Second Quarter 2022 Financial Summary July 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 Second 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; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets; 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, beginning with the quarter ended March 31, 2022, 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. 2 Important Notices (continued)
Portfolio Efficiency GAAP Key Statistics Income Statement Balance Sheet For the quarters ended 6/30/2022 3/31/2022 GAAP net income (loss) per average common share (1) $0.55 $1.37 Earnings available for distribution per average common share *(1) $0.30 $0.28 Annualized GAAP return (loss) on average equity 30.60% 65.62% Annualized EAD return on average equity* 17.49% 14.01% Book value per common share $5.90 $6.77 GAAP Leverage at period-end (2) 5.4x 5.3x Economic leverage at period-end *(2) 6.6x 6.4x GAAP capital ratio at period-end (3) 15.1% 15.1% Economic capital ratio at period-end *(3) 13.0% 13.1% Securities $59,042,734 $60,727,637 Loans, net 1,487,133 3,617,818 Mortgage servicing rights (4) 1,421,420 1,108,937 Interests in MSR (5) 83,622 85,653 Assets transferred or pledged to securitization vehicles 8,877,247 7,809,307 Assets of disposal group held for sale (6) 97,414 — Total investment portfolio $71,009,570 $73,349,352 Net interest margin (7) 2.64% 3.20% Average yield on interest earning assets (8) 3.58% 3.61% Average GAAP cost of interest bearing liabilities (9) 1.12% 0.48% Net interest spread 2.46% 3.13% Net interest margin (excluding PAA) *(7) 2.20% 2.04% Average yield on interest earning assets (excluding PAA) *(8) 2.87% 2.62% Average economic cost of interest bearing liabilities *(9) 1.11% 0.89% Net interest spread (excluding PAA) * 1.76% 1.73% Operating expenses to earnings available for distribution * 7.34% 10.63% Annualized operating expenses as a % of average total assets 0.19% 0.24% Annualized operating expenses as a % of average total equity 1.28% 1.48% Unaudited, dollars in thousands except per share amounts 3 Financial Snapshot Non-GAAP Key Statistics ______________ * Represents a non-GAAP financial measure. 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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Agency mortgage-backed securities $55,593,336 $57,787,141 $60,525,605 $62,818,079 $66,468,519 Residential credit risk transfer securities 965,714 845,809 936,228 787,235 827,328 Non-agency mortgage-backed securities 2,026,658 1,737,333 1,663,336 1,747,932 1,582,323 Commercial mortgage-backed securities 457,026 357,354 530,505 269,106 154,165 Total securities $59,042,734 $60,727,637 $63,655,674 $65,622,352 $69,032,335 Residential mortgage loans $1,486,811 $1,650,151 $2,272,072 $1,686,268 $1,029,929 Residential mortgage loan warehouse facility 322 — 980 1,431 — Corporate debt — 1,967,667 1,968,991 1,890,709 2,066,709 Corporate debt, held for sale — — — 2,113 466,370 Total loans, net $1,487,133 $3,617,818 $4,242,043 $3,580,521 $3,563,008 Mortgage servicing rights $1,421,420 $1,108,937 $544,562 $572,259 $202,616 Interests in MSR $83,622 $85,653 $69,316 $57,530 $49,035 Agency mortgage-backed securities transferred or pledged to securitization vehicles $458,268 $544,991 $589,873 $597,923 $605,163 Residential mortgage loans transferred or pledged to securitization vehicles 8,418,979 7,264,316 5,496,435 4,140,558 3,467,993 Assets transferred or pledged to securitization vehicles $8,877,247 $7,809,307 $6,086,308 $4,738,481 $4,073,156 Assets of disposal group held for sale (1) $97,414 $— $194,138 $238,042 $3,302,001 Total investment portfolio $71,009,570 $73,349,352 $74,792,041 $74,809,185 $80,222,151 Total assets $73,637,249 $76,185,134 $76,764,064 $76,662,433 $82,376,305 Average TBA contract and CMBX balances $20,566,553 $19,229,537 $21,159,120 $22,739,226 $18,761,062 ______________ Detailed endnotes are included within the Appendix at the end of this presentation.
Financing Data Key Capital and Hedging 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 5 Financing and Capital Data For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Repurchase agreements $51,364,097 $52,626,503 $54,769,643 $55,475,420 $60,221,067 Other secured financing — 914,255 903,255 729,555 909,655 Debt issued by securitization vehicles 7,502,483 6,711,953 5,155,633 3,935,410 3,315,087 Participations issued 696,944 775,432 1,049,066 641,006 315,810 Total debt $59,563,524 $61,028,143 $61,877,597 $60,781,391 $64,761,619 Liabilities of disposal group held for sale (1) $3,608 $— $154,956 $159,508 $2,362,690 Total liabilities $62,547,349 $64,706,364 $63,568,739 $62,944,566 $68,737,129 Cumulative redeemable preferred stock $1,536,569 $1,536,569 $1,536,569 $1,536,569 $1,536,569 Common equity (2) 9,490,182 9,890,673 11,633,257 12,161,233 12,080,546 Total Annaly stockholders' equity 11,026,751 11,427,242 13,169,826 13,697,802 13,617,115 Non-controlling interests 63,149 51,528 25,499 20,065 22,061 Total equity $11,089,900 $11,478,770 $13,195,325 $13,717,867 $13,639,176 Weighted average days to maturity of repurchase agreements 47 68 52 75 88 Weighted average rate on repurchase agreements, for the quarter (3)(4) 0.81% 0.20% 0.16% 0.15% 0.18% Weighted average rate on repurchase agreements, at period-end (4) 1.60% 0.41% 0.17% 0.15% 0.16% GAAP leverage at period-end 5.4x 5.3x 4.7x 4.4x 4.7x Economic leverage at period-end * 6.6x 6.4x 5.7x 5.8x 5.8x GAAP capital ratio at period-end 15.1% 15.1% 17.2% 17.9% 16.6% Economic capital ratio at period-end * 13.0% 13.1% 14.4% 14.2% 14.3% Book value per common share $5.90 $6.77 $7.97 $8.39 $8.37 Total common shares outstanding 1,609,215 1,461,012 1,459,736 1,449,935 1,444,156 Hedge ratio (5) 107% 109% 95% 80% 75% Weighted average pay rate on interest rate swaps, at period-end 1.16% 0.70% 0.59% 0.60% 0.81% Weighted average receive rate on interest rate swaps, at period-end 1.65% 0.50% 0.08% 0.07% 0.34% Weighted average net rate on interest rate swaps, at period-end (0.49%) 0.20% 0.51% 0.53% 0.47%
______________ * 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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Total interest income $645,615 $655,850 $422,780 $412,972 $383,906 Total interest expense 170,475 74,922 61,785 50,438 61,047 Net interest income $475,140 $580,928 $360,995 $362,534 $322,859 Total economic interest expense *(1) $169,483 $137,463 $120,682 $104,849 $144,134 Economic net interest income * $476,132 $518,387 $302,098 $308,123 $239,772 Total interest income (excluding PAA) * $518,094 $476,334 $480,175 $473,698 $537,513 Economic net interest income (excluding PAA) * $348,611 $338,871 $359,493 $368,849 $393,379 GAAP net income (loss) $863,317 $2,023,894 $418,460 $521,534 ($294,848) GAAP net income (loss) available (related) to common stockholders (2) $839,813 $1,995,372 $388,598 $492,361 ($322,525) GAAP net income (loss) per average common share (2) $0.55 $1.37 $0.27 $0.34 ($0.23) Earnings available for distribution * $490,802 $430,631 $440,043 $437,471 $451,358 Earnings available for distribution attributable to common stockholders *(2) $463,919 $403,748 $413,160 $410,588 $424,475 Earnings available for distribution per average common share *(2) $0.30 $0.28 $0.28 $0.28 $0.30 PAA cost (benefit) ($127,521) ($179,516) $57,395 $60,726 $153,607 Weighted average experienced CPR for the period 14.9% 16.7% 21.4% 23.1% 26.4% Weighted average projected long-term CPR at period-end 7.7% 9.5% 12.7% 12.7% 12.9% Summary Income Statement
For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Dividends declared per common share $0.22 $0.22 $0.22 $0.22 $0.22 Total common and preferred dividends declared (1) $382,350 $349,080 $348,793 $346,651 $345,417 Annualized GAAP return (loss) on average equity 30.60% 65.62% 12.44% 15.25% (8.51%) Annualized GAAP return (loss) on average equity per unit of GAAP leverage 5.67% 12.38% 2.65% 3.47% (1.81%) Net interest margin 2.64% 3.20% 1.97% 2.01% 1.66% Average yield on interest earning assets 3.58% 3.61% 2.31% 2.29% 1.97% Average GAAP cost of interest bearing liabilities 1.12% 0.48% 0.38% 0.32% 0.35% Net interest spread 2.46% 3.13% 1.93% 1.97% 1.62% Annualized EAD return on average equity * 17.49% 14.01% 13.10% 12.81% 13.05% Annualized EAD return on average equity per unit of economic leverage * 2.65% 2.19% 2.30% 2.21% 2.25% Net interest margin (excluding PAA) * 2.20% 2.04% 2.03% 2.04% 2.09% Average yield on interest earning assets (excluding PAA) * 2.87% 2.62% 2.63% 2.63% 2.76% Average economic cost of interest bearing liabilities * 1.11% 0.89% 0.75% 0.66% 0.83% Net interest spread (excluding PAA) * 1.76% 1.73% 1.88% 1.97% 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
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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Interest income: Agency Securities $497,135 $522,951 $301,001 $299,898 $255,801 Resi Credit Securities 30,037 22,122 21,450 20,774 19,477 Residential mortgage loans 91,648 73,488 60,486 45,801 38,963 Commercial investment portfolio 26,575 37,283 39,839 46,494 69,663 Reverse repurchase agreements 220 6 4 5 2 Total interest income $645,615 $655,850 $422,780 $412,972 $383,906 Economic interest expense: Repurchase agreements $105,608 $26,879 $22,852 $22,397 $29,140 Net interest component of interest rate swaps (992) 62,541 58,897 54,411 83,087 Debt issued by securitization vehicles 50,303 34,625 24,774 18,740 23,216 Participations issued 9,379 5,852 7,157 2,578 1,739 Other 5,185 7,566 7,002 6,723 6,952 Total economic interest expense * $169,483 $137,463 $120,682 $104,849 $144,134 Economic net interest income * $476,132 $518,387 $302,098 $308,123 $239,772 PAA cost (benefit) (127,521) (179,516) 57,395 60,726 153,607 Economic net interest income (excluding PAA) * $348,611 $338,871 $359,493 $368,849 $393,379
EAD* Reconciliation 9 GAAP Net Income to Earnings Available for Distribution* Reconciliation For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 GAAP net income (loss) $863,317 $2,023,894 $418,460 $521,534 ($294,848) Net income (loss) attributable to noncontrolling interests (3,379) 1,639 2,979 2,290 794 Net income (loss) attributable to Annaly 866,696 2,022,255 415,481 519,244 (295,642) Adjustments to exclude reported realized and unrealized (gains) losses: Net (gains) losses on investments and other 615,216 159,804 40,473 (102,819) (20,207) Net (gains) losses on derivatives (1) (1,014,651) (1,704,569) (194,256) (139,361) 498,875 Loan loss provision (reversal) (2) (29,380) 812 1,931 (6,771) 1,078 Business divestiture-related (gains) losses (3) 23,955 354 16,514 14,009 (1,527) Other adjustments: Depreciation expense related to commercial real estate and amortization of intangibles (4) 1,302 1,130 1,144 1,122 5,635 Non-EAD (income) loss allocated to equity method investments (5) (3,270) (9,920) (2,345) (2,046) 3,141 Transaction expenses and non-recurring items (6) 1,751 3,350 1,533 2,201 1,150 Income tax effect of non-EAD income (loss) items 28,841 27,091 8,380 (6,536) 7,147 TBA dollar roll income and CMBX coupon income (7) 161,673 129,492 119,657 115,586 111,592 MSR amortization (8) (33,810) (19,652) (25,864) (17,884) (13,491) Plus: Premium amortization adjustment cost (benefit) (127,521) (179,516) 57,395 60,726 153,607 Earnings available for distribution * 490,802 430,631 440,043 437,471 451,358 Dividends on preferred stock 26,883 26,883 26,883 26,883 26,883 Earnings available for distribution attributable to common stockholders * $463,919 $403,748 $413,160 $410,588 $424,475 ______________ * Represents a non-GAAP financial measure. 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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Book value per common share, beginning of period $6.77 $7.97 $8.39 $8.37 $8.95 Net income (loss) available (related) to common stockholders 0.55 1.37 0.27 0.34 (0.23) Other comprehensive income (loss) attributable to common stockholders (1.21) (2.35) (0.47) (0.10) (0.15) Common dividends declared (0.22) (0.22) (0.22) (0.22) (0.22) Issuance / buyback of common stock / redemption of preferred stock 0.01 — — — 0.02 Book value per common share, end of period $5.90 $6.77 $7.97 $8.39 $8.37 Prior quarter net interest margin 3.20% 1.97% 2.01% 1.66% 3.39% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.22% (0.01%) (0.08%) 0.01% (0.08%) Net amortization of premiums (0.25%) 1.31% 0.10% 0.31% (1.71%) GAAP interest expense (0.53%) (0.07%) (0.06%) 0.03% 0.06% Current quarter net interest margin 2.64% 3.20% 1.97% 2.01% 1.66% Prior quarter net interest spread 3.13% 1.93% 1.97% 1.62% 3.34% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.22% (0.01%) (0.08%) 0.01% (0.08%) Net amortization of premiums (0.25%) 1.31% 0.10% 0.31% (1.71%) GAAP interest expense (0.64%) (0.10%) (0.06%) 0.03% 0.07% Current quarter net interest spread 2.46% 3.13% 1.93% 1.97% 1.62% 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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Prior quarter net interest margin (excluding PAA) * 2.04% 2.03% 2.04% 2.09% 1.91% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (including average TBA dollar roll and CMBX balances) 0.13% 0.04% (0.01%) (0.16%) 0.00% Net amortization of premiums (excluding PAA) 0.03% 0.00% 0.05% (0.07%) 0.09% TBA dollar roll income and CMBX coupon income 0.13% 0.06% 0.02% 0.03% 0.08% Interest expense and net interest component of interest rate swaps (0.13%) (0.09%) (0.07%) 0.15% 0.01% Current quarter net interest margin (excluding PAA) * 2.20% 2.04% 2.03% 2.04% 2.09% Prior quarter net interest spread (excluding PAA) * 1.73% 1.88% 1.97% 1.93% 1.84% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.22% (0.02%) (0.08%) 0.01% (0.08%) Net amortization of premiums (excluding PAA) 0.03% 0.01% 0.08% (0.14%) 0.13% Interest expense and net interest component of interest rate swaps (0.22%) (0.14%) (0.09%) 0.17% 0.04% Current quarter net interest spread (excluding PAA) * 1.76% 1.73% 1.88% 1.97% 1.93% Net Interest Spread (excluding PAA)*
Annualized GAAP Return (Loss) on Average Equity Annualized EAD Return on Average Equity* ______________ * Represents a non-GAAP financial measure. 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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Prior quarter annualized GAAP return (loss) on average equity 65.62% 12.44% 15.25% (8.51%) 49.87% Quarter-over-quarter changes in contribution: Coupon income 3.20% 1.52% 0.15% (1.24%) (1.01%) Net amortization of premiums and accretion of discounts (1.58%) 7.17% 0.34% 2.23% (9.64%) GAAP interest expense (3.61%) (0.59%) (0.36%) 0.29% 0.40% Net servicing income 0.76% 0.20% 0.36% 0.21% 0.03% Net gains (losses) on investments and other (16.63%) (3.98%) (4.21%) 2.42% (0.51%) Net gains (losses) on derivatives (17.24%) 49.22% 1.54% 19.29% (50.11%) Business divestiture-related (losses) gains (1) (0.84%) 0.48% (0.08%) (0.45%) 7.15% Loan loss provision 0.97% (0.01%) (0.19%) 0.19% (3.99%) Other (2) (0.05%) (0.83%) (0.36%) 0.82% (0.70%) Current quarter annualized GAAP return (loss) on average equity 30.60% 65.62% 12.44% 15.25% (8.51%) Prior quarter annualized EAD return on average equity * 14.01% 13.10% 12.81% 13.05% 12.53% Quarter-over-quarter changes in contribution: Coupon income 3.26% 1.52% 0.15% (1.24%) (1.01%) Net amortization of premiums (excluding PAA) (0.29%) (0.32%) 0.27% (0.43%) 0.90% Interest expense and net interest component of interest rate swaps (1.57%) (0.88%) (0.52%) 1.10% 0.27% Net servicing income 0.76% 0.20% 0.36% 0.21% 0.03% TBA dollar roll income and CMBX coupon income 1.55% 0.65% 0.18% 0.16% 0.41% Other (3) (0.23%) (0.26%) (0.15%) (0.04%) (0.08%) Current quarter annualized EAD return on average equity * 17.49% 14.01% 13.10% 12.81% 13.05%
______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 13 Residential & Other Investments Overview as of June 30, 2022 Agency Fixed-Rate Securities (Pools) Original Weighted Avg. Years to Maturity Current Face Value % (4) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value <=15 years (1) $2,008,543 3.5% 3.33% 101.4% 98.8% 16.2% $1,984,496 20 years (2) 1,815,909 3.2% 3.18% 103.5% 96.9% 12.7% 1,759,886 >=30 years (3) 53,129,144 93.3% 3.43% 104.7% 96.9% 14.8% 51,504,308 Total/Weighted Avg. $56,953,596 100.0% 3.42% 104.6% 97.0% 14.8% $55,248,690 TBA Contracts Type Notional Value % (5) Weighted Avg. Coupon Implied Cost Basis Implied Market Value 15-year $513,000 2.6% 3.00% $503,272 $501,778 30-year 18,942,000 97.4% 4.27% 18,810,170 18,781,201 Total/Weighted Avg. $19,455,000 100.0% 4.24% $19,313,442 $19,282,979 Agency Adjustable-Rate Securities Weighted Avg. Months to Reset Current Face Value % (4) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value 0 - 24 months $262,246 89.8% 2.39% 104.7% 103.8% 24.5% $272,168 25 - 40 months 17,552 6.0% 3.01% 105.3% 100.6% 24.1% 17,662 41 - 60 months 12,408 4.2% 3.00% 105.1% 100.4% 35.2% 12,458 Total/Weighted Avg. $292,206 100.0% 2.45% 104.7% 103.5% 24.9% $302,288 Agency Interest-Only Collateralized Mortgage-Backed Obligations Type Current Notional Value % (5) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value Interest-only $603,054 6.8% 3.35% 17.8% 11.3% 16.3% $68,403 Inverse interest-only 1,059,513 11.9% 4.60% 29.2% 14.4% 20.7% 152,086 Multifamily interest-only 7,250,959 81.3% 0.68% 4.2% 3.9% —% 280,137 Total/Weighted Avg. $8,913,526 100.0% 1.33% 8.1% 5.6% 19.1% $500,626
______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 14 Residential & Other Investments Overview as of June 30, 2022 (continued) Mortgage Servicing Rights Type Unpaid Principal Balance Servicing Fee Weighted Avg. Note Rate Valuation Discount Rate Projected CPR Estimated Fair Value MSR held directly $99,504,712 0.26% 2.9% 142.8% 8.2% 5.4% $1,421,379 MSR of consolidated VIE 4,464 0.25% 4.1% 92.1% 9.0% 15.6% 41 Interests in MSR 6,501,645 0.25% 2.9% 128.6% 8.0% 6.8% 83,622 MSR of limited partnership interest (1) 2,990,231 39,927 Total/Weighted Avg. $109,001,052 0.26% 2.9% 142.0% 8.2% 5.5% $1,544,969 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 $1,010,209 7.5% 5.35% 100.4% 95.6% $965,714 Alt-A 138,473 0.9% 3.91% 85.7% 83.5% 115,578 Prime 1,227,193 2.1% 4.29% 96.8% 87.9% 269,717 Subprime 187,969 1.3% 3.57% 90.6% 89.0% 167,319 NPL/RPL 1,300,169 9.7% 3.74% 99.6% 96.1% 1,249,903 Prime jumbo 2,193,098 1.7% 4.64% 96.8% 86.8% 224,141 Residential mortgage loans 10,516,244 76.8% 4.18% 100.3% 94.2% 9,905,790 Total/Weighted Avg. $16,573,355 100.0% 4.22% $12,898,162 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% $397,024 Type Current Face / Notional Value Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Estimated Fair Value Multifamily CRT $19,000 5.15% 99.5% 93.3% $17,725 CLO $455,523 2.78% 99.6% 96.4% $439,301
______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 15 Residential Credit Securities Detail as of June 30, 2022 Product Estimated Fair Value Payment Structure Investment Characteristics Senior Subordinate Coupon Credit Enhancement 60+ Delinquencies 3M VPR (1) Credit Risk Transfer $965,714 $— $965,714 5.35% 1.99% 1.18% 18.95% Alt-A 115,578 65,972 49,606 3.91% 12.99% 5.45% 24.05% Prime 269,717 44,757 224,960 4.29% 8.67% 2.21% 12.08% Subprime 167,319 71,918 95,401 3.57% 19.10% 9.12% 15.25% Re-Performing Loan Securitizations 740,630 350,667 389,963 3.94% 26.44% 23.47% 10.70% Non-Performing Loan Securitizations 509,273 486,405 22,868 3.47% 33.98% 76.20% 15.22% Prime Jumbo 224,141 14,859 209,282 4.64% 2.99% 2.12% 8.88% Total (2) $2,992,372 $1,034,578 $1,957,794 4.37% 15.37% 19.80% 14.33% Product Bond Coupon Estimated Fair ValueARM Fixed Floater Interest Only Credit Risk Transfer $— $— $965,714 $— $965,714 Alt-A 4,275 103,711 7,592 — 115,578 Prime 25,939 232,205 4,537 7,036 269,717 Subprime — 95,453 71,725 141 167,319 Re-Performing Loan Securitizations — 740,630 — — 740,630 Non-Performing Loan Securitizations — 509,273 — — 509,273 Prime Jumbo — 169,678 39,604 14,859 224,141 Total $30,214 $1,850,950 $1,089,172 $22,036 $2,992,372
______________ Detailed endnotes are included within the Appendix at the end of this presentation. 16 Unaudited, dollars in thousands Hedging and Liabilities as of June 30, 2022 Principal Balance Weighted Average Rate Days to Maturity(5)At Period End For the Quarter Repurchase agreements $ 51,364,097 1.60 % 0.81 % 47 Other secured financing — — % 3.38 % — Debt issued by securitization vehicles 8,286,317 2.79 % 2.69 % 11,989 Participations issued 717,110 4.95 % 4.39 % 11,202 Total indebtedness $ 60,367,524 Maturity Current Notional (1)(2) Weighted Avg. Pay Rate Weighted Avg. Receive Rate Weighted Avg. Years to Maturity(3) 0 to 3 years $ 20,807,400 0.79 % 1.62 % 1.16 > 3 to 6 years 1,420,400 1.62 % 1.80 % 4.26 > 6 to 10 years 11,583,200 1.72 % 1.71 % 9.32 Greater than 10 years 1,411,000 3.88 % 1.39 % 19.11 Total / Weighted Avg. $ 35,222,000 1.16 % 1.65 % 4.69 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 9.15 13.46 Long Receive $ 1,000,000 1.49 % 3M LIBOR 11.20 14.46 Type Long Contracts Short Contracts Net Positions Weighted Avg. Years to Maturity U.S. Treasury Futures - 2 year $ — $ (10,264,200) $ (10,264,200) 1.97 U.S. Treasury Futures - 5 year $ — $ (5,903,400) $ (5,903,400) 4.40 U.S. Treasury Futures - 10 year & Greater $ — $ (19,832,600) $ (19,832,600) 7.31 Total / Weighted Avg. $ — $ (36,000,200) $ (36,000,200) 5.31 Maturity Principal Balance Weighted Avg. Rate At Period End Within 30 days $ 40,213,941 1.59 % 30 to 59 days 1,590,972 1.33 % 60 to 89 days 1,765,571 1.55 % 90 to 119 days 1,770,550 1.43 % Over 120 days(4) 6,023,063 1.84 % Total / Weighted Avg. $ 51,364,097 1.60 % 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 17 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 June 30, 2022 and March 31, 2022 ▪ 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 June 30, 2022 As of March 31, 2022 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% 0.5% 0.3% 1.7% (50) 0.2% 1.0% 0.3% 1.8% (25) 0.1% 0.8% 0.2% 1.2% 25 (0.2%) (1.4%) (0.3%) (1.8%) 50 (0.5%) (3.2%) (0.6%) (4.1%) 75 (0.8%) (5.4%) (1.0%) (6.8%) MBS Spread Sensitivity (1) MBS Spread Shock (bps) As of June 30, 2022 As of March 31, 2022 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% 12.9% 1.9% 12.3% (15) 1.1% 7.7% 1.1% 7.4% (5) 0.4% 2.6% 0.4% 2.4% 5 (0.4%) (2.5%) (0.4%) (2.4%) 15 (1.1%) (7.6%) (1.1%) (7.3%) 25 (1.8%) (12.6%) (1.8%) (12.0%)
Appendix
Dollars in thousands, except per share data 19 Consolidated Statements of Financial Condition 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 (unaudited) (unaudited) (unaudited) (unaudited) Assets Cash and cash equivalents $ 853,932 $ 955,840 $ 1,342,090 $ 1,046,300 $ 1,380,456 Securities 59,042,734 60,727,637 63,655,674 65,622,352 69,032,335 Loans, net 1,487,133 3,617,818 4,242,043 3,580,521 3,563,008 Mortgage servicing rights 1,421,420 1,108,937 544,562 572,259 202,616 Interests in MSR 83,622 85,653 69,316 57,530 49,035 Assets transferred or pledged to securitization vehicles 8,877,247 7,809,307 6,086,308 4,738,481 4,073,156 Assets of disposal group held for sale 97,414 — 194,138 238,042 3,302,001 Derivative assets 748,432 964,075 170,370 331,395 181,889 Receivable for unsettled trades 434,227 407,225 2,656 42,482 14,336 Principal and interest receivable 300,028 246,739 234,983 234,810 250,210 Goodwill and intangible assets, net 18,195 23,110 24,241 25,371 26,502 Other assets 272,865 238,793 197,683 172,890 300,761 Total assets $ 73,637,249 $ 76,185,134 $ 76,764,064 $ 76,662,433 $ 82,376,305 Liabilities and stockholders’ equity Liabilities Repurchase agreements $ 51,364,097 $ 52,626,503 $ 54,769,643 $ 55,475,420 $ 60,221,067 Other secured financing — 914,255 903,255 729,555 909,655 Debt issued by securitization vehicles 7,502,483 6,711,953 5,155,633 3,935,410 3,315,087 Participations issued 696,944 775,432 1,049,066 641,006 315,810 Liabilities of disposal group held for sale 3,608 — 154,956 159,508 2,362,690 Derivative liabilities 379,708 826,972 881,537 912,134 900,259 Payable for unsettled trades 1,995,960 1,992,568 147,908 571,540 154,405 Interest payable 91,962 80,870 91,176 109,586 173,721 Dividends payable 354,027 321,423 321,142 318,986 317,714 Other liabilities 158,560 456,388 94,423 91,421 66,721 Total liabilities 62,547,349 64,706,364 63,568,739 62,944,566 68,737,129 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) 16,092 14,610 14,597 14,499 14,442 Additional paid-in capital 21,281,077 20,321,952 20,313,832 20,228,366 20,178,692 Accumulated other comprehensive income (loss) (4,310,926) (2,465,482) 958,410 1,638,638 1,780,275 Accumulated deficit (7,496,061) (7,980,407) (9,653,582) (9,720,270) (9,892,863) Total stockholders’ equity 11,026,751 11,427,242 13,169,826 13,697,802 13,617,115 Noncontrolling interests 63,149 51,528 25,499 20,065 22,061 Total equity 11,089,900 11,478,770 13,195,325 13,717,867 13,639,176 Total liabilities and equity $ 73,637,249 $ 76,185,134 $ 76,764,064 $ 76,662,433 $ 82,376,305 ______________ Detailed endnotes are included within the Appendix at the end of this presentation. (1)
Unaudited, dollars in thousands, except per share data 20 Consolidated Statements of Comprehensive Income (Loss) For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Net interest income Interest income $ 645,615 $ 655,850 $ 422,780 $ 412,972 $ 383,906 Interest expense 170,475 74,922 61,785 50,438 61,047 Net interest income 475,140 580,928 360,995 362,534 322,859 Net servicing income Servicing and related income 55,685 34,715 31,322 17,948 10,519 Servicing and related expense 5,949 3,757 4,290 3,012 2,603 Net servicing income 49,736 30,958 27,032 14,936 7,916 Other income (loss) Net gains (losses) on investments and other (615,216) (159,804) (40,473) 102,819 20,207 Net gains (losses) on derivatives 1,015,643 1,642,028 135,359 84,950 (581,962) Loan loss (provision) reversal 26,913 (608) (194) 6,134 (494) Business divestiture-related gains (losses) (23,955) (354) (16,514) (14,009) 1,527 Other, net (5,486) 3,058 (415) 1,285 (6,241) Total other income (loss) 397,899 1,484,320 77,763 181,179 (566,963) General and administrative expenses Compensation expense 22,243 33,002 27,061 27,859 32,013 Other general and administrative expenses 13,795 12,762 13,640 16,023 21,513 Total general and administrative expenses 36,038 45,764 40,701 43,882 53,526 Income (loss) before income taxes 886,737 2,050,442 425,089 514,767 (289,714) Income taxes 23,420 26,548 6,629 (6,767) 5,134 Net income (loss) 863,317 2,023,894 418,460 521,534 (294,848) Net income (loss) attributable to noncontrolling interests (3,379) 1,639 2,979 2,290 794 Net income (loss) attributable to Annaly 866,696 2,022,255 415,481 519,244 (295,642) Dividends on preferred stock 26,883 26,883 26,883 26,883 26,883 Net income (loss) available (related) to common stockholders $ 839,813 $ 1,995,372 $ 388,598 $ 492,361 $ (322,525) Net income (loss) per share available (related) to common stockholders Basic $ 0.55 $ 1.37 $ 0.27 $ 0.34 $ (0.23) Diluted $ 0.55 $ 1.36 $ 0.27 $ 0.34 $ (0.23) Weighted average number of common shares outstanding Basic 1,522,436,766 1,461,363,637 1,454,138,154 1,445,315,914 1,410,239,138 Diluted 1,523,595,000 1,462,451,965 1,455,411,503 1,446,357,867 1,410,239,138 Other comprehensive income (loss) Net income (loss) $ 863,317 $ 2,023,894 $ 418,460 $ 521,534 $ (294,848) Unrealized gains (losses) on available-for-sale securities (2,503,250) (3,568,679) (685,699) (113,451) (191,541) Reclassification adjustment for net (gains) losses included in net income (loss) 657,806 144,787 5,471 (28,186) (30,415) Other comprehensive income (loss) (1,845,444) (3,423,892) (680,228) (141,637) (221,956) Comprehensive income (loss) (982,127) (1,399,998) (261,768) 379,897 (516,804) Comprehensive income (loss) attributable to noncontrolling interests (3,379) 1,639 2,979 2,290 794 Comprehensive income (loss) attributable to Annaly (978,748) (1,401,637) (264,747) 377,607 (517,598) Dividends on preferred stock 26,883 26,883 26,883 26,883 26,883 Comprehensive income (loss) attributable to common stockholders $ (1,005,631) $ (1,428,520) $ (291,630) $ 350,724 $ (544,481)
Unaudited, dollars in thousands 21 Income Statement Gains (Losses) Detail For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Net gains (losses) on disposal of investments and other ($646,177) ($144,224) ($25,144) $12,002 $16,223 Net unrealized gains (losses) on instruments measured at fair value through earnings 30,961 (15,580) (15,329) 90,817 3,984 Net gains (losses) on investments and other ($615,216) ($159,804) ($40,473) $102,819 $20,207 Net interest component of interest rate swaps $992 ($62,541) ($58,897) ($54,411) ($83,087) Realized gains (losses) on termination or maturity of interest rate swaps (16) — (39,932) (1,196,417) — Unrealized gains (losses) on interest rate swaps 897,537 1,323,439 186,345 1,380,946 (141,067) Net gains (losses) on other derivatives 117,130 381,130 47,843 (45,168) (357,808) Net gains (losses) on derivatives $1,015,643 $1,642,028 $135,359 $84,950 ($581,962) Other Income Statement Details
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 ("EAD"), or the premium amortization adjustment ("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 June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, is provided on page 9 of this financial summary. 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 23 Non-GAAP Reconciliations (continued) For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Economic leverage ratio reconciliation Repurchase agreements $51,364,097 $52,626,503 $54,769,643 $55,475,420 $60,221,067 Other secured financing — 914,255 903,255 729,555 909,655 Debt issued by securitization vehicles 7,502,483 6,711,953 5,155,633 3,935,410 3,315,087 Participations issued 696,944 775,432 1,049,066 641,006 315,810 Debt included in liabilities of disposal group held for sale — — 112,144 113,362 2,306,633 Total GAAP debt $59,563,524 $61,028,143 $61,989,741 $60,894,753 $67,068,252 Less non-recourse debt: Credit facilities (1) $— ($914,255) ($903,255) ($729,555) ($909,655) Debt issued by securitization vehicles (7,502,483) (6,711,953) (5,155,633) (3,935,410) (3,315,087) Participations issued (696,944) (775,432) (1,049,066) (641,006) (315,810) Non-recourse debt included in liabilities of disposal group held for sale — — (112,144) (113,362) (2,035,982) Total recourse debt $51,364,097 $52,626,503 $54,769,643 $55,475,420 $60,491,718 Plus / (Less): Cost basis of TBA and CMBX derivatives $19,723,326 $19,006,949 $20,690,768 $24,202,686 $18,107,549 Payable for unsettled trades 1,995,960 1,992,568 147,908 571,540 154,405 Receivable for unsettled trades (434,227) (407,225) (2,656) (42,482) (14,336) Economic debt * $72,649,156 $73,218,795 $75,605,663 $80,207,164 $78,739,336 Total equity $11,089,900 $11,478,770 $13,195,325 $13,717,867 $13,639,176 Economic leverage ratio * 6.6x 6.4x 5.7x 5.8x 5.8x ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation.
Unaudited, dollars in thousands 24 Non-GAAP Reconciliations (continued) For the quarters ended 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Economic capital ratio reconciliation Total GAAP assets $73,637,249 $76,185,134 $76,764,064 $76,662,433 $82,376,305 Less: Gross unrealized gains on TBA derivatives (1) (60,661) (24,757) (52,693) (1,776) (31,943) Debt issued by securitization vehicles (2) (7,502,483) (6,711,953) (5,155,633) (3,935,410) (4,925,196) Plus: Implied market value of TBA derivatives 19,282,979 18,284,708 20,338,633 23,622,635 17,691,150 Total economic assets * $85,357,084 $87,733,132 $91,894,371 $96,347,882 $95,110,316 Total equity $11,089,900 $11,478,770 $13,195,325 $13,717,867 $13,639,176 Economic capital ratio *(3) 13.0% 13.1% 14.4% 14.2% 14.3% Premium Amortization Reconciliation Premium amortization expense ($4,869) ($25,353) $219,172 $233,429 $320,108 Less: PAA cost (benefit) (127,521) (179,516) 57,395 60,726 153,607 Premium amortization expense (excluding PAA) $122,652 $154,163 $161,777 $172,703 $166,501 Interest Income (excluding PAA) Reconciliation GAAP interest income $645,615 $655,850 $422,780 $412,972 $383,906 PAA cost (benefit) (127,521) (179,516) 57,395 60,726 153,607 Interest income (excluding PAA) * $518,094 $476,334 $480,175 $473,698 $537,513 Economic Interest Expense Reconciliation GAAP interest expense $170,475 $74,922 $61,785 $50,438 $61,047 Add: Net interest component of interest rate swaps (992) 62,541 58,897 54,411 83,087 Economic interest expense * $169,483 $137,463 $120,682 $104,849 $144,134 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $518,094 $476,334 $480,175 $473,698 $537,513 Less: Economic interest expense * 169,483 137,463 120,682 104,849 144,134 Economic net interest income (excluding PAA) * $348,611 $338,871 $359,493 $368,849 $393,379 ______________ * 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 6/30/2022 3/31/2022 12/31/2021 9/30/2021 6/30/2021 Economic Metrics (excluding PAA) Average interest earning assets $72,123,055 $72,590,876 $73,134,966 $72,145,283 $77,916,766 Interest income (excluding PAA) * $518,094 $476,334 $480,175 $473,698 $537,513 Average yield on interest earning assets (excluding PAA) * 2.87% 2.62% 2.63% 2.63% 2.76% Average interest bearing liabilities $60,446,528 $61,865,292 $63,342,740 $62,614,042 $68,469,413 Economic interest expense * $169,483 $137,463 $120,682 $104,849 $144,134 Average economic cost of interest bearing liabilities * 1.11% 0.89% 0.75% 0.66% 0.83% Economic net interest income (excluding PAA)* $348,611 $338,871 $359,493 $368,849 $393,379 Net interest spread (excluding PAA) * 1.76% 1.73% 1.88% 1.97% 1.93% Interest income (excluding PAA) * $518,094 $476,334 $480,175 $473,698 $537,513 TBA dollar roll income and CMBX coupon income 161,673 129,492 119,657 115,586 111,592 Economic interest expense * (169,483) (137,463) (120,682) (104,849) (144,134) Subtotal $510,284 $468,363 $479,150 $484,435 $504,971 Average interest earning assets $72,123,055 $72,590,876 $73,134,966 $72,145,283 $77,916,766 Average TBA contract and CMBX balances 20,566,553 19,229,537 21,159,120 22,739,226 18,761,062 Subtotal $92,689,608 $91,820,413 $94,294,086 $94,884,509 $96,677,828 Net interest margin (excluding PAA) * 2.20% 2.04% 2.03% 2.04% 2.09% ______________ * Represents a non-GAAP financial measure.
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) Excludes $190 million of unsettled commitments as June 30, 2022. There were no unsettled commitments as of March 31, 2022. (5) Excludes $39.9 million and $38.9 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 June 30, 2022 and March 31, 2022, respectively. (6) Includes assets related to the sale of the Company's Middle Market Lending portfolio that are expected to be transferred by the third quarter of 2022. (7) 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. (8) 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). (9) 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 4 (1) Includes assets related to the sale of the Company's Middle Market Lending portfolio at June 30, 2022 and assets related to the sale of the Company's Commercial Real Estate business at December 31, 2021, September 30, 2021 and June 30, 2021. Page 5 (1) Includes liabilities related to the sale of the Company's Middle Market Lending portfolio at June 30, 2022 and liabilities related to the sale of the Company's Commercial Real Estate business at December 31, 2021, September 30, 2021 and June 30, 2021. (2) Consists of common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit. Page 5 (continued) (3) Utilizes an actual/360 factor. (4) 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. (5) 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 $1.0 million, ($62.5) million, ($58.9) million, ($54.4) million and ($83.1) million for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively. (2) Includes ($2.5) million, $0.2 million, $1.7 million, ($0.6) million and $0.6 million of loss provision (reversal) on the Company’s unfunded loan commitments for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively, which is reported in Other, net in the Company’s Consolidated Statement of Comprehensive Income (Loss). (3) Includes losses (gains) related to the sale of the Company's Middle Market Lending portfolio for the quarter ended June 30, 2022 and losses (gains) related to the sale of the Company's Commercial Real Estate business for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021. (4) Includes depreciation and amortization expense related to equity method investments. (5) 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). (6) All quarters presented include costs incurred in connection with securitizations of residential whole loans. (7) 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, $1.1 million, $1.2 million and $1.4 million for the quarters ended June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, respectively. (8) 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.
27 Endnotes (continued) Page 12 (1) Includes gains (losses) related to the sale of the Company's Middle Market Lending portfolio for the quarter ended June 30, 2022 and gains (losses) related to the sale of the Company's Commercial Real Estate business for the quarters ended March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021. (2) Includes other, net, general and administrative expenses and income taxes. (3) 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 $1.2 billion ($0.5 billion of which have been transferred or pledged to securitization vehicles). (2) Includes Agency-backed multifamily securities with an estimated fair value of $215.4 million. (3) Includes fixed-rate collateralized mortgage obligations with an estimated fair value of $101.3 million. (4) Weighted by current face value. (5) 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 15 (1) Represents the 3 month voluntary prepayment rate and excludes the impact of interest- only securities. (2) Total investment characteristics exclude the impact of interest-only securities. Page 16 (1) Current notional is presented net of receiver swaps. (2) As of June 30, 2022, 23%, 35% and 42% 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) 0% 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 17 (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 19 (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 1,609,215,497 shares issued and outstanding at June 30, 2022; 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. 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.