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Item 1. Financial Statements

2025-05-08 compared with 2024-10-31 · 215 added, 294 removed, 756 unchanged (40% of the section changed)

Financial Statements

As of September 30, 2024 and December 31, 2023, a total carrying value of $ 18.7 billion and $ 11.6 billion, respectively, of bonds were held by third parties and the Company retained $ 2.1 billion and $ 1.4 billion, respectively, of MBS, which were eliminated in consolidation.

As of March 31, 2025 and December 31, 2024, a total carrying value of $ 21.8 billion and $ 19.5 billion, respectively, of bonds were held by third parties and the Company retained $ 2.5 billion and $ 2.3 billion, respectively, of MBS, which were eliminated in consolidation.

The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs.

1 unchanged sentence

The liabilities of these securitization entities are deemed to be more observable and are used to measure the fair value of the assets.

The Company incurred $ 5.0 million and $ 1.9 million of costs during the three months ended September 30, 2024 and 2023, respectively, and $ 14.0 million and $ 5.9 million of costs during the nine months ended September 30, 2024 and 2023, respectively, in connection with these securitizations that were expensed as incurred.

The contractual principal amount of the OBX Trusts’ debt held by third parties was $ 19.3 billion and $ 12.6 billion at September 30, 2024 and December 31, 2023, respectively.

During the three months ended September 30, 2024 and 2023, the Company recorded ($ 430.4 ) million and $ 294.9 million, respectively, and ($ 339.6 ) million and $ 213.5 million during the nine months ended September 30, 2024 and 2023, respectively, of unrealized gains (losses) on debt held by third parties issued by OBX Trusts, which is reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss).

The Company incurred $ 6.8 million and $ 3.7 million of costs during the three months ended March 31, 2025 and 2024, respectively, in connection with these securitizations that were expensed as incurred.

The contractual principal amount of the OBX Trusts’ debt held by third parties was $ 22.5 billion and $ 20.5 billion at March 31, 2025 and December 31, 2024, respectively.

During the three months ended March 31, 2025 and 2024, the Company recorded ($ 170.9 ) million and $ 86.0 million, respectively, of unrealized gains (losses) on debt held by third parties issued by OBX Trusts, which is reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss).

Although the residential mortgage loans have been sold for bankruptcy and state law purposes, the transfers of the residential mortgage loans to the OBX Trusts did not qualify for sale accounting and are reflected as intercompany secured borrowings that are eliminated upon consolidation.

3 unchanged sentences

The Company is not the primary beneficiary and does not consolidate the residential credit fund as its only interest in the fund is the management and performance fees that it earns, which are not considered variable interests in the entity.

As of September 30, 2024 and December 31, 2023, the Company had outstanding participating interests in residential mortgage loans of $ 0.5 billion and $ 1.1 billion, respectively.

As of March 31, 2025 and December 31, 2024, the Company had outstanding participating interests in residential mortgage loans of $ 1.7 billion and $ 1.2 billion, respectively.

These transfers do not meet the criteria for sale accounting and are accounted for as secured borrowings, thus the residential loans are reported as Loans, net and the associated liability is reported as Participations issued in the Consolidated Statements of Financial Condition.

24 unchanged sentences

In accordance with a clearing organization’s rulebook, the Company presents the fair value of centrally cleared interest rate swaps net of variation margin pledged or received under such transactions.

At September 30, 2024 and December 31, 2023, ($ 1.8 ) billion and ($ 2.4 ) billion, respectively, of variation margin was reported as an adjustment to interest rate swaps, at fair value.

At March 31, 2025 and December 31, 2024, ($ 2.6 ) billion and ($ 3.3 ) billion, respectively, of variation margin was reported as an adjustment to interest rate swaps, at fair value.

Initial margin is reported in Cash and cash equivalents in the Consolidated Statements of Financial Condition.

26 unchanged sentences

Financial Statements

The following table summarizes fair value information about the Company’s derivative assets and liabilities at September 30, 2024 and December 31, 2023:

Derivatives Instruments September 30, 2024 December 31, 2023

The following table summarizes fair value information about the Company’s derivative assets and liabilities at March 31, 2025 and December 31, 2024:

Derivatives Instruments March 31, 2025 December 31, 2024

Assets (dollars in thousands)

10 unchanged sentences

Total derivative liabilities $ 181,065 $ 59,586

The following tables summarize certain characteristics of the Company’s interest rate swaps at September 30, 2024 and December 31, 2023:

September 30, 2024

The following tables summarize certain characteristics of the Company’s interest rate swaps at March 31, 2025 and December 31, 2024:

March 31, 2025

Maturity Current Notional (1)

18 unchanged sentences

Total / Weighted average $ 66,053,571 3.11 % 4.50 % 4.36

(1) As of September 30, 2024, 7 % and 93 % of the Company’s interest rate swaps were linked to the Federal funds rate and the SOFR, respectively.

As of December 31, 2023, 6 % and 94 % of the Company’s interest rate swaps were linked to the Federal funds rate and the SOFR, respectively.

(1) As of March 31, 2025, 93 % and 7 % of the Company’s interest rate swaps were linked to SOFR and the Federal funds rate, respectively.

As of December 31, 2024, 95 % and 5 % of the Company’s interest rate swaps were linked to SOFR and the Federal funds rate, respectively.

(2) The weighted average years to maturity of payer interest rate swaps is offset by the weighted average years to maturity of receiver interest rate swaps.

3 unchanged sentences

Financial Statements

The following tables summarize certain characteristics of the Company’s swaptions at September 30, 2024 and December 31, 2023:

September 30, 2024

The following tables summarize certain characteristics of the Company’s swaptions at March 31, 2025 and December 31, 2024:

March 31, 2025

Current Underlying Notional Weighted Average Underlying Fixed Rate Weighted Average Underlying Floating Rate Weighted Average Underlying Years to Maturity Weighted Average Months to Expiration

1 unchanged sentence

Long pay $ 1,000,000 4.68 % SOFR 10.83 9.92

Long receive $ — — % SOFR 0.00 0.00

December 31, 2024

3 unchanged sentences

Long receive $ — — % SOFR 0.00 0.00

The following tables summarize certain characteristics of the Company’s TBA derivatives at September 30, 2024 and December 31, 2023:

September 30, 2024

The following tables summarize certain characteristics of the Company’s TBA derivatives at March 31, 2025 and December 31, 2024:

March 31, 2025

Purchase and Sale Contracts for Derivative TBAs Notional Implied Cost Basis Implied Market Value Net Carrying Value

8 unchanged sentences

Net TBA derivatives $ 3,117,000 $ 3,158,058 $ 3,136,154 $ ( 21,904 )

The following tables summarize certain characteristics of the Company’s futures derivatives at September 30, 2024 and December 31, 2023:

September 30, 2024

The following tables summarize certain characteristics of the Company’s futures derivatives at March 31, 2025 and December 31, 2024:

March 31, 2025

Notional - Long

3 unchanged sentences

(dollars in thousands)

Treasury futures - 2 year

$ — $ ( 16,793,200 ) 1.94

Treasury futures - 5 year

3,346,000 — 4.39

Treasury futures - 10 year and greater

9 unchanged sentences

$ 6,511,600 $ — 1.98

Treasury futures - 5 year

1,960,500 — 4.40

Treasury futures - 10 year and greater

6 unchanged sentences

Financial Statements

The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset in the Company’s Consolidated Statements of Financial Condition at September 30, 2024 and December 31, 2023, respectively.

September 30, 2024

The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset in the Company’s Consolidated Statements of Financial Condition at March 31, 2025 and December 31, 2024, respectively.

March 31, 2025

Amounts Eligible for Offset

15 unchanged sentences

Interest rate swaps, at fair value $ 21,226 $ ( 8,138 ) $ — $ 13,088

Interest rate swaptions, at fair value 105,883 ( 45,930 ) ( 57,320 ) 2,633

TBA derivatives, at fair value 8,635 ( 879 ) ( 929 ) 6,827

Futures contracts, at fair value 190,980 ( 16,650 ) — 174,330

Purchase commitments 4,510 — — 4,510

9 unchanged sentences

For the three months ended (dollars in thousands)

September 30, 2024 $ 317,483 $ ( 94,016 ) $ ( 1,582,495 )

September 30, 2023 $ 394,677 $ 16,416 $ 1,475,547

For the nine months ended

September 30, 2024 $ 946,004 $ ( 96,532 ) $ ( 584,109 )

September 30, 2023 $ 1,205,676 $ ( 81,255 ) $ 1,360,977

March 31, 2025 $ 191,545 $ ( 43,789 ) $ ( 753,601 )

March 31, 2024 $ 330,149 $ ( 21,237 ) $ 900,902

(1) Included in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

The effect of other derivative contracts in the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:

Three Months Ended September 30, 2024

Three Months Ended March 31, 2025

Derivative Instruments Realized Gain (Loss) Unrealized Gain (Loss) Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives

5 unchanged sentences

$ ( 372,022 )

Three Months Ended September 30, 2023

Derivative Instruments Realized Gain (Loss) Unrealized Gain (Loss) Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives

(dollars in thousands)

Net TBA derivatives $ ( 81,964 ) $ ( 41,777 ) $ ( 123,741 )

Net interest rate swaptions ( 27,860 ) ( 51,041 ) ( 78,901 )

309,397 131,578 440,975

Purchase commitments — 2,457 2,457

Total $ 240,790

(1) For the three months ended September 30, 2023, includes $ 13.2 million of unrealized gain and ($ 18.9 ) million of realized loss related to SOFR futures options.

Nine Months Ended September 30, 2024

Derivative Instruments Realized Gain (Loss) Unrealized Gain (Loss) Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives

(dollars in thousands)

Net TBA derivatives $ 15,694 $ 12,649 $ 28,343

Net interest rate swaptions ( 33,511 ) ( 59,304 ) ( 92,815 )

( 323,113 ) 170,973 ( 152,140 )

Purchase commitments — 4,870 4,870

Total $ ( 211,742 )

(1) For the nine months ended September 30, 2024, includes ($ 6.8 ) million of realized loss related to SOFR futures options.

Nine Months Ended September 30, 2023

(1) For the three months ended March 31, 2025, includes $ 9.0 million of realized gain related to SOFR futures options.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

Three Months Ended March 31, 2024

Derivative Instruments Realized Gain (Loss) Unrealized Gain (Loss) Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives

4 unchanged sentences

Purchase commitments — ( 6,613 ) ( 6,613 )

Credit derivatives ( 19,282 ) 13,260 ( 6,022 )

Total $ 167,330

(1) For the nine months ended September 30, 2023, includes ($ 5.6 ) million of unrealized loss and ($ 18.9 ) million of realized loss related to SOFR futures options.

(1) For the three months ended March 31, 2024, includes $ 1.2 million of unrealized gain related to SOFR futures options.

Certain of the Company’s derivative contracts are subject to International Swaps and Derivatives Association Master Agreements or other similar agreements which may contain provisions that grant counterparties certain rights with respect to the applicable agreement upon the occurrence of certain events such as (i) a decline in stockholders’ equity in excess of specified thresholds or dollar amounts over set periods of time, (ii) the Company’s failure to maintain its REIT status, (iii) the Company’s failure to comply with limits on the amount of leverage, and (iv) the Company’s stock being delisted from the New York Stock Exchange.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

Upon the occurrence of any one of items (i) through (iv), or another default under the agreement, the counterparty to the applicable agreement has a right to terminate the agreement in accordance with its provisions.

The aggregate fair value of all derivative instruments with the aforementioned features were in a net liability position at September 30, 2024 of $ 42.2 million, which represents the maximum amount the Company would be required to pay upon termination.

The aggregate fair value of all derivative instruments with the aforementioned features were in a net liability position at March 31, 2025 of $ 115.1 million, which represents the maximum amount the Company would be required to pay upon termination.

This amount is fully collateralized.

15 unchanged sentences

Treasury securities are valued using quoted prices for identical instruments in active markets and are classified as Level 1.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

Residential Securities, interest rate swaps, swaptions and other derivatives are valued using quoted prices or internally estimated prices for similar assets using internal models.

8 unchanged sentences

Consequently, commercial mortgage-backed securities carried at fair value are classified as Level 2.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

For the fair value of debt issued by securitization vehicles, refer to the “Variable Interest Entities” Note for additional information.

6 unchanged sentences

Assumptions used for which there is a lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s financial statements.

The following tables present the estimated fair values of financial instruments and MSR measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023.

The following tables present the estimated fair values of financial instruments and MSR measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024.

There were no transfers between levels of the fair value hierarchy during the periods presented.

September 30, 2024

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

March 31, 2025

Level 1 Level 2 Level 3 Total

18 unchanged sentences

Total liabilities $ 2,667,496 $ 23,583,160 $ — $ 26,250,656

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

December 31, 2024

19 unchanged sentences

Total liabilities $ 2,487,279 $ 20,738,430 $ — $ 23,225,709

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

Qualitative and Quantitative Information about Level 3 Fair Value Measurements

14 unchanged sentences

Range (Weighted Average) (2)

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Discount rate 6.2 % - 12.2 % ( 8.2 %)

8 unchanged sentences

(2) Weighted average discount rate computed based on the fair value of MSR, weighted average prepayment rate, delinquency rate and cost to service based on unpaid principal balances of loans underlying the MSR.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

The following table summarizes the estimated fair values for financial assets and liabilities that are not carried at fair value at September 30, 2024 and December 31, 2023.

September 30, 2024 December 31, 2023

The following table summarizes the estimated fair values for financial assets and liabilities that are not carried at fair value at March 31, 2025 and December 31, 2024.

March 31, 2025 December 31, 2024

Value Carrying

8 unchanged sentences

As part of the Company’s management internalization transaction, which closed on June 30, 2020, the Company recognized an intangible asset for the acquired assembled workforce of approximately $ 41.2 million based on the replacement cost of the employee base acquired by the Company.

The following table presents the activity of finite lived intangible assets for the nine months ended September 30, 2024.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

The following table presents the activity of finite lived intangible assets for the three months ended March 31, 2025.

Intangible Assets, net

2 unchanged sentences

amortization expense ( 673 )

Ending balance September 30, 2024

Ending balance March 31, 2025

SECURED FINANCING

6 unchanged sentences

The Company reports cash flows on repurchase agreements as financing activities and cash flows on reverse repurchase agreements as investing activities in the Consolidated Statements of Cash Flows.

The Company had outstanding $ 64.3 billion and $ 62.2 billion of repurchase agreements with weighted average remaining maturities of 34 days and 44 days and weighted average rates of 5.23 % and 5.70 % at September 30, 2024 and December 31, 2023, respectively.

In connection with its residential mortgage loans, the Company has select arrangements with counterparties to enter into repurchase agreements for $ 3.5 billion with remaining capacity of $ 2.2 billion at September 30, 2024.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

At September 30, 2024 and December 31, 2023, the repurchase agreements had the following remaining maturities and collateral types:

September 30, 2024

The Company had outstanding $ 61.7 billion and $ 65.7 billion of repurchase agreements with weighted average remaining maturities of 50 days and 32 days and weighted average rates of 4.56 % and 4.76 % at March 31, 2025 and December 31, 2024, respectively.

In connection with its residential mortgage loans, the Company has select arrangements with counterparties to enter into repurchase agreements for $ 3.9 billion with remaining capacity of $ 2.2 billion at March 31, 2025.

At March 31, 2025 and December 31, 2024, the repurchase agreements had the following remaining maturities and collateral types:

March 31, 2025

Agency Mortgage-Backed Securities CRTs Non-Agency Mortgage-Backed Securities Residential Mortgage Loans Commercial Mortgage-Backed Securities Total Repurchase Agreements

9 unchanged sentences

Amounts offset in accordance with netting arrangements ( 2,541,160 )

( 2,678,880 )

Net amounts of Repurchase agreements as presented in the Consolidated Statements of Financial Condition $ 61,659,460

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

December 31, 2024

10 unchanged sentences

Amounts offset in accordance with netting arrangements ( 2,613,088 )

( 2,268,293 )

Net amounts of Repurchase agreements as presented in the Consolidated Statements of Financial Condition $ 65,688,923

(1) Less than 1 % of repurchase agreements had a remaining maturity over 1 year at September 30, 2024.

No repurchase agreements had a remaining maturity over 1 year at December 31, 2023.

The following table summarizes the gross amounts of reverse repurchase agreements and repurchase agreements, amounts offset in accordance with netting arrangements and net amounts of repurchase agreements and reverse repurchase agreements as presented in the Consolidated Statements of Financial Condition at September 30, 2024 and December 31, 2023.

(1) Less than 1 % of repurchase agreements had a remaining maturity over 1 year at March 31, 2025 and December 31, 2024.

Refer to the “Derivative Instruments” Note for information related to the effect of netting arrangements on the Company’s derivative instruments.

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Reverse Repurchase Agreements Repurchase Agreements Reverse Repurchase Agreements Repurchase Agreements

3 unchanged sentences

Netted amounts $ — $ 61,659,460 $ — $ 65,688,923

The fair value of collateral received in connection with reverse repurchase agreements as of September 30, 2024 was $ 2.7 billion, of which the Company sold $ 2.0 billion.

The fair value of collateral received in connection with reverse repurchase agreements as of March 31, 2025 was $ 2.5 billion, of which the Company sold $ 2.5 billion.

The fair value of collateral received in connection with reverse repurchase agreements as of December 31, 2024 was $ 2.6 billion, of which the Company sold $ 2.5 billion.

1 unchanged sentence

Treasury securities sold, not yet purchased.

Other Secured Financing - As of September 30, 2024, the Company had $ 1.3 billion in total committed credit facilities to finance a portion of its MSR portfolio.

Outstanding borrowings under this facility as of September 30, 2024 totaled $ 600.0 million with maturities ranging between four months to one year .

The weighted average interest rate of the borrowings was

Other Secured Financing - As of March 31, 2025, the Company had $ 1.8 billion in total committed credit facilities to finance a portion of its MSR portfolio.

Outstanding borrowings under these facilities as of March 31, 2025 totaled $ 900.0 million with maturities ranging between one year to two years .

As of December 31, 2024, the Company had $ 1.6 billion in total committed credit facilities to finance a portion of its MSR portfolio.

Outstanding borrowings under these facilities as of December 31, 2024 totaled $ 750.0 million with maturities ranging between one month to two years .

The weighted average interest rate of the borrowings was 7.03 % and 7.21 % as of March 31, 2025 and December 31, 2024, respectively.

Borrowings are reported in Other secured financing in the Company’s Consolidated Statements of Financial Condition.

Refer to the “Variable Interest Entities” Note for additional information on the Company’s other secured financing arrangements at December 31, 2024.

Investments pledged as collateral under secured financing arrangements and interest rate swaps, excluding residential mortgage loans of consolidated VIEs, had an estimated fair value and accrued interest of $ 68.0 billion and $ 310.1 million, respectively, at March 31, 2025 and $ 71.8 billion and $ 332.7 million, respectively, at December 31, 2024.

ANNALY CAPITAL MANAGEMENT, INC.

1 unchanged sentence

Financial Statements

8.05 % as of September 30, 2024.

Borrowings are reported in Other secured financing in the Company’s Consolidated Statements of Financial Condition.

Refer to the “Variable Interest Entities” Note for additional information on the Company’s other secured financing arrangements at December 31, 2023.

Investments pledged as collateral under secured financing arrangements and interest rate swaps, excluding residential mortgage loans of consolidated VIEs, had an estimated fair value and accrued interest of $ 69.3 billion and $ 304.7 million, respectively, at September 30, 2024 and $ 68.2 billion and $ 279.5 million, respectively, at December 31, 2023.

CAPITAL STOCK

(A) Common Stock

The following table provides a summary of the Company’s common shares authorized, and issued and outstanding at September 30, 2024 and December 31, 2023.

The following table provides a summary of the Company’s common shares authorized, and issued and outstanding at March 31, 2025 and December 31, 2024.

Shares authorized Shares issued and outstanding

September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023 Par Value

March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 Par Value

1,468,250,000 1,468,250,000 602,338,286 578,357,118 $ 0.01

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

During the three and nine months ended September 30, 2024 and 2023, no shares were repurchased under the Share Repurchase Program.

On August 6, 2020, the Company 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 “Prior 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 “Prior Sales Agents”).

Pursuant to the Prior Sales Agreements, the Company offered and sold shares of its 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, the Company 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, the Company may offer and sell shares of its 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 three and nine months ended September 30, 2024, under the at-the-market sales program, the Company issued 57.0 million and 57.6 million shares for proceeds of $ 1.1 billion and $ 1.2 billion, respectively, each net of commissions and fees.

During the three and nine months ended September 30, 2023, under the at-the-market sales program, the Company issued 0.9 million and 26.2 million shares for proceeds of $ 17.8 million and $ 580.5 million, respectively, each net of commissions and fees.

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

In January 2025, the Company announced that its Board authorized the repurchase of up to $ 1.5 billion of its 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 three months ended March 31, 2025 and 2024, no shares were repurchased under the Current Common Stock Repurchase Program or the Prior Common Stock Repurchase Program, respectively.

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

Under the terms of the Prior Sales Agreements, the Company offered and sold shares of its 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 “at-the-market sales program”).

During the three months ended March 31, 2025, under the at-the-market sales program, the Company issued 23.3 million shares for proceeds of $ 495.7 million, net of commissions and fees.

During the three months ended March 31, 2024, no shares were issued under the at-the-market sales program pursuant to the Prior Sales Agreements;

however, the Company incurred costs to maintain the effectiveness of the at-the-market sales program that was in effect at that time.

(B) Preferred Stock

The following is a summary of the Company’s cumulative redeemable preferred stock outstanding at September 30, 2024 and December 31, 2023.

The following is a summary of the Company’s cumulative redeemable preferred stock outstanding at March 31, 2025 and December 31, 2024.

In the event of a liquidation or dissolution of the Company, the Company’s then outstanding preferred stock takes precedence over the Company’s common stock with respect to payment of dividends and the distribution of assets.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

Shares Authorized Shares Issued And Outstanding Carrying Value Contractual Rate Earliest Redemption Date (1)

Effective Date of Floating Rate Dividend Period Floating Annual Rate (2)

September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024

Fixed-to-floating rate

6 unchanged sentences

Each series of preferred stock has a par value of $ 0.01 per share and a liquidation and redemption price of $ 25.00 , plus accrued and unpaid dividends through their redemption date.

Through September 30, 2024, the Company had declared and paid all required quarterly dividends on the Company’s preferred stock.

Through March 31, 2025, the Company had declared and paid all required quarterly dividends on the Company’s preferred stock.

The Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, Series G Fixed-to-Floating Rate Cumulative Preferred Stock and Series I Fixed-to-Floating Rate Cumulative Preferred Stock rank senior to the common stock of the Company.

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

Under the terms of the plan, the Company is 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 its 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 its 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 its 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 the Company 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 three and nine months ended September 30, 2024.

On December 31, 2024, the 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 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

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

of its 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 its 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 its 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 the Company pursuant to the Prior Preferred Stock Repurchase Program, as of November 3, 2022, was approximately $ 1.6 billion.

The Preferred Stock Repurchase Program became effective on January 1, 2025 and will expire on December 31, 2029, and replaced the Preferred Stock repurchase program, which was effective from November 2, 2022 and expired on December 31, 2024 (the “Prior Preferred Stock Repurchase Program”).

No shares were repurchased with respect to the Preferred Stock Repurchase Program during the three months ended March 31, 2025 and the Prior Preferred Stock Repurchase Program during the three months ended March 31, 2024.

The following table provides a summary of the Company’s dividend distribution activity for the periods presented:

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

For the Three Months Ended

March 31, 2025 March 31, 2024

(dollars in thousands, except per share data)

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Distributions paid per common share after period end $ 0.70 $ 0.65

Date of distributions paid to common stockholders after period end October 31, 2024 October 31, 2023 October 31, 2024 October 31, 2023

Date of distributions paid to common stockholders after period end April 30, 2025 April 30, 2024

Dividends declared to series F preferred stockholders $ 17,250 $ 19,085

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(3) Effective yield is recalculated for differences between estimated and actual prepayments and the amortized cost is adjusted as if the new effective yield had been applied since inception.

The following table presents the components of the Company’s interest income and interest expense for the three and nine months ended September 30, 2024 and 2023.

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

The following table presents the components of the Company’s interest income and interest expense for the three months ended March 31, 2025 and 2024.

For the Three Months Ended

March 31, 2025 March 31, 2024

Interest income (dollars in thousands)

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Commercial investment portfolio (1)

2,240 5,812 8,235 24,009

Reverse repurchase agreements 29,609 31,406

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NET INCOME (LOSS) PER COMMON SHARE

The following table presents a reconciliation of net income (loss) and shares used in calculating basic and diluted net income (loss) per share for the three and nine months ended September 30, 2024 and 2023.

For the Three Months Ended For the Nine Months Ended

September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023

The following table presents a reconciliation of net income (loss) and shares used in calculating basic and diluted net income (loss) per share for the three months ended March 31, 2025 and 2024.

For the Three Months Ended

March 31, 2025 March 31, 2024

(dollars in thousands, except per share data)

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Diluted $ 0.15 $ 0.85

The computations of diluted net income (loss) per share available (related) to common share for the three and nine months ended September 30, 2024 excludes 0 and 2 thousand, respectively, and for the three and nine months ended September 30, 2023 excludes 1.9 million and 1.8 million, respectively, of potentially dilutive restricted and performance stock units because their effect would have been anti-dilutive.

For the three months ended September 30, 2024, the Company was qualified to be taxed as a REIT under Code Sections 856 through 860.

There were no potentially dilutive restricted stock units or performance stock units for the three months ended March 31, 2025.

The computations of diluted net income (loss) per share available (related) to common share for the three months ended March 31, 2024 exclude 1.5 million of potentially dilutive restricted stock units and performance stock units because their effect would have been anti-dilutive.

For the three months ended March 31, 2025, the Company was qualified to be taxed as a REIT under Code Sections 856 through 860.

As a REIT, the Company will not incur federal income tax to the extent that it distributes its taxable income to its stockholders.

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The Company does not have any unrecognized tax benefits that would affect its financial position.

Thus, no accruals for penalties and interest were deemed necessary at September 30, 2024 and December 31, 2023.

Thus, no accruals for penalties and interest were deemed necessary at March 31, 2025 and December 31, 2024.

The state and local tax jurisdictions for which the Company is subject to tax-filing obligations recognize the Company’s status as a REIT and, therefore, the Company generally does not pay income tax in such jurisdictions.

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The Company’s TRSs are subject to federal, state and local taxes.

During the three and nine months ended September 30, 2024, the Company recorded ($ 6.1 ) million and $ 4.9 million, respectively, of income tax expense/(benefit) attributable to its TRSs.

During the three and nine months ended September 30, 2023, the Company recorded $ 12.4 million and $ 37.7 million, respectively, of income tax expense attributable to its TRSs.

The Company’s federal, state and local tax returns from 2021 and forward remain open for examination.

During the three months ended March 31, 2025 and 2024, the Company recorded $ 8.3 million and ($ 0.9 ) million, respectively, of income tax expense (benefit) attributable to its TRSs.

ANNALY CAPITAL MANAGEMENT, INC.

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Financial Statements

For the Three Months Ended

March 31, 2025 March 31, 2024

(dollars in thousands)

Current Tax Expense (Benefit)

Federal $ — $ —

State and local 13 —

Total current income tax expense (benefit) $ 13 $ —

Deferred Tax Expense (Benefit)

Federal $ 7,222 $ ( 824 )

State and local 1,032 ( 119 )

Total deferred income tax expense (benefit) $ 8,254 $ ( 943 )

Total income tax expense (benefit) $ 8,267 $ ( 943 )

The difference between the Company's reported income tax provision and the U.S.

federal statutory rate of 21.0% and state income tax rates is as follows:

For the Three Months Ended

March 31, 2025 March 31, 2024

Statutory federal income tax rate 21.0 % 21.0 %

Non-taxable REIT income ( 14.6 %) ( 24.5 %)

State and local taxes 3.0 % 3.0 %

VIE and Other ( 3.5 %) 0.3 %

Change in valuation allowance — % — %

Total provision 5.9 % ( 0.2 %)

As of March 31, 2025, the Company recorded a net deferred tax asset of $ 72.6 million resulting primarily from loss carryforwards, securitization gains and unrealized losses on swaps, and a net deferred tax liability of $ 149.9 million resulting primarily from unrealized gains on MSR, which is included in Other assets and Other liabilities, respectively, in the Consolidated Statements of Financial Condition.

As of March 31, 2025, no valuation allowance was established.

As of March 31, 2025, the Company's TRSs had approximately $ 61.5 million of net operating loss carryforwards for federal income tax purposes which may be available to offset future taxable income, including approximately $ 7.9 million of net operating loss carryforwards that are subject to an annual limitation under Internal Revenue Code Section 382 and $ 53.6 million that can be carried forward indefinitely.

As of March 31, 2025, the Company's TRSs had approximately $ 31.5 million of capital loss carryforwards for federal income tax purposes which can be carried back three years and forward up to five years to offset capital gains.

The Company operates in three reportable segments further described in the Description of Business Note.

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Comprehensive income is the measure of segment profit or loss that is determined in accordance with the measurement principles used in measuring the corresponding amounts in the consolidated financial statements and is a key determinant of the Company’s economic return (computed as the change in stockholders’ equity attributable to common stockholders plus common stock dividends declared divided by the prior period’s stockholders’ equity attributable to common stockholders), a measure which is used by the CODM to evaluate segment results and is one of the factors considered in determining capital allocation among the segments.

The following tables present the reportable operating segments related to the Company’s results of operations for the three and nine months ended September 30, 2024 and 2023:

Three Months Ended September 30, 2024

Agency Resi-credit MSR Corporate & Other Consolidated

(dollars in thousands)

Interest income $ 830,407 $ 396,694 $ — $ 2,240 $ 1,229,341

Interest expense 885,982 328,440 — 1,518 1,215,940

Net interest income ( 55,575 ) 68,254 — 722 13,401

Servicing and related income — — 122,583 — 122,583

Servicing and related expense — — 12,988 — 12,988

Net servicing income — — 109,595 — 109,595

Other income (loss) ( 6,658 ) 36,028 ( 33,967 ) 1,738 ( 2,859 )

Total general and administrative expenses 16,154 13,868 8,876 5,023 43,921

Income (loss) before income taxes ( 78,387 ) 90,414 66,752 ( 2,563 ) 76,216

Income taxes 23 ( 8,263 ) 2,126 ( 21 ) ( 6,135 )

Net income (loss) ( 78,410 ) 98,677 64,626 ( 2,542 ) 82,351

Net income (loss) attributable to noncontrolling interest — 15,906 — — 15,906

Net income (loss) attributable to Annaly ( 78,410 ) 82,771 64,626 ( 2,542 ) 66,445

Dividends on preferred stock — — — 41,628 41,628

Net income (loss) available (related) to common stockholders ( 78,410 ) 82,771 64,626 ( 44,170 ) 24,817

Unrealized gains (losses) on available-for-sale securities 428,955 — — — 428,955

Reclassification adjustment for net (gains) losses included in net income (loss) 15,769 — — — 15,769

Other comprehensive income (loss) 444,724 — — — 444,724

Comprehensive income (loss) 366,314 98,677 64,626 ( 2,542 ) 527,075

Comprehensive income (loss) attributable to noncontrolling interests — 15,906 — — 15,906

Comprehensive income (loss) attributable to Annaly $ 366,314 $ 82,771 $ 64,626 $ ( 2,542 ) $ 511,169

Noncash investing and financing activities:

Receivable for unsettled trades 727,124 — 39,217 — 766,341

Payable for unsettled trades 1,811,196 — 74,090 — 1,885,286

Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment 444,724 — — — 444,724

Dividends declared, not yet paid — — — 362,731 362,731

Total assets $ 71,699,019 $ 26,235,097 $ 3,371,113 $ 210,766 $ 101,515,995

ANNALY CAPITAL MANAGEMENT, INC.

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Financial Statements

Three Months Ended September 30, 2023

Agency Resi-credit MSR Corporate & Other Consolidated

(dollars in thousands)

Interest income $ 756,479 $ 239,194 $ — $ 5,812 $ 1,001,485

Interest expense 849,422 193,271 — 4,126 1,046,819

Net interest income ( 92,943 ) 45,923 — 1,686 ( 45,334 )

Servicing and related income — — 97,620 — 97,620

Servicing and related expense — — 9,623 — 9,623

Net servicing income — — 87,997 — 87,997

Other income (loss) ( 528,640 ) ( 12,974 ) ( 21,870 ) 4,038 ( 559,446 )

Total general and administrative expenses 14,576 12,195 7,657 5,481 39,909

Income (loss) before income taxes ( 636,159 ) 20,754 58,470 243 ( 556,692 )

Income taxes 727 5,985 5,858 ( 178 ) 12,392

Net income (loss) ( 636,886 ) 14,769 52,612 421 ( 569,084 )

Net income (loss) attributable to noncontrolling interest — ( 6,879 ) — — ( 6,879 )

Net income (loss) attributable to Annaly ( 636,886 ) 21,648 52,612 421 ( 562,205 )

Dividends on preferred stock — — — 36,854 36,854

Net income (loss) available (related) to common stockholders ( 636,886 ) 21,648 52,612 ( 36,433 ) ( 599,059 )

Unrealized gains (losses) on available-for-sale securities ( 825,286 ) — — — ( 825,286 )

Reclassification adjustment for net (gains) losses included in net income (loss) 513,041 — — — 513,041

Other comprehensive income (loss) ( 312,245 ) — — — ( 312,245 )

Comprehensive income (loss) ( 949,131 ) 14,769 52,612 421 ( 881,329 )

Comprehensive income (loss) attributable to noncontrolling interests — ( 6,879 ) — — ( 6,879 )

Comprehensive income (loss) attributable to Annaly $ ( 949,131 ) $ 21,648 $ 52,612 $ 421 $ ( 874,450 )

Noncash investing and financing activities:

Receivable for unsettled trades 1,039,173 — 8,393 — 1,047,566

Payable for unsettled trades 2,144,692 1,546 38,231 29,850 2,214,319

Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment ( 312,245 ) — — — ( 312,245 )

Dividends declared, not yet paid — — — 321,629 321,629

Total assets $ 70,047,768 $ 16,616,765 $ 2,647,052 $ 336,838 $ 89,648,423

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Financial Statements

Nine Months Ended September 30, 2024

The following tables present the reportable operating segments related to the Company’s results of operations for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31, 2025

Agency Resi-credit MSR Corporate & Other Consolidated

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Financial Statements

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Agency Resi-credit MSR Corporate & Other Consolidated

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The Company’s 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.

LEASE COMMITMENTS AND CONTINGENCIES

The Company’s operating leases are primarily comprised of corporate office leases with remaining lease terms of approximately one year and three years .

The Company’s operating leases are primarily comprised of corporate office leases with remaining lease terms of approximately three years and seventeen years .

The corporate office leases include options to extend for up to five years , however the extension terms were not included in the operating lease liability calculation.

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The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The lease cost for the three and nine months ended September 30, 2024 and 2023 was $ 0.8 million and $ 2.5 million, and $ 0.8 million and $ 2.4 million, respectively.

Supplemental information related to leases as of and for the nine months ended September 30, 2024 was as follows:

Operating Leases Classification September 30, 2024

The lease cost for the three months ended March 31, 2025 and 2024 was $ 1.1 million and $ 0.8 million, respectively.

Supplemental information related to leases as of and for the three months ended March 31, 2025 was as follows:

Operating Leases Classification March 31, 2025

Assets (dollars in thousands)

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In the opinion of management, the ultimate disposition of these matters will not have a material effect on the Company’s consolidated financial statements.

There were no material contingencies at September 30, 2024 and December 31, 2023.

There were no material contingencies at March 31, 2025 and December 31, 2024.

SUBSEQUENT EVENTS

In October 2024, the Company entered into a $ 300 million facility for financing its MSR investments.

In October 2024, the Company completed and closed the securitization of residential mortgage loans:

OBX 2024-NQM15, with a face value of $ 635.8 million.

The securitization represents a financing transaction which provided non-recourse financing to the Company collateralized by residential mortgage loans purchased by the Company.

In April 2025, the Company completed and closed two securitizations of residential mortgage loans, OBX 2025-NQM6, with a face value of $ 553.2 million, and OBX 2025-NQM7, with a face value of $ 572.4 million.

These securitizations represent financing transactions which provided non-recourse financing to the Company collateralized by residential mortgage loans purchased by the Company.

In April 2025, the Company upsized capacity of an existing credit facility by $ 100 million for the Company’s residential mortgage loans.

On May 8, 2025, the Company entered into separate Distribution Agency Agreements with certain sales agents, which agreements terminated and replaced the Prior Sales Agreements.

For additional information, see “Part II—Item 5.

Other Information—Current At-the-Market Sales Program.”

ANNALY CAPITAL MANAGEMENT, INC.

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Business Environment

Fixed income markets benefited from two positive trends in the third quarter (“Q3 2024”).

The Federal Reserve (the “Fed”) commenced a cycle of lowering the Federal Funds Target Rate to less restrictive levels, while the U.S.

economy generally maintained its strong pace of growth.

Officials lowered the Federal Funds Target Rate by 50 basis points at the September Federal Open Market Committee (“FOMC”) meeting, lowering short-term interest rates for the first time since the July 2023 FOMC meeting.

Fed officials signaled that they intend to ease monetary policy over time as current policy remains restrictive, with the pace and extent of easing dependent on incoming economic data.

The Fed's cutting cycle will be geared at lowering interest rates to levels that promote a healthy, stable labor market while keeping inflation near its 2% target.

Short-term interest rate markets currently price this “neutral rate” at 3.25%, though estimates have varied somewhat in recent weeks.

The change in monetary policy was driven by the labor market, as reduced demand for workers and slower hiring have moved labor supply and demand roughly in balance for the first time in the past three years.

For much of the post-pandemic experience, strong demand for labor had exceeded available supply, leading to higher wage growth and the potential for a negative feedback loop between rising prices and rising wages.

According to the minutes of the September FOMC meeting, Fed officials judged that risks of such a feedback loop appear to have declined.

Inflation continues to normalize with personal consumption expenditures excluding food and energy (“core PCE”) likely to run only slightly above 2% annualized in Q3 2024.

The market's pricing of additional rate cuts has led to a steeper yield curve, increasing the attractiveness of fixed income assets more broadly and Agency MBS in particular.

In addition, interest rate volatility has continued to decline to the lowest levels since the March 2023 regional banking crisis, though it remains meaningfully above pre-pandemic historical average levels.

These developments have been supportive of our diversified business model, as seen in the strong performance delivered in the quarter.

We generated an economic return of 4.9% in Q3 2024 and our earnings available for distribution (“EAD”) exceeded our common dividend.

We achieved these results with continued robust earnings power of our portfolio even with lower economic leverage, which decreased modestly during the quarter to 5.7x.

Our strong performance and the supportive backdrop for our investment strategies allowed us to raise over $1.1 billion of accretive common equity over the quarter through our at-the-market sales program.

The environment to deploy capital remains attractive as the market value of all three of our business lines increased quarter over quarter.

With respect to our portfolio activity during the quarter, in light of the capital raised, our Agency MBS investments grew by over $4 billion notional value with the remaining increase in market value attributable to price appreciation.

Despite the positive fixed income market backdrop, Agency MBS performance was bifurcated across coupons.

Lower coupons benefited from strong money manager demand, while the decline in mortgage rates raised concerns regarding prepayment behavior in higher coupons, leading such coupons to underperform their respective interest rate hedges.

Given this relative performance, we increased our allocation to 5.0% coupons and higher given their attractiveness relative to intermediate and lower coupons.

This represents an extension of our methodical migration up the coupon stack over the last two years with a diligent focus on high-quality pool selection.

For example, 6.0% coupons and higher represent roughly a quarter of our portfolio, though the majority of these higher coupon holdings are held in specified pool form that offer significant protections from higher prepayment speeds.

Our outlook for the Agency MBS sector remains favorable.

Notably, the supply and demand technical factors, often a headwind over the past few years, have continued to improve as net supply is trending lower, likely reaching levels somewhat below 2023 totals.

Meanwhile, fixed income flows have helped improve money manager demand for this year, which is currently running at nearly double the estimated pace from last year.

In addition, appetite from banks and overseas investors should increase as the Fed’s normalization of interest rates, leading the spread between MBS yields and deposit rates to increase and currency hedging costs to decline.

We maintained conservative interest rate exposure throughout the quarter, while benefiting from a position geared towards the steepening of the yield curve that ultimately took place during the quarter.

As interest rate levels declined throughout Q3 2024,

The first quarter of 2025 (“Q1 2025”) saw the Trump Administration entering its second term, ready to make meaningful changes across several different policy areas including trade, immigration, fiscal policy, and regulation.

While many initiatives, most notably easing of financial regulation, should be supportive of U.S.

businesses and financial markets in the medium-term, rapid and concurrent reform announcements introduced uncertainty and financial market volatility in the short-term.

The market volatility was primarily driven by the rollout of several tariff measures in March and April.

These announcements have led to decreased business and consumer confidence, risking lower activity data in quarters to come if businesses or consumers alter their behavior.

Of note, Q1 2025 activity data remained relatively strong, with consumption and business activity expanding at roughly the same rate as in prior quarters.

However, aggregate U.S.

gross domestic product (“GDP”) declined modestly in the quarter as higher import volumes reduced economic activity in the GDP growth calculation.

Additionally, inflation slowed marginally in the quarter, with personal consumption expenditures excluding food and energy (“core PCE”) running at 3.5% seasonally adjusted annualized rate (“SAAR”), slightly below the 3.7% SAAR recording in Q1 2024.

The Federal Reserve (“the Fed”) kept interest rates unchanged during the quarter, as officials weighed the conflicting signals from tariffs and other policy changes on economic growth and inflation.

Fed officials are waiting for further evidence about an economic slowdown or higher inflation before making further adjustments to the Federal Funds Target Rate (“Fed Funds Target Rate”).

Our portfolio performed relatively well in Q1 2025, delivering a 3% economic return during the quarter.

This was reflected in an increase to our common stock dividend to $0.70 per share, underscoring healthy earnings momentum, all while modestly increasing economic leverage to 5.7x at quarter end – still a leverage level at the low end of our historical range.

With respect to our portfolio activity, we grew our Agency MBS investments by $4.4 billion market value, with most of the increase coming from additional investments to deploy the approximately $495 million equity we raised during the quarter through the at-the-market stock sale program.

Unlike much of 2024, when we concentrated MBS purchases on higher coupon specified pools, a majority of Q1 purchases were in to-be-announced (“TBA”) securities in intermediate coupons.

These securities offered the highest relative value following the selloff in interest rates in Q4 2024 and January 2025, with dollar roll financing on TBA contracts improving significantly.

As a result, our TBA balances grew to $6.6 billion market value at the end of Q1 2025, the largest holdings in two years.

Similar to prior quarters, we continued to prudently manage our hedge position, maintaining a conservative stance with regard to our interest rate exposure.

Of note, increased optimism about changes to the bank regulatory landscape drove a widening in swap spreads – the difference between Treasury and same tenor interest rate swap yields – for much of the quarter.

We used this opportunity to better balance our hedge allocation between Treasuries and swaps, in turn lowering our aggregate swap notional and increasing the exposure to Treasury future hedges.

In addition, we entered into a $1 billion notional 10-year payer swaption in anticipation of higher interest rate volatility.

Our Residential Credit portfolio ended the quarter at $6.6 billion in market value, declining modestly as we opportunistically sold third-party securities early in the quarter given tight valuations and increased the pace of our securitizations.

Annaly’s Onslow Bay (“OBX”) shelf closed six securitization transactions totaling $3.1 billion during the quarter, including our inaugural securitization of home equity line of credit loans (“HELOCs”) and a private placement to a major U.S.

insurance company.

In addition, we have priced two additional securitizations in April.

Correspondent channel lock volumes remained strong, with aggregate quarterly fundings reaching $3.8 billion, just shy of the record pace of fundings seen in the fourth quarter of 2024.

Our mortgage servicing rights (“MSR”) strategy saw its portfolio relatively unchanged during the quarter as we purchased $48 million market value in assets, or $3 billion in unpaid principal balances (“UPB”) through our bulk and flow acquisition

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

we proactively managed our rate exposure, shifting hedges across the yield curve as mortgage durations contracted.

Going forward, we expect continued interest rate volatility driven by the upcoming elections, geopolitical risks and the trajectory of fiscal deficits, which present uncertainty around the terminal level of interest rates.

Meanwhile our Residential Credit portfolio increased approximately $535 million in Q3 2024 to $6.5 billion in economic market value and $2.3 billion of dedicated capital, representing 18% of the firm’s equity.

Growth continued to be driven by our correspondent platform with our residential whole loan and retained Onslow Bay (“OBX”) securitization portfolio.

Capitalizing on firm credit spreads, which moved in roughly a 10 basis point range during the quarter, we closed six securitizations totaling $3.2 billion in unpaid principal balance.

Since the beginning of 2024, we have now priced 18 securitizations totaling $9.4 billion, establishing Onslow Bay as the largest non-bank securitization sponsor in the residential credit market and second largest overall.

The quarter once again produced record volumes across both locks and fundings at $4.4 billion and $2.9 billion, respectively.

Our diligent focus on underwriting sound credit risk and proactive asset management has led to OBX Non-QM securitizations having the lowest delinquencies across the top 10 largest issuers in the market.

The Residential Credit business remains well-positioned given the optionality of our growing correspondent channel and our ability to manufacture high-yielding assets across various spread environments.

We continued to grow our holdings of mortgage servicing rights (“MSR”) to $2.8 billion in market value as we committed to purchase a bulk transaction comprising $125 million in market value, which is expected to settle before year-end 2024.

The mark on the portfolio decreased slightly in the quarter given a relatively sharp 80 basis point decline in the mortgage rate, highlighting the durability of a portfolio whose average refinancing incentive is 300 basis points below current mortgage rates.

Fundamental performance of the portfolio remained strong as the 3-month annualized prepayment speed of the portfolio was 3.9%, serious delinquencies were minimal at 45 basis points, deposit income remains elevated given the shape of the yield curve, and increased competition in the subservicing market has benefited financial participants like us.

On the strategic front as it relates to MSR, our long history of formulating value-add partnerships was again on display this quarter as we announced a sub-servicing partnership with Rocket Mortgage (“Rocket”) in early October.

Our size and the stability of our capital helped develop this relationship and we are pleased to be Rocket’s first Agency MSR subservicing client.

Rocket is expected to begin servicing loans for us as early as December, and this partnership should allow us to benefit from Rocket’s recapture abilities and we expect it to increase our competitiveness in purchasing new MSR.

Similar to our existing sub-servicing agreement, our Rocket agreement allows us to effectively participate in the gain on sale of a loan refinanced by our recapture partners, helping to preserve and protect our portfolio.

Earnings available for distribution and economic leverage are non-GAAP financial measures.

We remained selective in our purchases, maintaining our preference for low note rate MSR, though supply stayed elevated as the mortgage originator community remains under pressure to monetize servicing given historically compressed gain on sale margins.

After settling $28 billion in UPB of previously announced bulk MSR purchases, the weighted average note rate of our portfolio rose marginally to 3.23%, while our exposure to current coupon MSR remained relatively small.

As the mortgage origination and servicing industry consolidates – best seen in the merger announcement of Rocket Companies and Mr.

Cooper Group Inc.

at the end of the quarter – we have strategically aligned ourselves with industry leading sub-servicing and recapture partners that we believe provide our platform with clear competitive advantages.

We believe that greater efficiency and technological investment in the mortgage industry has provided the potential for enhanced portfolio yield through increased recapture capabilities and an enhanced borrower experience.

Economic return and economic leverage are non-GAAP financial measures.

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

Economic Environment

real economic growth remained sound in the third quarter, as gross domestic product rose 2.8% on a seasonally adjusted annualized rate (“SAAR”), in line with average growth seen in the first half of this year.

Measures of consumption indicate that rising real household incomes have led consumers to maintain spending power, with consumer spending rising 3.7% SAAR in the third quarter.

However, consumers appear to be increasingly cautious as elevated short-term interest rates, low savings rates, a slowing labor market, and declining confidence appear to weigh on spending behavior going forward.

Nonresidential investment activity appears to have been robust during the quarter, particularly in equipment and intangibles, though residential investment remains muted as the restrictive monetary policy and inclement weather have impacted housing construction.

The supply and demand for labor has continued to move into better balance.

According to the Bureau of Labor Statistics, seasonally adjusted total non-farm payroll employment rose at a stronger rate than the prior quarter, with a monthly average 186,000 workers added in the third quarter compared to 177,000 workers in the second quarter.

The unemployment rate ended the quarter at 4.1% after reaching 4.3% in July, the highest monthly reading since the fourth quarter of 2021, as more people entered the labor force, but ultimately were unable to find employment.

At the same time, wage growth, as measured by the year-over-year change in average hourly earnings, rose to 4.0% in September compared to 3.8% in June.

Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditure Chain Price Index (“PCE”) remain above the Fed’s 2% inflation target and progress on disinflationary measures appears to have resumed following the firmer readings in the early part of the year.

Total PCE prices over the 12 months ended in September fell to 2.1% compared to the 2.4% recorded by the same metric in June, while core PCE inflation, which excludes volatile food and energy prices, rose slightly from 2.6% in June to 2.7% year-over-year in September.

Price pressures eased in several services, including transportation and recreation services, as airline fares and live event pricing pressures continue to ease.

Shelter inflation, one of the largest expenses for households and therefore the largest weight in the Consumer Price Index , continues to ease at an uneven pace, with monthly readings during the quarter showing an elevated degree of volatility.

A further slowdown in aggregate inflation is likely to continue, particularly if shelter inflation eases further, as is widely expected.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

GDP growth in the first quarter of 2025 slowed with gross domestic product declining 0.3% SAAR, largely driven by a 4.8% drag of net trade to quarterly economic activity.

Despite the decline in the headline GDP number, consumption and investment activity remained relatively healthy in the quarter, with final sales to private domestic purchasers coming in at 3.0% SAAR, a gain in line with the quarterly average in 2024.

The labor market remained resilient in the first quarter.

Labor supply and demand stayed balanced, as evidenced by the first quarter’s stronger-than-expected employment data.

According to the Bureau of Labor Statistics, seasonally adjusted total non-farm payroll employment rose at a monthly average pace of 133,000 workers added in the first quarter – a modest decline from the average of 167,667 workers added per month in all of 2024.

The unemployment rate ended the quarter at 4.2%, only modestly higher than the 4.1% rate at the end of 2024.

The increase was driven by more people entering the labor force, with not all of them being able to find work.

At the same time, wage growth, as measured by the year-over-year change in Average Hourly Earnings, fell from 4.0% in the fourth quarter to 3.8% in the first quarter.

Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditure Price Index (“PCE”), remain above the Fed’s 2% inflation target and progress on disinflationary measures has been slow.

Total PCE prices over the 12 months ending in March rose 2.3% compared to the 2.6% recorded by the same metric at the end of December, while core PCE inflation, which excludes volatile food and energy prices, fell from 2.9% in December 2024 to 2.6% in March.

Progress on inflation in the first quarter remained uneven, much like it had been over the past year.

Moreover, the forecast has become increasingly uncertain due to the most significant increase in the effective tariff rate in decades.

The Fed conducts monetary policy with a dual mandate:

full employment and price stability.

Given the significant progress in reducing inflation, participants of the FOMC judged that the risks to achieving their dual mandate were in balance and that it is appropriate to begin to ease the stance of policy.

At the September FOMC meeting, the Committee reduced their target range for the federal funds rate to 4.75 – 5.0% and forecast a further 50 basis points in cuts through the end of the year.

The FOMC concluded that recalibrating the stance of policy closer to their observed neutral rate would help sustain the strength of the economy while continuing to promote progress on inflation.

Meanwhile, regarding the FOMC’s balance sheet policy, the decline in their securities portfolio, which started in 2022, continued throughout the third quarter at a pace of $25 billion per month in Treasury securities and $35 billion per month in MBS.

Interest rate levels fell during the third quarter as market participants priced a downward shift in the Fed’s policy rate path.

The most pronounced shift occurred in short-term rates, leading the Treasury yield curve to steepen.

Measures of interest rate volatility remained high as policy uncertainty in the near term rose notably.

Given the slow progress on inflation, the Federal Reserve Open Market Committee (“FOMC”) kept the target range for the Federal Funds rate unchanged at 4.25% - 4.50% at their March meeting, marking their second pause since cutting rates by 100 basis points at the end of last year.

The Federal Reserve Chair Jerome Powell has emphasized that it is too soon to determine the appropriate monetary policy response to the tariffs, while acknowledging their inflationary impact.

In addition, the FOMC has maintained its focus on the still positive growth outlook and reiterated their guidance that they are not in a hurry to act.

Forecasts from the FOMC meeting in March show a median of two 25 basis point interest rate cuts for 2025.

However, the recent deterioration of economic growth forecasts has raised the odds of additional rate cuts.

Meanwhile, regarding the FOMC’s balance sheet policy, the Fed announced that it will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion, while maintaining the monthly redemption cap on Agency mortgage-backed securities at $35 billion.

Considering these developments, we now expect the Fed to continue to attempt to reduce its balance sheet over a longer period than initially anticipated.

Given the FOMC maintaining its on-hold status and the market awaiting further information on the fiscal front, Treasury yields were relatively rangebound in the first quarter.

Interest rate volatility moved lower across the curve, and swap spreads – the difference between swap rates and Treasury rates of the same maturities – widened.

The 10-year U.S.

Treasury rate declined from 4.40% on June 30 to 3.78% on September 30, 2024.

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

Treasury rate, tightened from 147 basis points to 118 basis points over the same period.

Treasury yield fell from 4.57% on December 31, 2024 to 4.21% on March 31, 2025.

Despite lower rates and reduced volatility, the mortgage basis, or the spread between the 30-year Agency MBS coupon and 10-year U.S.

Treasury rate, widened slightly from 126 basis points at the end of 2024 to 130 basis points at the end of the first quarter.

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

September 30, 2024 December 31, 2023 September 30, 2023

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

March 31, 2025 December 31, 2024 March 31, 2024

30-Year mortgage current coupon 5.51% 5.83% 5.60%

17 unchanged sentences

Net Income (Loss) Summary

The following table presents financial information related to our results of operations as of and for the three and nine months ended September 30, 2024 and 2023.

As of and for the Three Months Ended September 30,

As of and for the Nine Months Ended September 30,

2024 2023 2024 2023

The following table presents financial information related to our results of operations as of and for the three months ended March 31, 2025 and 2024.

As of and for the Three Months Ended March 31,

(dollars in thousands, except per share data)

25 unchanged sentences

GAAP leverage at period-end (1)

6.9:1 7.1:1 6.9:1 7.1:1

GAAP capital ratio at period-end (2)

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Economic leverage at period-end (1)

5.7:1 6.4:1 5.7:1 6.4:1

Economic capital ratio at period-end (2)

10 unchanged sentences

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-Q

Item 1. Financial Statements