Document

ANNALY CAPITAL MANAGEMENT, INC. REPORTS 4th QUARTER 2019 RESULTS

NEW YORK—February 12, 2020 —Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company") today announced its financial results for the quarter and year ended December 31, 2019.

Financial Highlights


•	GAAP net income (loss) of $0.82 per average common share for the quarter, ($1.60) for the year ended 2019


•	Core earnings (excluding PAA) of $0.26 per average common share for the quarter, $1.00 for the year ended 2019


•	Economic return of 7.6% for the quarter, 14.1% for the year ended 2019


•	GAAP return on average equity of 31.20% and core return on average equity (excluding PAA) of 10.56% for the quarter


•	Book value per common share of $9.66 up from $9.21 in the prior quarter


•	Economic leverage of 7.2x down from 7.7x in the prior quarter


•	Declared quarterly common stock dividend of $0.25 per share

Business Highlights

Fourth Quarter Highlights


•	Capital allocation to credit increased to 26% from 23%, driven by $1.8 billion in new credit assets


•	Annaly Residential Credit Group completed a $465.5 million residential whole loan securitization and purchased $957.0 million of residential whole loans during the fourth quarter


•	Annaly Commercial Real Estate Group closed $596.0 million in new investments, bringing total assets to $2.3 billion, an increase of 31% from the third quarter


•	Annaly Middle Market Lending Group closed $238.7 million of loans in the quarter


•	Average interest rate on repo borrowings declined by over 40 bps during the quarter to 2.09%; extended weighted average days to maturity of repo to 65 days


•	Appointed Serena Wolfe as Chief Financial Officer


•	Separated the roles of CEO and Chair of the Board; appointed the Company’s first independent Board Chair


•	Subsequent to quarter end, announced signing of definitive agreements under which Annaly will acquire its external manager, Annaly Management Company LLC, and transition to being an internally-managed REIT

Full-Year 2019 Highlights

Investment and Strategy


•	Originated $4.6 billion of new credit assets in 2019, up 11% from 2018


•	Annaly Residential Credit Group issued $2.5 billion in residential whole loan securitizations across six transactions since the beginning of 2019, inclusive of the $374.6 million residential whole loan securitization closed subsequent to year end


•	Expanded partnerships to more than 25 across our four businesses


•	Authored industry-focused joint study on GSE reform in conjunction with Barclays' Head of Macro Research

Financing and Capital


•	Raised gross proceeds of $442.5 million through issuance of Series I fixed-to-floating rate cumulative redeemable preferred equity; redeemed all outstanding shares of Series H and Series C classes of preferred stock in May and July, respectively, reducing the cost of preferred capital by 15 bps


•	Raised $1.2 billion of common equity inclusive of $223.2 million of common shares repurchased during the second half of 2019 to take advantage of temporary market dislocation


•	Annaly Middle Market Lending Group added $695.0 million of credit facility capacity throughout the year

Corporate Governance


•	Expanded Board of Directors with election of two new independent directors during 2019; Board comprised of 82% independent directors and 45% women directors


•	Published extensive disclosure on the Company’s continued commitment to leading Corporate Responsibility practices including the launch of Annaly's Corporate Responsibility web page


•	Annaly’s Women’s Interactive Network hosted two external events in 2019 with nearly 350 attendees, including a Women’s Leadership Event and Nonprofit Board Fair, to enhance and empower women both inside and outside of Annaly

“Annaly successfully executed on its strategic goals and initiatives during 2019, including generating an economic return of over 14%, our highest annual return since 2014, and originating nearly $5 billion of credit assets throughout the year,” stated Glenn Votek, Annaly’s Interim Chief Executive Officer and President. “Although we are always prepared for uncertainty, our outlook for the year is constructive given a robust global economy, more accommodative Fed policy and increased role for private capital in the housing market.”

“As we are keenly focused on creating value for our shareholders, 2019 was also a milestone year for Annaly’s corporate responsibility and corporate governance initiatives with significant enhancements made to benefit our shareholders. These were highlighted by the announcement to internalize our manager and the separation of the CEO and Board Chair positions. We also substantially expanded our ESG disclosure through the creation of our Corporate Responsibility web page, were recognized as a 'Winning Company' by 2020 Women on Boards, and were recently named to the Bloomberg Gender-Equality Index for the third consecutive year. We look forward to building on these successes in 2020 as we continue to prioritize delivering attractive risk-adjusted returns while driving a positive impact over the long term.”

Financial Performance

The following table summarizes certain key performance indicators as of and for the quarters ended December 31, 2019, September 30, 2019 and December 31, 2018:



	December 31, 2019			September 30, 2019			December 31, 2018
Book value per common share	$	9.66		$	9.21		$	9.39
Economic leverage at period-end ⁽¹⁾	7.2:1			7.7:1			7.0:1
GAAP net income (loss) per average common share ⁽²⁾	$	0.82		$	(0.54	)	$	(1.74	)
Annualized GAAP return (loss) on average equity	31.20		%	(19.32		%)	(62.05		%)
Net interest margin ⁽³⁾	1.67		%	0.75		%	1.34		%
Average yield on interest earning assets ⁽⁴⁾	3.53		%	2.89		%	3.21		%
Average cost of interest bearing liabilities ⁽⁵⁾	2.01		%	2.28		%	2.22		%
Net interest spread	1.52		%	0.61		%	0.99		%
Core earnings metrics *
Core earnings (excluding PAA) per average common share ⁽²⁾	$	0.26		$	0.21		$	0.29
Core earnings per average common share ⁽²⁾	$	0.32		$	0.13		$	0.26
PAA cost (benefit) per average common share	$	(0.06	)	$	0.08		$	0.03
Annualized core return on average equity (excluding PAA)	10.56		%	8.85		%	11.48		%
Net interest margin (excluding PAA) ⁽³⁾	1.41		%	1.10		%	1.49		%
Average yield on interest earning assets (excluding PAA) ⁽⁴⁾	3.25		%	3.26		%	3.38		%
Net interest spread (excluding PAA)	1.24		%	0.98		%	1.16		%
* Represents non-GAAP financial measures. 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. The quarter ended September 30, 2019 excludes cumulative and undeclared dividends of $0.3 million on the Company's Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series I Preferred Stock”) as of June 30, 2019. ⁽³⁾ Net interest margin represents the sum of the Company's interest income 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. Net interest margin (excluding PAA) excludes the premium amortization adjustment ("PAA") representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities. ⁽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 cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average amortized cost during the period. 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, 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 Fourth Quarter 2019 Investor Presentation and the Fourth Quarter 2019 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 fourth quarter 2019 earnings conference call on February 13, 2020 at 9:00 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/10138795.

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 10138795. 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)



	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018 ⁽¹⁾
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Assets
Cash and cash equivalents	$	1,850,729		$	1,793,921		$	1,982,311		$	1,522,605		$	1,735,749
Securities	114,833,580			116,094,061			119,926,869			104,993,271			92,623,788
Loans, net	4,462,350			3,946,614			3,546,468			3,879,324			4,585,975
Mortgage servicing rights	378,078			386,051			425,328			500,745			557,813
Assets transferred or pledged to securitization vehicles	7,002,460			4,688,144			4,211,582			4,365,300			3,833,200
Real estate, net	725,638			725,508			733,196			734,239			739,473
Derivative assets	113,556			168,755			75,142			148,178			200,503
Reverse repurchase agreements	—			—			—			523,449			650,040
Receivable for unsettled trades	4,792			193,229			5,322			1,574,251			68,779
Principal and interest receivable	449,906			483,744			440,940			390,930			357,365
Goodwill and intangible assets, net	92,772			94,904			96,591			98,551			100,854
Other assets	381,220			381,189			357,027			441,706			333,988
Total assets	$	130,295,081		$	128,956,120		$	131,800,776		$	119,172,549		$	105,787,527
Liabilities and stockholders’ equity
Liabilities
Repurchase agreements	$	101,740,728		$	102,682,104		$	105,181,241		$	88,554,170		$	81,115,874
Other secured financing	4,455,700			4,466,030			4,127,989			4,144,623			4,183,311
Debt issued by securitization vehicles	5,622,801			3,856,082			3,470,168			3,693,766			3,347,062
Mortgages payable	485,005			485,657			498,772			510,386			511,056
Derivative liabilities	803,866			972,415			1,043,197			775,980			889,750
Payable for unsettled trades	463,387			245,626			620,784			4,763,376			583,036
Interest payable	476,335			565,797			691,327			424,391			570,928
Dividends payable	357,527			359,491			364,066			434,431			394,129
Other liabilities	93,388			99,214			95,825			89,982			74,580
Total liabilities	114,498,737			113,732,416			116,093,369			103,391,105			91,669,726
Stockholders’ equity
Preferred stock, par value $0.01 per share ⁽²⁾	1,982,026			1,982,026			2,110,346			1,778,168			1,778,168
Common stock, par value $0.01 per share ⁽³⁾	14,301			14,380			14,562			14,481			13,138
Additional paid-in capital	19,966,923			20,034,970			20,195,419			20,112,875			18,794,331
Accumulated other comprehensive income (loss)	2,138,191			2,313,815			1,365,003			(319,376		)	(1,979,865		)
Accumulated deficit	(8,309,424		)	(9,125,895		)	(7,982,649		)	(5,809,931		)	(4,493,660		)
Total stockholders’ equity	15,792,017			15,219,296			15,702,681			15,776,217			14,112,112
Noncontrolling interests	4,327			4,408			4,726			5,227			5,689
Total equity	15,796,344			15,223,704			15,707,407			15,781,444			14,117,801
Total liabilities and equity	$	130,295,081		$	128,956,120		$	131,800,776		$	119,172,549		$	105,787,527


⁽¹⁾	Derived from the audited consolidated financial statements at December 31, 2018.


⁽²⁾	7.625% Series C Cumulative Redeemable Preferred Stock - Includes 0 shares authorized, issued and outstanding at December 31, 2019 and September 30, 2019. Includes 7,000,000 shares authorized, issued and outstanding at June 30, 2019, March 31, 2019 and December 31, 2018.

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 December 31, 2019, September 30, 2019 and June 30, 2019. Includes 2,200,000 shares authorized, issued and outstanding at March 31, 2019 and December 31, 2018.

6.75% Series I Preferred Stock - Includes 18,400,000 shares authorized and 17,700,000 issued and outstanding at 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 and December 31, 2018.

⁽³⁾

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. Includes 1,924,050,000 shares authorized and 1,313,763,450 shares issued and outstanding at December 31, 2018.



ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except per share data) (Unaudited)
	For the quarters ended
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Net interest income
Interest income	$	1,074,214		$	919,299		$	927,598		$	866,186		$	859,674
Interest expense	620,058			766,905			750,217			647,695			586,774
Net interest income	454,156			152,394			177,381			218,491			272,900
Realized and unrealized gains (losses)
Net interest component of interest rate swaps	45,221			88,466			83,653			134,035			65,889
Realized gains (losses) on termination or maturity of interest rate swaps	(4,615		)	(682,602		)	(167,491		)	(588,256		)	—
Unrealized gains (losses) on interest rate swaps	782,608			(326,309		)	(1,276,019		)	(390,556		)	(1,313,882		)
Subtotal	823,214			(920,445		)	(1,359,857		)	(844,777		)	(1,247,993		)
Net gains (losses) on disposal of investments	17,783			66,522			(38,333		)	(93,916		)	(747,505		)
Net gains (losses) on other derivatives	(42,312		)	(16,888		)	(506,411		)	(115,159		)	(484,872		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	(5,636		)	(1,091		)	(4,881		)	47,629			(18,169		)
Loan loss provision	(7,362		)	(3,504		)	—			(5,703		)	(3,496		)
Subtotal	(37,527		)	45,039			(549,625		)	(167,149		)	(1,254,042		)
Total realized and unrealized gains (losses)	785,687			(875,406		)	(1,909,482		)	(1,011,926		)	(2,502,035		)
Other income (loss)	42,656			35,074			28,181			30,502			52,377
General and administrative expenses
Compensation and management fee	40,403			41,161			44,231			44,833			43,750
Other general and administrative expenses	32,948			24,977			34,177			38,904			33,323
Total general and administrative expenses	73,351			66,138			78,408			83,737			77,073
Income (loss) before income taxes	1,209,148			(754,076		)	(1,782,328		)	(846,670		)	(2,253,831		)
Income taxes	(594		)	(6,907		)	(5,915		)	2,581			1,041
Net income (loss)	1,209,742			(747,169		)	(1,776,413		)	(849,251		)	(2,254,872		)
Net income (loss) attributable to noncontrolling interests	68			(110		)	(83		)	(101		)	17
Net income (loss) attributable to Annaly	1,209,674			(747,059		)	(1,776,330		)	(849,150		)	(2,254,889		)
Dividends on preferred stock ⁽¹⁾	35,509			36,151			32,422			32,494			32,494
Net income (loss) available (related) to common stockholders	$	1,174,165		$	(783,210	)	$	(1,808,752	)	$	(881,644	)	$	(2,287,383	)
Net income (loss) per share available (related) to common stockholders
Basic	$	0.82		$	(0.54	)	$	(1.24	)	$	(0.63	)	$	(1.74	)
Diluted	$	0.82		$	(0.54	)	$	(1.24	)	$	(0.63	)	$	(1.74	)
Weighted average number of common shares outstanding
Basic	1,431,079,108			1,453,359,211			1,456,038,736			1,398,614,205			1,314,377,748
Diluted	1,431,079,108			1,453,359,211			1,456,038,736			1,398,614,205			1,314,377,748
Other comprehensive income (loss)
Net income (loss)	$	1,209,742		$	(747,169	)	$	(1,776,413	)	$	(849,251	)	$	(2,254,872	)
Unrealized gains (losses) on available-for-sale securities	(153,192		)	1,034,873			1,654,783			1,599,398			1,100,052
Reclassification adjustment for net (gains) losses included in net income (loss)	(22,432		)	(86,061		)	29,596			61,091			743,039
Other comprehensive income (loss)	(175,624		)	948,812			1,684,379			1,660,489			1,843,091
Comprehensive income (loss)	1,034,118			201,643			(92,034		)	811,238			(411,781		)
Comprehensive income (loss) attributable to noncontrolling interests	68			(110		)	(83		)	(101		)	17
Comprehensive income (loss) attributable to Annaly	1,034,050			201,753			(91,951		)	811,339			(411,798		)
Dividends on preferred stock ⁽¹⁾	35,509			36,151			32,422			32,494			32,494
Comprehensive income (loss) attributable to common stockholders	$	998,541		$	165,602		$	(124,373	)	$	778,845		$	(444,292	)


⁽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.



ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except per share data)
	For the years ended
	December 31, 2019			December 31, 2018 ⁽¹⁾
	(unaudited)
Net interest income
Interest income	$	3,787,297		$	3,332,563
Interest expense	2,784,875			1,897,860
Net interest income	1,002,422			1,434,703
Realized and unrealized gains (losses)
Net interest component of interest rate swaps	351,375			100,553
Realized gains (losses) on termination or maturity of interest rate swaps	(1,442,964		)	1,409
Unrealized gains (losses) on interest rate swaps	(1,210,276		)	424,081
Subtotal	(2,301,865		)	526,043
Net gains (losses) on disposal of investments	(47,944		)	(1,124,448		)
Net gains (losses) on other derivatives	(680,770		)	(403,001		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	36,021			(158,082		)
Loan loss provision	(16,569		)	(3,496		)
Subtotal	(709,262		)	(1,689,027		)
Total realized and unrealized gains (losses)	(3,011,127		)	(1,162,984		)
Other income (loss)	136,413			109,927
General and administrative expenses
Compensation and management fee	170,628			179,841
Other general and administrative expenses	131,006			150,032
Total general and administrative expenses	301,634			329,873
Income (loss) before income taxes	(2,173,926		)	51,773
Income taxes	(10,835		)	(2,375		)
Net income (loss)	(2,163,091		)	54,148
Net income (loss) attributable to noncontrolling interests	(226		)	(260		)
Net income (loss) attributable to Annaly	(2,162,865		)	54,408
Dividends on preferred stock	136,576			129,312
Net income (loss) available (related) to common stockholders	$	(2,299,441	)	$	(74,904	)
Net income (loss) per share available (related) to common stockholders
Basic	$	(1.60	)	$	(0.06	)
Diluted	$	(1.60	)	$	(0.06	)
Weighted average number of common shares outstanding
Basic	1,434,912,682			1,209,601,809
Diluted	1,434,912,682			1,209,601,809
Other comprehensive income (loss)
Net income (loss)	$	(2,163,091	)	$	54,148
Unrealized gains (losses) on available-for-sale securities	4,135,862			(2,004,166		)
Reclassification adjustment for net (gains) losses included in net income (loss)	(17,806		)	1,150,321
Other comprehensive income (loss)	4,118,056			(853,845		)
Comprehensive income (loss)	1,954,965			(799,697		)
Comprehensive income (loss) attributable to noncontrolling interests	(226		)	(260		)
Comprehensive income (loss) attributable to Annaly	1,955,191			(799,437		)
Dividends on preferred stock	136,576			129,312
Comprehensive income (loss) attributable to common stockholders	$	1,818,615		$	(928,749	)

⁽¹⁾ Derived from the audited consolidated financial statements for the year ended December 31, 2018.

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 December 31, 2019, September 30, 2019, and December 31, 2018:



	December 31, 2019			September 30, 2019			December 31, 2018
Portfolio related metrics
Fixed-rate Residential Securities as a percentage of total Residential Securities	97		%	97		%	93		%
Adjustable-rate and floating-rate Residential Securities as a percentage of total Residential Securities	3		%	3		%	7		%
Weighted average experienced CPR for the period	17.8		%	14.6		%	7.9		%
Weighted average projected long-term CPR at period-end	13.9		%	16.3		%	10.1		%
Liabilities and hedging metrics
Weighted average days to maturity on repurchase agreements outstanding at period-end	65			45			77
Hedge ratio ⁽¹⁾	75		%	73		%	94		%
Weighted average pay rate on interest rate swaps at period-end ⁽²⁾	1.84		%	1.88		%	2.17		%
Weighted average receive rate on interest rate swaps at period-end ⁽²⁾	1.89		%	2.16		%	2.68		%
Weighted average net rate on interest rate swaps at period-end ⁽²⁾	(0.05		%)	(0.28		%)	(0.51		%)
Leverage at period-end ⁽³⁾	7.1:1			7.3:1			6.3:1
Economic leverage at period-end ⁽⁴⁾	7.2:1			7.7:1			7.0:1
Capital ratio at period-end	12.0		%	11.2		%	12.1		%
Performance related metrics
Book value per common share	$	9.66		$	9.21		$	9.39
GAAP net income (loss) per average common share ⁽⁵⁾	$	0.82		$	(0.54	)	$	(1.74	)
Annualized GAAP return (loss) on average equity	31.20		%	(19.32		%)	(62.05		%)
Net interest margin	1.67		%	0.75		%	1.34		%
Average yield on interest earning assets ⁽⁶⁾	3.53		%	2.89		%	3.21		%
Average cost of interest bearing liabilities ⁽⁷⁾	2.01		%	2.28		%	2.22		%
Net interest spread	1.52		%	0.61		%	0.99		%
Dividend declared per common share	$	0.25		$	0.25		$	0.30
Annualized dividend yield ⁽⁸⁾	10.62		%	11.36		%	12.22		%
Core earnings metrics *
Core earnings (excluding PAA) per average common share ⁽⁵⁾	$	0.26		$	0.21		$	0.29
Core earnings per average common share ⁽⁵⁾	$	0.32		$	0.13		$	0.26
PAA cost (benefit) per average common share	$	(0.06	)	$	0.08		$	0.03
Annualized core return on average equity (excluding PAA)	10.56		%	8.85		%	11.48		%
Net interest margin (excluding PAA)	1.41		%	1.10		%	1.49		%
Average yield on interest earning assets (excluding PAA) ⁽⁶⁾	3.25		%	3.26		%	3.38		%
Net interest spread (excluding PAA)	1.24		%	0.98		%	1.16		%


*	Represents non-GAAP financial measures. 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. The quarter ended September 30, 2019 excludes cumulative and undeclared dividends of $0.3 million on the Company's Series I Preferred Stock as of June 30, 2019.


⁽⁶⁾	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).


⁽⁷⁾	Average cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average amortized cost during the period. Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.


⁽⁸⁾	Based on the closing price of the Company’s common stock of $9.42, $8.80 and $9.82 at December 31, 2019, September 30, 2019 and December 31, 2018, respectively.

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



	For the quarters ended
	December 31, 2019		September 30, 2019		December 31, 2018
Agency mortgage-backed securities	$	112,893,367	$	114,462,524	$	90,752,995
Credit risk transfer securities	531,322		474,765		552,097
Non-agency mortgage-backed securities	1,135,868		1,015,921		1,161,938
Commercial mortgage-backed securities	273,023		140,851		156,758
Total securities	$	114,833,580	$	116,094,061	$	92,623,788
Residential mortgage loans	$	1,647,787	$	1,219,402	$	1,359,806
Commercial real estate debt and preferred equity	669,713		611,429		1,296,803
Corporate debt	2,144,850		2,115,783		1,887,182
Loans held for sale	—		—		42,184
Total loans, net	$	4,462,350	$	3,946,614	$	4,585,975
Mortgage servicing rights	$	378,078	$	386,051	$	557,813
Agency mortgage-backed securities transferred or pledged to securitization vehicles	$	1,122,588	$	—	$	—
Residential mortgage loans transferred or pledged to securitization vehicles	2,598,374		2,376,731		1,094,831
Commercial real estate debt investments transferred or pledged to securitization vehicles	2,345,120		2,311,413		2,738,369
Commercial real estate debt and preferred equity transferred or pledged to securitization vehicles	936,378		—		—
Assets transferred or pledged to securitization vehicles	$	7,002,460	$	4,688,144	$	3,833,200
Real estate, net	$	725,638	$	725,508	$	739,473
Total residential and commercial investments	$	127,402,106	$	125,840,378	$	102,340,249

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 and core earnings (excluding PAA);


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


•	core earnings and 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);


•	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, 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 and core earnings (excluding PAA), core earnings attributable to common stockholders and core earnings attributable to common stockholders (excluding PAA), core earnings and 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, 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 core earnings (excluding PAA), which is defined as core earnings excluding 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, are 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 generated by the Company’s invested equity capital.

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



	For the quarters ended
	December 31, 2019			September 30, 2019			December 31, 2018
	(dollars in thousands, except per share data)
GAAP net income (loss)	$	1,209,742		$	(747,169	)	$	(2,254,872	)
Net income (loss) attributable to noncontrolling interests	68			(110		)	17
Net income (loss) attributable to Annaly	1,209,674			(747,059		)	(2,254,889		)
Adjustments to exclude reported realized and unrealized (gains) losses
Realized (gains) losses on termination or maturity of interest rate swaps	4,615			682,602			—
Unrealized (gains) losses on interest rate swaps	(782,608		)	326,309			1,313,882
Net (gains) losses on disposal of investments	(17,783		)	(66,522		)	747,505
Net (gains) losses on other derivatives	42,312			16,888			484,872
Net unrealized (gains) losses on instruments measured at fair value through earnings	5,636			1,091			18,169
Loan loss provision	7,362			3,504			3,496
Adjustments to exclude components of other (income) loss
Depreciation and amortization expense related to commercial real estate	9,823			9,974			11,000
Non-core (income) loss allocated to equity method investments ⁽¹⁾	(3,979		)	4,541			(10,307		)
Adjustments to exclude components of general and administrative expenses and income taxes
Transaction expenses and non-recurring items⁽³⁾	3,634			2,622			3,816
Income tax effect of non-core income (loss) items	(418		)	(2,762		)	3,334
Adjustments to add back components of realized and unrealized (gains) losses
TBA dollar roll income and CMBX coupon income ⁽⁴⁾	36,901			15,554			69,572
MSR amortization ⁽⁵⁾	(22,120		)	(21,963		)	(18,753		)
Core earnings *	493,049			224,779			371,697
Less:
Premium amortization adjustment cost (benefit)	(83,892		)	117,152			45,472
Core earnings (excluding PAA) *	$	409,157		$	341,931		$	417,169

Dividends on preferred stock ⁽⁶⁾	35,509			36,151			32,494
Core earnings attributable to common stockholders *	$	457,540		$	188,628		$	339,203
Core earnings attributable to common stockholders (excluding PAA) *	$	373,648		$	305,780		$	384,675
GAAP net income (loss) per average common share	$	0.82		$	(0.54	)	$	(1.74	)
Core earnings per average common share *	$	0.32		$	0.13		$	0.26
Core earnings (excluding PAA) per average common share *	$	0.26		$	0.21		$	0.29
Annualized GAAP return (loss) on average equity	31.20		%	(19.32		%)	(62.05		%)
Annualized core return on average equity (excluding PAA) *	10.56		%	8.85		%	11.48		%



	For the years ended
	December 31, 2019			December 31, 2018
	(dollars in thousands, except per share data)
GAAP net income (loss)	$	(2,163,091	)	$	54,148
Net income (loss) attributable to noncontrolling interests	(226		)	(260		)
Net income (loss) attributable to Annaly	(2,162,865		)	54,408
Adjustments to exclude reported realized and unrealized (gains) losses
Realized (gains) losses on termination or maturity of interest rate swaps	1,442,964			(1,409		)
Unrealized (gains) losses on interest rate swaps	1,210,276			(424,081		)
Net (gains) losses on disposal of investments	47,944			1,124,448
Net (gains) losses on other derivatives	680,770			403,001
Net unrealized (gains) losses on instruments measured at fair value through earnings	(36,021		)	158,082
Loan loss provision	16,569			3,496
Adjustments to exclude components of other (income) loss
Depreciation and amortization expense related to commercial real estate	40,058			20,278
Non-core (income) loss allocated to equity method investments ⁽¹⁾	21,385			(12,665		)
Non-core other (income) loss ⁽²⁾	—			44,525
Adjustments to exclude components of general and administrative expenses and income taxes
Transaction expenses and non-recurring items ⁽³⁾	19,284			65,416
Income tax effect of non-core income (loss) items	(5,961		)	4,220
Adjustments to add back components of realized and unrealized (gains) losses
TBA dollar roll income and CMBX coupon income ⁽⁴⁾	123,818			276,986
MSR amortization ⁽⁵⁾	(77,719		)	(79,764		)
Core earnings *	1,320,502			1,636,941
Less:
Premium amortization adjustment cost (benefit)	254,894			(62,021		)
Core earnings (excluding PAA) *	$	1,575,396		$	1,574,920

Dividends on preferred stock	136,576			129,312
Core earnings attributable to common stockholders *	$	1,183,926		$	1,507,629
Core earnings attributable to common stockholders (excluding PAA) *	$	1,438,820		$	1,445,608
GAAP net income (loss) per average common share	$	(1.60	)	$	(0.06	)
Core earnings per average common share *	$	0.83		$	1.25
Core earnings (excluding PAA) per average common share *	$	1.00		$	1.20
Annualized GAAP return (loss) on average equity	(14.11		)%	0.38		%
Annualized core return on average equity (excluding PAA) *	10.28		%	10.99		%


*	Represents a non-GAAP financial measure.


⁽¹⁾	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). The quarter and year ended December 31, 2018 also includes a realized gain on sale within an unconsolidated joint venture, which is a component of Other income (loss).


⁽²⁾	Represents the amount of consideration paid for the acquisition of MTGE Investment Corp. (“MTGE”) in excess of the fair value of net assets acquired. This amount is primarily attributable to a decline in portfolio valuation between the pricing and closing dates of the transaction and is consistent with changes in market values observed for similar instruments over the same period.


⁽³⁾	Represents costs incurred in connection with securitizations of residential whole loans. The quarter and year ended December 31, 2019 also includes costs incurred in connection with the securitizations of commercial loans and mortgage-backed securities. The year ended December 31, 2018 also includes costs incurred in connection with the MTGE transaction.

⁽⁴⁾

TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on other derivatives. CMBX coupon income totaled $1.3 million, $1.5 million and $1.2 million for the quarters ended December 31, 2019, September 30, 2019 and December 31, 2018, respectively. CMBX coupon income totaled $4.6 million and $2.3 million for the years ended December 31, 2019 and December 31, 2018, 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.


⁽⁶⁾	The quarter ended September 30, 2019 excludes cumulative and undeclared dividends of $0.3 million on the Company's Series I Preferred Stock as of June 30, 2019.

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 as 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.

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 December 31, 2019, September 30, 2019, and December 31, 2018:



	For the quarters ended
	December 31, 2019			September 30, 2019		December 31, 2018
	(dollars in thousands)
Premium amortization expense (accretion)	$	171,447		$	376,306	$	220,131
Less: PAA cost (benefit)	(83,892		)	117,152		45,472
Premium amortization expense (excluding PAA)	$	255,339		$	259,154	$	174,659


	For the quarters ended
	December 31, 2019			September 30, 2019		December 31, 2018
	(per average common share)
Premium amortization expense (accretion)	$	0.12		$	0.26	$	0.17
Less: PAA cost (benefit) ⁽¹⁾	(0.06		)	0.08		0.03
Premium amortization expense (excluding PAA)	$	0.18		$	0.18	$	0.14

⁽¹⁾The Company separately calculates core earnings per average common share and core earnings (excluding PAA) per average common share, with the difference between these two per share amounts attributed to the PAA cost (benefit) per average common share. As such, the reported value of the PAA cost (benefit) per average common share may not reflect the result of dividing the PAA cost (benefit) by the weighted average number of common shares outstanding due to rounding.

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 December 31, 2019.

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
	December 31, 2019			September 30, 2019			December 31, 2018
Interest income (excluding PAA) reconciliation	(dollars in thousands)
GAAP interest income	$	1,074,214		$	919,299		$	859,674
Premium amortization adjustment	(83,892		)	117,152			45,472
Interest income (excluding PAA) *	$	990,322		$	1,036,451		$	905,146
Economic interest expense reconciliation
GAAP interest expense	$	620,058		$	766,905		$	586,774
Add:
Net interest component of interest rate swaps	(45,221		)	(88,466		)	(65,889		)
Economic interest expense *	$	574,837		$	678,439		$	520,885
Economic net interest income (excluding PAA) reconciliation
Interest income (excluding PAA) *	$	990,322		$	1,036,451		$	905,146
Less:
Economic interest expense *	574,837			678,439			520,885
Economic net interest income (excluding PAA) *	$	415,485		$	358,012		$	384,261

* Represents a non-GAAP financial measure.

Average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA)

Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average cost of 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
	December 31, 2019			September 30, 2019			December 31, 2018
Economic metrics (excluding PAA)	(dollars in thousands)
Average interest earning assets	$	121,801,951		$	127,207,668		$	107,232,861
Interest income (excluding PAA) *	$	990,322		$	1,036,451		$	905,146
Average yield on interest earning assets (excluding PAA) *	3.25		%	3.26		%	3.38		%
Average interest bearing liabilities	$	111,873,379		$	116,391,094		$	91,746,160
Economic interest expense *	$	574,837		$	678,439		$	520,885
Average cost of interest bearing liabilities	2.01		%	2.28		%	2.22		%
Economic net interest income (excluding PAA) *	$	415,485		$	358,012		$	384,261
Net interest spread (excluding PAA) *	1.24		%	0.98		%	1.16		%
Interest income (excluding PAA) *	$	990,322		$	1,036,451		$	905,146
TBA dollar roll income and CMBX coupon income	36,901			15,554			69,572
Interest expense	(620,058		)	(766,905		)	(586,774		)
Net interest component of interest rate swaps	45,221			88,466			65,889
Subtotal	$	452,386		$	373,566		$	453,833
Average interest earnings assets	$	121,801,951		$	127,207,668		$	107,232,861
Average TBA contract and CMBX balances	6,878,502			9,248,502			14,788,453
Subtotal	$	128,680,453		$	136,456,170		$	122,021,314
Net interest margin (excluding PAA) *	1.41		%	1.10		%	1.49		%
* Represents a non-GAAP financial measure.

Fourth Quarter 2019 Financial Summary February 12, 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 Fourth Quarter 2019 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 and future opportunities. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, 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 metrics, which are presented both inclusive and exclusive of 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 non-GAAP metrics, which include core earnings, and 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 12/31/2019 9/30/2019 GAAP net income (loss) per average common share (1) $0.82 ($0.54) Core earnings (excluding PAA) per average common share *(1) $0.26 $0.21 Core earnings per average common share *(1) $0.32 $0.13 Income Statement PAA cost (benefit) per average common share (2) ($0.06) $0.08 Annualized GAAP return (loss) on average equity 31.20% (19.32%) Annualized core return on average equity (excluding PAA)* 10.56% 8.85% Book value per common share $9.66 $9.21 Leverage at period-end (3) 7.1x 7.3x Balance Sheet Economic leverage at period-end (4) 7.2x 7.7x Capital ratio at period-end (5) 12.0% 11.2% Securities $114,833,580 $116,094,061 Loans, net 4,462,350 3,946,614 Mortgage servicing rights 378,078 386,051 Portfolio Assets transferred or pledged to securitization vehicles 7,002,460 4,688,144 Real estate, net 725,638 725,508 Total residential and commercial investments $127,402,106 $125,840,378 Net interest margin (6) 1.67% 0.75% Net interest margin (excluding PAA) *(6) 1.41% 1.10% Average yield on interest earning assets (7) 3.53% 2.89% Key Statistics Average yield on interest earning assets (excluding PAA) *(7) 3.25% 3.26% Average cost of interest bearing liabilities (8) 2.01% 2.28% Net interest spread 1.52% 0.61% Net interest spread (excluding PAA) * 1.24% 0.98% Operating expenses to core earnings (excluding PAA) *(9) 17.04% 18.58% Efficiency Annualized operating expenses as a % of average total assets (9) 0.22% 0.19% Annualized operating expenses as a % of average total equity (9) 1.80% 1.64% * 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 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Agency mortgage-backed securities $112,893,367 $114,462,524 $118,202,040 $103,093,526 $90,752,995 Credit risk transfer securities 531,322 474,765 491,969 607,945 552,097 Non-agency mortgage-backed securities 1,135,868 1,015,921 1,097,752 1,116,569 1,161,938 Commercial mortgage-backed securities 273,023 140,851 135,108 175,231 156,758 Total securities $114,833,580 $116,094,061 $119,926,869 $104,993,271 $92,623,788 Residential mortgage loans $1,647,787 $1,219,402 $1,061,124 $1,311,720 $1,359,806 Commercial real estate debt and preferred equity 669,713 611,429 623,705 722,962 1,296,803 Corporate debt 2,144,850 2,115,783 1,792,837 1,758,082 1,887,182 Loans held for sale — — 68,802 86,560 42,184 Portfolio- Total loans, net $4,462,350 $3,946,614 $3,546,468 $3,879,324 $4,585,975 Related Mortgage servicing rights $378,078 $386,051 $425,328 $500,745 $557,813 Data Agency mortgage-backed securities transferred or pledged to securitization vehicles $1,122,588 $— $— $— $— Residential mortgage loans transferred or pledged to securitization vehicles 2,598,374 2,376,731 2,106,981 1,425,668 1,094,831 Commercial real estate debt investments transferred or pledged to securitization vehicles 2,345,120 2,311,413 2,104,601 2,939,632 2,738,369 Commercial real estate debt and preferred equity transferred or pledged to securitization vehicles 936,378 — — — — Assets transferred or pledged to securitization vehicles $7,002,460 $4,688,144 $4,211,582 $4,365,300 $3,833,200 Real estate, net $725,638 $725,508 $733,196 $734,239 $739,473 Total residential and commercial investments $127,402,106 $125,840,378 $128,843,443 $114,472,879 $102,340,249 Total assets $130,295,081 $128,956,120 $131,800,776 $119,172,549 $105,787,527 Average TBA contract and CMBX balances $6,878,502 $9,248,502 $12,757,975 $14,927,490 $14,788,453 % Fixed-rate 97% 97% 96% 94% 93% Residential % Adjustable-rate 3% 3% 4% 6% 7% Securities Weighted average experienced CPR for the period 17.8% 14.6% 11.2% 7.3% 7.9% Summary Portfolio Weighted average projected long-term CPR at period-end 13.9% 16.3% 14.5% 11.6% 10.1% Statistics Net premium and discount balance in Residential Securities $5,185,797 $5,262,316 $5,625,788 $5,217,013 $5,118,478 Net premium and discount balance as % of stockholders' equity 32.84% 34.58% 35.83% 33.07% 36.27% 3

Financing and Capital Data Unaudited, dollars in thousands except per share amounts For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Repurchase agreements $101,740,728 $102,682,104 $105,181,241 $88,554,170 $81,115,874 Other secured financing 4,455,700 4,466,030 4,127,989 4,144,623 4,183,311 Debt issued by securitization vehicles 5,622,801 3,856,082 3,470,168 3,693,766 3,347,062 Mortgages payable 485,005 485,657 498,772 510,386 511,056 Total debt $112,304,234 $111,489,873 $113,278,170 $96,902,945 $89,157,303 Financing Data Total liabilities $114,498,737 $113,732,416 $116,093,369 $103,391,105 $91,669,726 Cumulative redeemable preferred stock $1,982,026 $1,982,026 $2,110,346 $1,778,168 $1,778,168 Common equity(1) 13,809,991 13,237,270 13,592,335 13,998,049 12,333,944 Total Annaly stockholders' equity 15,792,017 15,219,296 15,702,681 15,776,217 14,112,112 Non-controlling interests 4,327 4,408 4,726 5,227 5,689 Total equity $15,796,344 $15,223,704 $15,707,407 $15,781,444 $14,117,801 Weighted average days to maturity of repurchase agreements 65 45 70 72 77 Weighted average rate on repurchase agreements, for the quarter(2)(3) 2.09% 2.53% 2.66% 2.64% 2.43% Weighted average rate on repurchase agreements, at period-end(3) 2.03% 2.48% 2.69% 2.85% 2.96% Leverage at period-end 7.1x 7.3x 7.2x 6.1x 6.3x Economic leverage at period-end 7.2x 7.7x 7.6x 7.0x 7.0x Key Capital and Capital ratio at period-end 12.0% 11.2% 11.4% 12.0% 12.1% Hedging Metrics Book value per common share $9.66 $9.21 $9.33 $9.67 $9.39 Total common shares outstanding 1,430,106 1,437,964 1,456,263 1,448,103 1,313,763 Hedge ratio(4) 75% 73% 74% 85% 94% Weighted average pay rate on interest rate swaps, at period-end 1.84% 1.88% 2.12% 2.20% 2.17% Weighted average receive rate on interest rate swaps, at period-end 1.89% 2.16% 2.46% 2.66% 2.68% Weighted average net rate on interest rate swaps, at period-end (0.05%) (0.28%) (0.34%) (0.46%) (0.51%) 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 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Total interest income $1,074,214 $919,299 $927,598 $866,186 $859,674 Total interest expense 620,058 766,905 750,217 647,695 586,774 Net interest income $454,156 $152,394 $177,381 $218,491 $272,900 Total economic interest expense *(1) $574,837 $678,439 $666,564 $513,660 $520,885 Economic net interest income * $499,377 $240,860 $261,034 $352,526 $338,789 Total interest income (excluding PAA) * $990,322 $1,036,451 $1,067,361 $948,057 $905,146 Economic net interest income (excluding PAA) * $415,485 $358,012 $400,797 $434,397 $384,261 GAAP net income (loss) $1,209,742 ($747,169) ($1,776,413) ($849,251) ($2,254,872) (2) Summary Income GAAP net income (loss) available (related) to common stockholders $1,174,165 ($783,210) ($1,808,752) ($881,644) ($2,287,383) Statement GAAP net income (loss) per average common share (2) $0.82 ($0.54) ($1.24) ($0.63) ($1.74) Core earnings (excluding PAA) * $409,157 $341,931 $391,153 $433,155 $417,169 Core earnings (excluding PAA) available to common stockholders *(2) $373,648 $305,780 $358,731 $400,661 $384,675 Core earnings (excluding PAA) per average common share *(2) $0.26 $0.21 $0.25 $0.29 $0.29 Core earnings * $493,049 $224,779 $251,390 $351,284 $371,697 Core earnings available to common stockholders *(2) $457,540 $188,628 $218,968 $318,790 $339,203 Core earnings per average common share *(2) $0.32 $0.13 $0.15 $0.23 $0.26 PAA cost (benefit) ($83,892) $117,152 $139,763 $81,871 $45,472 PAA cost (benefit) per average common share (3) ($0.06) $0.08 $0.10 $0.06 $0.03 * 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 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Dividends declared per common share $0.25 $0.25 $0.25 $0.30 $0.30 Total common and preferred dividends declared $393,203 $396,187 $396,388 $467,121 $426,816 Annualized GAAP return (loss) on average equity 31.20% (19.32%) (45.13%) (22.72%) (62.05%) Annualized GAAP return (loss) on average equity per unit of economic leverage 4.33% (2.51%) (5.94%) (3.25%) (8.86%) Annualized core return on average equity (excluding PAA) * 10.56% 8.85% 9.94% 11.59% 11.48% Annualized core return on average equity per unit of economic leverage (excluding PAA) * 1.47% 1.15% 1.31% 1.66% 1.64% Key Earnings Metrics Net interest margin 1.67% 0.75% 0.87% 1.25% 1.34% Net interest margin (excluding PAA) * 1.41% 1.10% 1.28% 1.51% 1.49% Average yield on interest earning assets 3.53% 2.89% 3.03% 3.15% 3.21% Average yield on interest earning assets (excluding PAA) * 3.25% 3.26% 3.48% 3.45% 3.38% Average cost of interest bearing liabilities 2.01% 2.28% 2.41% 2.15% 2.22% Net interest spread 1.52% 0.61% 0.62% 1.00% 0.99% Net interest spread (excluding PAA) * 1.24% 0.98% 1.07% 1.30% 1.16% * Represents a non-GAAP financial measure. 6

Components of Economic Net Interest Income Unaudited, dollars in thousands For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Interest income: Residential Securities $923,653 $784,228 $777,891 $709,774 $708,146 Residential mortgage loans 47,377 37,673 35,025 29,991 27,703 Commercial investment portfolio 97,366 87,946 92,131 100,952 107,650 Reverse repurchase agreements 5,818 9,452 22,551 25,469 16,175 Total interest income $1,074,214 $919,299 $927,598 $866,186 $859,674 Economic interest expense: Economic Net Repurchase agreements $550,283 $699,838 $683,647 $579,514 $521,546 Interest Income Net interest component of interest rate swaps (45,221) (88,466) (83,653) (134,035) (65,889) Debt issued by securitization vehicles 39,099 34,524 34,151 34,207 34,769 Other 30,676 32,543 32,419 33,974 30,459 Total economic interest expense * $574,837 $678,439 $666,564 $513,660 $520,885 Economic net interest income * $499,377 $240,860 $261,034 $352,526 $338,789 PAA cost (benefit) (83,892) 117,152 139,763 81,871 45,472 Economic net interest income (excluding PAA) * $415,485 $358,012 $400,797 $434,397 $384,261 * Represents a non-GAAP financial measure. 7

GAAP Net Income to Core Earnings Reconciliation Unaudited, dollars in thousands For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 GAAP net income (loss) $1,209,742 ($747,169) ($1,776,413) ($849,251) ($2,254,872) Net income (loss) attributable to noncontrolling interests 68 (110) (83) (101) 17 Net income (loss) attributable to Annaly $1,209,674 ($747,059) ($1,776,330) ($849,150) ($2,254,889) Adjustments to exclude reported realized and unrealized (gains) losses: Realized (gains) losses on termination or maturity of interest rate swaps 4,615 682,602 167,491 588,256 — Unrealized (gains) losses on interest rate swaps (782,608) 326,309 1,276,019 390,556 1,313,882 Net (gains) losses on disposal of investments (17,783) (66,522) 38,333 93,916 747,505 Net (gains) losses on other derivatives 42,312 16,888 506,411 115,159 484,872 Net unrealized (gains) losses on instruments measured at fair value through earnings 5,636 1,091 4,881 (47,629) 18,169 Loan loss provision 7,362 3,504 — 5,703 3,496 Adjustments to exclude components of other (income) loss: Depreciation and amortization expense related to commercial real estate (1) 9,823 9,974 10,147 10,114 11,000 Non-core (income) loss allocated to equity method investments (2) (3,979) 4,541 11,327 9,496 (10,307) Core Earnings Adjustments to exclude components of general and administrative expenses and income taxes: Reconciliation Transaction expenses and non-recurring items (3) 3,634 2,622 3,046 9,982 3,816 Income tax effect of non-core income (loss) items (418) (2,762) (3,507) 726 3,334 Adjustments to add back components of realized and unrealized (gains) losses: TBA dollar roll income and CMBX coupon income (4) 36,901 15,554 33,229 38,134 69,572 MSR amortization (5) (22,120) (21,963) (19,657) (13,979) (18,753) Core earnings * 493,049 224,779 251,390 351,284 371,697 Less: Premium amortization adjustment cost (benefit) (83,892) 117,152 139,763 81,871 45,472 Core earnings (excluding PAA) * $409,157 $341,931 $391,153 $433,155 $417,169 Dividends on preferred stock (6) 35,509 36,151 32,422 32,494 32,494 Core earnings attributable to common stockholders * $457,540 $188,628 $218,968 $318,790 $339,203 Core earnings attributable to common stockholders (excluding PAA) * $373,648 $305,780 $358,731 $400,661 $384,675 * 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 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Book value per common share, beginning of period $9.21 $9.33 $9.67 $9.39 $10.03 Net income (loss) available (related) to common stockholders 0.82 (0.54) (1.24) (0.63) (1.74) Book Value Other comprehensive income (loss) attributable to common stockholders (0.12) 0.66 1.15 1.19 1.40 Rollforward Common dividends declared (0.25) (0.25) (0.25) (0.30) (0.30) Issuance / buyback of common stock / redemption of preferred stock 0.00 0.01 0.00 0.02 0.00 Book value per common share, end of period $9.66 $9.21 $9.33 $9.67 $9.39 Prior quarter net interest margin 0.75% 0.87% 1.25% 1.34% 1.49% Quarter-over-quarter changes in contribution: Coupon on average interest-earning assets (including average TBA dollar roll and 0.08% 0.09% 0.12% 0.04% 0.02% CMBX balances) Net Interest Margin Net amortization of premiums 0.57% (0.14%) (0.16%) (0.08%) (0.07%) TBA dollar roll income and CMBX coupon income 0.07% (0.05%) (0.02%) (0.11%) 0.03% Interest expense and net interest component of interest rate swaps 0.20% (0.02%) (0.32%) 0.06% (0.13%) Current quarter net interest margin 1.67% 0.75% 0.87% 1.25% 1.34% Prior quarter net interest margin (excluding PAA) * 1.10% 1.28% 1.51% 1.49% 1.50% Quarter-over-quarter changes in contribution: Coupon on average interest-earning assets (including average TBA dollar roll and CMBX balances) 0.08% 0.09% 0.12% 0.04% 0.02% Net Interest Margin (excluding PAA)* Net amortization of premiums (excluding PAA) (0.04%) (0.20%) (0.01%) 0.03% 0.07% TBA dollar roll income and CMBX coupon income 0.07% (0.05%) (0.02%) (0.11%) 0.03% Interest expense and net interest component of interest rate swaps 0.20% (0.02%) (0.32%) 0.06% (0.13%) Current quarter net interest margin (excluding PAA) * 1.41% 1.10% 1.28% 1.51% 1.49% * Represents a non-GAAP financial measure. 9

Quarter-Over-Quarter Changes in Key Metrics (continued) Unaudited For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Prior quarter net interest spread 0.61% 0.62% 1.00% 0.99% 1.13% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.02% (0.02%) 0.03% 0.03% 0.08% Net Interest Spread Net amortization of premiums 0.62% (0.12%) (0.15%) (0.09%) (0.08%) Average cost of interest bearing liabilities 0.27% 0.13% (0.26%) 0.07% (0.14%) Current quarter net interest spread 1.52% 0.61% 0.62% 1.00% 0.99% Prior quarter net interest spread (excluding PAA) * 0.98% 1.07% 1.30% 1.16% 1.14% Quarter-over-quarter changes in contribution: Net Interest Spread Coupon on average interest earning assets 0.02% (0.02%) 0.03% 0.03% 0.08% * (excluding PAA) Net amortization of premiums, excluding PAA (0.03%) (0.20%) 0.00% 0.04% 0.08% Average cost of interest bearing liabilities 0.27% 0.13% (0.26%) 0.07% (0.14%) Current quarter net interest spread (excluding PAA) * 1.24% 0.98% 1.07% 1.30% 1.16% * Represents a non-GAAP financial measure. 10

Quarter-Over-Quarter Changes in Annualized Return on Average Equity Unaudited For the quarters ended 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Prior quarter annualized GAAP return (loss) on average equity (19.32%) (45.13%) (22.72%) (62.05%) 10.73% Quarter-over-quarter changes in contribution: Coupon income (1.36%) 1.67% 2.00% 0.16% 1.78% Net amortization of premiums and accretion of discounts 5.29% (1.46%) (1.61%) (0.64%) (0.86%) Interest expense and net interest component of interest rate swaps 2.72% (0.61%) (3.19%) 0.59% (1.81%) Annualized GAAP Return (Loss) on Realized gains (losses) on termination or maturity of interest rate swaps 17.54% (13.40%) 11.48% (15.74%) (0.02%) Average Equity Unrealized gains (losses) on interest rate swaps 28.62% 23.98% (21.97%) 25.70% (47.77%) Realized and unrealized gains (losses) on investments and other derivatives (2.04%) 15.22% (9.64%) 30.10% (27.00%) Loan loss provision (0.10%) (0.09%) 0.15% (0.06%) (0.10%) Other(1) (0.15%) 0.50% 0.37% (0.78%) 3.00% Current quarter annualized GAAP return (loss) on average equity 31.20% (19.32%) (45.13%) (22.72%) (62.05%) Prior quarter annualized core return on average equity (excluding PAA) * 8.85% 9.94% 11.59% 11.48% 10.85% Quarter-over-quarter changes in contribution: Coupon income (1.36%) 1.67% 2.00% 0.16% 1.78% Annualized Core Return on Average Net amortization of premiums (excluding PAA) 0.09% (1.98%) (0.25%) 0.30% 0.29% Equity (excluding Interest expense and net interest component of interest rate swaps 2.72% (0.61%) (3.19%) 0.59% (1.81%) PAA)* TBA dollar roll income and CMBX coupon income 0.56% (0.44%) (0.18%) (0.89%) 0.34% Other(2) (0.30%) 0.27% (0.03%) (0.05%) 0.03% Current quarter core return on annualized average equity (excluding PAA) * 10.56% 8.85% 9.94% 11.59% 11.48% * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 11

Residential Investments and TBA Derivative Overview as of December 31, 2019 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) $4,509,128 4.3% 3.35% 101.8% 105.9% 12.3% $4,774,378 20 years 2,580,631 2.4% 3.53% 103.9% 105.0% 13.0% 2,709,298 >=30 years (2) 98,150,998 93.3% 3.93% 104.2% 106.2% 17.8% 104,239,539 Total/Weighted Avg. $105,240,757 100.0% 3.90% 104.1% 106.2% 17.6% $111,723,215 TBA Contracts Weighted Avg. Implied Cost Implied Market Type Notional Value % (4) Coupon Basis Value 15-year $500,000 7.2% 2.50% $503,798 $504,453 30-year 6,399,000 92.8% 2.27% 6,384,607 6,387,817 Total/Weighted Avg. $6,899,000 100.0% 2.28% $6,888,405 $6,892,270 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 $1,362,726 89.1% 4.18% 105.4% 103.7% 40.4% $1,413,676 25 - 40 months — —% —% —% —% —% — 41 - 60 months 56,157 3.7% 2.55% 99.4% 101.5% 18.2% 56,973 61 - 90 months 110,488 7.2% 2.97% 102.0% 102.8% 13.3% 113,529 Total/Weighted Avg. $1,529,371 100.0% 4.03% 105.0% 103.6% 40.3% $1,584,178 Detailed endnotes are included within the Appendix at the end of this presentation. 12

Residential Investments & TBA Derivative Overview as of December 31, 2019 (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 $1,709,865 38.1% 3.33% 14.3% 11.0% 13.4% $188,052 Inverse Interest-only 2,776,980 61.9% 4.33% 22.3% 18.7% 15.0% 520,510 Total/Weighted Avg. $4,486,845 100.0% 3.95% 19.2% 15.8% 14.4% $708,562 Mortgage Servicing Rights Unpaid Excess Weighted Avg. Principal Weighted Avg. Servicing Loan Age Estimated Type Balance Coupon Spread (months) Fair Value Total/Weighted Avg. $36,418,833 3.82% 0.24% 45 $378,078 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 $517,110 9.0% 5.73% 99.8% 102.7% $531,322 Alt-A 160,957 2.6% 4.49% 86.3% 94.1% 151,383 Prime 277,076 4.7% 4.38% 94.8% 99.7% 276,257 Prime Interest-only 391,234 0.1% 0.47% 1.0% 0.8% 3,167 Subprime 370,263 5.9% 2.58% 84.2% 94.3% 348,979 NPL/RPL 164,180 2.7% 4.19% 99.9% 100.1% 164,268 Prime Jumbo 182,709 3.1% 3.95% 98.2% 101.1% 184,664 Prime Jumbo Interest-only 554,189 0.1% 0.37% 1.6% 1.3% 7,150 Residential Mortgage Loans 4,133,149 71.8% 4.94% 101.6% 102.7% 4,246,161 Total/Weighted Avg. $6,750,867 100.0% 4.77% $5,913,351 Detailed endnotes are included within the Appendix at the end of this presentation. 13

(1) Residential Credit Investments Detail as of December 31, 2019 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 $508,643 $— $508,643 5.67% 1.00% 0.43% 22.58% Private Label Credit Risk Transfer 22,679 — 22,679 7.25% —% 0.21% 17.67% Alt-A 151,383 82,005 69,378 4.49% 12.41% 8.51% 13.66% Prime 276,257 78,289 197,968 4.38% 7.64% 4.12% 20.08% Prime Interest-only 3,167 3,167 — 0.47% —% 0.44% 40.67% Subprime 348,979 118,352 230,627 2.58% 9.05% 21.74% 6.97% Re-Performing Loan Securitizations 164,268 — 164,268 4.19% 23.37% 13.64% 6.19% Prime Jumbo 184,664 145,901 38,763 3.95% 15.92% 0.19% 32.12% Prime Jumbo Interest-only 7,150 7,150 — 0.37% —% 0.13% 19.45% Total $1,667,190 $434,864 $1,232,326 4.62% 8.87% 8.02% 33.00% Bond Coupon Estimated Fair Product Value ARM Fixed Floater Interest Only Agency Credit Risk Transfer $508,643 $— $— $508,643 $— Private Label Credit Risk Transfer 22,679 — — 22,679 — Alt-A 151,383 30,636 102,855 17,892 — Prime 276,257 68,448 177,827 29,982 — Prime Interest-only 3,167 — — — 3,167 Subprime 348,979 — 26,914 322,065 — Re-Performing Loan Securitizations 164,268 — 164,268 — — Prime Jumbo 184,664 — 184,664 — — Prime Jumbo Interest-only 7,150 — — — 7,150 Total $1,667,190 $99,084 $656,528 $901,261 $10,317 Detailed endnotes are included within the Appendix at the end of this presentation. 14

Commercial Real Estate Overview as of December 31, 2019 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 21 $499,690 10.2% 72.7% 3.4 $207,532 9.3% Mezzanine Loans 12 170,023 3.4% 78.4% 3.0 115,159 9.4% Total Loans 33 669,713 13.6% 74.2% 3.3 322,691 9.3% Securities CMBS (AAA) 2 57,711 1.2% 25.1% 0.5 5,788 16.8% CMBS (Credit) 5 169,076 3.4% 60.2% 3.6 54,754 15.2% CMBS (Credit IO) 1 10,609 0.2% 66.8% 9.6 10,609 6.0% CMBS (Conduit) 4 35,627 0.7% 48.2% 6.7 4,190 16.5% Total Securities 12 273,023 5.5% 51.5% 3.6 75,341 14.2% Assets transferred or pledged to securitization vehicles NLY 2019-FL2 24 853,165 17.2% 69.4% 3.3 187,822 16.0% NLY 2019 - OAKS 1 83,213 1.7% 37.5% 5.1 28,534 17.9% Commercial Trusts 71 2,345,120 47.3% 44.1% 1.6 92,864 18.2% Total Assets transferred or pledged to securitization vehicles 96 $3,281,498 66.2% 50.5% 2.1 $309,220 16.8% Total Debt Investments 141 $4,224,234 85.3% 54.3% 2.4 $707,252 13.1% Equity Investments Real Estate Held for Investment 46 616,822 12.5% 235,559 13.2% Investment in Unconsolidated Joint Ventures (5) 32 108,816 2.2% 155,931 8.2% Total Equity Investments 78 725,638 14.7% 391,490 11.2% Total Investment Portfolio 219 $4,949,872 100.0% $1,098,742 12.5% Range of Implied Net Weighted Derivatives Net Notional Ratings Market Value Average Coupon CMBX (6) $335,000 AA to BBB- $340,657 1.3% Detailed endnotes are included within the Appendix at the end of this presentation. 15

Middle Market Lending Overview as of December 31, 2019 Unaudited, dollars in thousands Industry Dispersion Size Dispersion Floating Industry Fixed Rate Rate Total Position Size Amount Percentage Chemicals & Allied Products — 15,002 15,002 $0 - $20 million $238,713 11.1% Coating, Engraving and Allied Services — 47,249 47,249 $20 - $40 million 419,800 19.6% Computer Programming, Data Processing & Other Computer Related Services — 394,193 394,193 $40 - $60 million 430,395 20.1% Drugs — 15,923 15,923 Greater than $60 million 1,055,942 49.2% Electric Work — 43,175 43,175 Total $2,144,850 100.0% Electronic Components & Accessories — 24,000 24,000 Engineering, Architectural, and Surveying — 124,201 124,201 Grocery Stores — 23,248 23,248 Tenor Dispersion Home Health Care Services — 29,361 29,361 Remaining Term Amount Percentage Insurance Agents, Brokers and Services — 75,410 75,410 One year or less $3,010 0.1% Mailing, Reproduction, Commercial Art and Photography, and Stenographic — 14,755 14,755 One to three years 128,721 6.0% Management and Public Relations Services — 339,179 339,179 Three to five years 874,700 40.8% Medical and Dental Laboratories — 41,344 41,344 Greater than five years 1,138,419 53.1% Metal Cans & Shipping Containers — 118,456 118,456 Total $2,144,850 100.0% Miscellaneous Business Services — 164,033 164,033 Miscellaneous Equipment Rental and Leasing — 49,776 49,776 Lien Position Amount Percentage Miscellaneous Health and Allied Services, not elsewhere classified — 78,908 78,908 First lien loans $1,396,140 65.1% Miscellaneous Plastic Products — 10,000 10,000 Second lien loans 748,710 34.9% Motor Vehicles and Motor Vehicle Parts and Supplies — 28,815 28,815 Total $2,144,850 100.0% Nonferrous Foundries (Castings) — 30,191 30,191 Offices and Clinics of Doctors of Medicine — 106,993 106,993 Offices and Clinics of Other Health Practitioners — 10,098 10,098 Petroleum and Petroleum Products — 24,923 24,923 Public Warehousing and Storage — 107,029 107,029 Research, Development and Testing Services — 45,610 45,610 Schools and Educational Services, not elsewhere classified — 19,586 19,586 Surgical, Medical, and Dental Instruments and Supplies — 102,182 102,182 Telephone Communications — 61,210 61,210 Total $— $2,144,850 $2,144,850 16

Hedging and Liabilities as of December 31, 2019 Unaudited, dollars in thousands Interest Rate Swaps Interest Rate Swaptions Weighted Weighted Weighted Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Current Avg. Avg. Avg. Underlying Underlying Underlying Underlying Months to Maturity Notional Pay Rate Receive Rate Years to Maturity Type Notional Fixed Rate Floating Rate Years to Maturity Expiration 0 to 3 years $38,942,400 1.60% 1.84% 1.29 Long Pay $4,675,000 2.53% 3M LIBOR 9.22 4.66 >3 to 6 years 16,097,450 1.77% 1.87% 4.30 Long Receive $2,000,000 1.49% 3M LIBOR 10.29 3.40 > 6 to 10 years 16,176,500 2.20% 2.02% 9.00 Greater than 10 years 2,930,000 3.76% 1.86% 17.88 Total / Weighted Avg. $74,146,350 1.84% 1.89% 4.23 Futures Positions Repurchase Agreements & Other Secured Financing Notional Notional Weighted Avg. Weighted Avg. Long Short Years to Principal Rate Type Positions Positions Maturity(1) Maturity Balance At Period End U.S. Treasury Futures - 2 year $— ($180,000) 1.96 Within 30 days $37,382,530 2.15% U.S. Treasury Futures - 5 year — (2,953,300) 4.42 30 to 59 days 15,300,157 2.00% U.S. Treasury Futures - 10 year & Greater 2,600,000 (5,806,400) 9.74 60 to 89 days 22,207,736 1.97% Total $2,600,000 ($8,939,700) 8.26 90 to 119 days 10,020,505 1.97% Over 120 days(2) 21,285,500 2.02% Total / Weighted Avg. $106,196,428 2.05% Weighted Average Rate Principal Balance At Period End For the Quarter Days to Maturity(3) Repurchase agreements $101,740,728 2.03% 2.10% 65 Other secured financing 4,455,700 2.48% 2.70% 620 Debt issued by securitization vehicles 5,584,552 3.23% 3.28% 7,627 Mortgages payable 490,631 4.07% 3.98% 4,594 Total indebtedness $112,271,611 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 December 31, 2019 and September 30, 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 December 31, 2019 As of September 30, 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% 1.0% 0.1% 0.9% (50) 0.1% 1.0% 0.1% 0.8% (25) 0.1% 0.8% 0.1% 0.6% 25 (0.2%) (1.7%) (0.1%) (1.2%) 50 (0.5%) (4.5%) (0.4%) (3.4%) 75 (1.0%) (8.1%) (0.7%) (6.5%) MBS Spread Sensitivity (1) As of December 31, 2019 As of September 30, 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) 1.2% 10.5% 1.2% 10.5% (15) 0.7% 6.2% 0.7% 6.3% (5) 0.2% 2.1% 0.2% 2.1% 5 (0.2%) (2.1%) (0.2%) (2.1%) 15 (0.7%) (6.2%) (0.7%) (6.2%) 25 (1.2%) (10.2%) (1.2%) (10.4%) 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, 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 for the quarters ended December 31, 2019, September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, is provided on page 8 of this financial summary. The Company calculates “core earnings”, a non-GAAP measure, 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 core earnings (excluding PAA), which is defined as core earnings excluding 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. 20

Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended, 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Premium Amortization Reconciliation Premium amortization expense $171,447 $376,306 $318,587 $247,446 $220,131 Less: PAA cost (benefit) (83,892) 117,152 139,763 81,871 45,472 Premium amortization expense (excluding PAA) $255,339 $259,154 $178,824 $165,575 $174,659 Interest Income (excluding PAA) Reconciliation GAAP interest income $1,074,214 $919,299 $927,598 $866,186 $859,674 PAA cost (benefit) (83,892) 117,152 139,763 81,871 45,472 Interest Income (excluding PAA) * $990,322 $1,036,451 $1,067,361 $948,057 $905,146 Economic Interest Expense Reconciliation GAAP interest expense $620,058 $766,905 $750,217 $647,695 $586,774 Add: Net interest component of interest rate swaps (45,221) (88,466) (83,653) (134,035) (65,889) Economic interest expense * $574,837 $678,439 $666,564 $513,660 $520,885 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $990,322 $1,036,451 $1,067,361 $948,057 $905,146 Less: Economic interest expense * 574,837 678,439 666,564 513,660 520,885 Economic net interest income (excluding PAA) * $415,485 $358,012 $400,797 $434,397 $384,261 * Represents a non-GAAP financial measure. 21

Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended, 12/31/2019 9/30/2019 6/30/2019 3/31/2019 12/31/2018 Economic Metrics (excluding PAA) Average interest earning assets $121,801,951 $127,207,668 $122,601,881 $109,946,527 $107,232,861 Interest income (excluding PAA) * $990,322 $1,036,451 $1,067,361 $948,057 $905,146 Average yield on interest earning assets (excluding PAA) * 3.25% 3.26% 3.48% 3.45% 3.38% Average interest bearing liabilities $111,873,379 $116,391,094 $109,628,007 $95,529,819 $91,746,160 Economic interest expense * 574,837 678,439 666,564 513,660 520,885 Average cost of interest bearing liabilities 2.01% 2.28% 2.41% 2.15% 2.22% Economic net interest income (excluding PAA)* $415,485 $358,012 $400,797 $434,397 $384,261 Net interest spread (excluding PAA) * 1.24% 0.98% 1.07% 1.30% 1.16% Interest income (excluding PAA) * $990,322 $1,036,451 $1,067,361 $948,057 $905,146 TBA dollar roll income and CMBX coupon income 36,901 15,554 33,229 38,134 69,572 Interest expense (620,058) (766,905) (750,217) (647,695) (586,774) Net interest component of interest rate swaps 45,221 88,466 83,653 134,035 65,889 Subtotal $452,386 $373,566 $434,026 $472,531 $453,833 Average interest earning assets $121,801,951 $127,207,668 $122,601,881 $109,946,527 $107,232,861 Average TBA contract and CMBX balances 6,878,502 9,248,502 12,757,975 14,927,490 14,788,453 Subtotal $128,680,453 $136,456,170 $135,359,856 $124,874,017 $122,021,314 Net interest margin (excluding PAA) * 1.41% 1.10% 1.28% 1.51% 1.49% * Represents a non-GAAP financial measure. 22

Endnotes Page 2 Page 4 (1) Net of dividends on preferred stock. The quarter ended September 30, 2019 excludes cumulative (1) Consists of common stock, additional paid-in capital, accumulated other comprehensive income and undeclared dividends of $0.3 million on the Company's Series I Preferred Stock as of June 30, (loss) and accumulated deficit. 2019. (2) Utilizes an actual/360 factor. (2) The Company separately calculates core earnings per average common share and core earnings (3) The average and period-end rates are net of reverse repurchase agreements. Without netting reverse (excluding PAA) per average common share, with the difference between these two per share repurchase agreements, the average rate was 2.10%, 2.53%, 2.65%, 2.64% and 2.43% and the amounts attributed to the PAA cost (benefit) per average common share. As such, the reported value period-end rate was 2.03%, 2.48%, 2.69%, 2.86% and 2.97% for the quarters ended December 31, of the PAA cost (benefit) per average common share may not reflect the result of dividing the PAA 2019, September 30, 2019, June 30, 2019, March 31, 2019 and December 31, 2018, respectively. cost (benefit) by the weighted average number of common shares outstanding due to rounding. (4) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding receiver (3) 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 (4) 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). Securitized debt, certain credit facilities (included within other secured financing) and (1) Includes GAAP interest expense and the net interest component of interest rate swaps. mortgages payable are non-recourse to the Company and are excluded from this measure. (2) Net of dividends on preferred stock. The quarter ended September 30, 2019 excludes, and the (5) Computed as the ratio of total equity to total assets (inclusive of total market value of TBA derivatives quarter ended June 30, 2019 includes, cumulative and undeclared dividends of $0.3 million on and CMBX positions and exclusive of securitized debt of consolidated variable interest entities the Company's Series I Preferred Stock as of June 30, 2019. ("VIEs"). (3) The Company separately calculates core earnings per average common share and core earnings (6) Net interest margin represents the sum of the Company's interest income plus TBA dollar roll (excluding PAA) per average common share, with the difference between these two per share income and CMBX coupon income less interest expense and the net interest component of interest amounts attributed to the PAA cost (benefit) per average common share. As such, the reported rate swaps divided by the sum of average interest earning assets plus average TBA contract and value of the PAA cost (benefit) per average common share may not reflect the result of dividing CMBX balances. Net interest margin (excluding PAA) excludes the PAA representing the the PAA cost (benefit) by the weighted average number of common shares outstanding due to cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in rounding. estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities. (7) Represents annualized interest income divided by average interest earning assets. Interest earning assets reflects the average amortized cost of our investments during the period. Annualized yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (8) Average cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average amortized cost during the period. Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps. (9) Excludes costs incurred in connection with securitizations of Agency mortgage-backed securities and residential whole loans for the quarter ended December 31, 2019 and securitizations of residential whole loans for the quarter ended September 30, 2019. 23

Endnotes (continued) Page 8 Page 13 (1) Includes depreciation and amortization expense related to equity method investments. (1) Weighted by current notional value. (2) The Company excludes non-core (income) loss allocated to equity method investments, which (2) Weighted by estimated fair value. represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other income (loss). The quarter ended December 31, 2018 also includes an Page 14 adjustment for a gain on sale within an unconsolidated joint venture which is a component of Other income (loss) but excluded from core earnings. (1) Excludes residential mortgage loans. (3) The quarter ended December 31, 2019 represents costs incurred in connection with securitizations of Agency mortgage-backed securities and residential whole loans. The quarters ended September Page 15 30, 2019 and June 30, 2019 represent costs incurred in connection with securitizations of residential whole loans. The quarter ended March 31, 2019 represents costs incurred in connection with a (1) Based on an internal valuation or the most recent third party appraisal, which may be prior to loan securitization of commercial loans and a securitization of residential whole loans. The quarter ended origination/purchase date or at the time of underwriting. December 31, 2018 represents costs incurred in connection with the Company's acquisition of (2) Maturity dates assume all of the borrowers' extension options are exercised for the loan portfolio. MTGE Investment Corp and costs incurred in connection with a securitization of residential whole (3) Economic Interest is a non-GAAP measure to include gross asset values less related financings. loans. Equity investments are adjusted to exclude depreciation and amortization and grosses up real estate (4) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) investments accounted for under equity method accounting. on other derivatives. CMBX coupon income totaled $1.3 million, $1.5 million, $0.8 million, $1.1 (4) Levered returns for equity investments comprise a trailing twelve-month (“TTM”) distribution million and $1.2 million for the quarters ended December 31, 2019, September 30, 2019, June 30, yield for joint venture investments and core return for wholly owned properties. 2019, March 31, 2019 and December 31, 2018. (5) Includes investment in unconsolidated debt fund of $44.0 million, investments in Community (5) MSR amortization represents the portion of changes in fair value that is attributable to the realization Investment Impact Funds of $30.3 million and a portfolio of real estate properties of $34.5 million. of estimated cash flows on the Company’s MSR portfolio and is reported as a component of Net (6) The Company sells/buys protection on CMBX tranches referencing baskets of Conduit CMBS unrealized gains (losses) on instruments measured at fair value. bonds with various ratings. Positive net notional indicates selling protection and being long the (6) The quarter ended September 30, 2019 excludes, and the quarter ended June 30, 2019 includes, exposure to the underlying CMBS. CMBX positions are accounted for as derivatives with changes cumulative and undeclared dividends of $0.3 million on the Company's Series I Preferred Stock as in fair value presented in Net gains (losses) on other derivatives. of June 30, 2019. Page 17 Page 11 (1) Includes other income (loss), general and administrative expenses and income taxes. (1) Weighted average years to maturity for futures positions are based on the U.S. Treasury contracts cheapest to deliver. (2) Includes other income (loss) (excluding non-core items), MSR amortization (a component of Net (2) Approximately 4% of the total repurchase agreements and other secured financing have a remaining unrealized gains (losses) on instruments measured at fair value through earnings), general and maturity over one year. administrative expenses (excluding transaction related expenses) and income taxes (excluding non- (3) Determined based on estimated weighted average lives of the underlying debt instruments. core income tax). Page 18 Page 12 (1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction (1) Includes Agency-backed multifamily securities with an estimated fair value of $2.8 billion ($1.1 with internally derived inputs. Actual results could differ materially from these estimates. billion of which have been transferred or pledged to securitization vehicles). (2) Scenarios include Residential Investment Securities, residential mortgage loans, MSRs and (2) Includes fixed-rate collateralized mortgage obligations with an estimated fair value of $160.0 derivative instruments. million and Agency-backed multifamily securities with an estimated fair value of $48.0 million. (3) Net asset value (“NAV”) represents book value of common equity. (3) Weighted by current face value. (4) Weighted by current notional value. 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