total economic assets * $87,733,132 $91,894,371 $96,347,882 $95,110,316 $102,558,796 Total equity $11,478,770 $13,195,325 $13,717,867 $13,639,176 $14,067,595 Economic capital ratio *(3) 13.1% 14.4% 14.2% 14.3% 13.7% Premium Amortization Reconciliation Premium amortization expense ($25,353) $219,172 $233,429 $320,108 ($11,891) Less: PAA cost (benefit) (179,516) 57,395 60,726 153,607 (214,570) Premium amortization expense (excluding PAA) $154,163 $161,777 $172,703 $166,501 $202,679 Interest Income (excluding PAA) Reconciliation GAAP interest income $655,850 $422,780 $412,972 $383,906 $763,378 PAA cost (benefit) (179,516) 57,395 60,726 153,607 (214,570) Interest income (excluding PAA) * $476,334 $480,175 $473,698 $537,513 $548,808 Economic Interest Expense Reconciliation GAAP interest expense $74,922 $61,785 $50,438 $61,047 $75,973 Add: Net interest component of interest rate swaps 62,541 58,897 54,411 83,087 79,747 Economic interest expense * $137,463 $120,682 $104,849 $144,134 $155,720 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $476,334 $480,175 $473,698 $537,513 $548,808 Less: Economic interest expense * 137,463 120,682 104,849 144,134 155,720 Economic net interest income (excluding PAA) * $338,871 $359,493 $368,849 $393,379 $393,088 ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation.
Unaudited, dollars in thousands 26 Non-GAAP Reconciliations (continued) For the quarters ended 3/31/2022 12/31/2021 9/30/2021 6/30/2021 3/31/2021 Economic Metrics (excluding PAA) Average interest earning assets $72,590,876 $73,134,966 $72,145,283 $77,916,766 $81,121,340 Interest income (excluding PAA) * $476,334 $480,175 $473,698 $537,513 $548,808 Average yield on interest earning assets (excluding PAA) * 2.62% 2.63% 2.63% 2.76% 2.71% Average interest bearing liabilities $61,865,292 $63,342,740 $62,614,042 $68,469,413 $72,002,031 Economic interest expense * $137,463 $120,682 $104,849 $144,134 $155,720 Average economic cost of interest bearing liabilities * 0.89% 0.75% 0.66% 0.83% 0.87% Economic net interest income (excluding PAA)* $338,871 $359,493 $368,849 $393,379 $393,088 Net interest spread (excluding PAA) * 1.73% 1.88% 1.97% 1.93% 1.84% Interest income (excluding PAA) * $476,334 $480,175 $473,698 $537,513 $548,808 TBA dollar roll income and CMBX coupon income 129,492 119,657 115,586 111,592 98,933 Economic interest expense * (137,463) (120,682) (104,849) (144,134) (155,720) Subtotal $468,363 $479,150 $484,435 $504,971 $492,021 Average interest earning assets $72,590,876 $73,134,966 $72,145,283 $77,916,766 $81,121,340 Average TBA contract and CMBX balances 19,229,537 21,159,120 22,739,226 18,761,062 21,865,969 Subtotal $91,820,413 $94,294,086 $94,884,509 $96,677,828 $102,987,309 Net interest margin (excluding PAA) * 2.04% 2.03% 2.04% 2.09% 1.91% ______________ * Represents a non-GAAP financial measure.
27 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 March 31, 2022 and December 31, 2021. (5) Excludes $38.9 million and $31.0 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 March 31, 2022 and December 31, 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) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled ($62.5) million, ($58.9) million, ($54.4) million, ($83.1) million and ($79.7) million for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively. (2) Includes $0.2 million, $1.7 million, ($0.6) million, $0.6 million and ($5.3) million of loss provision (reversal) on the Company’s unfunded loan commitments for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021, June 30, 2021 and March 31, 2021, respectively, which is reported in Other, net in the Company’s Consolidated Statement of Comprehensive Income (Loss). (3) Includes depreciation and amortization expense related to equity method investments. (4) 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 reported in Other, net in the Company’s Consolidated Statement of Comprehensive Income (Loss). (5) All quarters presented include costs incurred in connection with securitizations of residential whole loans. (6) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives. CMBX coupon income totaled $1.1 million, $1.1 million, $1.2 million, $1.4 million and $1.5 million for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively. (7) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period.
28 Endnotes (continued) Page 12 (1) Includes other, net, general and administrative expenses and income taxes. (2) Includes other, net (excluding non-EAD items), MSR amortization (a component of net gains (losses) on investments and other), 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 $2.0 billion ($0.5 billion of which have been transferred or pledged to securitization vehicles). (2) Includes fixed-rate collateralized mortgage obligations with an estimated fair value of $110.3 million. (3) Weighted by current face value. (4) Weighted by current notional value. Page 14 (1) Included in Other assets in the Company’s Consolidated Statements of Financial Condition. (2) Weighted by estimated fair value. (3) 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 derivatives. Page 16 (1) All Middle Market Lending positions are floating rate. (2) Includes mezzanine loans. Page 17 (1) Current notional is presented net of receiver swaps. (2) As of March 31, 2022, 17%, 46% and 37% 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) 2% 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, 2021. (2) 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. 6.75% Series I Preferred Stock - Includes 17,700,000 shares authorized, issued and outstanding. (3) Includes 2,936,500,000 shares authorized. Includes 1,461,012,252 shares issued and outstanding at March 31, 2022; Includes 1,459,736,258 shares issued and outstanding at December 31, 2021; 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. Page 24 (1) Included in Other secured financing in the Company's Consolidated Statements of Financial Condition. Page 25 (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.