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Item 5. Market for Registrant’s Common Equity

2025-02-13 compared with 2024-02-15 · 125 added, 96 removed, 113 unchanged (66% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock began trading publicly on October 8, 1997 and is traded on the New York Stock Exchange under the trading symbol “NLY.” As of January 31, 2025, we had 578,357,904 shares of common stock issued and outstanding which were held by approxima tely 464,395 beneficial holders.

The equity compensation plan information called for by Item 201(d) of Regulation S-K is set forth in Item 12 of Part III of this Form 10-K under the heading “Equity Compensation Plan Information.”

We intend to pay quarterly dividends and to distribute to our stockholders all or substantially all of our taxable income in each year (subject to certain adjustments) consistent with the distribution requirements applicable to REITs.

This will enable us to qualify for the tax benefits accorded to a REIT under the Code.

We have not established a minimum dividend payment level and our ability to pay dividends may be adversely affected by factors beyond our control.

In addition, unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on dividends.

All distributions will be made at the discretion of our Board and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board may deem relevant from time to time.

See also Item 1A.

“Risk Factors.” No dividends can be paid on our common stock unless we have paid full cumulative dividends on our preferred stock.

From the date of issuance of our preferred stock through December 31, 2024, we have paid full cumulative dividends on our preferred stock.

Share Performance Graph

The following graph and table set forth certain information comparing the yearly percentage change in cumulative total return on our common stock to the cumulative total return of the Standard & Poor’s Composite 500 stock Index or S&P 500 Index, and a select group of peers operating within the mortgage REIT industry, or Performance Peer Group.

The comparison is for the five-year period ended December 31, 2024and assumes the reinvestment of dividends.

The graph and table assume that $100 was invested in our common stock, the S&P 500 Index and the Performance Peer Group on the last trading day of the initial year shown in the graph.

In previous filings, we included the Bloomberg Mortgage REIT Index, or BBG REIT Index, in the share performance graph and table.

As a result of the discontinuation of the BBG REIT Index in 2024, we have replaced the BBG REIT Index with the Performance Peer Group.

The Performance Peer Group represents a group of mortgage REIT peers used by the Management Development and Compensation Committee of our Board of Directors to evaluate our performance and to inform certain elements of our executive compensation program.

We believe that companies included in the Performance Peer Group have portfolios and investment strategies that most closely resemble our focus on residential mortgage assets.

Companies comprising the Performance Peer Group include AGNC Investment Corp., ARMOUR Residential REIT, Inc., Chimera Investment Corporation, Dynex Capital, Inc., Ellington Financial Inc., Invesco Mortgage Capital, Inc., MFA Financial, Inc., New York Mortgage Trust, Orchid Island Capital, Inc., Redwood Trust, Inc., Rithm Capital Corp., and Two Harbors Investment Corp.

The cumulative total return of the Performance Peer Group was weighted according to the respective issuer's stock market capitalization at the beginning of the performance period.

For the five-year period ended December 31, 2023, an investment of $100 at the beginning of the period would have resulted in a value of $93 in our common stock, $98 in the BBG REIT Index, and $85 in the Performance Peer Group.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

Five-Year Share Performance

12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024

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S&P 500 Index 100 118 152 125 157 197

BBG REIT Index 100 124 96 113 86 98

Performance Peer Group 100 68 79 57 67 71

The information in the share performance graph and table has been obtained from sources believed to be reliable, but neither the accuracy nor completeness can be guaranteed.

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Share Repurchase

In January 2022, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding common shares through December 31, 2024.

The new share repurchase program replaces our previous $1.5 billion share repurchase program, which expired on December 31, 2021.

No shares were repurchased with respect to this share repurchase program during the year ended December 31, 2023.

As of December 31, 2023, the maximum dollar value of shares that may yet be purchased under this program was $1.5 billion.

In November 2022, we announced that our Board authorized a repurchase plan for all of our existing outstanding Preferred Stock (as defined below, the “Preferred Stock Repurchase Program”).

In January 2025, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2029 (the “Current Common Stock Repurchase Program”).

The Current Common Stock Repurchase Program replaces our previous $1.5 billion share repurchase program, which expired on December 31, 2024 (the “Prior Common Stock Repurchase Program”).

No shares were repurchased with respect to the Prior Common Stock Repurchase Program during the year ended December 31, 2024.

Purchases made pursuant to the Current Common Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.

The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors.

The authorization does not obligate us to acquire any particular amount of common stock and the program may be suspended or discontinued at our discretion without prior notice.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Market for Registrant’s Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities

In January 2025, we announced that our Board authorized a repurchase plan for all of our existing outstanding Preferred Stock (as defined below, the “Current Preferred Stock Repurchase Program”).

Under the terms of the plan, we are authorized to repurchase up to an aggregate of 63,500,000 shares of Preferred Stock, comprised of up to (i) 28,800,000 shares of our 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series F Preferred Stock”), (ii) 17,000,000 shares of our 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series G Preferred Stock”), and (iii) 17,700,000 shares of our 6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series I Preferred Stock”, and together with Series F Preferred Stock and Series G Preferred Stock, the “Preferred Stock”).

The aggregate liquidation value of the Preferred Stock that may be repurchased by us pursuant to the Preferred Stock Repurchase Program, as of November 3, 2022, was approximately $1.6 billion.

The Preferred Stock Repurchase Program became effective on November 3, 2022, and shall expire on December 31, 2024.

No shares were repurchased to with respect to the Preferred Stock Repurchase Program during the year ended December 31, 2023.

As of December 31, 2023, the maximum dollar value of shares that may yet be purchased under this plan was $1.6 billion.

Purchases made pursuant to the Preferred Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.

The aggregate liquidation value of the Current Preferred Stock that may be repurchased by us pursuant to the Current Preferred Stock Repurchase Program, as of December 31, 2024, was approximately $1.6 billion.

The Current Preferred Stock Repurchase Program replaces our previous repurchase plan for all of our existing outstanding Preferred Stock, which expired on December 31, 2024 (the “Prior Preferred Stock Repurchase Program”).

The Current Preferred Stock Repurchase Program became effective on January 1, 2025, and will expire on December 31, 2029.

No shares were repurchased with respect to the Prior Preferred Stock Repurchase Program during the year ended December 31, 2024.

Purchases made pursuant to the Current Preferred Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Reverse Stock Split

Business Environment

Economic Environment

London Interbank Offered Rate (“LIBOR”) Transition

Results of Operations

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Non-GAAP Financial Measures

Earnings Available for Distribution, Earnings Available for Distribution Attributable to Common Stockholders, Earnings Available for Distribution P er Average Common Share and Annualized EAD Return on Average Equity

Earnings Available for Distribution, Earnings Available for Distribution Attributable to Common Stockholders, Earnings Available for Distribution Per Average Common Share and Annualized EAD Return on Average Equity

Premium Amortization Expense

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We use our capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities.

Our three investment groups are primarily comprised of the following:

Investment Groups Description

Annaly Agency Group Invests in Agency mortgage-backed securities (“MBS”) collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae and complementary investments within the Agency market, including Agency commercial MBS.

Annaly Residential Credit Group Invests primarily in non-Agency residential whole loans and securitized products within the residential and commercial markets.

Annaly Mortgage Servicing Rights Group Invests in mortgage servicing rights (“MSR”), which provide the right to service residential mortgage loans in exchange for a portion of the interest payments made on the loans.

For a full discussion of our business, refer to the section titled “Business Overview” of Part I, Item 1.

Reverse Stock Split

On September 8, 2022, we announced that our Board had unanimously approved a reverse stock split of our common stock at a ratio of 1-for-4 (the “Reverse Stock Split”).

The Reverse Stock Split was effective following the close of business on September 23, 2022 (the “Effective Time”).

Accordingly, at the Effective Time, every four issued and outstanding shares of our common stock were converted into one share of our common stock.

No fractional shares were issued in connection with the Reverse Stock Split.

Instead, each stockholder that would have held fractional shares as a result of the Reverse Stock Split received cash in lieu of such fractional shares.

The par value per share of our common stock remained unchanged at $0.01 per share after the Reverse Stock Split.

Accordingly, for all historical periods presented, an amount equal to the par value of the reduced number of shares resulting from the Reverse Stock Split was reclassified from Common stock to Additional paid in capital in our Consolidated Statements of Financial Condition.

All references made to share or per share amounts in the accompanying consolidated financial statements and disclosures have been retroactively adjusted, where applicable, to reflect the effects of the Reverse Stock Split.

“Business” and see the Note titled "Segments" in the Notes to the Consolidated Financial Statements included in Item 15.

"Exhibits, Financial Statement Schedules."

Business Environment

Financial markets saw meaningful volatility in 2023, marking a second consecutive year in which fixed income markets were more broadly impacted by elevated uncertainty around the outlook for the economy and the macroeconomic landscape.

The volatility was driven by a combination of factors, including bank earnings and liquidity pressures that emerged in March 2023 following the sudden failure of Silicon Valley Bank.

Fears over the health of the broader banking system ultimately proved disproportionate, evidenced by a normalization in interest rates as the economy remained robust.

However, interest rates then rose sharply between August and October with the ten-year Treasury note reaching the 5% yield mark as market participants appeared increasingly concerned about the outlook for the fiscal trajectory.

The total deficit reached $1.78 trillion for the full calendar year, representing another year of large fiscal deficits despite healthy economic growth.

The broader economy continued to expand, labor markets remained robust and inflation moderated throughout the year.

While many observers had expected the economy to enter into a recession in 2023, data thus far has suggested that inflation moderated without a meaningful deterioration in economic activity, setting up a scenario in which parts of the economy moved into better balances without a sharp contraction in economic output or a significantly weaker labor market (a so-called “soft landing”).

The increased likelihood of a soft landing appears to have been driven by numerous factors, including fewer price pressures on the supply side of the economy as shipping of goods normalized following earlier disruptions from the pandemic and the Russian invasion of the Ukraine.

In addition, U.S.

consumers continue to find employment and enjoy healthy balance sheets, while growing wages afford them the ability to continue to spend on goods and services, thereby supporting broader economic growth.

Private sector investment activity rebounded somewhat in 2023 relative to 2022, while government spending and investment incentives created by federal legislation supported economic growth as well.

Following the rapid tightening in monetary policy in 2022, the Federal Reserve (the “Fed”) raised interest rates an additional one percentage point in 2023 and ultimately kept the Federal Funds Target Rate at 5.25% – 5.50% since late July.

Meanwhile, the Fed maintained the pace it set in 2022 in the reduction of its balance sheet throughout the year, effectively letting up to $60 billion in Treasury and up to $35 billion in Agency MBS runoff per month in 2023.

Driven by the continued maturities, the Federal Reserve’s balance sheet declined by $838 billion to $7.7 trillion over the course of the year.

In this environment, home prices outperformed the market’s expectations despite mortgage rates reaching 20-year highs, resulting in historically low affordability for prospective homeowners.

Home prices have continued to benefit from existing homeowners’ inability to move homes absent a meaningful increase in housing costs (the so called “lock in effect”), resulting in low availability of inventory for sale as borrowers locked into below-market mortgage rates are less willing to move or trade up.

Housing activity remains depressed, although we have seen modest signs of an uptick in demand following the recent decline in mortgage rates.

Ultimately, we are constructive on the housing market outlook should the labor market and consumers remain resilient in line with a “soft landing” economic scenario.

real economic growth remained at its above-trend pace in 2024, marking a second consecutive year of strong U.S.

economic growth despite continued elevated interest rates.

The strength of the U.S.

economy was primarily driven by consumption, as individuals benefitted from robust wage growth and a moderation of inflation pressures.

Government spending also supported economic growth, while investment activity contributed somewhat less than in 2023.

Separately, the U.S.

economy broadly appears to have benefitted from recent strong immigration flows, which helped balance labor market supply and demand, and improved productivity gains.

Financial markets observed a constructive 2024, with equities recording strong returns given the healthy economic picture, best seen in the 25.0% total return for the S&P 500 Index.

Interest rates, however, remained volatile throughout the year, though were generally more rangebound than in 2023.

Ten-year Treasury yields traded in a range between 3.6% and 4.7%, generally narrower than in 2023, when the range was 3.3% to 5.0%.

Nonetheless, interest rates generally remained elevated relative to the period between the 2008 financial crisis and the 2020 pandemic, which has led to increased speculation that the lower interest rates in that period were more of an outlier than a new normal.

For now, the U.S.

economy remains strong, which in turn suggests healthy economic growth can occur even at these higher interest rate levels.

The Federal Reserve (“the Fed”) lowered the Federal Funds Target Rate (“Fed Funds Rate”) in the second half of 2024.

As inflation rates fell from their peak in the summer of 2022 and hiring slowed over the summer months, the risk that a Fed Funds Rate at a peak of 5.25-5.50% would unduly constrain economic growth and the labor market rose.

Consequently, the Fed lowered the Fed Funds Rate by 1% over the course of three meetings between September and December, even though inflation remained above 2% annual rates.

Given continued strength in both inflation and economic activity, Fed officials have signaled a more gradual approach going forward, waiting for further inflation progress to lower the rate further.

Regarding their balance sheet policy, the Fed slowed the decline in their securities portfolio mid-year by reducing the cap on Treasury securities runoff from $60 billion per month to $25 billion.

Combined with the decline in their mortgage-backed securities portfolio, the Fed’s security portfolio declined $668 billion in 2024 and continues to decline at a $60 billion per month pace.

Of note, given the lower Fed Funds Rate and relatively less movement in long-term Treasury rates, the yield curve steepened, with the 2-year 10-year Treasury spread, the difference between yields of those maturities, turning positive for the first time in over two years.

In addition, long-term Treasuries appeared increasingly driven by investors’ increased demand for compensation to hold longer maturity securities, with rising term premia driving much of the increase in long-term Treasury yields seen in 2024.

Additionally, the U.S.

presidential election outcome amplified the rise in term premia, as expectations for a permanent extension of the 2017 “Tax Cuts and Jobs Act” was estimated to further increase the U.S.

budget deficit according to estimates by the Congressional Budget Office.

Meanwhile, residential investment slowed as high mortgage rates curbed demand for housing and housing construction, particularly in the second half of the year.

In this economic environment, the housing market saw limited changes in aggregate as inventories and activity remain subdued relative to the pre-pandemic averages, which supported home prices.

National home prices rose roughly 3.0% in 2024.

Historically low affordability for prospective homeowners, as mortgage rates remained above

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Over the course of the year, we generated a +6.0% economic return, which demonstrates the efficacy of our diversified housing finance model, as well as our disciplined portfolio and risk management.

In light of the volatile environment, we continued to proactively manage our leverage profile throughout the year, in turn reducing our economic leverage from 6.3x at the end of the 2022 to 5.7x at the end of 2023.

A part of the reduced leverage is driven by further diversification into our Residential Credit and MSR businesses, which are less levered than Agency MBS.

Of note, the combined capital allocation to the two businesses increased by five percentage points to 38% at the end of 2023.

Turning to the Agency MBS portfolio, our aggregate portfolio declined modestly, falling from $72.9 billion in assets at the end of 2022 to $65.7 billion at the end of 2023.

The lower portfolio balance is largely driven by asset sales throughout the year to accommodate the shift in capital allocation, as well as a somewhat lower leverage in the strategy as interest rate markets and mortgage spreads remained very volatile throughout most of the year.

In addition to somewhat lower aggregate holdings, we focused on shifting the coupon distribution higher throughout the year, bringing the share of 5.0% coupons or higher to 48%, up 17 percentage points from the 2022 year-end levels.

In addition, we rotated out of “to be announced” (“TBA”) security holdings, in turn reducing our holdings from $10.6 billion at the end of 2022 to ($0.6) billion at the end of 2023.

This reduction was driven by the combination of reduced advantageous financing of TBA securities relative to specified pool ownership and the desire to add prepayment protection in higher coupon purchases.

Finally, given attractive relative value opportunities with respect to Agency MBS, we increased our portfolio of Agency CMBS to $3.5 billion market value, as the asset class offered an attractive stable cash flow in volatile interest rate markets.

The residential credit sector benefited from the strong economic environment and the resilience of the housing market, enabling us to continue to achieve progress in building out the business.

Our Residential Credit portfolio ended the year at $5.7 billion market value, having grown 14% year over year, and representing 20% of the firm’s capital.

The business growth continued to be driven by our residential whole loan acquisition strategy, through which our Residential Credit business acquired $4.7 billion in loans, with a vast majority coming through our correspondent channel, which allows us to control all aspects of the loan making process, including asset selection, counterparties and loss mitigation.

Finally, we also continued to grow our MSR portfolio, further increasing assets through purchases predominantly of low-coupon bulk MSR packages, in turn growing the portfolio by 50% throughout 2023, to $2.7 billion market value.

Similar to 2022, bulk trading activity of MSR packages remained at historically elevated levels as mortgage originators looked to monetize MSR holdings to offset low profit margins in their mortgage origination businesses.

Meanwhile, demand for MSR also remained strong, as a broad investor base sought MSR as purely financial investments or to acquire escrow deposits and customers that can later be refinanced.

We opportunistically bought MSR packages as a strategic partner to originators given our complementary business strategy as a financial investor.

Our MSR portfolio continued to consist predominantly of low coupon, high quality conventional MSR, which at the weighted average coupon of 3.06% at the end of 2023, remained far from having a refinancing incentive considering prevailing mortgage rates.

Economic leverage is a non-GAAP financial measure.

Refer to the “Non-GAAP Financial Measures” section for additional information, including reconciliations to its most directly comparable GAAP results.

6.0% for nearly the entire year and existing homeowners’ inability to move homes without a meaningful increase in housing costs (the so called “lock in effect”), have supported home prices at low levels of sales turnover.

However, there has been increased regional differentiation, with larger growth in supply in states and cities in the Southern and Western United States, which in turn saw price changes below the national average.

Areas of home price weakness generally correspond to areas with easier zoning restrictions and greater ability to build new homes, though many of them also saw more notable price increases following the pandemic driven by housing shortages and outsized population growth.

In this environment, Annaly generated an 11.9% economic return in 2024, underscoring the efficacy of our diversified housing finance model and our disciplined portfolio and risk management.

We proactively managed our leverage profile throughout the year, reducing aggregate leverage modestly from 5.7x at the end of 2023 to 5.5x at the end of 2024.

Similar to 2023, a portion of the reduced leverage is driven by further diversification into the Residential Credit and mortgage servicing rights (“MSR”) businesses, which now represent 2 percentage points more of our capital than at year end 2023.

Both businesses are less levered than Agency MBS.

Finally, as a result of constructive financial markets, we were able to raise $1.6 billion in accretive equity capital over the course of the year.

Given the increased capital base, Annaly’s aggregate portfolio grew to $80.9 billion as of December 31, 2024, up roughly $6.5 billion relative to the same date a year earlier.

Of note, we grew assets and capital in each of our three businesses.

The Agency MBS portfolio grew its assets to $70.6 billion as we added a modest amount of assets across the major asset classes in the portfolio.

The increases were focused on our continued purchases of prepayment protected Agency MBS specified pools in production coupons, which added attractive cash flows that also offered prepayment protection.

In addition, Annaly began to hold a larger balance of “to be announced” (“TBA”) securities after holding a modestly negative balance at the end of 2023, though at $3.1 billion, our TBA position remains small relative to recent years.

This smaller share is largely a function of the continued unattractive financing conditions in the TBA market relative to repurchase agreement (“repo”) funding of specified pools.

In addition, larger loan sizes have left TBAs with elevated prepayment risks.

Finally, Annaly modestly increased our portfolio of Agency commercial mortgage-backed securities to $3.3 billion market value as the asset class continues to offer an attractive stable cash flow in volatile interest rate markets.

Our Residential Credit business portfolio continued to grow strongly driven by Annaly’s residential whole loan acquisition strategy, through which the business acquired $13 billion in loans, predominantly through our correspondent channel.

The strategy continued to allow us to control all aspects of the loan making process, including asset selection, counterparties and loss mitigation.

Extracting favorable economics and long-term non-recourse financing, our Residential Credit business issued a record 21 securitizations under Annaly’s Onslow Bay (“OBX”) shelf in 2024, worth a total of $11.0 billion.

Given the stable housing market, a strong network of counterparties and robust demand for residential credit assets, we expect to continue to grow the strategy in 2025.

Finally, Annaly also continued to grow its MSR strategy, further increasing assets through purchases predominantly of low-coupon bulk MSR packages, growing the portfolio to $3.3 billion market value.

Annaly continued to opportunistically buy MSR bulk packages, which generally saw healthy demand into somewhat lower trading volumes than in 2023.Our strategy continued to focus on predominantly low coupon, high quality MSR.

The current weighted average note rate of the MSR portfolio is 3.20%, up only slightly from a year ago and well below prevailing mortgage rates at the end of 2024.

Economic Environment

real economic growth accelerated in 2023, with U.S.

gross domestic product (“GDP”) rising 2.5% on a year-over-year basis, above the 1.9% recorded for 2022.

Economic activity continued to strengthen throughout the year, led by sizeable increases in consumption.

Consumer balance sheets remained healthy and benefited from further income growth, leading retail sales data to notably increase in the fourth quarter.

Increased government spending spread across state, local and federal levels, as well as higher exports, also boosted the GDP.

Meanwhile, fixed business investment was more muted throughout the year, while residential housing started to move sideways and home sales continued to fall in light of higher mortgage rates.

Heading into 2024, recession risks appear relatively low given the upbeat picture of consumer and business spending, although the impact of the Fed’s monetary policy tightening continues to flow through to the real economy and credit conditions have tightened.

Meanwhile, the supply and demand for labor moved into better balance by the end of 2023.

The unemployment rate ended the year at 3.7%, increasing 0.2 percentage points from the historic low of 3.5% reported in December 2022.

Total nonfarm payroll employment expanded at a slower pace in 2023, totaling 3.1 million added jobs, relative to 4.5 million added jobs seen in 2022.

Strong job creation was accompanied by an increase in the supply of workers, as the labor force participation rate increased gradually throughout the year and the employment-to-population ratio rose slightly.

At the same time, job openings trended lower, although they remained elevated relative to pre-pandemic averages.

As a result of the more balanced labor market, wage growth slowed as the Employment Cost Index wages rose 4.3% over the 12 months ending in December, well below the 5.1% shown by the same metric a year earlier.

In 2024, the U.S.

economy performed strongly, with the gross domestic product (“GDP”) rising by 2.8% on a year-over-year (“yoy”) basis.

This marks the second consecutive year of robust growth, following a 2.9% increase in real GDP in 2023, despite elevated interest rates.

This economic resilience was driven by a strong income growth and sound financial market performance, which generated wealth gains across households.

Consequently, consumer spending made up a majority of U.S.

aggregate demand in 2024.

Personal consumption expenditures rose at a 5.3% annual rate per month in 2024, down from 6.4% in 2024, though slower price gains resulted in stronger inflation-adjusted consumption than in 2023.

The labor force benefited from stable employment and sustained wage growth throughout 2024, with the supply and demand of the labor market now in better balance compared to the end of 2023.

Monthly employment growth slowed but remained in healthy territory, with the economy adding 186,000 in total nonfarm payroll jobs per month in 2024, compared to 251,000 per month in 2023.

The unemployment rate ended the year at 4.1%, increasing only 0.3 percentage points relative to a year earlier, and has remained below 4.3% since November 2021.

Job openings trended lower but remained elevated relative to pre-pandemic averages, while layoffs stayed low.

As a result of the more balanced labor market, wage growth – as measured by the Employment Cost Index - decelerated from a pace of 4.3% yoy at the end of 2023 to a still healthy 3.8% yoy at the end of 2024.

Price pressures moderated throughout 2024, but progress has been slow and inflation is still at levels above the Fed’s 2% target.

The headline Personal Consumption Expenditure Chain Price Index (“PCE”), the Fed’s preferred inflation gauge, measured 2.6% in December 2024, modestly slower than the 2.7% pace in December 2023.

Notably, energy prices saw a decline,

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Price pressures remained at elevated levels throughout the year although they have shown notable signs of progress toward the Fed’s 2% target.

The headline Personal Consumption Expenditure Chain Price Index (“PCE”), the Fed’s preferred inflation gauge, measured 2.6% in December 2023, after peaking at 7.0% on a year-over-year basis in June 2022.

The core measure, which does not include price changes in food and energy sectors, measured 2.9% year-over year, the first time that the core PCE has been below 3.0% on a year-over-year basis since March 2021.

Additionally, recent survey measures of short-run inflation expectations have declined meaningfully and longer-term inflation expectations appear well anchored.

The disinflationary pressures are mostly attributed to lower goods prices, while the service sector remains elevated, particularly in measures such as shelter inflation.

The Fed conducts monetary policy with a dual mandate:

full employment and price stability.

Given the easing of inflation pressures, the Fed slowed its tightening campaign at the beginning of 2023 and remained on pause in the second half of the year.

The target range for the Federal Funds rate increased 100 basis points from 4.25% - 4.50% in December 2022 to 5.25% - 5.50% by the end of 2023.

At the December meeting of the Federal Open Market Committee (“FOMC”), Federal Reserve Chair Jerome Powell stated that the policy rate is at or near its peak in the Fed’s tightening cycle and signaled an potentially easier monetary policy over the course of 2024.

Regarding the FOMC’s balance sheet policy, the decline in their securities portfolio, which started in 2022, continued uninterrupted throughout all of 2023.

The amount of quantitative tightening – the process in which the Federal Reserve lets securities in its portfolio mature, thereby lowering bank reserves and other liquidity in the financial system – continues at $95 billion per month across U.S.

Treasuries and Agency MBS, almost twice the runoff rate of the prior quantitative tightening period between 2017 and 2019.

During 2023, U.S.

Treasury rates were volatile as market participants adjusted expectations for economic conditions and monetary policy.

Despite the volatility, the yield on the 10-year Treasury note ended the year effectively unchanged at 3.88%.

The 10-year Treasury Inflation Protected Security (“TIPS”), which subtracts the expected inflation rate from the bond’s nominal yield, fell 13 basis points, as market participants have started to price in an easing cycle for the Fed.

particularly in gasoline and fuel.

The core measure, which does not include price changes in food and energy sectors, measured 2.8% year-over year, also slightly slower than at the end of 2023.

Measures of inflation have shown uneven progress in the services sector, with shelter inflation slowing at a very gradual pace and remaining above pre-pandemic averages.

Additionally, survey measures of short-run inflation expectations continued to decline in 2024, while longer-term inflation expectations appear well anchored.

The inflation outlook for 2025 is uncertain, as many policy proposals from President Donald Trump’s new administration – such as expansionary fiscal policy, immigration restrictions, and tariffs – indicate potential inflationary pressures.

U.S Treasury yields moved higher given the resilience of the U.S.

economy and elevated supply of Treasury debt hitting the market during the year.

The yield on the 10-year Treasury note ended the year 69 basis points (“bps”) higher at 4.57%, despite the 100 bps move lower in the Fed Funds rate.

The 10-year Treasury Inflation Protected Security (“TIPS”), which subtracts the expected inflation rate from the bond’s nominal yield, rose 52 bps as market participants revised upward their estimate of the Fed’s neutral rate in light of the resilient macroeconomy.

Meanwhile, the mortgage basis, or the spread between the 30-year Agency MBS coupon and 10-year U.S.

Treasury rate, tightened slightly, ending the year 12 basis points tighter than December 2022.

Treasury rate, widened slightly, ending the year 11 bps tighter than in December 2023.

The following table below presents interest rates and spreads at each date presented:

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6-Month 4.25% 5.15% 4.80%

London Interbank Offered Rate (“LIBOR”) Transition

All LIBOR tenors relevant to us either are no longer published or are no longer representative.

All of our LIBOR-linked instruments have fallen back to a non-LIBOR-based index, either by their contractual terms, pursuant to U.S.

federal legislation, through clearinghouse action, or otherwise.

Results of Operations

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity