Document

ANNALY CAPITAL MANAGEMENT, INC. REPORTS 1st QUARTER 2020 RESULTS

NEW YORK—April 29, 2020—Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company") today announced its financial results for the quarter ended March 31, 2020.

Financial Highlights


•	GAAP net income (loss) of ($2.57) per average common share for the quarter


•	Core earnings (excluding PAA) of $0.21 per average common share for the quarter


•	GAAP return on average equity of (102.17%) and core return on average equity (excluding PAA) of 9.27% for the quarter


•	Book value per common share of $7.50


•	Economic leverage of 6.8x down from 7.2x in the prior quarter


•	Declared quarterly common stock cash dividend of $0.25 per share

Business Highlights

First Quarter Highlights

Investment and Strategy


•	Actively managed portfolio size to reduce leverage with total assets of $99.3 billion⁽¹⁾


•	Agency MBS⁽²⁾ represents 93% of total assets and 75% of dedicated equity capital, nearly unchanged from year end


•	Credit businesses well-positioned amidst current volatility given the composition of our portfolios and manageable exposure to industries and asset classes most heavily-affected as a result of COVID-19


•	During the quarter, we recorded reserves of $136.7 million (4% of ACREG and AMML’s funded loan portfolio), which was largely driven by adoption of the new CECL accounting standard and COVID-19–related adverse economic scenario forecasting

Financing and Capital


•	$6.9 billion of unencumbered assets, including cash and unencumbered Agency MBS of $4.6 billion


•	Despite the heightened market volatility in March, repo operations were orderly with no collateral or margining issues


•	Strong capital ratio of 12.3%, up 30 basis points since the prior quarter


•	Average economic cost of funds declined by 10 basis points to 1.91%

Corporate Governance & Responsibility


•	Announced Annaly will acquire its external manager, Annaly Management Company LLC, and transition to an internally-managed REIT, with the transaction on track to close by the end of the second quarter of 2020


•	Appointed David Finkelstein as Chief Executive Officer and as a member of the Board


•	Included in the Bloomberg Gender-Equality Index for the third consecutive year


•	Utilized extensive business continuity planning to transition to remote-working environment in response to COVID-19

"First and foremost, our thoughts go out to all those affected by COVID-19. The health and well-being of our staff and our community remains our first priority and we are grateful to our talented employees who have enabled us to persevere through this challenging time," remarked David Finkelstein, Annaly’s Chief Executive Officer and Chief Investment Officer.

"In light of extreme volatility, Annaly performed well through one of the most challenging and unique operating environments in our Company's history. The breadth and flexibility in our investments and financing positioned us to successfully navigate the market uncertainty and we continue to benefit from the size of our capital base and strength of our business model. We took significant, measured steps to fortify our balance sheet and liquidity to position ourselves for the remainder of the year. While we continue to be cautious, we are encouraged by the meaningful tailwinds in the mortgage market and are poised to take advantage of upcoming investment opportunities."

⁽¹⁾ Assets represent Annaly’s investments that are on balance sheet, net of securitized debt of consolidated VIEs, as well as investments that are off-balance sheet in which the Company has economic exposure. Assets include TBA purchase contracts (market value) of $13.1 billion and CMBX derivatives (market value) of $463.5 million and are shown net of securitized debt of consolidated VIEs of $6.4 billion.

⁽²⁾Includes TBA purchase contracts (market value) of $13.1 billion.

Financial Performance

The following table summarizes certain key performance indicators as of and for the quarters ended March 31, 2020, December 31, 2019 and March 31, 2019:



	March 31, 2020			December 31, 2019			March 31, 2019
Book value per common share	$	7.50		$	9.66		$	9.67
Economic leverage at period-end ⁽¹⁾	6.8:1			7.2:1			7.0:1
GAAP net income (loss) per average common share ⁽²⁾	$	(2.57	)	$	0.82		$	(0.63	)
Annualized GAAP return (loss) on average equity	(102.17		%)	31.20		%	(22.72		%)
Net interest margin ⁽³⁾	0.18		%	1.49		%	0.79		%
Average yield on interest earning assets ⁽⁴⁾	1.91		%	3.53		%	3.15		%
Average GAAP cost of interest bearing liabilities ⁽⁵⁾	1.86		%	2.17		%	2.71		%
Net interest spread	0.05		%	1.36		%	0.44		%
Non-GAAP metrics *
Core earnings (excluding PAA) per average common share ⁽²⁾	$	0.21		$	0.26		$	0.29
Annualized core return on average equity (excluding PAA)	9.27		%	10.56		%	11.59		%
Net interest margin (excluding PAA) ⁽³⁾	1.18		%	1.41		%	1.51		%
Average yield on interest earning assets (excluding PAA) ⁽⁴⁾	2.91		%	3.25		%	3.45		%
Average economic cost of interest bearing liabilities ⁽⁵⁾	1.91		%	2.01		%	2.15		%
Net interest spread (excluding PAA)	1.00		%	1.24		%	1.30		%
* Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information. ⁽¹⁾ 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). Securitized debt, certain credit facilities (included within other secured financing) and mortgages payable are non-recourse to the Company and are excluded from this measure. ⁽²⁾ Net of dividends on preferred stock. ⁽³⁾ Net interest margin represents interest income less interest expense divided by average Interest Earning Assets. Net interest margin (excluding PAA) represents the sum of 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 outstanding TBA contract and CMBX balances. PAA represents 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. ⁽⁴⁾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). ⁽⁵⁾ 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.

Other Information

This news release 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; 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; our ability to grow our commercial real estate business; our ability to grow our residential credit business; our ability to grow our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights; 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; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; and risks and uncertainties associated with the Internalization, including but not limited to the occurrence of any event, change or other circumstances that could give rise to the termination of the Internalization Agreement; the outcome of any legal proceedings that may be instituted against the parties to the Internalization Agreement; the inability to complete the Internalization due to the failure to satisfy closing conditions or otherwise; risks that the Internalization disrupts our current plans and operations; the impact, if any, of the announcement or pendency of the Internalization on our relationships with third parties; and the amount of the costs, fees, expenses charges related to the Internalization; and the risk that the expected benefits, including long-term cost savings, of the Internalization are not achieved. 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. We do not undertake, and specifically disclaim 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.

Annaly is a leading diversified capital manager that invests in and finances residential and commercial assets. Annaly’s principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Prior to the closing of the transaction discussed above, Annaly is externally managed by Annaly Management Company LLC. Additional information on the company can be found at www.annaly.com.

Annaly routinely posts important information for investors on the Company’s website, www.annaly.com. Annaly intends to use this webpage as a means of disclosing material, non-public information, for complying with the Company’s 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 Company’s website, in addition to following Annaly’s press releases, SEC filings, public conference calls, presentations, webcasts and other information it posts from time to time on its 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, the Company’s webpage is not incorporated by reference into, and is not a part of, this document.

The Company prepares a supplemental investor presentation and a financial summary for the benefit of its shareholders. Both the First Quarter 2020 Investor Presentation and the First Quarter 2020 Financial Summary can be found at the Company’s website (www.annaly.com) in the Investors section under Investor Presentations.

Conference Call

The Company will hold the first quarter 2020 earnings conference call on April 30, 2020 at 10:00 a.m. Eastern Time. Participants are encouraged to pre-register for the conference call to receive a unique PIN to gain immediate access to the call and bypass the live operator. Pre-registration may be completed by accessing the Pre-Registration link found on the homepage or "Investors" section of the Company's website at www.annaly.com, or by using the following link: http://dpregister.com/10142582.

Pre-registration may be completed at any time, including up to and after the call start time.

For participants who would like to join the call but have not pre-registered, access is available by dialing 844-735-3317 within the U.S., or 412-317-5703 internationally, and requesting the "Annaly Earnings Call."

There will also be an audio webcast of the call on www.annaly.com. A replay of the call will be available for one week following the conference call. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 10142582. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on Investors, then select Email Alerts and complete the email notification form.

Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands, except per share data)



	March 31, 2020			December 31, 2019 ⁽¹⁾			September 30, 2019			June 30, 2019			March 31, 2019
	(unaudited)						(unaudited)			(unaudited)			(unaudited)
Assets
Cash and cash equivalents	$	2,823,521		$	1,850,729		$	1,793,921		$	1,982,311		$	1,522,605
Securities	79,357,596			114,833,580			116,094,061			119,926,869			104,993,271
Loans, net	4,068,189			4,462,350			3,946,614			3,546,468			3,879,324
Mortgage servicing rights	280,558			378,078			386,051			425,328			500,745
Assets transferred or pledged to securitization vehicles	7,671,662			7,002,460			4,688,144			4,211,582			4,365,300
Real estate, net	751,738			725,638			725,508			733,196			734,239
Derivative assets	238,776			113,556			168,755			75,142			148,178
Reverse repurchase agreements	—			—			—			—			523,449
Receivable for unsettled trades	1,006,853			4,792			193,229			5,322			1,574,251
Principal and interest receivable	335,170			449,906			483,744			440,940			390,930
Goodwill and intangible assets, net	98,293			92,772			94,904			96,591			98,551
Other assets	284,918			381,220			381,189			357,027			441,706
Total assets	$	96,917,274		$	130,295,081		$	128,956,120		$	131,800,776		$	119,172,549
Liabilities and stockholders’ equity
Liabilities
Repurchase agreements	$	72,580,183		$	101,740,728		$	102,682,104		$	105,181,241		$	88,554,170
Other secured financing	1,805,428			4,455,700			4,466,030			4,127,989			4,144,623
Debt issued by securitization vehicles	6,364,949			5,622,801			3,856,082			3,470,168			3,693,766
Mortgages payable	484,762			485,005			485,657			498,772			510,386
Derivative liabilities	1,331,188			803,866			972,415			1,043,197			775,980
Payable for unsettled trades	923,552			463,387			245,626			620,784			4,763,376
Interest payable	261,304			476,335			565,797			691,327			424,391
Dividends payable	357,606			357,527			359,491			364,066			434,431
Other liabilities	100,772			93,388			99,214			95,825			89,982
Total liabilities	84,209,744			114,498,737			113,732,416			116,093,369			103,391,105
Stockholders’ equity
Preferred stock, par value $0.01 per share ⁽²⁾	1,982,026			1,982,026			1,982,026			2,110,346			1,778,168
Common stock, par value $0.01 per share ⁽³⁾	14,304			14,301			14,380			14,562			14,481
Additional paid-in capital	19,968,372			19,966,923			20,034,970			20,195,419			20,112,875
Accumulated other comprehensive income (loss)	3,121,371			2,138,191			2,313,815			1,365,003			(319,376		)
Accumulated deficit	(12,382,648		)	(8,309,424		)	(9,125,895		)	(7,982,649		)	(5,809,931		)
Total stockholders’ equity	12,703,425			15,792,017			15,219,296			15,702,681			15,776,217
Noncontrolling interests	4,105			4,327			4,408			4,726			5,227
Total equity	12,707,530			15,796,344			15,223,704			15,707,407			15,781,444
Total liabilities and equity	$	96,917,274		$	130,295,081		$	128,956,120		$	131,800,776		$	119,172,549


⁽¹⁾	Derived from the audited consolidated financial statements at December 31, 2019.


⁽²⁾	7.625% Series C Cumulative Redeemable Preferred Stock - Includes 0 shares authorized, issued and outstanding at March 31, 2020, December 31, 2019 and September 30, 2019. Includes 7,000,000 shares authorized, issued and outstanding at June 30, 2019 and March 31, 2019.

7.50% Series D Cumulative Redeemable Preferred Stock - Includes 18,400,000 shares authorized, issued and outstanding.

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 19,550,000 shares authorized and 17,000,000 shares issued and outstanding.8.125% Series H Cumulative Redeemable Preferred Stock - Includes 0 shares authorized, issued and outstanding at March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019. Includes 2,200,000 shares authorized, issued and outstanding at March 31, 2019.

6.75% Series I Preferred Stock - Includes 18,400,000 shares authorized and 17,700,000 issued and outstanding at March 31, 2020, December 31, 2019 and September 30, 2019. Includes 18,400,000 shares authorized and 16,000,000 issued and outstanding at June 30, 2019. Includes 0 shares authorized, issued and outstanding at March 31, 2019.

⁽³⁾

Includes 2,914,850,000 shares authorized and 1,430,424,398 shares issued and outstanding at March 31, 2020. Includes 2,914,850,000 shares authorized and 1,430,106,199 shares issued and outstanding at December 31, 2019. Includes 2,914,850,000 shares authorized and 1,437,964,466 shares issued and outstanding at September 30, 2019. Includes 2,907,850,000 shares authorized and 1,456,263,410 shares issued and outstanding at June 30, 2019. Includes 1,924,050,000 shares authorized and 1,448,103,248 shares issued and outstanding at March 31, 2019.



ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except per share data) (Unaudited)
	For the quarters ended
	March 31, 2020			December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019
Net interest income
Interest income	$	555,026		$	1,074,214		$	919,299		$	927,598		$	866,186
Interest expense	503,473			620,058			766,905			750,217			647,695
Net interest income	51,553			454,156			152,394			177,381			218,491
Realized and unrealized gains (losses)
Net interest component of interest rate swaps	(13,980		)	45,221			88,466			83,653			134,035
Realized gains (losses) on termination or maturity of interest rate swaps	(397,561		)	(4,615		)	(682,602		)	(167,491		)	(588,256		)
Unrealized gains (losses) on interest rate swaps	(2,827,723		)	782,608			(326,309		)	(1,276,019		)	(390,556		)
Subtotal	(3,239,264		)	823,214			(920,445		)	(1,359,857		)	(844,777		)
Net gains (losses) on disposal of investments and other	206,583			17,783			66,522			(38,333		)	(93,916		)
Net gains (losses) on other derivatives	206,426			(42,312		)	(16,888		)	(506,411		)	(115,159		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	(730,160		)	(5,636		)	(1,091		)	(4,881		)	47,629
Loan loss provision	(99,326		)	(7,362		)	(3,504		)	—			(5,703		)
Subtotal	(416,477		)	(37,527		)	45,039			(549,625		)	(167,149		)
Total realized and unrealized gains (losses)	(3,655,741		)	785,687			(875,406		)	(1,909,482		)	(1,011,926		)
Other income (loss)	14,926			42,656			35,074			28,181			30,502
General and administrative expenses
Compensation and management fee	40,825			40,403			41,161			44,231			44,833
Other general and administrative expenses	36,804			32,948			24,977			34,177			38,904
Total general and administrative expenses	77,629			73,351			66,138			78,408			83,737
Income (loss) before income taxes	(3,666,891		)	1,209,148			(754,076		)	(1,782,328		)	(846,670		)
Income taxes	(26,702		)	(594		)	(6,907		)	(5,915		)	2,581
Net income (loss)	(3,640,189		)	1,209,742			(747,169		)	(1,776,413		)	(849,251		)
Net income (loss) attributable to noncontrolling interests	66			68			(110		)	(83		)	(101		)
Net income (loss) attributable to Annaly	(3,640,255		)	1,209,674			(747,059		)	(1,776,330		)	(849,150		)
Dividends on preferred stock ⁽¹⁾	35,509			35,509			36,151			32,422			32,494
Net income (loss) available (related) to common stockholders	$	(3,675,764	)	$	1,174,165		$	(783,210	)	$	(1,808,752	)	$	(881,644	)
Net income (loss) per share available (related) to common stockholders
Basic	$	(2.57	)	$	0.82		$	(0.54	)	$	(1.24	)	$	(0.63	)
Diluted	$	(2.57	)	$	0.82		$	(0.54	)	$	(1.24	)	$	(0.63	)
Weighted average number of common shares outstanding
Basic	1,430,994,319			1,431,079,108			1,453,359,211			1,456,038,736			1,398,614,205
Diluted	1,430,994,319			1,431,079,108			1,453,359,211			1,456,038,736			1,398,614,205
Other comprehensive income (loss)
Net income (loss)	$	(3,640,189	)	$	1,209,742		$	(747,169	)	$	(1,776,413	)	$	(849,251	)
Unrealized gains (losses) on available-for-sale securities	1,374,796			(153,192		)	1,034,873			1,654,783			1,599,398
Reclassification adjustment for net (gains) losses included in net income (loss)	(391,616		)	(22,432		)	(86,061		)	29,596			61,091
Other comprehensive income (loss)	983,180			(175,624		)	948,812			1,684,379			1,660,489
Comprehensive income (loss)	(2,657,009		)	1,034,118			201,643			(92,034		)	811,238
Comprehensive income (loss) attributable to noncontrolling interests	66			68			(110		)	(83		)	(101		)
Comprehensive income (loss) attributable to Annaly	(2,657,075		)	1,034,050			201,753			(91,951		)	811,339
Dividends on preferred stock ⁽¹⁾	35,509			35,509			36,151			32,422			32,494
Comprehensive income (loss) attributable to common stockholders	$	(2,692,584	)	$	998,541		$	165,602		$	(124,373	)	$	778,845


⁽¹⁾	The quarter ended September 30, 2019 excludes, and the quarter ended June 30, 2019 includes, cumulative and undeclared dividends of $0.3 million on the Company's Series I Preferred Stock as of June 30, 2019.

Key Financial Data

The following table presents key metrics of the Company’s portfolio, liabilities and hedging positions, and performance as of and for the quarters ended March 31, 2020, December 31, 2019, and March 31, 2019:



	March 31, 2020			December 31, 2019			March 31, 2019
Portfolio related metrics
Fixed-rate Residential Securities as a percentage of total Residential Securities	99		%	97		%	94		%
Adjustable-rate and floating-rate Residential Securities as a percentage of total Residential Securities	1		%	3		%	6		%
Weighted average experienced CPR for the period	13.6		%	17.8		%	7.3		%
Weighted average projected long-term CPR at period-end	17.7		%	13.9		%	11.6		%
Liabilities and hedging metrics
Weighted average days to maturity on repurchase agreements outstanding at period-end	48			65			72
Hedge ratio ⁽¹⁾	19		%	75		%	85		%
Weighted average pay rate on interest rate swaps at period-end ⁽²⁾	1.63		%	1.84		%	2.20		%
Weighted average receive rate on interest rate swaps at period-end ⁽²⁾	1.16		%	1.89		%	2.66		%
Weighted average net rate on interest rate swaps at period-end ⁽²⁾	0.47		%	(0.05		%)	(0.46		%)
Leverage at period-end ⁽³⁾	6.4:1			7.1:1			6.1:1
Economic leverage at period-end ⁽⁴⁾	6.8:1			7.2:1			7.0:1
Capital ratio at period-end	12.3		%	12.0		%	12.0		%
Performance related metrics
Book value per common share	$	7.50		$	9.66		$	9.67
GAAP net income (loss) per average common share ⁽⁵⁾	$	(2.57	)	$	0.82		$	(0.63	)
Annualized GAAP return (loss) on average equity	(102.17		%)	31.20		%	(22.72		%)
Net interest margin⁽⁶⁾	0.18		%	1.49		%	0.79		%
Average yield on interest earning assets ⁽⁷⁾	1.91		%	3.53		%	3.15		%
Average GAAP cost of interest bearing liabilities⁽⁸⁾	1.86		%	2.17		%	2.71		%
Net interest spread	0.05		%	1.36		%	0.44		%
Dividend declared per common share	$	0.25		$	0.25		$	0.30
Annualized dividend yield ⁽⁹⁾	19.72		%	10.62		%	12.01		%
Non-GAAP metrics *
Core earnings (excluding PAA) per average common share ⁽⁵⁾	$	0.21		$	0.26		$	0.29
Annualized core return on average equity (excluding PAA)	9.27		%	10.56		%	11.59		%
Net interest margin (excluding PAA) ⁽⁶⁾	1.18		%	1.41		%	1.51		%
Average yield on interest earning assets (excluding PAA) ⁽⁷⁾	2.91		%	3.25		%	3.45		%
Average economic cost of interest bearing liabilities ⁽⁸⁾	1.91		%	2.01		%	2.15		%
Net interest spread (excluding PAA)	1.00		%	1.24		%	1.30		%


*	Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information.

⁽¹⁾

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 MSRs 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.


⁽²⁾	Excludes forward starting swaps.


⁽³⁾	Debt consists of repurchase agreements, other secured financing, securitized debt and mortgages payable. Certain credit facilities (included within other secured financing), securitized debt and mortgages payable are non-recourse to the Company.


⁽⁴⁾	Computed as the sum of recourse debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity.


⁽⁵⁾	Net of dividends on preferred stock.

⁽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 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.


⁽⁹⁾	Based on the closing price of the Company’s common stock of $5.07, $9.42 and $9.99 at March 31, 2020, December 31, 2019 and March 31, 2019, respectively.

The following table contains additional information on our residential and commercial investments as of the dates presented:



	For the quarters ended
	March 31, 2020		December 31, 2019		March 31, 2019
Agency mortgage-backed securities	$	78,456,846	$	112,893,367	$	103,093,526
Credit risk transfer securities	222,871		531,322		607,945
Non-agency mortgage-backed securities	585,954		1,135,868		1,116,569
Commercial mortgage-backed securities	91,925		273,023		175,231
Total securities	$	79,357,596	$	114,833,580	$	104,993,271
Residential mortgage loans	$	1,268,083	$	1,647,787	$	1,311,720
Commercial real estate debt and preferred equity	649,843		669,713		722,962
Corporate debt	2,150,263		2,144,850		1,758,082
Loans held for sale	—		—		86,560
Total loans, net	$	4,068,189	$	4,462,350	$	3,879,324
Mortgage servicing rights	$	280,558	$	378,078	$	500,745
Agency mortgage-backed securities transferred or pledged to securitization vehicles	$	1,803,608	$	1,122,588	$	—
Residential mortgage loans transferred or pledged to securitization vehicles	3,027,188		2,598,374		1,425,668
Commercial real estate debt investments transferred or pledged to securitization vehicles	1,927,575		2,345,120		2,939,632
Commercial real estate debt and preferred equity transferred or pledged to securitization vehicles	913,291		936,378		—
Assets transferred or pledged to securitization vehicles	$	7,671,662	$	7,002,460	$	4,365,300
Real estate, net	$	751,738	$	725,638	$	734,239
Total residential and commercial investments	$	92,129,743	$	127,402,106	$	114,472,879

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company provides the following non-GAAP measures:


•	core earnings (excluding PAA);


•	core earnings (excluding PAA) attributable to common stockholders;


•	core earnings (excluding PAA) per average common share;


•	annualized core return on average equity (excluding PAA);


•	interest income (excluding PAA);


•	economic interest expense;


•	economic net interest income (excluding PAA);


•	average yield on interest earning assets (excluding PAA);


•	average economic cost of interest bearing liabilities;


•	net interest margin (excluding PAA); and


•	net interest spread (excluding PAA).

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 core earnings (excluding PAA), 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 the Company’s use of these non-GAAP financial measures, including discussion of how each such measure may be useful to investors, and reconciliations to their most directly comparable GAAP results are provided below.

Core earnings (excluding PAA), core earnings (excluding PAA) attributable to common stockholders, core earnings (excluding PAA) per average common share and annualized core return on average equity (excluding PAA)

The Company's principal business objective is to generate net income for distribution to its stockholders and to preserve capital through prudent selection of investments and continuous management of its portfolio. The Company generates net income by earning a net interest spread on its investment portfolio, which is a function of interest income from its investment portfolio less financing, hedging and operating costs. Core earnings (excluding PAA), which is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) realized amortization of MSRs, (d) other income (loss) (excluding depreciation and amortization expense on real estate and related intangibles, non-core income allocated to equity method investments and other non-core 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-core 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 ("PAA"), is used by the Company's management and, the Company believes, used by analysts and investors to measure its progress in achieving its principal business objective.

The Company seeks to fulfill this objective through a variety of factors including portfolio construction, the degree of market risk exposure and related hedge profile, and the use and forms of leverage, all while operating within the parameters of the Company's capital allocation policy and risk governance framework.

The Company believes these non-GAAP measures provide management and investors with additional details regarding the Company’s underlying operating results and investment portfolio trends by (i) making adjustments to account for the disparate reporting of changes in fair value where certain instruments are reflected in GAAP net income (loss) while others are reflected in other comprehensive income (loss) and (ii) by excluding certain unrealized, non-cash or episodic components of GAAP net income (loss) in order to provide additional transparency into the operating performance of the Company’s portfolio. Annualized core return on average equity (excluding PAA), which is calculated by dividing core earnings (excluding PAA) over average stockholders’ equity, provides investors with additional detail on the core earnings (excluding PAA) generated by the Company’s invested equity capital.

The following table presents a reconciliation of GAAP financial results to non-GAAP core earnings (excluding PAA) for the periods presented:



	For the quarters ended
	March 31, 2020			December 31, 2019			March 31, 2019
	(dollars in thousands, except per share data)
GAAP net income (loss)	$	(3,640,189	)	$	1,209,742		$	(849,251	)
Net income (loss) attributable to noncontrolling interests	66			68			(101		)
Net income (loss) attributable to Annaly	(3,640,255		)	1,209,674			(849,150		)
Adjustments to exclude reported realized and unrealized (gains) losses
Realized (gains) losses on termination or maturity of interest rate swaps	397,561			4,615			588,256
Unrealized (gains) losses on interest rate swaps	2,827,723			(782,608		)	390,556
Net (gains) losses on disposal of investments and other	(206,583		)	(17,783		)	93,916
Net (gains) losses on other derivatives	(206,426		)	42,312			115,159
Net unrealized (gains) losses on instruments measured at fair value through earnings	730,160			5,636			(47,629		)
Loan loss provision⁽¹⁾	99,993			7,362			5,703
Adjustments to exclude components of other (income) loss
Depreciation and amortization expense related to commercial real estate	7,934			9,823			10,114
Non-core (income) loss allocated to equity method investments ⁽²⁾	19,398			(3,979		)	9,496
Adjustments to exclude components of general and administrative expenses and income taxes
Transaction expenses and non-recurring items⁽³⁾	7,245			3,634			9,982
Income tax effect of non-core income (loss) items	(23,862		)	(418		)	726
Adjustments to add back components of realized and unrealized (gains) losses
TBA dollar roll income and CMBX coupon income ⁽⁴⁾	44,904			36,901			38,134
MSR amortization ⁽⁵⁾	(18,296		)	(22,120		)	(13,979		)
Plus:
Premium amortization adjustment cost (benefit)	290,722			(83,892		)	81,871
Core earnings (excluding PAA) *	330,218			409,157			433,155
Dividends on preferred stock	35,509			35,509			32,494
Core earnings (excluding PAA) attributable to common stockholders *	$	294,709		$	373,648		$	400,661
GAAP net income (loss) per average common share	$	(2.57	)	$	0.82		$	(0.63	)
Core earnings (excluding PAA) per average common share *	$	0.21		$	0.26		$	0.29
Annualized GAAP return (loss) on average equity	(102.17		%)	31.20		%	(22.72		%)
Annualized core return on average equity (excluding PAA) *	9.27		%	10.56		%	11.59		%


*	Represents a non-GAAP financial measure.


⁽¹⁾	Includes $0.7 million of loss provision on the Company’s unfunded loan commitments for the quarter ended March 31, 2020 which is reported in Other income (loss) in the Company’s Consolidated Statements of Comprehensive Income (Loss).


⁽²⁾	The Company excludes non-core (income) loss allocated to equity method investments, which represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other income (loss).

⁽³⁾

The quarter ended March 31, 2020 includes costs incurred in connection with securitizations of Agency mortgage-backed securities and residential whole loans as well as costs incurred in connection with the expected Internalization and costs incurred in connection with the CEO transition. The quarter ended December 31, 2019 includes costs incurred in connection with securitizations of Agency mortgage-backed securities and residential whole loans. The quarter ended March 31, 2019 includes costs incurred in connection with a securitization of commercial loans and a securitization of residential whole loans.


⁽⁴⁾	TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on other derivatives. CMBX coupon income totaled $1.2 million, $1.3 million and $1.1 million for the quarters ended March 31, 2020, December 31, 2019 and March 31, 2019, respectively.


⁽⁵⁾	MSR amortization represents the portion of changes in fair value that is attributable to the realization of estimated cash flows on the Company’s MSR portfolio and is reported as a component of Net unrealized gains (losses) on instruments measured at fair value.

From time to time, the Company enters into TBA forward contracts as an alternate means of investing in and financing Agency mortgage-backed securities. A TBA contract is an agreement to purchase or sell, for future delivery, an Agency mortgage-backed security with a specified issuer, term and coupon. A TBA dollar roll represents a transaction where TBA contracts with the same terms but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the "drop". The drop is a reflection of the expected net interest income from an investment in similar Agency mortgage-backed securities, net of an implied financing cost, that would be foregone as a result of settling the contract in the later month rather than in the earlier month. The drop between the current settlement month price and the forward settlement month price occurs because in the TBA dollar roll market, the party providing the financing is the party that would retain all principal and interest payments accrued during the financing period. Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency mortgage-backed security less an implied financing cost.

TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions. The fair value of TBA derivatives is based on methods similar to those used to value Agency mortgage-backed securities. The Company records TBA derivatives at fair value on its Consolidated Statements of Financial Condition and recognizes periodic changes in fair value in Net gains (losses) on other derivatives in the Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives (excluding interest rate swaps).

TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract. Although accounted for as derivatives, TBA dollar rolls capture the economic equivalent of net interest income, or carry, on the underlying Agency mortgage-backed security (interest income less an implied cost of financing). TBA dollar roll income is reported as a component of Net gains (losses) on other derivatives in the Consolidated Statements of Comprehensive Income (Loss).

The CMBX index is a synthetic tradable index referencing a basket of 25 commercial mortgage-backed securities ("CMBS") of a particular rating and vintage. The CMBX index allows investors to take a long exposure (referred to as selling protection) or short exposure (referred to as buying protection) on the respective basket of CMBS securities and is structured as a "pay-as-you-go" contract whereby the protection buyer pays to the protection seller a standardized running coupon on the contracted notional amount. The Company reports income (expense) on CMBX positions in Net gains (losses) on other derivatives in the Consolidated Statements of Comprehensive Income (Loss). The coupon payments received or paid on CMBX positions are equivalent to interest income (expense) and therefore included in core earnings (excluding PAA).

Premium Amortization Expense

In accordance with GAAP, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities, excluding interest-only securities, multifamily and reverse mortgages, taking into account estimates of future principal prepayments in the calculation of the effective yield. The Company recalculates the effective yield as differences between anticipated and actual prepayments occur. Using third-party model and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security’s acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period.

The Company’s GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of the Company’s non-GAAP metrics exclude the effect of the PAA, which quantifies the component of premium amortization representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term CPR.

The following table illustrates the impact of the PAA on premium amortization expense for the Company’s Residential Securities portfolio and residential securities transferred or pledged to securitization vehicles, for the quarters ended March 31, 2020, December 31, 2019, and March 31, 2019:



	For the quarters ended
	March 31, 2020		December 31, 2019			March 31, 2019
	(dollars in thousands)
Premium amortization expense (accretion)	$	616,937	$	171,447		$	247,446
Less: PAA cost (benefit)	290,722		(83,892		)	81,871
Premium amortization expense (excluding PAA)	$	326,215	$	255,339		$	165,575

Interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA)

Interest income (excluding PAA) represents interest income excluding the effect of the PAA, and serves as the basis for deriving average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA), which are discussed below. The Company believes this measure provides management and investors with additional detail to enhance their understanding of the Company’s operating results and trends by excluding the component of premium amortization expense 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 (other than interest-only securities), which can obscure underlying trends in the performance of the portfolio.

Economic interest expense includes GAAP interest expense and the net interest component of interest rate swaps. The Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. Accordingly, adding the net interest component of interest rate swaps to interest expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of the Company's financing strategy. The Company may use market agreed coupon (“MAC”) interest rate swaps in which the Company may receive or make a payment at the time of entering into such interest rate swap to compensate for the off-market nature of such interest rate swap. In accordance with GAAP, upfront payments associated with MAC interest rate swaps are not reflected in the net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss). The Company did not enter into any MAC interest rate swaps during the quarter ended March 31, 2020.

Similarly, economic net interest income (excluding PAA), as computed below, provides investors with additional information to enhance their understanding of the net economics of our primary business operations.



	For the quarters ended
	March 31, 2020		December 31, 2019			March 31, 2019
Interest income (excluding PAA) reconciliation	(dollars in thousands)
GAAP interest income	$	555,026	$	1,074,214		$	866,186
Premium amortization adjustment	290,722		(83,892		)	81,871
Interest income (excluding PAA) *	$	845,748	$	990,322		$	948,057
Economic interest expense reconciliation
GAAP interest expense	$	503,473	$	620,058		$	647,695
Add:
Net interest component of interest rate swaps	13,980		(45,221		)	(134,035		)
Economic interest expense *	$	517,453	$	574,837		$	513,660
Economic net interest income (excluding PAA) reconciliation
Interest income (excluding PAA) *	$	845,748	$	990,322		$	948,057
Less:
Economic interest expense *	517,453		574,837			513,660
Economic net interest income (excluding PAA) *	$	328,295	$	415,485		$	434,397

* Represents a non-GAAP financial measure.

Average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA), net interest margin (excluding PAA) and average economic cost of interest bearing liabilities

Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of 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, provide management with additional measures of the Company’s profitability that management relies upon in monitoring the performance of the business.

Disclosure of these measures, which are presented below, provides investors with additional detail regarding how management evaluates the Company’s performance.



	For the quarters ended
	March 31, 2020			December 31, 2019			March 31, 2019
Economic metrics (excluding PAA)	(dollars in thousands)
Average interest earning assets	$	116,063,895		$	121,801,951		$	109,946,527
Interest income (excluding PAA) *	$	845,748		$	990,322		$	948,057
Average yield on interest earning assets (excluding PAA) *	2.91		%	3.25		%	3.45		%
Average interest bearing liabilities	$	107,029,466		$	111,873,379		$	95,529,819
Economic interest expense *	$	517,453		$	574,837		$	513,660
Average economic cost of interest bearing liabilities *	1.91		%	2.01		%	2.15		%
Economic net interest income (excluding PAA) *	$	328,295		$	415,485		$	434,397
Net interest spread (excluding PAA) *	1.00		%	1.24		%	1.30		%
Interest income (excluding PAA) *	$	845,748		$	990,322		$	948,057
TBA dollar roll income and CMBX coupon income	44,904			36,901			38,134
Interest expense	(503,473		)	(620,058		)	(647,695		)
Net interest component of interest rate swaps	(13,980		)	45,221			134,035
Subtotal	$	373,199		$	452,386		$	472,531
Average interest earnings assets	$	116,063,895		$	121,801,951		$	109,946,527
Average TBA contract and CMBX balances	9,965,142			6,878,502			14,927,490
Subtotal	$	126,029,037		$	128,680,453		$	124,874,017
Net interest margin (excluding PAA) *	1.18		%	1.41		%	1.51		%
* Represents a non-GAAP financial measure.

First Quarter 2020 Financial Summary April 29, 2020

Important Notices This presentation is issued by Annaly Capital Management, Inc. ("Annaly"), a 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 2020 quarterly report. 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. Annaly is not a registered investment adviser. Annaly is managed by Annaly Management Company LLC ("AMCO"), a registered investment adviser. This presentation is not a communication by AMCO and is not designed to maintain any existing AMCO client or investor or solicit new AMCO clients or investors. 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. Such statements include those relating to our future performance, macro outlook, the interest rate and credit environments, tax reform, future opportunities and the anticipated Internalization. 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; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities (“MBS”) 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; our ability to grow our commercial real estate business; our ability to grow our residential credit business; our ability to grow our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights ("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 of 1940, as amended; and risks and uncertainties associated with the Internalization, including but not limited to the occurrence of any event, change or other circumstances that could give rise to the termination of the Internalization Agreement; the outcome of any legal proceedings that may be instituted against the parties to the Internalization Agreement; the inability to complete the Internalization due to the failure to satisfy closing conditions or otherwise; risks that the Internalization disrupts our current plans and operations; the impact, if any, of the announcement or pendency of the Internalization on our relationships with third parties; and the amount of the costs, fees, expenses charges related to the Internalization; and the risk that the expected benefits, including long-term cost savings, of the Internalization are not achieved. 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. We do not undertake, and specifically disclaim 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. Non-GAAP Financial Measures This presentation includes certain non-GAAP financial measures, including core earnings excluding the premium amortization adjustment (“PAA”). We believe the non-GAAP financial measures are useful for management, investors, analysts, and other interested parties in evaluating our performance but should not be viewed in isolation and are not a substitute for financial measures computed in accordance with U.S. generally accepted accounting principles (“GAAP”). In addition, we may calculate its non-GAAP metrics, such as core earnings (excluding PAA), or the PAA, differently than our peers making comparative analysis difficult. Please see the section entitled “Non-GAAP Reconciliations” in the attached Appendix for a reconciliation to the most directly comparable GAAP financial measures. 1

Financial Snapshot Unaudited, dollars in thousands except per share amounts For the quarters ended 3/31/2020 12/31/2019 GAAP net income (loss) per average common share (1) ($2.57) $0.82 Core earnings (excluding PAA) per average common share *(1) $0.21 $0.26 Income Statement Annualized GAAP return (loss) on average equity (102.17%) 31.20% Annualized core return on average equity (excluding PAA)* 9.27% 10.56% Book value per common share $7.50 $9.66 Leverage at period-end (2) 6.4x 7.1x Balance Sheet Economic leverage at period-end *(3) 6.8x 7.2x Capital ratio at period-end (4) 12.3% 12.0% Securities $79,357,596 $114,833,580 Loans, net 4,068,189 4,462,350 Mortgage servicing rights 280,558 378,078 Portfolio Assets transferred or pledged to securitization vehicles 7,671,662 7,002,460 Real estate, net 751,738 725,638 Total residential and commercial investments $92,129,743 $127,402,106 Net interest margin (5) 0.18% 1.49% GAAP Average yield on interest earning assets (6) 1.91% 3.53% Key Statistics Average GAAP cost of interest bearing liabilities (7) 1.86% 2.17% Net interest spread 0.05% 1.36% Net interest margin (excluding PAA) *(5) 1.18% 1.41% Non-GAAP Average yield on interest earning assets (excluding PAA) *(6) 2.91% 3.25% Key Statistics Average economic cost of interest bearing liabilities *(7) 1.91% 2.01% Net interest spread (excluding PAA) * 1.00% 1.24% Operating expenses to core earnings (excluding PAA) *(8) 21.31% 17.04% Efficiency Annualized operating expenses as a % of average total assets (8) 0.25% 0.22% Annualized operating expenses as a % of average total equity (8) 1.98% 1.80% * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 2

Portfolio Data Unaudited, dollars in thousands For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Agency mortgage-backed securities $78,456,846 $112,893,367 $114,462,524 $118,202,040 $103,093,526 Credit risk transfer securities 222,871 531,322 474,765 491,969 607,945 Non-agency mortgage-backed securities 585,954 1,135,868 1,015,921 1,097,752 1,116,569 Commercial mortgage-backed securities 91,925 273,023 140,851 135,108 175,231 Total securities $79,357,596 $114,833,580 $116,094,061 $119,926,869 $104,993,271 Residential mortgage loans $1,268,083 $1,647,787 $1,219,402 $1,061,124 $1,311,720 Commercial real estate debt and preferred equity 649,843 669,713 611,429 623,705 722,962 Corporate debt 2,150,263 2,144,850 2,115,783 1,792,837 1,758,082 Loans held for sale — — — 68,802 86,560 Portfolio- Total loans, net $4,068,189 $4,462,350 $3,946,614 $3,546,468 $3,879,324 Related Mortgage servicing rights $280,558 $378,078 $386,051 $425,328 $500,745 Data Agency mortgage-backed securities transferred or pledged to securitization vehicles $1,803,608 $1,122,588 $— $— $— Residential mortgage loans transferred or pledged to securitization vehicles 3,027,188 2,598,374 2,376,731 2,106,981 1,425,668 Commercial real estate debt investments transferred or pledged to securitization vehicles 1,927,575 2,345,120 2,311,413 2,104,601 2,939,632 Commercial real estate debt and preferred equity transferred or pledged to securitization vehicles 913,291 936,378 — — — Assets transferred or pledged to securitization vehicles $7,671,662 $7,002,460 $4,688,144 $4,211,582 $4,365,300 Real estate, net $751,738 $725,638 $725,508 $733,196 $734,239 Total residential and commercial investments $92,129,743 $127,402,106 $125,840,378 $128,843,443 $114,472,879 Total assets $96,917,274 $130,295,081 $128,956,120 $131,800,776 $119,172,549 Average TBA contract and CMBX balances $9,965,142 $6,878,502 $9,248,502 $12,757,975 $14,927,490 % Fixed-rate 99% 97% 97% 96% 94% Residential % Adjustable-rate 1% 3% 3% 4% 6% Securities Weighted average experienced CPR for the period 13.6% 17.8% 14.6% 11.2% 7.3% Summary Portfolio Weighted average projected long-term CPR at period-end 17.7% 13.9% 16.3% 14.5% 11.6% Statistics Net premium and discount balance in Residential Securities $3,815,149 $5,185,797 $5,262,316 $5,625,788 $5,217,013 Net premium and discount balance as % of stockholders' equity 30.03% 32.84% 34.58% 35.83% 33.07% 3

Financing and Capital Data Unaudited, dollars in thousands except per share amounts For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Repurchase agreements $72,580,183 $101,740,728 $102,682,104 $105,181,241 $88,554,170 Other secured financing 1,805,428 4,455,700 4,466,030 4,127,989 4,144,623 Debt issued by securitization vehicles 6,364,949 5,622,801 3,856,082 3,470,168 3,693,766 Mortgages payable 484,762 485,005 485,657 498,772 510,386 Total debt $81,235,322 $112,304,234 $111,489,873 $113,278,170 $96,902,945 Financing Data Total liabilities $84,209,744 $114,498,737 $113,732,416 $116,093,369 $103,391,105 Cumulative redeemable preferred stock $1,982,026 $1,982,026 $1,982,026 $2,110,346 $1,778,168 Common equity(1) 10,721,399 13,809,991 13,237,270 13,592,335 13,998,049 Total Annaly stockholders' equity 12,703,425 15,792,017 15,219,296 15,702,681 15,776,217 Non-controlling interests 4,105 4,327 4,408 4,726 5,227 Total equity $12,707,530 $15,796,344 $15,223,704 $15,707,407 $15,781,444 Weighted average days to maturity of repurchase agreements 48 65 45 70 72 Weighted average rate on repurchase agreements, for the quarter(2)(3) 1.78% 2.09% 2.53% 2.66% 2.64% Weighted average rate on repurchase agreements, at period-end(3) 1.23% 2.03% 2.48% 2.69% 2.85% Leverage at period-end 6.4x 7.1x 7.3x 7.2x 6.1x Economic leverage at period-end * 6.8x 7.2x 7.7x 7.6x 7.0x Key Capital and Capital ratio at period-end 12.3% 12.0% 11.2% 11.4% 12.0% Hedging Metrics Book value per common share $7.50 $9.66 $9.21 $9.33 $9.67 Total common shares outstanding 1,430,424 1,430,106 1,437,964 1,456,263 1,448,103 Hedge ratio(4) 19% 75% 73% 74% 85% Weighted average pay rate on interest rate swaps, at period-end 1.63% 1.84% 1.88% 2.12% 2.20% Weighted average receive rate on interest rate swaps, at period-end 1.16% 1.89% 2.16% 2.46% 2.66% Weighted average net rate on interest rate swaps, at period-end 0.47% (0.05%) (0.28%) (0.34%) (0.46%) * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 4

Income Statement Data Unaudited, dollars in thousands except per share amounts For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Total interest income $555,026 $1,074,214 $919,299 $927,598 $866,186 Total interest expense 503,473 620,058 766,905 750,217 647,695 Net interest income $51,553 $454,156 $152,394 $177,381 $218,491 Total economic interest expense *(1) $517,453 $574,837 $678,439 $666,564 $513,660 Economic net interest income * $37,573 $499,377 $240,860 $261,034 $352,526 Total interest income (excluding PAA) * $845,748 $990,322 $1,036,451 $1,067,361 $948,057 Summary Income Economic net interest income (excluding PAA) * $328,295 $415,485 $358,012 $400,797 $434,397 Statement GAAP net income (loss) ($3,640,189) $1,209,742 ($747,169) ($1,776,413) ($849,251) GAAP net income (loss) available (related) to common stockholders (2) ($3,675,764) $1,174,165 ($783,210) ($1,808,752) ($881,644) GAAP net income (loss) per average common share (2) ($2.57) $0.82 ($0.54) ($1.24) ($0.63) Core earnings (excluding PAA) * $330,218 $409,157 $341,931 $391,153 $433,155 Core earnings (excluding PAA) available to common stockholders *(2) $294,709 $373,648 $305,780 $358,731 $400,661 Core earnings (excluding PAA) per average common share *(2) $0.21 $0.26 $0.21 $0.25 $0.29 PAA cost (benefit) $290,722 ($83,892) $117,152 $139,763 $81,871 * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 5

Key Earnings Metrics Unaudited, dollars in thousands except per share amounts For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Dividends declared per common share $0.25 $0.25 $0.25 $0.25 $0.30 Total common and preferred dividends declared (1) $393,328 $393,203 $396,187 $396,388 $467,121 Annualized GAAP return (loss) on average equity (102.17%) 31.20% (19.32%) (45.13%) (22.72%) Annualized GAAP return (loss) on average equity per unit of economic leverage (15.03%) 4.33% (2.51%) (5.94%) (3.25%) Key GAAP Earnings Metrics Net interest margin 0.18% 1.49% 0.48% 0.58% 0.79% Average yield on interest earning assets 1.91% 3.53% 2.89% 3.03% 3.15% Average GAAP cost of interest bearing liabilities 1.86% 2.17% 2.58% 2.71% 2.71% Net interest spread 0.05% 1.36% 0.31% 0.32% 0.44% Annualized core return on average equity (excluding PAA) * 9.27% 10.56% 8.85% 9.94% 11.59% Annualized core return on average equity per unit of economic leverage (excluding PAA) * 1.36% 1.47% 1.15% 1.31% 1.66% Net interest margin (excluding PAA) * 1.18% 1.41% 1.10% 1.28% 1.51% Key Non-GAAP Earnings Metrics Average yield on interest earning assets (excluding PAA) * 2.91% 3.25% 3.26% 3.48% 3.45% Average economic cost of interest bearing liabilities * 1.91% 2.01% 2.28% 2.41% 2.15% Net interest spread (excluding PAA) * 1.00% 1.24% 0.98% 1.07% 1.30% * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 6

Components of Economic Net Interest Income * Unaudited, dollars in thousands For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Interest income: Residential Securities $410,380 $923,653 $784,228 $777,891 $709,774 Residential mortgage loans 47,557 47,377 37,673 35,025 29,991 Commercial investment portfolio 95,676 97,366 87,946 92,131 100,952 Reverse repurchase agreements 1,413 5,818 9,452 22,551 25,469 Total interest income $555,026 $1,074,214 $919,299 $927,598 $866,186 Economic interest expense: Economic Net Interest Income * Repurchase agreements $434,021 $550,283 $699,838 $683,647 $579,514 Net interest component of interest rate swaps 13,980 (45,221) (88,466) (83,653) (134,035) Debt issued by securitization vehicles 42,119 39,099 34,524 34,151 34,207 Other 27,333 30,676 32,543 32,419 33,974 Total economic interest expense * $517,453 $574,837 $678,439 $666,564 $513,660 Economic net interest income * $37,573 $499,377 $240,860 $261,034 $352,526 PAA cost (benefit) 290,722 (83,892) 117,152 139,763 81,871 Economic net interest income (excluding PAA) * $328,295 $415,485 $358,012 $400,797 $434,397 * Represents a non-GAAP financial measure. 7

GAAP Net Income to Core Earnings (excluding PAA)* Reconciliation Unaudited, dollars in thousands For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 GAAP net income (loss) ($3,640,189) $1,209,742 ($747,169) ($1,776,413) ($849,251) Net income (loss) attributable to noncontrolling interests 66 68 (110) (83) (101) Net income (loss) attributable to Annaly (3,640,255) 1,209,674 (747,059) (1,776,330) (849,150) Adjustments to exclude reported realized and unrealized (gains) losses: Realized (gains) losses on termination or maturity of interest rate swaps 397,561 4,615 682,602 167,491 588,256 Unrealized (gains) losses on interest rate swaps 2,827,723 (782,608) 326,309 1,276,019 390,556 Net (gains) losses on disposal of investments and other (206,583) (17,783) (66,522) 38,333 93,916 Net (gains) losses on other derivatives (206,426) 42,312 16,888 506,411 115,159 Net unrealized (gains) losses on instruments measured at fair value through earnings 730,160 5,636 1,091 4,881 (47,629) Loan loss provision (1) 99,993 7,362 3,504 — 5,703 Adjustments to exclude components of other (income) loss: Core Earnings Depreciation and amortization expense related to commercial real estate (2) 7,934 9,823 9,974 10,147 10,114 Reconciliation Non-core (income) loss allocated to equity method investments (3) 19,398 (3,979) 4,541 11,327 9,496 Adjustments to exclude components of general and administrative expenses and income taxes: Transaction expenses and non-recurring items (4) 7,245 3,634 2,622 3,046 9,982 Income tax effect of non-core income (loss) items (23,862) (418) (2,762) (3,507) 726 Adjustments to add back components of realized and unrealized (gains) losses: TBA dollar roll income and CMBX coupon income (5) 44,904 36,901 15,554 33,229 38,134 MSR amortization (6) (18,296) (22,120) (21,963) (19,657) (13,979) Plus: Premium amortization adjustment cost (benefit) 290,722 (83,892) 117,152 139,763 81,871 Core earnings (excluding PAA) * 330,218 409,157 341,931 391,153 433,155 Dividends on preferred stock (7) 35,509 35,509 36,151 32,422 32,494 Core earnings (excluding PAA) attributable to common stockholders * $294,709 $373,648 $305,780 $358,731 $400,661 * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 8

Quarter-Over-Quarter Changes in Key Metrics Unaudited For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Book value per common share, beginning of period $9.66 $9.21 $9.33 $9.67 $9.39 Net income (loss) available (related) to common stockholders (2.57) 0.82 (0.54) (1.24) (0.63) Other comprehensive income (loss) attributable to common stockholders 0.69 (0.12) 0.66 1.15 1.19 Book Value Common dividends declared (0.25) (0.25) (0.25) (0.25) (0.30) Rollforward Issuance / buyback of common stock / redemption of preferred stock — — 0.01 — 0.02 Other adjustment (1) (0.03) — — — — Book value per common share, end of period $7.50 $9.66 $9.21 $9.33 $9.67 Prior quarter net interest margin 1.49% 0.48% 0.58% 0.79% 1.02% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.04%) 0.02% (0.02%) 0.03% 0.03% Net Interest Margin Net amortization of premiums (1.58%) 0.62% (0.12%) (0.15%) (0.09%) GAAP interest expense 0.31% 0.37% 0.04% (0.09%) (0.17%) Current quarter net interest margin 0.18% 1.49% 0.48% 0.58% 0.79% Prior quarter net interest spread 1.36% 0.31% 0.32% 0.44% 0.71% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.04%) 0.02% (0.02%) 0.03% 0.03% Net Interest Spread Net amortization of premiums (1.58%) 0.62% (0.12%) (0.15%) (0.09%) Average GAAP cost of interest bearing liabilities 0.31% 0.41% 0.13% 0.00% (0.21%) Current quarter net interest spread 0.05% 1.36% 0.31% 0.32% 0.44% Detailed endnotes are included within the Appendix at the end of this presentation. 9

Quarter-Over-Quarter Changes in Key Metrics (continued) Unaudited For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Prior quarter net interest margin (excluding PAA) * 1.41% 1.10% 1.28% 1.51% 1.49% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (including average TBA dollar roll and CMBX balances) (0.14%) 0.08% 0.09% 0.12% 0.04% Net Interest Margin (excluding PAA)* Net amortization of premiums (excluding PAA) (0.26%) (0.04%) (0.20%) (0.01%) 0.03% TBA dollar roll income and CMBX coupon income 0.03% 0.07% (0.05%) (0.02%) (0.11%) Interest expense and net interest component of interest rate swaps 0.14% 0.20% (0.02%) (0.32%) 0.06% Current quarter net interest margin (excluding PAA) * 1.18% 1.41% 1.10% 1.28% 1.51% Prior quarter net interest spread (excluding PAA) * 1.24% 0.98% 1.07% 1.30% 1.16% Quarter-over-quarter changes in contribution: Net Interest Spread Coupon on average interest earning assets (0.04%) 0.02% (0.02%) 0.03% 0.03% * (excluding PAA) Net amortization of premiums, excluding PAA (0.30%) (0.03%) (0.20%) 0.00% 0.04% Average economic cost of interest bearing liabilities 0.10% 0.27% 0.13% (0.26%) 0.07% Current quarter net interest spread (excluding PAA) * 1.00% 1.24% 0.98% 1.07% 1.30% * Represents a non-GAAP financial measure. 10

Quarter-Over-Quarter Changes in Annualized Return on Average Equity Unaudited For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Prior quarter annualized GAAP return (loss) on average equity 31.20% (19.32%) (45.13%) (22.72%) (62.05%) Quarter-over-quarter changes in contribution: Coupon income 0.88% (1.36%) 1.67% 2.00% 0.16% Net amortization of premiums and accretion of discounts (13.00%) 5.29% (1.46%) (1.61%) (0.64%) Interest expense and net interest component of interest rate swaps 0.30% 2.72% (0.61%) (3.19%) 0.59% Annualized GAAP Return (Loss) on Realized gains (losses) on termination or maturity of interest rate swaps (11.04%) 17.54% (13.40%) 11.48% (15.74%) Average Equity Unrealized gains (losses) on interest rate swaps (99.56%) 28.62% 23.98% (21.97%) 25.70% Realized and unrealized gains (losses) on investments and other derivatives (8.12%) (2.04%) 15.22% (9.64%) 30.10% Loan loss provision (2.60%) (0.10%) (0.09%) 0.15% (0.06%) Other(1) (0.23%) (0.15%) 0.50% 0.37% (0.78%) Current quarter annualized GAAP return (loss) on average equity (102.17%) 31.20% (19.32%) (45.13%) (22.72%) Prior quarter annualized core return on average equity (excluding PAA) * 10.56% 8.85% 9.94% 11.59% 11.48% Quarter-over-quarter changes in contribution: Coupon income 0.88% (1.36%) 1.67% 2.00% 0.16% Annualized Core Return on Average Net amortization of premiums (excluding PAA) (2.68%) 0.09% (1.98%) (0.25%) 0.30% Equity (excluding Interest expense and net interest component of interest rate swaps 0.30% 2.72% (0.61%) (3.19%) 0.59% PAA)* TBA dollar roll income and CMBX coupon income 0.31% 0.56% (0.44%) (0.18%) (0.89%) Other(2) (0.10%) (0.30%) 0.27% (0.03%) (0.05%) Current quarter core return on annualized average equity (excluding PAA) * 9.27% 10.56% 8.85% 9.94% 11.59% * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 11

Residential Investments & TBA Derivative Overview as of March 31, 2020 Unaudited, dollars in thousands Agency Fixed-Rate Securities (Pools) Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Years to Maturity Face Value % (3) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value <=15 years (1) $3,493,793 4.8% 3.46% 101.8% 111.2% 12.5% $3,886,709 20 years 2,237,713 3.1% 3.58% 103.7% 107.5% 12.2% 2,406,080 >=30 years (2) 67,021,576 92.1% 3.98% 104.5% 108.6% 13.6% 72,748,540 Total/Weighted Avg. $72,753,082 100.0% 3.94% 104.4% 108.7% 13.5% $79,041,329 TBA Contracts Weighted Avg. Implied Cost Implied Market Type Notional Value % (4) Coupon Basis Value 15-year $1,000,000 7.9% 2.25% $1,035,156 $1,031,250 30-year 11,581,000 92.1% 2.73% 11,916,041 12,084,507 Total/Weighted Avg. $12,581,000 100.0% 2.69% $12,951,197 $13,115,757 Agency Adjustable-Rate Securities Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Months to Reset Face Value % (3) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value 0 - 24 months $506,896 76.4% 3.84% 102.1% 103.8% 27.2% $526,059 25 - 40 months 25,616 3.9% 2.46% 99.1% 102.7% 29.0% 26,299 41 - 60 months 26,655 4.0% 2.62% 99.2% 103.0% 16.1% 27,467 61 - 90 months 104,309 15.7% 2.97% 101.3% 105.1% 18.7% 109,664 Total/Weighted Avg. $663,476 100.0% 3.60% 101.7% 103.9% 25.5% $689,489 Detailed endnotes are included within the Appendix at the end of this presentation. 12

Residential Investments & TBA Derivative Overview as of March 31, 2020 (continued) Unaudited, dollars in thousands Agency Interest-Only Collateralized Mortgage-Backed Obligations Current Notional Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Type Value % (1) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value Interest-only $1,388,375 38.6% 3.39% 14.4% 8.8% 12.5% $121,755 Inverse interest-only 2,204,658 61.4% 5.25% 22.0% 18.5% 13.7% 407,881 Total/Weighted Avg. $3,593,033 100.0% 4.53% 19.0% 14.7% 13.2% $529,636 Mortgage Servicing Rights Unpaid Excess Weighted Avg. Principal Weighted Avg. Servicing Loan Age Estimated Type Balance Coupon Spread (months) Fair Value Total/Weighted Avg. $34,569,873 3.82% 0.24% 48 $280,558 Residential Credit Portfolio Current Face / Weighted Avg. Weighted Avg. Weighted Avg. Estimated Sector Notional Value % (2) Coupon Amortized Cost Fair Value Fair Value Credit Risk Transfer $470,229 4.4% 5.28% 98.8% 47.4% $222,871 Alt-A 108,312 1.5% 4.14% 80.8% 70.4% 76,260 Prime 230,056 4.1% 4.46% 95.1% 90.7% 208,636 Prime Interest-only 332,185 0.1% 0.46% 1.0% 0.7% 2,273 Subprime 160,887 2.5% 2.14% 84.4% 80.2% 129,043 NPL/RPL 132,603 2.0% 4.18% 100.0% 80.0% 106,083 Prime Jumbo 65,787 1.1% 4.08% 93.6% 89.2% 58,665 Prime Jumbo Interest-only 512,838 0.1% 0.38% 1.7% 1.0% 4,994 Residential Mortgage Loans 4,372,834 84.2% 4.89% 101.6% 98.2% 4,295,271 Total/Weighted Avg. $6,385,731 100.0% 4.78% $5,104,096 Detailed endnotes are included within the Appendix at the end of this presentation. 13

(1) Residential Credit Investments Detail as of March 31, 2020 Unaudited, dollars in thousands Payment Structure Investment Characteristics Estimated Credit Product Fair Value Senior Subordinate Coupon Enhancement 60+ Delinquencies 3M VPR Agency Credit Risk Transfer $207,849 $— $207,849 5.22% 0.58% 0.47% 19.72% Private Label Credit Risk Transfer 15,022 — 15,022 6.64% —% 0.25% 13.84% Alt-A 76,260 22,183 54,077 4.14% 8.17% 9.66% 16.92% Prime 208,636 71,312 137,324 4.46% 8.79% 3.63% 18.36% Prime Interest-only 2,273 2,273 — 0.46% —% 0.29% 41.23% Subprime 129,043 58,726 70,317 2.14% 9.79% 15.55% 6.06% Re-Performing Loan Securitizations 106,083 — 106,083 4.18% 23.25% 12.09% 6.48% Prime Jumbo 58,665 25,529 33,136 4.08% 5.84% 0.21% 32.71% Prime Jumbo Interest-only 4,994 4,994 — 0.38% —% 0.38% 22.04% Total (2) $808,825 $185,017 $623,808 4.39% 7.03% 5.32% 16.06% Bond Coupon Estimated Fair Product Value ARM Fixed Floater Interest Only Agency Credit Risk Transfer $207,849 $— $— $207,849 $— Private Label Credit Risk Transfer 15,022 — — 15,022 — Alt-A 76,260 24,791 36,343 15,126 — Prime 208,636 27,869 156,754 24,013 — Prime Interest-only 2,273 — — — 2,273 Subprime 129,043 — 4,272 124,512 259 Re-Performing Loan Securitizations 106,083 — 106,083 — — Prime Jumbo 58,665 — 58,665 — — Prime Jumbo Interest-only 4,994 — — — 4,994 Total $808,825 $52,660 $362,117 $386,522 $7,526 Detailed endnotes are included within the Appendix at the end of this presentation. 14

Commercial Real Estate Overview as of March 31, 2020 Unaudited, dollars in thousands GAAP Non-GAAP Number of Weighted Avg Weighted Avg Economic Levered Investment Portfolio Investments Book Values % of Portfolio LTV (1) Life (years) (2) Interest (3) Return (4) Loans Senior Mortgages 17 $519,387 12.1% 73.1% 3.6 $202,206 8.1% Mezzanine Loans 12 130,456 3.0% 72.9% 2.8 76,842 8.9% Total Loans 29 649,843 15.1% 73.0% 3.5 279,048 8.3% Securities CMBS (AAA) 2 50,121 1.1% 25.2% 0.3 5,997 16.2% CMBS (Credit) 4 34,152 0.8% 57.9% 5.6 10,826 14.2% CMBS (Conduit) 1 7,652 0.2% 51.6% 9.0 1,146 14.0% Total Securities 7 91,925 2.1% 39.5% 3.0 17,969 15.0% Assets transferred or pledged to securitization vehicles NLY 2019-FL2 25 830,810 19.1% 74.3% 3.3 143,429 13.9% NLY 2019 - OAKS 1 82,481 1.9% 77.9% 4.8 15,307 20.2% Commercial Trusts 64 1,927,575 44.5% 44.1% 1.6 75,386 16.3% Total Assets transferred or pledged to securitization vehicles 90 $2,840,866 65.5% 54.0% 2.2 $234,122 15.1% Total Debt Investments 126 $3,582,634 82.7% 57.0% 2.4 $531,139 11.5% Equity Investments Real Estate Held for Investment 47 647,919 14.9% 278,574 11.4% Investment in Unconsolidated Joint Ventures (5) 32 103,819 2.4% 155,931 9.4% Total Equity Investments 79 751,738 17.3% 434,505 10.7% Total Investment Portfolio 205 $4,334,372 100.0% $965,644 11.2% Range of Implied Net Weighted Derivatives Net Notional Ratings Market Value Average Coupon CMBX (6) $525,000 AAA to BBB- $463,534 1.2% Detailed endnotes are included within the Appendix at the end of this presentation. 15

Middle Market Lending Overview as of March 31, 2020 Industry Dispersion Unaudited, dollars in thousands Industry Fixed Rate Floating Rate Total Size Dispersion Computer Programming, Data Processing & Other Computer Related Services — 391,559 391,559 Management and Public Relations Services — 288,586 288,586 Position Size Amount Percentage Chemicals & Chemical Preparations — 145,446 145,446 $0 - $20 million $230,687 10.7% Miscellaneous Business Services — 122,275 122,275 $20 - $40 million 477,522 22.2% Public Warehousing and Storage — 119,577 119,577 $40 - $60 million 381,139 17.7% Engineering, Architectural, and Surveying — 113,496 113,496 Greater than $60 million 1,060,915 49.3% Metal Cans & Shipping Containers — 108,266 108,266 Total $2,150,263 100.0% Offices and Clinics of Doctors of Medicine — 104,919 104,919 Surgical, Medical, and Dental Instruments and Supplies — 100,791 100,791 Tenor Dispersion Insurance Agents, Brokers and Services — 74,013 74,013 Telephone Communications — 57,508 57,508 Remaining Term Amount Percentage Miscellaneous Health and Allied Services, not elsewhere classified — 50,327 50,327 One year or less $539 —% Miscellaneous Equipment Rental and Leasing — 49,423 49,423 One to three years 180,305 8.4% Electric Work — 44,442 44,442 Three to five years 840,591 39.1% Medical and Dental Laboratories — 35,465 35,465 Greater than five years 1,128,828 52.5% Nonferrous Foundries (Castings) — 31,903 31,903 Total $2,150,263 100.0% Research, Development and Testing Services — 29,796 29,796 Coating, Engraving and Allied Services — 29,323 29,323 Lien Position Amount Percentage Home Health Care Services — 28,537 28,537 First lien loans $1,496,887 69.6% Motor Vehicles and Motor Vehicle Parts and Supplies — 28,464 28,464 Second lien loans 653,376 30.4% Legal Services — 28,079 28,079 Total $2,150,263 100.0% Petroleum and Petroleum Products — 24,834 24,834 Electronic Components & Accessories — 23,266 23,266 Grocery Stores — 22,987 22,987 Schools and Educational Services, not elsewhere classified — 19,376 19,376 Drugs — 15,881 15,881 Chemicals & Allied Products — 14,868 14,868 Mailing, Reproduction, Commercial Art and Photography, and Stenographic — 14,528 14,528 Transportation Equipment & Supplies (Except Motor Vehicles) — 12,468 12,468 Offices and Clinics of Other Health Practitioners — 10,110 10,110 Miscellaneous Plastic Products — 9,750 9,750 Total $— $2,150,263 $2,150,263 16

Hedging and Liabilities as of March 31, 2020 Unaudited, dollars in thousands Interest Rate Swaps Weighted Current Weighted Avg. Weighted Avg. Avg. Maturity Notional (1) Pay Rate Receive Rate Years to Maturity(2) 0 to 3 years $1,459,400 1.41% 1.03% 2.98 >3 to 6 years 1,310,400 1.47% 0.93% 2.97 > 6 to 10 years 7,949,500 1.91% 1.56% 8.73 Greater than 10 years 2,249,000 3.42% 1.21% 17.54 Total / Weighted Avg. $12,968,300 1.63% 1.16% 9.03 Interest Rate Swaptions Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Underlying Underlying Underlying Underlying Months to Type Notional Fixed Rate Floating Rate Years to Maturity Expiration Long Pay $3,675,000 2.54% 3M LIBOR 9.40 2.41 Long Receive $750,000 1.50% 3M LIBOR 10.42 4.88 Repurchase Agreements & Other Secured Financing Principal Weighted Avg. Rate Maturity Balance At Period End Within 30 days $40,494,245 0.90% 30 to 59 days 12,055,306 1.58% 60 to 89 days 11,062,283 1.61% 90 to 119 days 2,291,460 1.80% Over 120 days(3) 8,482,317 1.91% Total / Weighted Avg. $74,385,611 1.26% Weighted Average Rate Principal Balance At Period End For the Quarter Days to Maturity(4) Repurchase agreements $72,580,183 1.23% 1.77% 48 Other secured financing 1,805,428 2.56% 2.46% 970 Debt issued by securitization vehicles 6,675,989 2.65% 2.83% 7,527 Mortgages payable 489,820 4.05% 4.10% 4,502 Total indebtedness $81,551,420 Detailed endnotes are included within the Appendix at the end of this presentation. 17

Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity Unaudited Assumptions: ▪ The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of March 31, 2020 and December 31, 2019 ▪ 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) As of March 31, 2020 As of December 31, 2019 Estimated Percentage Change in Estimated Change as a % of Estimated Percentage Change in Estimated Change as a % of Interest Rate Change (bps) Portfolio Value(2) NAV(2)(3) Portfolio Value(2) NAV(2)(3) (75) 0.1% 0.9% 0.1% 1.0% (50) 0.3% 1.9% 0.1% 1.0% (25) 0.3% 1.8% 0.1% 0.8% 25 (0.2%) (1.7%) (0.2%) (1.7%) 50 (0.5%) (4.0%) (0.5%) (4.5%) 75 (1.0%) (6.9%) (1.0%) (8.1%) MBS Spread Sensitivity (1) As of March 31, 2020 As of December 31, 2019 Estimated Change in Portfolio Estimated Change as a % of Estimated Change in Portfolio Estimated Change as a % of MBS Spread Shock (bps) Market Value (2) NAV(2)(3) Market Value (2) NAV(2)(3) (25) 1.3% 9.1% 1.2% 10.5% (15) 0.8% 5.5% 0.7% 6.2% (5) 0.2% 1.8% 0.2% 2.1% 5 (0.2%) (1.8%) (0.2%) (2.1%) 15 (0.7%) (5.4%) (0.7%) (6.2%) 25 (1.2%) (9.0%) (1.2%) (10.2%) Detailed endnotes are included within the Appendix at the end of this presentation. 18

Appendix

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 core earnings (excluding PAA), 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 core earnings (excluding PAA) for the quarters ended March 31, 2020, December 31, 2019, September 30, 2019, June 30, 2019 and March 31, 2019, is provided on page 8 of this financial summary. Core earnings (excluding PAA), a non-GAAP measure, is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) realized amortization of MSRs, (d) other income (loss) (excluding depreciation and amortization expense on real estate and related intangibles, non-core income allocated to equity method investments and other non-core 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-core 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 ("PAA"). 20

Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Premium Amortization Reconciliation Premium amortization expense $616,937 $171,447 $376,306 $318,587 $247,446 Less: PAA cost (benefit) 290,722 (83,892) 117,152 139,763 81,871 Premium amortization expense (excluding PAA) $326,215 $255,339 $259,154 $178,824 $165,575 Interest Income (excluding PAA) Reconciliation GAAP interest income $555,026 $1,074,214 $919,299 $927,598 $866,186 PAA cost (benefit) 290,722 (83,892) 117,152 139,763 81,871 Interest income (excluding PAA) * $845,748 $990,322 $1,036,451 $1,067,361 $948,057 Economic Interest Expense Reconciliation GAAP interest expense $503,473 $620,058 $766,905 $750,217 $647,695 Add: Net interest component of interest rate swaps 13,980 (45,221) (88,466) (83,653) (134,035) Economic interest expense * $517,453 $574,837 $678,439 $666,564 $513,660 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $845,748 $990,322 $1,036,451 $1,067,361 $948,057 Less: Economic interest expense * 517,453 574,837 678,439 666,564 513,660 Economic net interest income (excluding PAA) * $328,295 $415,485 $358,012 $400,797 $434,397 * Represents a non-GAAP financial measure. 21

Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended 3/31/2020 12/31/2019 9/30/2019 6/30/2019 3/31/2019 Economic Metrics (excluding PAA) Average interest earning assets $116,063,895 $121,801,951 $127,207,668 $122,601,881 $109,946,527 Interest income (excluding PAA) * $845,748 $990,322 $1,036,451 $1,067,361 $948,057 Average yield on interest earning assets (excluding PAA) * 2.91% 3.25% 3.26% 3.48% 3.45% Average interest bearing liabilities $107,029,466 $111,873,379 $116,391,094 $109,628,007 $95,529,819 Economic interest expense * 517,453 574,837 678,439 666,564 513,660 Average economic cost of interest bearing liabilities * 1.91% 2.01% 2.28% 2.41% 2.15% Economic net interest income (excluding PAA)* $328,295 $415,485 $358,012 $400,797 $434,397 Net interest spread (excluding PAA) * 1.00% 1.24% 0.98% 1.07% 1.30% Interest income (excluding PAA) * $845,748 $990,322 $1,036,451 $1,067,361 $948,057 TBA dollar roll income and CMBX coupon income 44,904 36,901 15,554 33,229 38,134 Interest expense (503,473) (620,058) (766,905) (750,217) (647,695) Net interest component of interest rate swaps (13,980) 45,221 88,466 83,653 134,035 Subtotal $373,199 $452,386 $373,566 $434,026 $472,531 Average interest earning assets $116,063,895 $121,801,951 $127,207,668 $122,601,881 $109,946,527 Average TBA contract and CMBX balances 9,965,142 6,878,502 9,248,502 12,757,975 14,927,490 Subtotal $126,029,037 $128,680,453 $136,456,170 $135,359,856 $124,874,017 Net interest margin (excluding PAA) * 1.18% 1.41% 1.10% 1.28% 1.51% * Represents a non-GAAP financial measure. 22

Endnotes Page 2 Page 4 (continued) (1) Net of dividends on preferred stock. (4) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding receiver (2) Debt consists of repurchase agreements, other secured financing, securitized debt and mortgages swaptions) and futures relative to repurchase agreements, other secured financing and cost basis payable. Certain credit facilities (included within other secured financing), securitized debt and of TBA derivatives outstanding; excludes MSRs and the effects of term financing, both of which mortgages payable are non-recourse to the Company. serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration (3) Computed as the sum of recourse debt, cost basis of to be announced ("TBA") derivatives and credit differences in duration between assets and liabilities. derivatives referencing the commercial mortgage-backed securities index ("CMBX") outstanding and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of Page 5 repurchase agreements and other secured financing (excluding certain non-recourse credit facilities). (1) Includes GAAP interest expense and the net interest component of interest rate swaps. Securitized debt, certain credit facilities (included within other secured financing) and mortgages (2) Net of dividends on preferred stock. The quarter ended September 30, 2019 excludes, and the payable are non-recourse to the Company and are excluded from this measure. quarter ended June 30, 2019 includes, cumulative and undeclared dividends of $0.3 million on (4) Computed as the ratio of total equity to total assets (inclusive of total market value of TBA derivatives the Company's Series I Preferred Stock as of June 30, 2019. and CMBX positions and exclusive of securitized debt of consolidated variable interest entities ("VIEs")). Page 6 (5) Net interest margin represents interest income less interest expense divided by average interest earning (1) Includes dividend equivalents on share-based awards. 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 Page 8 the net interest component of interest rate swaps divided by the sum of average interest earning assets (1) Includes $0.7 million loss provision on the Company’s unfunded loan commitments as of March plus average TBA contract and CMBX balances. 31, 2020 which is reported in Other income (loss) in the Company’s Consolidated Statement of (6) Average yield on interest earning assets represents annualized interest income divided by average Comprehensive Income (Loss). interest earning assets. Average interest earning assets reflects the average amortized cost of our (2) Amount includes depreciation and amortization expense related to equity method investments. investments during the period. Average yield on interest earning assets (excluding PAA) is calculated (3) The Company excludes non-core (income) loss allocated to equity method investments, which using annualized interest income (excluding PAA). represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which (7) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by is a component of Other income (loss). average interest bearing liabilities. Average interest bearing liabilities reflects the average balances (4) The quarter ended March 31, 2020 includes costs incurred in connection with securitizations of during the period. Average economic cost of interest bearing liabilities represents annualized Agency mortgage-backed securities and residential whole loans as well as costs incurred in economic interest expense divided by average interest bearing liabilities. Economic interest expense connection with the expected Internalization and costs incurred in connection with the CEO is comprised of GAAP interest expense and the net interest component of interest rate swaps. transition. The quarter ended December 31, 2019 includes costs incurred in connection with (8) Excludes costs incurred in connection with securitizations of Agency mortgage-backed securities securitizations of Agency mortgage-backed securities and residential whole loans. The quarters and residential whole loans as well as costs incurred in connection with the expected Internalization ended September 30, 2019 and June 30, 2019 include costs incurred in connection with and costs incurred in connection with the CEO transition for the quarter ended March 31, 2020 and securitizations of residential whole loans. The quarter ended March 31, 2019 includes costs incurred excludes costs incurred in connection with securitizations of Agency mortgage-backed securities and in connection with a securitization of commercial loans and a securitization of residential whole residential whole loans for the quarter ended December 31, 2019. loans. (5) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) Page 4 on other derivatives. CMBX coupon income totaled $1.2 million, $1.3 million, $1.5 million, $0.8 (1) Consists of common stock, additional paid-in capital, accumulated other comprehensive income million and $1.1 million for the quarters ended March 31, 2020, December 31, 2019, September (loss) and accumulated deficit. 30, 2019, June 30, 2019 and March 31, 2019. (2) Utilizes an actual/360 factor. (6) MSR amortization represents the portion of changes in fair value that is attributable to the realization (3) The average and period-end rates are net of reverse repurchase agreements. Without netting reverse of estimated cash flows on the Company’s MSR portfolio and is reported as a component of Net repurchase agreements, the average rate was 1.77%, 2.10%, 2.53%, 2.65% and 2.64% and the period- unrealized gains (losses) on instruments measured at fair value. end rate was 1.23%, 2.03%, 2.48%, 2.69% and 2.86% for the quarters ended March 31, 2020, (7) The quarter ended September 30, 2019 excludes, and the quarter ended June 30, 2019 includes, December 31, 2019, September 30, 2019, June 30, 2019 and March 31, 2019, respectively. cumulative and undeclared dividends of $0.3 million on the Company's Series I Preferred Stock as of June 30, 2019. 23

Endnotes (continued) Page 9 Page 15 (1) Represents the opening adjustment to retained earnings upon adoption of Accounting Standards (1) Based on an internal valuation or the most recent third party appraisal, which may be prior to loan Update 2016-13 Financial instruments - Credit losses (Topic 326): Measurement of credit losses origination/purchase date or at the time of underwriting. on financial instruments, commonly referred to as CECL. (2) Maturity dates assume all of the borrowers' extension options are exercised for the loan portfolio. (3) Economic interest is a non-GAAP measure to include gross asset values less related financings. Equity Page 11 investments are adjusted to exclude depreciation and amortization and grosses up real estate investments (1) Includes other income (loss), general and administrative expenses and income taxes. accounted for under equity method accounting. (4) Levered returns for equity investments comprise a trailing twelve-month (“TTM”) distribution yield (2) Includes other income (loss) (excluding non-core items), MSR amortization (a component of Net for joint venture investments and core return for wholly owned properties. unrealized gains (losses) on instruments measured at fair value through earnings), general and (5) Includes investment in unconsolidated debt fund of $43.7 million, investments in Community administrative expenses (excluding transaction related expenses) and income taxes (excluding Investment Impact Funds of $26.6 million and a portfolio of real estate properties of $33.5 million. non-core income tax). (6) 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 Page 12 the underlying CMBS. CMBX positions are accounted for as derivatives with changes in fair value (1) Includes Agency-backed multifamily securities with an estimated fair value of $2.3 billion ($1.8 presented in Net gains (losses) on other derivatives. billion of which have been transferred or pledged to securitization vehicles). (2) Includes fixed-rate collateralized mortgage obligations with an estimated fair value of $160.6 Page 17 million and Agency-backed multifamily securities with an estimated fair value of $876.9 million. (1) Current notional is presented net of receiver swaps. (3) Weighted by current face value. (2) The weighted average years to maturity of payer interest rate swaps is offset by the weighted average (4) Weighted by current notional value. 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. Page 13 (3) Approximately 1% of the total repurchase agreements and other secured financing have a remaining (1) Weighted by current notional value. maturity over one year. (2) Weighted by estimated fair value. (4) Determined based on estimated weighted average lives of the underlying debt instruments. Page 14 Page 18 (1) Excludes residential mortgage loans. (1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction (2) Total investment characteristics exclude interest-only securities. with internally derived inputs. Actual results could differ materially from these estimates. (2) Scenarios include Residential Investment Securities, residential mortgage loans, MSRs and derivative instruments. (3) Net asset value (“NAV”) represents book value of common equity. 24



Maryland		1-13447	22-3479661
(State or other jurisdiction of incorporation or organization)		(Commission File Number)	(IRS Employer Identification No.)

1211 Avenue of the Americas
New York,	New York		10036
(Address of principal executive offices)			(Zip Code)



Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	NLY	New York Stock Exchange
7.50% Series D Cumulative Redeemable Preferred Stock	NLY.D	New York Stock Exchange
6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	NLY.F	New York Stock Exchange
6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	NLY.G	New York Stock Exchange
6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	NLY.I	New York Stock Exchange



		ANNALY CAPITAL MANAGEMENT, INC.

		By:		/s/ Anthony C. Green
				Name: Anthony C. Green
				Title: Chief Corporate Officer & Chief Legal Officer