What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-13 compared with 2024-02-15 · 179 added, 161 removed, 1421 unchanged (19% of the section changed)

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12.3 % 12.2 % 13.9 %

Annualized return on average total assets (1.86) % 2.19 % 2.92 %

Annualized return on average equity (14.33) % 14.86 % 17.45 %

Annualized return (loss) on average total assets 1.05 % (1.86 %) 2.19 %

Annualized return (loss) on average equity 8.53 % (14.33 %) 14.86 %

Net interest margin (3)

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Net interest margin does not include net interest component of interest rate swaps.

Net interest margin (excluding PAA) represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.

Net interest margin (excluding PAA) represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.

(4) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets.

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Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities.

Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.

Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Prior period results have not been adjusted in accordance with this change as the impact is not material.

Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss) for all periods presented.

(6 ) Excludes dividends on preferred stock.

Net income (loss) was $1.0 billion, which includes $9.9 million attributable to noncontrolling interests, or $1.62 per average basic common share, for the year ended December 31, 2024 compared to ($1.6) billion, which includes $4.7 million attributable to noncontrolling interests, or ($3.61) per average basic common share, for the same period in 2023.

We attribute the majority of the change in net income (loss) to an unfavorable change in net gains (losses) on derivatives and net interest income, partially offset by favorable changes in net gains (losses) on investments and other, higher net servicing income, higher other, net and lower business divestiture-related losses.

Net gains (losses) on derivatives for the year ended December 31, 2023 was $0.4 billion compared to $4.9 billion for the same period in 2022.

Net interest income for the year ended December 31, 2023 was ($111.4) million compared to $1.5 billion for the same period in 2022.

We attribute the majority of the change in net income (loss) to a favorable change in net gains (losses) on derivatives, net interest income, net gains (losses) on investments and other, and net servicing income.

Net gains (losses) on derivatives for the year ended December 31, 2024 was $2.3 billion compared to $400.1 million for the same period in 2023.

Net interest income for the year ended December 31, 2024 was $247.8 million compared to ($111.4) million for the same period in 2023.

Net gains (losses) on investments and other for the year ended December 31, 2024 was ($1.8) billion compared to ($2.1) billion for the same period in 2023.

Net servicing income for the year ended December 31, 2024 was $435.9 million compared to $326.5 million for the same period in 2023.

Other, net for the year ended December 31, 2023 was $73.7 million compared to $6.7 million for the same period in 2022.

Business divestiture-related gains (losses) for the year ended December 31, 2023 was $0.0 million compared to ($40.3) million for the same period in 2022.

Refer to the section titled “Other income (loss)” located within this Item 7 for additional information related to these changes.

Earnings available for distribution were $1.6 billion, or $2.70 per average common share, for the year ended December 31, 2024, compared to $1.6 billion, or $2.86 per average common share, for the same period in 2023.

The change in earnings available for distribution for the year ended December 31, 2023 compared to the same period in 2022 was primarily due to an higher interest expense from an increase in average borrowing rates and average interest bearing balances, a decline in TBA dollar roll income on reduced specialness partially offset by a favorable change in the net interest component of interest rate swaps, higher coupon income and lower premium amortization expense, excluding PAA, resulting from an increase in interest rates, purchasing assets with lower cost bases, and lower prepayment speeds, combined with higher servicing income and other, net.

The change in earnings available for distribution for the year ended December 31, 2024 compared to the same period in 2023 was primarily due to higher coupon income, resulting from higher residential mortgage loan balances and purchasing securities higher up in the coupon stack, and higher net servicing income.

This change was almost entirely offset by higher interest expense from an increase in average borrowing rates and average interest bearing liabilities, and an unfavorable change in the net interest component of interest rate swaps.

ANNALY CAPITAL MANAGEMENT, INC.

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Refer to the disclosure within this section above for additional information on non-GAAP financial measures.

(1) Includes write-downs or recoveries which are reported in Other, net in the Company's Consolidated Statement of Comprehensive Income (Loss).

(1) Includes write-downs or recoveries which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss).

(2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution.

The net interest component of interest rate swaps totaled $1.6 billion, $366.2 million and ($276.1) million for the years ended December 31, 2023, 2022 and 2021, respectively.

The net interest component of interest rate swaps totaled $1.2 billion, $1.6 billion and $366.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(3) Includes $0.0 million, $0.0 million, and ($2.3) million of loss provision (reversal) on unfunded loan commitments for the years ended December 31, 2024, 2023 and 2022, respectively, which is reported in Other, net in the Consolidated Statements of Comprehensive Income (Loss).

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The fair value of TBA derivatives is based on methods similar to those used to value Agency MBS.

We record TBA derivatives at fair value on our Consolidated Statements of Financial Condition and recognize periodic changes in fair value in Net gains (losses) on derivatives in our Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives.

We record TBA derivatives at fair value in our Consolidated Statements of Financial Condition and recognize periodic changes in fair value in Net gains (losses) on derivatives in our Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives.

ANNALY CAPITAL MANAGEMENT, INC.

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Our economic leverage ratio is 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.

Recourse debt consists of repurchase agreements, other secured financing (excluding certain non-recourse credit facilities), and U.S.

Treasury securities sold, not yet purchased.

Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, and participations issued are non-recourse to us and are excluded from economic leverage.

Recourse debt consists of repurchase agreements, other secured financing and U.S Treasury securities sold, not yet purchased.

Debt issued by securitization vehicles and participations issued are non-recourse to us and are excluded from economic leverage.

The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating our economic leverage ratio for the periods presented:

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating our economic leverage ratio for the periods presented:

December 31, 2024

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We believe this measure provides management and investors with additional detail to enhance their understanding of our operating results and trends by excluding the component of premium amortization expense representing the cumulative effect of quarter-over-quarter changes in estimated long-term prepayment speeds related to our Agency MBS (other than interest-only securities, multifamily and reverse mortgages), which can obscure underlying trends in the performance of the portfolio.

Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.

Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps (which includes net interest on variation margin related to interest rate swaps) and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

We use interest rate swaps to manage our exposure to changing interest rates on repurchase agreements by economically hedging cash flows associated with these borrowings.

Accordingly, adding the net interest component of interest rate swaps to interest

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

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of our financing strategy.

additional information about the cost of our financing strategy.

We may use market agreed coupon (“MAC”) interest rate swaps in which we 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.

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Economic Interest Expense and Economic Net Interest Income (excluding PAA)

Net Interest Component of Interest Rate Swaps Economic Interest

Net Interest Component of Interest Rate Swaps and Net Interest on Initial Margin Economic Interest

Expense * (1)

Net Interest Component

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Refer to disclosures within this section above for additional information on non-GAAP financial measures.

(1) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Prior period results have not been adjusted in accordance with this change as the impact is not material.

Experienced and Projected Long-Term CPR

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(2) At December 31, 2024, 2023 and 2022, respectively.

Average Yield on Interest Earning Assets (excluding PAA), Net Interest Spread (excluding PAA), Net Interest Margin (excluding PAA) and Average Economic Cost of Interest Bearing Liabilities

Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average TBA contract and

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

CMBX balances, provide management with additional measures of our profitability that management relies upon in monitoring the performance of the business.

Average Yield on Interest Earning Assets (excluding PAA), Net Interest Spread (excluding PAA), Net Interest Margin (excluding PAA) and Average Economic Cost of Interest Bearing Liabilities

Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract and CMBX balances, provide management with additional measures of our 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 our performance.

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(2) Average interest bearing liabilities reflects the average balances during the period.

Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.

Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities.

Prior period results have not been adjusted in accordance with this change as the impact is not material.

Net Interest Margin (excluding PAA)

Interest Income (excluding PAA) * TBA Dollar Roll and CMBX Coupon Income (1)

Economic Interest Expense * Subtotal Average Interest Earnings Assets Average TBA Contract and CMBX Balances Subtotal Net Interest Margin (excluding PAA) *

Economic Interest Expense * (2)

Subtotal Average Interest Earnings Assets Average TBA Contract and CMBX Balances Subtotal Net Interest Margin (excluding PAA) *

For the years ended (dollars in thousands)

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CMBX coupon income totaled $0.0 million, $1.5 million and $4.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.

(2) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Prior period results have not been adjusted in accordance with this change as the impact is not material.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities

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Refer to the “Non-GAAP Financial Measures” section for additional information.

(1) Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Prior period results have not been adjusted in accordance with this change as the impact is not material.

2024 Compared with 2023

Economic interest expense increased by $1.1 billion for the year ended December 31, 2024 compared to the same period in 2023.

The change was primarily due to higher average interest bearing liabilities from an increase in repurchase agreement balances and higher borrowing rates.

This was partially offset by the change in the net interest component of interest rate swaps, which was $1.6 billion for the year ended December 31, 2023 compared to $366.2 million for the same period in 2022.

The change was primarily due to higher average interest bearing liabilities from an increase in securitized debt balances due to the 21 securitizations closed during the year ended December 31, 2024 combined with higher repurchase agreement balances and higher borrowing rates.

This was partially offset by the change in the net interest component of interest rate swaps, which was $1.2 billion for the year ended December 31, 2024 compared to $1.6 billion for the same period in 2023.

We do not manage our portfolio to have a pre-designated amount of borrowings at quarter or year end.

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Since our average borrowings and period end borrowings can be expected to differ, we believe our average borrowings during a period provide a more accurate representation of our exposure to the risks associated with leverage than our period end borrowings.

At December 31, 2023 the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and MSR.

At December 31, 2022, the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and MSR.

At December 31, 2024 and December 31, 2023 the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and MSR.

All of our Residential Securities are currently accepted as collateral for these borrowings.

However, we limit our borrowings, and thus our potential asset growth, in order to maintain unused borrowing capacity and maintain the liquidity and strength of our balance sheet.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Other Income (Loss)

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Net gains (losses) on disposal of investments and other was ($1.1) billion for the year ended December 31, 2024 compared with ($2.9) billion for the same period in 2023.

For the year ended December 31, 2023, we disposed of Residential Securities with a carrying value of $36.4 billion for an aggregate net loss of ($2.9) billion.

For the same period in 2022, we disposed of Residential Securities with a carrying value of $28.9 billion for an aggregate net loss of ($3.6) billion and we recognized a realized gain of $33.4 million as a result of deconsolidating a multifamily VIE.

Net unrealized gains (losses) on instruments measured at fair value through earnings was $797.6 million for the year ended December 31, 2023 compared to ($1.1) billion for the same period in 2022, primarily due to favorable changes in unrealized gains (losses) on securitized residential whole loans of consolidated VIEs of $1.5 billion, Agency MBS of $1.5 billion, non-Agency MBS of $334.1 million, residential whole loans of $252.2 million, and CRT securities of $95.7 million partially offset by unfavorable changes in residential securitized debt of consolidated VIEs of ($1.5) billion, MSR of ($134.9) million and participations issued of ($123.5) million.

For the year ended December 31, 2024, we disposed of Residential Securities with a carrying value of $21.4 billion for an aggregate net loss of ($886.0) million.

For the same period in 2023, we disposed of Residential Securities with a carrying value of $36.4 billion for an aggregate net loss of ($2.9) billion.

Net unrealized gains (losses) on instruments measured at fair value through earnings was ($764.5) million for the year ended December 31, 2024 compared to $797.6 million for the same period in 2023, primarily due to unfavorable changes in unrealized gains (losses) on Agency MBS of ($1.8) billion, securitized residential whole loans of consolidated VIEs of ($231.0) million, residential whole loans of ($159.1) million, and CRT securities of ($71.9) million, partially offset by favorable changes in residential securitized debt of consolidated VIEs of $308.7 million, U.S.

Treasury securities sold, not yet purchased of $293.5 million, participations issued of $71.8 million and MSR of $44.8 million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the year ended December 31, 2023 was $0.7 billion compared to $3.6 billion for the same period in 2022, attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, partially offset by the changes in net interest component of interest rate swaps and realized gains (losses) on termination or maturity of interest rate swaps.

Unrealized gains (losses) on interest rate swaps was ($815.6) million for the year ended December 31, 2023, reflecting quarters of rate rallies and sell-offs in forward interest rates during the current period, compared to $3.5 billion for the same period in 2022, reflecting a sharper rise in forward interest rates during the prior period.

Realized gains (losses) on termination or maturity of interest rate swaps was ($74.8) million resulting from the termination or maturity of interest rate swaps with a notional amount of $12.7 billion for the year ended December 31, 2023 compared to ($266.4) million resulting from the termination or maturity of interest rate swaps with a notional amount of $21.3 billion for the same period in 2022.

Net interest component of interest rate swaps was $1.6 billion for the year ended December 31, 2023 compared to $366.2 million for the same period in 2022 due to an increase in average notional complemented by a full year of net receive rates.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Net gains (losses) on other derivatives was ($294.6) million for the year ended December 31, 2023 compared to $1.3 billion for the same period in 2022.

The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures contracts, which was ($6.8) million for the year ended December 31, 2023 compared to $4.0 billion for the same period in 2022 and net gains (losses) on interest rate swaptions, which was ($148.8) million for the year ended December 31, 2023 compared to $152.0 million for the same period in 2022, partially offset by a favorable change in net gains (losses) on TBA derivatives, which was ($140.8) million for the year ended December 31, 2023 compared to ($2.8) billion for the same period in 2022.

Loan Loss (Provision) Reversal

For the year ended December 31, 2023, a loan loss (provision) reversal of $0.2 million was recorded on commercial mortgage and corporate loans compared to $20.7 million for the same period in 2022.

Refer to the “Loans” Note located within Item 15 for additional information related to these loan loss provisions.

Business Divestiture-Related Gains (Losses)

For the year ended December 31, 2023, there were no business divestiture-related gains (losses).

For the year ended December 31, 2022, the majority of business divestiture-related gain (losses) were associated with the sale of our corporate loan interests.

Refer to the “Sale of Middle Market Lending Portfolio” Note located within Item 15 for additional information related to the transaction.

Net gains (losses) on interest rate swaps for the year ended December 31, 2024 was $2.1 billion compared to $694.7 million for the same period in 2023, attributable to favorable changes in unrealized gains (losses) on interest rate swaps and realized gains (losses) on termination or maturity of interest rate swaps, partially offset by the change in the net interest component of interest rate swaps.

Unrealized gains (losses) on interest rate swaps was $1.0 billion for the year ended December 31, 2024 compared to ($815.6) million for the same period in 2023.

Realized gains (losses) on termination or maturity of interest rate swaps was ($60.5) million resulting from the termination or maturity of interest rate swaps with a notional amount of $13.7 billion for the year ended December 31, 2024 compared to ($74.8) million resulting from the termination of interest rate swaps with a notional amount of $12.7 billion for the same period in 2023.

Net interest component of interest rate swaps was $1.2 billion for the year ended December 31, 2024 compared to $1.6 billion for the same period in 2023 due to a decrease in average net receive rate.

Net gains (losses) on other derivatives was $124.9 million for the year ended December 31, 2024 compared to ($294.6) million for the same period in 2023.

The change in net gains (losses) on other derivatives was primarily due to favorable changes in net gains (losses) on futures contracts, which was $257.5 million for the year ended December 31, 2024 compared to ($6.8) million for the same period in 2023, net gains (losses) on TBA derivatives, which was ($16.7) million for the year ended December 31, 2024 compared to ($140.8) million for the same period in 2023, and net gains (losses) on interest rate swaptions, which was ($105.9) million for the year ended December 31, 2024 compared to ($148.8) million for the same period in 2023, partially offset by an unfavorable change in net gains (losses) on purchase commitments, which was ($10.0) million for the year ended December 31, 2024 compared to $7.9 million for the same period in 2023.

Other, net includes brokerage and commission fees, due diligence costs, securitization expenses, and interest on custodial balances.

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December 31, 2022 $ 162,729 0.21 % 1.40 %

2023 Compared with 2022

G&A expenses decreased $0.2 million to $162.6 million for the year ended December 31, 2023 compared to the same period in 2022.

The increase in compensation expense was almost fully offset by the decrease in other general and administrative expense due to lower expenses resulting from the divestiture of our MML assets, which was announced in the second quarter of 2022.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

2024 Compared with 2023

G&A expenses increased $8.8 million to $171.4 million for the year ended December 31, 2024 compared to the same period in 2023.

The change in the period was primarily due to an increase in compensation expense, partially offset by lower expenses related to technology and professional fees.

Return on Average Equity

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December 31, 2022 15.80 % 1.91 % (1.06 %) (1.40 %) (0.39 %) 14.86 %

(1) Economic net interest income includes the net interest component of interest rate swaps.

(1) Economic net interest income includes the net interest component of interest rate swaps and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Prior period results have not been adjusted in accordance with this change as the impact is not material.

(2) Other income (loss) excludes the net interest component of interest rate swaps.

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Total assets were $103.6 billion and $93.2 billion at December 31, 2024 and 2023, respectively.

The change was primarily due to increases in Agency MBS of $4.0 billion, residential mortgage loans, including assets transferred or pledged to securitization vehicles, of $4.7 billion, MSR of $0.4 billion, receivable for unsettled trades of $2.1 billion, and principal and interest receivable of $0.6 billion, partially offset by decreases in CMBS of $0.3 billion and derivative assets of $0.2 billion.

The change was primarily due to increases in residential mortgage loans, including securitized residential whole loans of consolidated VIEs, of $9.9 billion and MSR of $0.8 billion, partially offset by decreases in receivable for unsettled trades of $0.5 billion.

Our portfolio composition, net equity allocation and debt-to-net equity ratio by asset class were as follows at December 31, 2024:

Agency MBS MSR Residential Credit (1)

Commercial Total

Agency MBS Residential Credit (1)

Assets (dollars in thousands)

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8.6:1 9.0:1 0.3:1 7.1:1

(1) Fair value includes residential loans held for sale, and assets and liabilities associated with non-controlling interests.

(1) Fair value includes residential loans held for sale, commercial assets and liabilities and assets and liabilities associated with non-controlling interests.

(2) Derivatives include TBA contracts under Agency MBS.

(3) Represents the debt/net equity ratio as determined using amounts on the Consolidated Statements of Financial Condition.

(3) Represents the debt/net equity ratio as determined using amounts in the Consolidated Statements of Financial Condition.

Residential Securities

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Our mortgage-backed securities were largely Fannie Mae, Freddie Mac or Ginnie Mae pass through certificates or CMOs, which have an actual or implied credit rating that is the same as that of the U.S.

We carry all of our Agency MBS at fair value on the Consolidated Statements of Financial Condition.

We carry all of our Agency MBS at fair value in the Consolidated Statements of Financial Condition.

We accrete discount balances as an increase to interest income over the expected life of the related interest earning assets and we amortize premium balances as a decrease to interest income over the expected life of the related interest earning assets.

At December 31, 2023 and December 31, 2022 we had on our Consolidated Statements of Financial Condition a total of $1.4 billion and $1.1 billion, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities acquired at a price below principal value) and a total of $2.4 billion and $2.9 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities acquired at a price above principal value).

At December 31, 2024 and December 31, 2023 we had in our Consolidated Statements of Financial Condition a total of $1.3 billion and $1.4 billion, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities acquired at a price below principal value) and a total of $2.5 billion and $2.4 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities acquired at a price above principal value).

The weighted average experienced prepayment speed on our Agency MBS portfolio for the years ended December 31, 2024 and 2023 was 7.4% and 6.5%, respectively.

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Weighted average coupon rate 0.46 % 0.43 %

Weighted average yield NM NM

Weighted average yield 2.40 % NM

(1) Excludes interest-only MBS.

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Capital Stock

In December 2020, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding common shares, which expired on December 31, 2021 (the “Prior Share Repurchase Program”).

In January 2022, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2024 (the “Current Share Repurchase Program”).

The Current Share Repurchase Program replaced the Prior Share Repurchase Program.

During the years ended December 31, 2023 and 2022, no shares were repurchased under the Current Share Repurchase Program or Prior Share Repurchase Program.

In January 2022, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2024 (the “Prior Common 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 replaced the Prior Common Stock Repurchase Program.

During the years ended December 31, 2024 and 2023, no shares were repurchased under the Prior Common Stock Repurchase Program.

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.

On August 6, 2020, we entered into separate Amended and Restated Distribution Agency Agreements (as amended by Amendment No.

1 to the Amended and Restated Distribution Agency Agreements on August 6, 2021, and Amendment No.

2 to the Amended and Restated Distribution Agency Agreements on November 3, 2022, collectively, the “Sales Agreements”) with each of Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co.

LLC, Keefe, Bruyette & Woods, Inc., J.P.

Morgan Securities LLC, RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Sales Agents”).

Pursuant to the Sales Agreements, we may offer and sell shares of common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Sales Agents (the “at-the-market sales program”).

During the year ended December 31, 2023, under the at-the-market sales program, we issued 31.4 million shares for proceeds of $0.7 billion, net of commissions and fees.

During the year ended December 31, 2022, under the at-the-market sales program,

2 to the Amended and Restated Distribution Agency Agreements on November 3, 2022, collectively, the “Prior Sales Agreements”) with each of Barclays Capital Inc., BofA Securities, Inc., Citigroup Global Markets Inc., Goldman Sachs & Co.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

we issued 45.7 million shares for proceeds of $1.1 billion, net of commissions and fees.

The foregoing share amounts have been retroactively adjusted to reflect the effects of the Reverse Stock Split.

During the year ended December 31, 2022, we closed two public offerings for an aggregate original issuance of 50 million shares of common stock for aggregate proceeds of $1.31 billion before deducting offering expenses.

In connection with each offering, we granted the underwriters a thirty-day option to purchase up to an additional 3.75 million shares of common stock, which the underwriters exercised in full in both instances, resulting in an additional $196.5 million in proceeds before deducting offering expenses for the year ended December 31, 2022.

The 2022 share amounts have been retroactively adjusted to reflect the effects of the Reverse Stock Split.

Bruyette & Woods, Inc., J.P.

Morgan Securities LLC, RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Prior Sales Agents”).

Pursuant to the Prior Sales Agreements, we offered and sold shares of common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Prior Sales Agents (the “Prior At-the-Market Sales Program”).

On September 20, 2024, we entered into new Distribution Agency Agreements (collectively, the “Sales Agreements”) with each of Barclays Capital Inc., BNP Paribas Securities Corp., BofA Securities, Inc., Citizens JMP Securities, LLC, Goldman Sachs & Co.

Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., Morgan Stanley & Co., LLC, RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Sales Agents”), which terminated and replaced the Prior Sales Agreements.

Under the terms of the Sales Agreements, we may offer and sell shares of our common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Sales Agents (the “Current At-the-Market Sales Program” and, together with the Prior At-the-Market Sales Program, the “at-the-market sales program”).

During the year ended December 31, 2024, under the at-the-market sales program, we issued 77.9 million shares for proceeds of $1.6 billion, net of commissions and fees.

During the year ended December 31, 2023, under the at-the-market sales program, we issued 31.4 million shares for proceeds of $0.7 billion, net of commissions and fees.

Preferred Stock

On November 3, 2022, our Board approved a repurchase plan for all of our existing outstanding Preferred Stock (as defined below, the “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 with respect to the Preferred Stock Repurchase Program during the year ended December 31, 2023.

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.

On November 3, 2022, our Board approved a repurchase plan for all of our existing outstanding Preferred Stock (as defined below, the “Prior Preferred Stock Repurchase Program”).

Under the terms of the Prior Preferred Stock Repurchase Program, 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 Prior Preferred Stock Repurchase Program, as of November 3, 2022, was approximately $1.6 billion.

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

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

On December 31, 2024, our Board approved 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 Current Preferred Stock Repurchase Program, 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 Series F Preferred Stock, (ii) 17,000,000 shares of our Series G Preferred Stock, and (iii) 17,700,000 shares of our Series I Preferred Stock.

The aggregate liquidation value of the 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 replaced 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.

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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Our economic leverage ratio, which is 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 was 5.5:1 and 5.7:1, at December 31, 2024 and 2023, respectively.

Our GAAP capital ratio at December 31, 2023 and 2022 was 12.2% and 13.9%, respectively.

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Management’s Discussion and Analysis

GAAP capital ratio at December 31, 2024 and 2023 was 12.3% and 12.2%, respectively.

Our economic capital ratio, which represents our ratio of stockholders’ equity to total economic assets (inclusive of the implied market value of TBA derivatives and net of debt issued by securitization vehicles), was 14.6% and 14.0% at December 31, 2024 and 2023, respectively.

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Each employee is accountable for identifying, monitoring and managing risk within their area of responsibility.

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Management’s Discussion and Analysis

Risk Appetite

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The Nominating/Corporate Governance Committee assists the Board in its oversight of our corporate governance framework and the annual self-evaluation of the Board, and the Corporate Responsibility Committee assists the Board in its oversight of any matters that may present reputational or ESG risk to us.

The Corporate Responsibility Committee shares oversight of specific ESG-related matters with other Board Committees and meets jointly with the Management Development and Compensation Committee on the Company's human capital management and culture and with the Risk Committee on ESG-related regulatory and policy risks.

The full Board has overall

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Management’s Discussion and Analysis

responsibility for ESG oversight, and the Corporate Responsibility Committee meets jointly with other Committees from time to time in order to review areas of shared responsibility.

Risk assessment and risk management are the responsibility of our management.

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Audit Services is responsible for performing our internal audit activities, which includes independently assessing and validating key controls within the risk management framework.

Our compliance group is responsible for oversight of our regulatory compliance.

Our Chief Compliance Officer has reporting lines to the Audit Committee.

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Management’s Discussion and Analysis

Our compliance group is responsible for oversight of our regulatory compliance.

Our Chief Compliance Officer has reporting lines to the Audit Committee.

Description of Risks

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Compliance, Regulatory and Legal Risk Risk to earnings, capital, reputation or conduct of business arising from violations of, or nonconformance with internal and external applicable rules and regulations, losses resulting from lawsuits or adverse judgments, or from changes in the regulatory environment that may impact our business model.

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Management’s Discussion and Analysis

Liquidity and Funding Risk Management

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At December 31, 2024 and December 31, 2023, the weighted average days to maturity was 32 days and 44 days, respectively.

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Management’s Discussion and Analysis

Our repurchase agreements generally provide that in the event of a margin call we must provide additional securities or cash on the same business day that a margin call is made.

Should prepayment speeds on the mortgages underlying our Agency and Residential mortgage-backed securities and/or market interest rates or other factors move suddenly and cause declines in the market value of assets posted as collateral, resulting margin calls may cause an adverse change in our liquidity position.

We have continued to diversify our financing profile adding new non-mark-to-market facilities and financing options under existing facilities for our Residential Credit operating segment.

At December 31, 2024, we had total financial assets and cash pledged against existing liabilities of $70.5 billion.

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December 31, 2022 59,946,810 59,512,597 102,025 —

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Management’s Discussion and Analysis

Our committed facility warehouse lines provide financing for our MSR portfolio for liquidity purposes.

We maintain a conservative approach to these facilities, generally over-collateralizing the lines against margin calls.

The following table provides information on our repurchase agreements and other secured financing by maturity date at December 31, 2024.

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We also finance our investments in residential mortgage loans through the issuance of securitization transactions sponsored by our wholly-owned subsidiary Onslow Bay Financial LLC (“Onslow Bay”) under the Onslow Bay private-label securitization program.

In order to increase financing optionality for our Onslow Bay platform we closed new warehouse facilities and upsized existing warehouse facilities.

These included expanded product offerings for residential whole loans, including a component not subject to margin calls, and a two-year facility for OBX retained securities not subject to margin calls.

The following table presents our outstanding debt balances and associated weighted average rates and days to maturity at December 31, 2024:

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Management’s Discussion and Analysis

Weighted Average Rate

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The following table also provides the carrying amount of our encumbered and unencumbered financial assets at December 31, 2024:

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Management’s Discussion and Analysis

Assets Unencumbered Assets Total

Encumbered Assets Unencumbered Assets Total

Financial assets (dollars in thousands)

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Total financial assets $ 95,847,776 $ 5,848,015 $ 101,695,791

(1) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported on the Consolidated Statements of Financial Condition.

(1) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported in the Consolidated Statements of Financial Condition.

(2) Includes assets transferred or pledged to securitization vehicles.

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The following table presents our liquid assets as a percentage of total assets at December 31, 2024:

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Management’s Discussion and Analysis

Carrying Value (1)

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Please refer to the Encumbered and Unencumbered Assets table for related information.

(2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported on the Consolidated Statements of Financial Condition.

(2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported in the Consolidated Statements of Financial Condition.

(3) Excludes securitized residential mortgage loans transferred or pledged to consolidated VIEs carried at fair value of $22.0 billion.

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Our interest rate sensitivity gap is the difference between interest earning assets and interest bearing liabilities maturing or re-pricing within a given time period.

Unlike the calculation of maturity gap, interest rate sensitivity gap includes the effect of our

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Management’s Discussion and Analysis

interest rate swaps.

Unlike the calculation of maturity gap, interest rate sensitivity gap includes the effect of our interest rate swaps.

A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities.

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The interest rate sensitivity of our assets and liabilities in the following table at December 31, 2024 could vary substantially based on actual prepayment experience.

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Management’s Discussion and Analysis

Months 3-12 Months More than 1 Year to 3 Years 3 Years and Over Total

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The stresses applied include market-wide and firm-specific stresses.

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Management’s Discussion and Analysis

Liquidity Management Policies

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Changes in the level of interest rates and spreads can also affect the value of our assets and potential realization of gains or losses from the sale of these assets.

We may utilize a variety of financial instruments, including interest rate swaps, swaptions, options, futures and other hedges, in order to limit the adverse effects of interest rates on our results.

We may utilize a variety of financial instruments, including interest rate swaps, swaptions, options, futures and other hedges, in order to limit the adverse effects of

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Management’s Discussion and Analysis

interest rates on our results.

In the case of interest rate swaps, we utilize contracts linked to SOFR but may also enter into interest rate swaps where the floating leg is linked to the overnight index swap rate or another index.

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Actual results could differ materially from these estimates.

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Management’s Discussion and Analysis

Change in Interest Rate (1)

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(4) Scenarios include securities, residential mortgage loans, repurchase agreements, other secured financing and interest rate swaps.

Economic net interest income includes the net interest component of interest rate swaps.

Economic net interest income includes the net interest component of interest rate swaps and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Credit Risk Management

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In the case of residential mortgage loans and MSR, we may engage a third party to perform due diligence on a sample of loans that we believe sufficiently represents the entire pool.

Once an investment is made, our ongoing surveillance process includes regular reviews, analysis and oversight of investments by our investment personnel and appropriate committee.

Once an investment is made, our ongoing surveillance process includes regular reviews,

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Management’s Discussion and Analysis

analysis and oversight of investments by our investment personnel and appropriate committee.

We review credit and other risks of loss associated with each investment.

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26.0 % 17.9 %

Commercial mortgage-backed securities 0.1 % 0.3 %

Mortgage servicing rights 3.0 % 2.4 %

Commercial real estate (1)

(1) Includes assets transferred or pledged to securitization vehicles.

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In the event of default by a counterparty, we could have difficulty obtaining our assets pledged as collateral.

A significant portion of our investments are financed with repurchase agreements by pledging our Residential Securities as collateral to the

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Management’s Discussion and Analysis

applicable lender.

A significant portion of our investments are financed with repurchase agreements by pledging our Residential Securities as collateral to the applicable lender.

The collateral we pledge generally exceeds the amount of the borrowings under each agreement.

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(2) Represents the amount of cash and/or securities pledged as collateral to each counterparty less the aggregate of repurchase agreement and other secured financing and derivatives for each counterparty.

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Management’s Discussion and Analysis

Operational Risk Management

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We also maintain a Cybersecurity Incident Response Plan (“Response Plan”) with processes to identify, contain, mitigate and escalate cybersecurity incidents, utilizing cross-functional expertise and external resources as needed.

We conduct tabletop exercises to test our Response Plan and our reaction to various business disruption events, and the results of these tabletop exercises are reported to the Cybersecurity Committee and the ERC.

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Management’s Discussion and Analysis

We also have processes in place to oversee and identify material risks from cybersecurity threats associated with our use of third party service providers, including mortgage loan servicers and sub-servicers, upon which we depend on to perform various business processes related to our operations.

Our vendor management policy establishes procedures for engaging, onboarding and monitoring the performance of third party vendors.

For mortgage loan servicers and sub-servicers, these procedures include assessing a vendor’s financial health as well as oversight of its compliance with applicable laws and regulations, cybersecurity and business continuity programs and security of personally identifiable information.

We conduct periodic tabletop exercises to test our Response Plan and our reaction to various business disruption events, and the results of these tabletop exercises are reported to the Cybersecurity Committee and the ERC.

We also have processes in place to oversee and identify material risks from cybersecurity threats associated with our use of third party service providers upon which we depend on to perform various business processes related to our operations, including mortgage loan servicers and sub-servicers.

Our vendor management and IT policies establish procedures for engaging, onboarding and monitoring the performance of third party vendors.

We also have processes to evaluate and classify cybersecurity risk related to sensitive data held by key third party service providers on their systems.

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The Cybersecurity Committee regularly meets to discuss both routine oversight of cybersecurity processes, policies and procedures and management of any cyber-specific events, including escalation to the ERC, the executive leadership team and/or the Board, as appropriate.

The Cybersecurity Committee includes representatives from Operational Risk Management, Information Technology, Legal, Mortgage Operations and Internal Control.

The Cybersecurity Committee includes representatives from Operational Risk Management, Information Technology, Legal, Mortgage Operations and Internal Controls.

Certain members of the Cybersecurity Committee have relevant qualifications such as extensive work experience implementing data security measures, developing cybersecurity policies and procedures and assessing, managing and reporting cybersecurity risk.

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The Cybersecurity Committee regularly discusses cybersecurity risk management and best practices with the ERC and with the Audit and Risk Committees of our Board.

The Audit and Risk Committees jointly oversee processes, practices and policies related to cybersecurity and receive joint and individual presentations from management and external experts on cyber and technology-related risks.

Two members of our Board have completed the Carnegie Mellon/NACD Cyber-Risk Oversight Program and earned the CERT Certificate in Cybersecurity Oversight and one member of our Board has completed the NACD Master Class:

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To date, we have not detected any risks from cybersecurity threats that have materially affected us.

However, even though we take steps to employ reasonable cybersecurity efforts, not every cybersecurity incident can be prevented or detected.

We also may be held responsible for cybersecurity threats affecting our third party service providers, including mortgage sub-servicers.

Therefore, while we believe there are currently no risks from any potential cybersecurity threat or cybersecurity incident that are reasonably likely to have a material effect on our business strategy, results of operations or financial condition, the likelihood or severity of such risks are difficult to predict.

For further discussion, please see the risk factors titled "We are highly dependent on information systems and networks, many of which are operated by third parties, and any failure of these systems or networks could materially and adversely affect our business" and "Cyberattacks or other information security breaches could adversely affect our business, reputation and financial condition" in Part I, Item 1A.

However, even though we take steps to employ reasonable cybersecurity defenses, not every cybersecurity incident can be prevented or detected.

We also may be held responsible for cybersecurity threats affecting our third party service providers, including servicers and sub-servicers, some of whom have reported breaches in the past.

Therefore, while we are not aware of any cybersecurity threats or

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Management’s Discussion and Analysis

incidents that are reasonably likely to have a material effect on our business strategy, results of operations or financial condition, the likelihood and severity of such risks are difficult to predict.

For further discussion, please see the risk factors titled “We are highly dependent on information systems and networks, many of which are operated by third parties” and “Cyberattacks or other information security breaches of our Company's, service providers' or counterparties' systems or networks affect our business, reputation and financial condition” in Part I, Item 1A.

“Risk Factors” in this Annual Report on Form 10-K.

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The determination that we qualify for this exemption from registration depends on various factual matters and circumstances.

Accordingly, in conjunction with our legal department, we closely monitor our compliance with Section 3(c)(5)(C) within our risk management program.

Compliance with Section 3(c)(5)(C) of the Investment Company Act is monitored by the FRDC under the oversight of the ERC.

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Management’s Discussion and Analysis

Accordingly, in conjunction with our legal department, we closely monitor our compliance with Section 3(c)(5)(C) of the Investment Company Act within our risk management program.

Compliance with Section 3(c)(5)(C) of the Investment Company Act is monitored by the FRDC.

Critical Accounting Estimates

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Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds.

Refer to the Experienced and Projected Long-Term CPR, Financial Condition – Residential Securities and the interest rate sensitivity and interest rate and MBS spread shock analysis and discussions within this Item 7.

for further information.

Refer to the Experienced and Projected Long-Term CPR, Financial Condition – Residential Securities and

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Management’s Discussion and Analysis

the interest rate sensitivity and interest rate and MBS spread shock analysis and discussions within this Item 7 for further information.

Residential Mortgage Loans

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Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds.

Refer to the interest rate sensitivity and interest rate shock analysis and discussions within this Item 7.

for further information.

Refer to the interest rate sensitivity and interest rate shock analysis and discussions within this Item 7 for further information.

We elected to account for MSR at fair value.

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Model valuations are then compared to valuations obtained from third party pricing providers.

Management reviews the valuations received from

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Management’s Discussion and Analysis

third party pricing providers and uses them as a point of comparison to modeled values.

Management reviews the valuations received from third party pricing providers and uses them as a point of comparison to modeled values.

The valuation of MSR requires significant judgment by management and the third party pricing providers.

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Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds.

See the interest rate sensitivity and interest rate shock analysis and discussions within this Item 7.

for further information.

See the interest rate sensitivity and interest rate shock analysis and discussions within this Item 7 for further information.

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Management’s Discussion and Analysis

Revenue Recognition

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Economic Interest Expense

Non-GAAP financial measure that is comprised of GAAP interest expense and the net interest component of interest rate swaps.

Non-GAAP financial measure that is comprised of GAAP interest expense, the net interest component of interest rate swaps and net interest on initial margin, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Economic Leverage Ratio (Economic Debt-to-Equity Ratio)

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An investment made with the intention of minimizing the impact of adverse movements in interest rates or securities prices.

Initial Margin

Cash or securities provided by a party to collateralize its obligations under a transaction that is not based on changes in the value of such transaction since the trade was executed.

Description for an option that has intrinsic value and can be sold or exercised for a profit;

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Average interest earning assets is based on daily balances.

Interest-Only (IO) Bond

The interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments.

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Management’s Discussion and Analysis

Interests in MSR

Represents agreements to purchase all, or a component of, net servicing cash flows.

Interest-Only (IO) Bond

The interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments.

Interest Rate Risk

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Treasury securities sold, not yet purchased.

Debt issued by securitization vehicles and participations issued and mortgages payable are non-recourse to us.

Debt issued by securitization vehicles and participations issued are non-recourse to us.

LIBOR (London Interbank Offered Rate)

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Net interest margin represents our interest income less interest expense divided by average interest earning assets.

Net interest margin (excluding PAA) is a non-GAAP financial measure that represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.

Net interest margin (excluding PAA) is a non-GAAP financial measure that represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances.

Net Interest Spread and Net Interest Spread (excluding PAA)

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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 7. Management’s Discussion and Analysis