What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-10-31 · 225 added, 284 removed, 1280 unchanged (28% of the section changed)

11 unchanged sentences

Total economic assets include the implied market value of TBA derivatives and net of debt issued by securitization vehicles.

(3) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 0.69%, and (5.04%) for the three months ended September 30, 2024 and 2023, respectively, and 4.62% and (10.88%) for the the nine months ended September 30, 2024 and 2023, respectively.

(3) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 1.01%, and 4.07% for the three months ended March 31, 2025 and 2024, respectively.

(4) Net interest margin represents our interest income less interest expense divided by the average interest earning assets.

7 unchanged sentences

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, 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 Statement 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 Statement of Comprehensive Income (Loss) for all periods presented.

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.

(7) Excludes dividends on preferred stock.

Net income (loss) was $82.4 million, which includes $15.9 million attributable to noncontrolling interests, or $0.05 per average basic common share, for the three months ended September 30, 2024, compared to ($569.1) million, which includes ($6.9) million attributable to noncontrolling interests, or ($1.21) per average basic common share, for the same period in 2023.

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

Net gains (losses) on investments and other was $1.7 billion for the three months ended September 30, 2024 compared to ($2.7) billion for the same period in 2023.

Net interest income for the three months ended September 30, 2024 was $13.4 million compared to ($45.3) million for the same period in 2023.

Net servicing income for the three months ended September 30, 2024 was $109.6 million compared to $88.0 million for the same period in 2023.

Net gains (losses) on derivatives was ($1.8) billion for the three months ended September 30, 2024 compared to $2.1 billion for the same period in 2023.

Net income (loss) was $538.7 million, which includes $18.8 million attributable to noncontrolling interests, or $0.80 per average basic common share, for the nine months ended September 30, 2024 compared to ($1.2) billion, which includes ($7.8) million attributable to noncontrolling interests, or ($2.73) per average basic common share, for the same period in 2023.

Net gains (losses) on investments and other was $160.8 million for the nine months ended September 30, 2024 compared to ($4.0) billion for the same period in 2023.

Net interest income for the nine months ended September 30, 2024 was $60.5 million compared to ($57.8) million for the same period in 2023.

Net servicing income for the nine months ended September 30, 2024 was $320.4 million compared to $239.3 million for the same period in 2023.

Net gains on derivatives for the nine months ended September 30, 2024 was $53.6 million compared to $2.7 billion for the same period in 2023.

Refer to the section titled “Other income (loss)” located within this Item 2 for additional information related to these changes.

Earnings available for distribution were $382.5 million, or $0.66 per average common share, for the three months ended September 30, 2024 compared to $362.0 million, or $0.66 per average common share, for the same period in 2023.

The change in earnings available for distribution during the three months ended September 30, 2024, compared to the same period in 2023, was primarily due to higher coupon income, resulting from higher residential mortgage loan and reverse repurchase agreement balances and purchasing securities higher up in the coupon stack, and higher net servicing income.

This change was partially 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.

Earnings available for distribution were $1.1 billion, or $1.98 per average common share, for the nine months ended September 30, 2024, compared to $1.2 billion, or $2.18 per average common share, for the same period in 2023.

The change in earnings available for distribution during the nine months ended September 30, 2024, compared to the same period in 2023, was

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

primarily due to 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.

This change was partially offset by higher coupon income, resulting from increased residential mortgage loan balances, purchasing securities higher up in the coupon stack, lower premium amortization expense, excluding PAA, and higher net servicing income.

Net income (loss) was $130.3 million, which includes $6.1 million attributable to noncontrolling interests, or $0.15 per average basic common share, for the three months ended March 31, 2025, compared to $465.2 million, which includes $2.3 million attributable to noncontrolling interests, or $0.85 per average basic common share, for the same period in 2024.

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

Net gains (losses) on derivatives was ($977.9) million for the three months ended March 31, 2025 compared to $1.4 billion for the same period in 2024.

Net gains (losses) on investments and other was $810.8 million for the three months ended March 31, 2025 compared to ($994.1) million for the same period in 2024.

Net interest income for the three months ended March 31, 2025 was $220.0 million compared to ($6.5) million for the same period in 2024.

Net servicing income for the three months ended March 31, 2025 was $126.3 million compared to $102.9 million for the same period in 2024.

Earnings available for distribution were $461.9 million, or $0.72 per average common share, for the three months ended March 31, 2025 compared to $358.0 million, or $0.64 per average common share, for the same period in 2024.

The change in earnings available for distribution during the three months ended March 31, 2025, compared to the same period in 2024, was primarily due to higher coupon income, resulting from higher residential mortgage loan balances and purchasing securities higher up in the coupon stack, lower interest expense on repurchase agreements resulting from lower average rates and higher net servicing income.

This change was partially offset by an unfavorable change in the net interest component of interest rate swaps, higher interest expense resulting from higher securitized debt balances from new securitizations and lower other, net.

Non-GAAP Financial Measures

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• economic net interest income (excluding PAA);

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

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

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We seek to fulfill our principal business objective through a variety of factors including portfolio construction, the degree of market risk exposure and related hedge profile, and the use and forms of leverage, all while operating within the parameters of our capital allocation policy and risk governance framework.

We believe these non-GAAP measures provide management and investors with additional details regarding our underlying operating results and investment portfolio trends by (i) making adjustments to account for the disparate reporting of changes in fair value where certain instruments are reflected in GAAP net income (loss) while others are reflected in other comprehensive income (loss), and (ii) by excluding certain unrealized, non-cash or episodic components of GAAP net income (loss) in order to

In addition, EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends.

Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders’ equity, provides investors with additional detail on the earnings available for distribution generated by our invested equity capital.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

provide additional transparency into the operating performance of our portfolio.

In addition, EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends.

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2024 2023 2024 2023

For the Three Months Ended March 31,

(dollars in thousands, except per share data)

5 unchanged sentences

1,169,412 (1,046,995)

Loan loss provision (reversal) — — — (219)

Other adjustments

1 unchanged sentence

Non-EAD (income) loss allocated to equity method investments (3)

1,465 (140) 1,158 157

Transaction expenses and non-recurring items (4)

4,966 1,882 14,032 5,890

Income tax effect of non-EAD income (loss) items 7,355 (2,918)

TBA dollar roll income and CMBX coupon income (5)

(1,132) (1,016) 729 18,901

MSR amortization (6)

16 unchanged sentences

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 $317.5 million and $394.7 million for the three months ended September 30, 2024 and 2023, respectively, and $946.0 million and $1.2 billion for the nine months ended September 30, 2024 and 2023, respectively.

The net interest component of interest rate swaps totaled $191.5 million and $330.1 million for the three months ended March 31, 2025 and 2024, respectively.

(3) Represents unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other, net in the Consolidated Statements of Comprehensive Income (Loss).

1 unchanged sentence

(5) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

CMBX coupon income totaled $0 and $0 for the three months ended September 30, 2024 and 2023, respectively, and $0 and $1.5 million for the nine months ended September 30, 2024 and 2023, respectively.

There was no CMBX coupon income for the three months ended March 31, 2025 and 2024.

(6) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period.

(7) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 0.69%, and (5.04%) for the three months ended September 30, 2024 and 2023, respectively, and 4.62% and (10.88%) for the the nine months ended September 30, 2024 and 2023, respectively.

(7) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 1.01%, and 4.07% for the three months ended March 31, 2025 and 2024, respectively.

From time to time, we enter into TBA forward contracts as an alternate means of investing in and financing Agency MBS.

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Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency MBS less an implied financing cost.

TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions.

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

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

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions.

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

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.

derivatives in our Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives.

TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract.

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The following table illustrates the impact of the PAA on premium amortization expense for our Residential Securities portfolio for the periods presented:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2024 2023 2024 2023

For the Three Months Ended March 31,

(dollars in thousands)

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Equity capital primarily consists of common and preferred stock.

Our economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity.

Recourse debt consists of repurchase agreements, other

ANNALY CAPITAL MANAGEMENT, INC.

1 unchanged sentence

Management’s Discussion and Analysis

Our economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity.

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

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:

September 30, 2024 September 30, 2023

March 31, 2025 March 31, 2024

Economic leverage ratio reconciliation

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The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating our economic capital ratio for the periods presented:

September 30, 2024 September 30, 2023

March 31, 2025 March 31, 2024

Economic capital ratio reconciliation

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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.

ANNALY CAPITAL MANAGEMENT, INC.

1 unchanged sentence

Management’s Discussion and Analysis

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 Statement of Comprehensive Income (Loss).

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.

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For the three months ended (dollars in thousands)

September 30, 2024 $ 1,229,341 $ 21,365 $ 1,250,706

September 30, 2023 $ 1,001,485 $ (6,062) $ 995,423

For the nine months ended

September 30, 2024 $ 3,501,154 $ 11,046 $ 3,512,200

September 30, 2023 $ 2,741,229 $ (17,494) $ 2,723,735

March 31, 2025 $ 1,317,108 $ 12,296 $ 1,329,404

March 31, 2024 $ 1,094,488 $ (3,013) $ 1,091,475

* Represents a non-GAAP financial measure.

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

Expense * GAAP Net

Expense * (1)

Net Interest Component

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For the three months ended (dollars in thousands)

September 30, 2024 $ 1,215,940 $ (333,696) $ 882,244 $ 13,401 $ (333,696) $ 347,097 $ 21,365 $ 368,462

September 30, 2023 $ 1,046,819 $ (394,677) $ 652,142 $ (45,334) $ (394,677) $ 349,343 $ (6,062) $ 343,281

For the nine months ended

September 30, 2024 $ 3,440,646 $ (981,142) $ 2,459,504 $ 60,508 $ (981,142) $ 1,041,650 $ 11,046 $ 1,052,696

September 30, 2023 $ 2,799,063 $ (1,205,676) $ 1,593,387 $ (57,834) $ (1,205,676) $ 1,147,842 $ (17,494) $ 1,130,348

March 31, 2025 $ 1,097,137 $ (204,389) $ 892,748 $ 219,971 $ (204,389) $ 424,360 $ 12,296 $ 436,656

March 31, 2024 $ 1,100,939 $ (330,149) $ 770,790 $ (6,451) $ (330,149) $ 323,698 $ (3,013) $ 320,685

* Represents a non-GAAP financial measure.

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.

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.

Experienced and Projected Long-Term CPR

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The following table presents the weighted average experienced CPR and weighted average projected long-term CPR on our Agency MBS portfolio as of and for the periods presented.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

Experienced CPR (1)

1 unchanged sentence

For the three months ended

September 30, 2024 7.6 % 11.9 %

September 30, 2023 7.3 % 7.1 %

For the nine months ended

September 30, 2024 7.0 % 11.9 %

September 30, 2023 6.6 % 7.1 %

(1) For the three and nine months ended September 30, 2024 and 2023, respectively.

(2) At September 30, 2024 and 2023, respectively.

March 31, 2025 7.1 % 9.5 %

March 31, 2024 6.0 % 8.9 %

(1) For the three months ended March 31, 2025 and 2024, respectively.

(2) At March 31, 2025 and 2024, respectively.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

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

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For the three months ended (dollars in thousands)

September 30, 2024 $ 95,379,071 $ 1,250,706 5.25 % $ 87,819,655 $ 882,244 3.93 % $ 368,462 1.32 %

September 30, 2023 $ 89,300,922 $ 995,423 4.46 % $ 77,780,989 $ 652,142 3.28 % $ 343,281 1.18 %

For the nine months ended

September 30, 2024 $ 92,042,244 $ 3,512,200 5.09 % $ 83,467,666 $ 2,459,504 3.87 % $ 1,052,696 1.22 %

September 30, 2023 $ 86,066,958 $ 2,723,735 4.22 % $ 74,613,728 $ 1,593,387 2.82 % $ 1,130,348 1.40 %

March 31, 2025 $ 101,631,610 $ 1,329,404 5.23 % $ 92,001,700 $ 892,748 3.88 % $ 436,656 1.35 %

March 31, 2024 $ 89,738,726 $ 1,091,475 4.87 % $ 80,682,111 $ 770,790 3.78 % $ 320,685 1.09 %

* Represents a non-GAAP financial measure.

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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 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.

Net Interest Margin (excluding PAA)

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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 three months ended (dollars in thousands)

September 30, 2024 $ 1,250,706 (1,132) (882,244) $ 367,330 $ 95,379,071 973,713 $ 96,352,784 1.52 %

September 30, 2023 $ 995,423 (1,016) (652,142) $ 342,265 $ 89,300,922 2,960,081 $ 92,261,003 1.48 %

For the nine months ended

September 30, 2024 $ 3,512,200 729 (2,459,504) $ 1,053,425 $ 92,042,244 707,431 $ 92,749,675 1.51 %

September 30, 2023 $ 2,723,735 18,901 (1,593,387) $ 1,149,249 $ 86,066,958 7,737,723 $ 93,804,681 1.63 %

March 31, 2025 $ 1,329,404 11,275 (892,748) $ 447,931 $ 101,631,610 4,625,212 $ 106,256,822 1.69 %

March 31, 2024 $ 1,091,475 1,375 (770,790) $ 322,060 $ 89,738,726 149,590 $ 89,888,316 1.43 %

* Represents a non-GAAP financial measure.

1 unchanged sentence

(1) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives.

CMBX coupon income totaled $0 and $0 for the three months ended September 30, 2024 and 2023, respectively.

CMBX coupon income totaled $0 and $1.5 million for the nine months ended September 30, 2024 and 2023, 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.

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.

ANNALY CAPITAL MANAGEMENT, INC.

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For the three months ended

September 30, 2024 $ 87,819,655 $ 85,529,919 $ 882,244 3.93 % 5.22 % 4.82 % 0.40 % (1.29 %) (0.89 %)

September 30, 2023 $ 77,780,989 $ 75,466,110 $ 652,142 3.28 % 5.29 % 5.44 % (0.15 %) (2.01 %) (2.16 %)

For the nine months ended

September 30, 2024 $ 83,467,666 $ 85,529,919 $ 2,459,504 3.87 % 5.29 % 5.10 % 0.19 % (1.42 %) (1.23 %)

September 30, 2023 $ 74,613,728 $ 75,466,110 $ 1,593,387 2.82 % 4.98 % 5.17 % (0.19 %) (2.16 %) (2.35 %)

March 31, 2025 $ 92,001,700 $ 87,729,051 $ 892,748 3.88 % 4.32 % 4.24 % 0.08 % (0.44 %) (0.36 %)

March 31, 2024 $ 80,682,111 $ 75,904,926 $ 770,790 3.78 % 5.33 % 5.21 % 0.12 % (1.55 %) (1.43 %)

* Represents a non-GAAP financial measure.

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

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

Economic interest expense increased by $230.1 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to higher interest expense on securitized debt and repurchase agreements reflecting higher borrowing rates and higher average interest bearing liabilities, as well as the reduction in the net interest component of interest rate swaps, which was $317.5 million for the three months ended September 30, 2024, compared to $394.7 million for the same period in 2023.

Economic interest expense increased by $866.1 million for the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to higher interest expense on securitized debt and repurchase agreements reflecting higher borrowing rates and higher average interest bearing liabilities as well as the reduction in the net interest component of interest rate swaps, which was $946.0 million for the nine months ended September 30, 2024 compared to $1.2 billion for the same period in 2023.

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.

Economic interest expense increased by $122.0 million for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to the reduction in the net interest component of interest rate swaps, which was $191.5 million for the three months ended March 31, 2025, compared to $330.1 million for the same period in 2024.

Additionally, this increase resulted from higher securitized debt balances from new securitizations, offset by lower interest expense on repurchase agreements from lower average rates.

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 September 30, 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.

At March 31, 2025 and December 31, 2024, 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.

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Other Income (Loss)

For the Three Months Ended September 30, 2024 and 2023

For the Three Months Ended March 31, 2025 and 2024

Net Gains (Losses) on Investments and Other

Net gains (losses) on disposal of investments was ($169.1) million for the three months ended September 30, 2024, compared to ($616.5) million for the same period in 2023.

For the three months ended September 30, 2024, we disposed of Residential Securities with a carrying value of $2.8 billion for an aggregate net gain (loss) of ($8.3) million.

Net gains (losses) on disposal of investments was ($49.4) million for the three months ended March 31, 2025, compared to ($545.9) million for the same period in 2024.

For the three months ended March 31, 2025, we disposed of Residential Securities with a carrying value of $5.2 billion for an aggregate net gain (loss) of ($54.6) million.

For the same period in 2024, we disposed of Residential Securities, with a carrying value of $8.1 billion for an aggregate net gain (loss) of ($438.2) million.

Realized gains (losses) on U.S.

Treasury securities sold, not yet purchased was ($117.1) million for the three months ended September 30, 2024, compared to $0 for the same period in 2023.

Net unrealized gains (losses) on instruments measured at fair value through earnings was $1.9 billion for the three months ended September 30, 2024, compared to ($2.1) billion for the same period in 2023, primarily due to favorable changes in unrealized gains (losses) on Agency MBS of $3.8 billion, securitized residential whole loans of consolidated VIEs of $953.6 million, residential credit securities of $61.6 million, U.S.

Treasury securities sold, not yet purchased of $29.1 million, and residential whole loans of $23.3 million, partially offset by unfavorable changes in residential securitized debt of consolidated VIEs of ($725.3) million, MSR of ($114.2) million, and CRT securities of ($19.4) million.

Treasury securities sold, not yet purchased was $43.8 million for the three months ended March 31, 2025, compared to ($77.9) million for the same period in 2024.

Net unrealized gains (losses) on instruments measured at fair value through earnings was $860.2 million for the three months ended March 31, 2025, compared to ($448.2) million for the same period in 2024, primarily due to favorable changes in unrealized gains (losses) on Agency MBS of $1.6 billion, securitized residential whole loans of consolidated VIEs of $287.2 million, and residential whole loans of $38.4 million, partially offset by unfavorable changes in residential securitized debt of consolidated VIEs of ($256.9) million, U.S.

Treasury securities sold, not yet purchased of ($245.9) million, Non-Agency MBS of ($48.5) million, MSR of ($40.2) million, and CRT securities of ($25.9) million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the three months ended September 30, 2024 was ($1.4) billion compared to $1.9 billion for the same period in 2023, primarily attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, realized gains (losses) on interest rate swaps and net interest component of interest rate swaps.

Unrealized gains (losses) on interest rate swaps was ($1.6) billion for the three months ended September 30, 2024, compared to $1.5 billion for the same period in 2023.

Realized gains (losses) on termination of interest rate swaps was ($94.0) million for the three months ended September 30, 2024, compared to $16.4 million for the same period in 2023, which reflected our termination of fixed-rate payer interest rate swaps with notional amounts of $5.1 billion, compared to notional amounts of $1.1 billion and $300.0 million of fixed-rate payer and receiver interest rate swaps for the same period in 2023.

Net interest component on interest rate swaps was $317.5 million for the three months ended September 30, 2024, compared to $394.7 million for the same period in 2023.

Net gains (losses) on other derivatives was ($395.0) million for the three months ended September 30, 2024, compared to $240.8 million for the same period in 2023.

The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was ($291.5) million for the three months ended September 30, 2024, compared to $441.0 million for the same period in 2023, and net gains (losses) on interest rate swaptions, which was ($135.0) million for the three months ended September 30, 2024, compared to ($78.9) million for the same period in 2023, partially offset by a favorable change in net gains (losses) on TBA derivatives, which was $22.4 million for the three months ended September 30, 2024, compared to ($123.7) million for the same period in 2023.

Net gains (losses) on interest rate swaps for the three months ended March 31, 2025 was ($605.8) million compared to $1.2 billion for the same period in 2024, primarily attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, 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 ($753.6) million for the three months ended March 31, 2025, compared to $900.9 million for the same period in 2024.

Net interest component on interest rate swaps was $191.5 million for the three months ended March 31, 2025, compared to $330.1 million for the same period in 2024.

Realized gains (losses) on termination or maturity of interest rate swaps was ($43.8) million for the three months ended March 31, 2025, compared to ($21.2) million for the same period in 2024, which reflected our termination or maturity of fixed-rate payer and receiver interest rate swaps with notional amounts of $11.7 billion and $3.2 billion, compared to fixed-rate payer and receiver interest rate swaps with notional amounts of $2.3 billion and $220.0 million, respectively, for the same period in 2024.

Net gains (losses) on other derivatives was ($372.0) million for the three months ended March 31, 2025, compared to $167.3 million for the same period in 2024.

The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was ($403.5) million for the three months ended March 31, 2025, compared to $137.0 million for the same period in 2024, and net gains (losses) on interest rate swaptions, which was ($8.6) million for the three months ended March 31, 2025, compared to $30.6 million for the same period in 2024, partially offset by a favorable change in net gains (losses) on TBA derivatives, which was $30.2 million for the three months ended March 31, 2025, compared to $6.3 million for the same period in 2024.

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

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Given the nature of certain components of this line item, balances may fluctuate from period to period.

Other, net for the three months ended September 30, 2024 was $27.4 million compared to $26.3 million for the same period in 2023, primarily attributable to an increase in interest on custodial balances and decrease in asset write-downs, partially offset by an increase in securitization related costs and MSR financing expenses.

For the Nine Months Ended September 30, 2024 and 2023

Net Gains (Losses) on Investments and Other

Net gains (losses) on disposal of investments and other was ($1.1) billion for the nine months ended September 30, 2024 compared to ($1.7) billion for the same period in 2023.

For the nine months ended September 30, 2024, we disposed of Residential Securities with a carrying value of $16.0 billion for an aggregate net gain (loss) of ($821.5) million.

Other, net for the three months ended March 31, 2025 was $7.4 million compared to $23.4 million for the same period in 2024, primarily attributable to a decrease in sponsored securitization fees and net interest on initial margin related to interest rate swaps, an increase in securitization related costs and MSR financing expenses, partially offset by an increase in interest on custodial balances and conduit transaction fees.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

period in 2023, we disposed of Residential Securities with a carrying value of $20.5 billion for an aggregate net gain (loss) of ($1.7) billion.

Realized gains (losses) on U.S.

Treasury securities sold, not yet purchased was ($126.0) million for the nine months ended September 30, 2024, compared to $0 for the same period in 2023.

Net unrealized gains (losses) on instruments measured at fair value through earnings was $1.2 billion for the nine months ended September 30, 2024 compared to ($2.3) billion for the same period in 2023, primarily due to favorable changes on Agency MBS of $3.2 billion, securitized residential whole loans of consolidated VIEs of $831.3 million, U.S.

Treasury securities sold, not yet purchased of $117.5 million, non-Agency MBS of $109.7 million, and participations issued of $24.3 million partially offset by unfavorable changes in unrealized gains (losses) on securitized debt of consolidated VIEs of ($553.1) million, mortgage servicing rights of ($131.1) million, CRT securities of ($56.9) million, and residential whole loans of ($35.7) million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the nine months ended September 30, 2024 was $265.4 million compared to $2.5 billion for the same period in 2023, attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, the change in the net interest component of interest rate swaps and realized gains (losses) on termination of interest rate swaps.

Unrealized gains (losses) on interest rate swaps was ($584.1) million for the nine months ended September 30, 2024 compared to $1.4 billion for the same period in 2023.

Net interest component on interest rate swaps was $946.0 million for the nine months ended September 30, 2024 compared to $1.2 billion for the same period in 2023.

Realized gains (losses) on termination of interest rate swaps was ($96.5) million for the nine months ended September 30, 2024, compared to ($81.3) million for the same period in 2023, which reflected our termination of fixed-rate payer and receiver interest rate swaps with notional amounts of $7.7 billion and $3.3 billion, compared to fixed-rate payer and receiver interest rate swaps with notional amounts of $4.2 billion and $6.6 billion for the same period in 2023.

Net gains (losses) on other derivatives was ($211.7) million for the nine months ended September 30, 2024 compared to $216.6 million for the same period in 2023.

The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was ($152.1) million for the nine months ended September 30, 2024 compared to $415.7 million for the same period in 2023, and net gains (losses) on interest rate swaptions, which was ($92.8) million for the nine months ended September 30, 2024 compared to ($69.2) million for the same period in 2023, partially offset by a favorable change in TBA derivatives, which was $28.3 million for the nine months ended September 30, 2024 compared to ($123.7) million for the same period in 2023.

Other, net for the nine months ended September 30, 2024 was $75.6 million compared to $50.9 million for the same period in 2023, primarily attributable to an increase in interest on custodial balances and decrease in asset write-downs, partially offset by an increase in securitization related costs and MSR financing expenses.

General and Administrative Expenses

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For the three months ended (dollars in thousands)

September 30, 2024 $ 43,921 0.18 % 1.48 %

September 30, 2023 $ 39,909 0.18 % 1.41 %

For the nine months ended

September 30, 2024 $ 127,382 0.18 % 1.46 %

September 30, 2023 $ 123,652 0.19 % 1.44 %

G&A expenses were $43.9 million for the three months ended September 30, 2024, an increase of $4.0 million 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.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

G&A expenses were $127.4 million for the nine months ended September 30, 2024, an increase of $3.7 million 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.

March 31, 2025 $ 48,064 0.18 % 1.49 %

March 31, 2024 $ 38,570 0.17 % 1.35 %

G&A expenses were $48.1 million for the three months ended March 31, 2025, an increase of $9.5 million compared to the same period in 2024.

The change in the period was primarily due to an increase in compensation expense and higher expenses related to rent, technology, and professional fees.

Return on Average Equity

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For the three months ended

September 30, 2024 11.12 % 3.68 % (10.76 %) (1.48 %) 0.21 % 2.77 %

September 30, 2023 12.39 % 3.12 % (33.84 %) (1.41 %) (0.44 %) (20.18 %)

For the nine months ended

September 30, 2024 11.51 % 3.66 % (7.49 %) (1.46 %) (0.06 %) 6.16 %

September 30, 2023 13.35 % 2.78 % (28.76 %) (1.44 %) (0.44 %) (14.51 %)

(1) 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 Statement of Comprehensive Income (Loss).

March 31, 2025 12.77 % 3.92 % (10.90 %) (1.49 %) (0.26 %) 4.04 %

March 31, 2024 11.34 % 3.60 % 2.67 % (1.35 %) 0.03 % 16.29 %

(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.

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.

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

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The following table shows cumulative unrealized gains and losses on our available-for-sale investments reflected in the Consolidated Statements of Financial Condition.

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

(dollars in thousands)

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A very large negative change in the net fair value of our available-for-sale Residential Securities might impair our liquidity position, requiring us to sell assets with the potential result of realized losses upon sale.

The fair value of these securities being less than amortized cost at September 30, 2024 is solely due to market conditions and not the quality of the assets.

The fair value of these securities being less than amortized cost at March 31, 2025 is solely due to market conditions and not the

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

quality of the assets.

Substantially all of the Agency MBS have an actual or implied credit rating that is the same as that of the U.S.

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Financial Condition

Total assets were $101.5 billion and $93.2 billion at September 30, 2024 and December 31, 2023, respectively.

The change was primarily due to increases in securitized residential whole loans of consolidated VIEs of $7.7 billion, securities of $2.1 billion, mortgage servicing rights of $570.9 million, and cash and cash equivalents of $148.0 million, partially offset by decreases in

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

receivables for unsettled trades of $1.9 billion and principal and interest receivable of $161.7 million.

Our portfolio composition, net equity allocation and debt-to-net equity ratio by asset class were as follows at September 30, 2024.

Total assets were $105.1 billion and $103.6 billion at March 31, 2025 and December 31, 2024, respectively.

The change was primarily due to increases in securitized residential whole loans of consolidated VIEs of $2.5 billion, securities of $604.9 million, mortgage servicing rights of $363.8 million, cash and cash equivalents of $345.5 million, and residential mortgage loans of $313.7 million, partially offset by decreases in receivables for unsettled trades of $2.2 billion and principal and interest receivable of $232.1 million.

Our portfolio composition, net equity allocation and debt-to-net equity ratio by asset class were as follows at March 31, 2025.

Agency MBS Residential Credit (1)

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Residential Securities

Substantially all of our Agency MBS at September 30, 2024 and December 31, 2023 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties.

Substantially all of our Agency MBS at March 31, 2025 and December 31, 2024 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties.

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.

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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 September 30, 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 $2.4 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 three months ended September 30, 2024 and 2023 was 7.6% and 7.3%, respectively.

The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of September 30, 2024 and 2023 was 11.9% and 7.1%, respectively.

Given our current portfolio composition, if mortgage principal prepayment rates were to increase over the life of our mortgage-backed securities, all other factors being equal, our net interest income would decrease during the life of these mortgage-backed securities as we would be required to amortize our net premium balance into income over a shorter time period.

Similarly, if mortgage principal prepayment rates were to decrease over the life of our mortgage-backed securities, all other factors being equal, our net interest income would increase during the life of these mortgage-backed securities as we would amortize our net premium balance over a longer time period.

At March 31, 2025 and December 31, 2024 we had in our Consolidated Statements of Financial Condition a total of $1.3 billion and $1.3 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 $2.5 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 three months ended March 31, 2025 and 2024 was 7.1% and 6.0%, respectively.

The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of March 31, 2025 and 2024 was 9.5% and 8.9%, respectively.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

The following table presents our Residential Securities that were carried at fair value at September 30, 2024 and December 31, 2023.

September 30, 2024 December 31, 2023

The following table presents our Residential Securities that were carried at fair value at March 31, 2025 and December 31, 2024.

March 31, 2025 December 31, 2024

Estimated Fair Value

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Total Residential Securities $ 70,302,303 $ 69,682,169

The following table summarizes certain characteristics of our Residential Securities (excluding interest-only mortgage-backed securities) and interest-only mortgage-backed securities at September 30, 2024 and December 31, 2023.

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

Residential Securities (1)

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Amortized cost 1,173,717 1,091,361

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Amortized cost / notional amount 2.76 % 2.85 %

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Weighted average coupon rate 0.45 % 0.46 %

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Weighted average yield 0.03 % NM

Weighted average yield 2.74 % 2.40 %

(1) Excludes interest-only MBS.

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(3) Excludes non-Agency MBS and CRT securities as this attribute is not applicable to these asset classes.

NM Not meaningful.

The following tables summarize certain characteristics of our Residential Credit portfolio at September 30, 2024.

The following tables summarize certain characteristics of our Residential Credit portfolio at March 31, 2025.

Payment Structure Investment Characteristics (1)

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Contractual Obligations

The following table summarizes the effect on our liquidity and cash flows from contractual obligations at September 30, 2024.

The following table summarizes the effect on our liquidity and cash flows from contractual obligations at March 31, 2025.

The table does not include the effect of net interest rate payments on our interest rate swap agreements.

The net swap payments will fluctuate based on monthly changes in the receive rate.

At September 30, 2024, the interest rate swaps had a net fair value of ($56.2) million.

At March 31, 2025, the interest rate swaps had a net fair value of ($10.4) million.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Year One to Three

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Total $ 63,506,586 $ 3,593,572 $ 2,695,942 $ 65,171,902 $ 134,968,002

(1) Interest expense on repurchase agreements and other secured financing calculated based on rates at September 30, 2024.

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

Management’s Discussion and Analysis

(1) Interest expense on repurchase agreements and other secured financing calculated based on rates at March 31, 2025.

In the coming periods, we expect to continue to finance our Residential Securities in a manner that is largely consistent with our current operations via repurchase agreements.

We may use securitization structures, credit facilities, or other term financing structures to finance certain of our assets.

During the nine months ended September 30, 2024, we received $4.9 billion from principal repayments and $17.3 billion in cash from disposal of Securities.

During the nine months ended September 30, 2023, we received $4.7 billion from principal repayments and $18.7 billion in cash from disposal of Securities.

During the three months ended March 31, 2025, we received $1.7 billion from principal repayments and $7.3 billion in cash from disposal of Securities.

Commitments and Contractual Obligations with Unconsolidated Entities

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Stockholders’ Equity

The following table provides a summary of total stockholders’ equity at September 30, 2024 and December 31, 2023:

September 30, 2024 December 31, 2023

The following table provides a summary of total stockholders’ equity at March 31, 2025 and December 31, 2024:

March 31, 2025 December 31, 2024

Stockholders’ equity (dollars in thousands)

7 unchanged sentences

Total stockholders’ equity $ 12,994,716 $ 12,609,241

Capital Stock

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 “Share Repurchase Program”).

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

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 “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, we offered and sold shares of

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

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 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, we 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, we 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.

Refer to the “Capital Stock” Note located within Item 1 for additional information related to the at-the-market sales program.

Capital Stock

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 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.

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 September 20, 2024, we 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, we offered and sold shares of our 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”).

On May 8, 2025, we 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.”

During the three months ended March 31, 2025, under the at-the-market sales program, we 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 Agreement;

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

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 three and nine months ended September 30, 2024.

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 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 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 March 31, 2025, 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.

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.

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

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Management’s Discussion and Analysis

Leverage and Capital

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Our actual economic leverage ratio varies from time to time based upon various factors, including our management’s opinion of the level of risk of our assets and liabilities, our liquidity position, our level of unused borrowing capacity, the availability of credit, over-collateralization levels required by lenders when we pledge assets to secure borrowings and our assessment of domestic and international market conditions.

Our GAAP leverage ratio at September 30, 2024 and December 31, 2023 was 6.9:1 and 6.8:1, respectively.

Our economic leverage ratio, which is computed as the sum of Recourse Debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity was 5.7:1 and 5.7:1, at September 30, 2024 and December 31, 2023, respectively.

Our GAAP capital ratio at September 30, 2024 and December 31, 2023 was 12.4% 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 September 30, 2024 and December 31, 2023, respectively.

Our GAAP leverage ratio at March 31, 2025 and December 31, 2024 was 6.8:1 and 7.1:1, respectively.

Our economic leverage ratio, which is computed as the sum of Recourse Debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity was 5.7:1 and 5.5:1, at March 31, 2025 and December 31, 2024, respectively.

Our GAAP capital ratio at March 31, 2025 and December 31, 2024 was 12.4% and 12.3%, 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 14.6% at March 31, 2025 and December 31, 2024, respectively.

Economic leverage ratio and economic capital ratio are non-GAAP financial measures.

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

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Risk Management

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Compliance, Regulatory and Legal We will seek to comply with regulatory requirements needed to maintain our REIT status and our exemption from registration under the Investment Company Act and the licenses and approvals of our regulated and licensed subsidiaries.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Risk management begins with our Board, through the review and oversight of the risk management framework, and executive management, through the ongoing formulation of risk management practices and related execution in managing risk.

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The Management Development and Compensation Committee is responsible for oversight of risk related to our compensation policies and practices and other human capital matters such as succession and culture.

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 environmental, social, and governance (“ESG”) risk to us.

The full Board has overall 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.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

The full Board has overall responsibility for this 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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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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Our primary financing sources are repurchase agreements provided through counterparty arrangements and through our wholly-owned subsidiary, Arcola Securities, Inc.

(“Arcola”), other secured financing, debt issued by securitization vehicles, mortgages,

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

credit facilities, note sales and various forms of equity.

(“Arcola”), other secured financing, debt issued by securitization vehicles, mortgages, credit facilities, note sales and various forms of equity.

We maintain excess liquidity by holding unencumbered liquid assets that could be either used to collateralize additional borrowings or sold.

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To reduce our liquidity risk we maintain a laddered approach to our repurchase agreements.

At September 30, 2024 and December 31, 2023, the weighted average days to maturity was 34 days and 44 days, respectively.

At March 31, 2025 and December 31, 2024, the weighted average days to maturity was 50 days and 32 days, respectively.

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.

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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.

The non-mark-to-market facilities have margin call features that adjust on factors other than the changes in the market value of pledged collateral.

We remain active and flexible in our liquidity structure.

At September 30, 2024, we had total financial assets and cash pledged against existing liabilities of $68.7 billion.

At March 31, 2025, we had total financial assets and cash pledged against existing liabilities of $66.8 billion.

The weighted average haircut was approximately 3% on repurchase agreements.

The quality and character of the Residential Securities that we pledge as collateral under the repurchase agreements and interest rate swaps did not materially change at September 30, 2024, compared to the same period in 2023, and our counterparties did not materially alter any requirements, including required haircuts, related to the col lateral we pledge under repurchase agreements and interest rate swaps during the three months ended September 30, 2024.

The quality and character of the Residential Securities that we pledge as collateral under the repurchase agreements and interest rate swaps did not materially change at March 31, 2025, compared to the same period in 2024, and our counterparties did not materially alter any requirements, including required haircuts, related to the col lateral we pledge under repurchase agreements and interest rate swaps during the three months ended March 31, 2025.

The following table presents our quarterly average and quarter-end repurchase agreement and reverse repurchase agreement balances outstanding for the periods presented:

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For the three months ended (dollars in thousands)

September 30, 2024 $ 67,092,629 $ 64,310,276 $ 3,041,120 $ —

June 30, 2024 63,043,218 60,787,994 2,322,479 —

March 31, 2025 $ 66,724,268 $ 61,659,460 $ 2,721,386 $ —

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September 30, 2023 66,020,036 64,693,821 257,097 —

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 September 30, 2024.

The weighted average remaining maturity on our repurchase agreements and other secured financing was 36 days at September 30, 2024:

June 30, 2023 64,591,463 61,637,600 600,968 —

March 31, 2023 60,477,833 60,993,018 371,429 —

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

September 30, 2024

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 March 31, 2025.

The weighted average remaining maturity on our repurchase agreements and other secured financing was 56 days at March 31, 2025:

March 31, 2025

Principal Balance Weighted Average Rate % of Total

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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 a new warehouse facility and expanded an existing facility.

Both facilities include expanded product offerings with a committed component for residential whole loans.

The following table presents our outstanding debt balances and associated weighted average rates and days to maturity at September 30, 2024:

In order to increase financing optionality for our Onslow Bay platform, during the quarter we closed a new warehouse facility and renewed or extended existing facilities.

The following table presents our outstanding debt balances and associated weighted average rates and days to maturity at March 31, 2025:

Weighted Average Rate

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An asset is considered unencumbered if it has not been pledged or securitized.

The following table also provides the carrying amount of our encumbered and unencumbered financial assets at September 30, 2024:

The following table also provides the carrying amount of our encumbered and unencumbered financial assets at March 31, 2025:

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Management’s Discussion and Analysis

Encumbered Assets Unencumbered Assets Total

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(3) Includes commercial real estate investments and interests in certain joint ventures.

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Management’s Discussion and Analysis

We maintain liquid assets in order to satisfy our current and future obligations in normal and stressed operating environments.

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Our balance sheet also generates liquidity on an on-going basis through mortgage principal and interest repayments and net earnings held prior to payment of dividends.

The following table presents our liquid assets as a percentage of total assets at September 30, 2024:

The following table presents our liquid assets as a percentage of total assets at March 31, 2025:

Carrying Value (1)

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(1) Carrying value approximates the market value of assets.

The assets listed in this table include $68.7 billion of assets that have been pledged as collateral against existing liabilities at September 30, 2024.

The assets listed in this table include $66.8 billion of assets that have been pledged as collateral against existing liabilities at March 31, 2025.

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

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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.

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

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Management’s Discussion and Analysis

interest-rate sensitive liabilities.

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

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The effects of interest rate swaps, whereby we generally pay a fixed rate and receive a floating rate and effectively lock in our financing costs for a longer term, are also reflected in our interest rate sensitivity gap.

The interest rate sensitivity of our assets and liabilities in the following table at September 30, 2024 could vary substantially based on actual prepayment experience.

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Management’s Discussion and Analysis

The interest rate sensitivity of our assets and liabilities in the following table at March 31, 2025 could vary substantially based on actual prepayment experience.

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

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Liquidity Management Policies

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Management’s Discussion and Analysis

We utilize a comprehensive liquidity policy structure to inform our liquidity risk management practices including monitoring and measurement, along with well-defined key risk indicators.

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The metrics assist in assessing our liquidity conditions and are integrated into our escalation protocol.

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Management’s Discussion and Analysis

Investment/Market Risk Management

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The results assume no management actions in response to the rate or spread changes.

The following table presents estimates at September 30, 2024.

The following table presents estimates at March 31, 2025.

Actual results could differ materially from these estimates.

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

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Management’s Discussion and Analysis

Credit Risk Management

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In addition, we are also exposed to credit risk on residential mortgage loans and commercial real estate investments.

MSR values may also be impacted through reduced

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

servicing fees and higher costs to service the underlying mortgage loans due to borrower performance.

MSR values may also be impacted through reduced servicing fees and higher costs to service the underlying mortgage loans due to borrower performance.

Generally, we are subject to risk of loss if an issuer or borrower fails to perform its contractual obligations.

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Additionally, ALCO has oversight of our credit risk exposure.

Our portfolio composition, based on balance sheet values, at September 30, 2024 and December 31, 2023 was as follows:

September 30, 2024 December 31, 2023

Our portfolio composition, based on balance sheet values, at March 31, 2025 and December 31, 2024 was as follows:

March 31, 2025 December 31, 2024

Agency mortgage-backed securities 67.0 % 68.6 %

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27.8 % 26.0 %

Commercial mortgage-backed securities 0.1 % 0.1 %

Mortgage servicing rights 3.2 % 3.0 %

Commercial real estate 0.1 % 0.3 %

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

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The amount of this exposure is the difference between the amount loaned to us plus interest due to the counterparty and the fair value of the collateral pledged by us to the lender including accrued interest receivable on such collateral.

We also use interest rate swaps and other derivatives to manage interest rate risk.

We also use interest rate swaps and other derivatives that are not centrally cleared to manage interest rate risk.

Under these agreements, we pledge securities and cash as collateral or settle variation margin payments as part of a margin arrangement.

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Additionally, ALCO has oversight of our counterparty exposure.

The following table summarizes our exposure to counterparties by geography at September 30, 2024:

The following table summarizes our exposure to counterparties by geography at March 31, 2025:

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Number of Counterparties Secured Financing (1)

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Europe 10 11,344,781 (3,724) 855,791

Asia (non-Japan) 1 497,273 — 18,330

Japan 4 3,717,300 — 392,568

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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.

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Operational Risk Management

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We periodically engage penetration testing companies and law firms to assist in these processes.

When we do so, we hire reputable companies, limit their access to only information necessary for the specific purpose and maintain security controls around confidential information, including personally identifiable information.

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.

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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 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.

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 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.

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

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Management’s Discussion and Analysis

assessing, managing and reporting cybersecurity risk.

Members also participate in cybersecurity-related professional organizations that discuss industry threats, challenges and solutions to cybersecurity issues.

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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 servicers and sub-

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Management’s Discussion and Analysis

Therefore, while we believe there are currently no risks from any potential 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 incidents that are reasonably likely to have a material effect on our business strategy, results of operations, 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 network affect our business, reputation and financial condition” in Part I, Item 1A.

“Risk Factors” of our most recent Annual Report on Form 10-K and in Part II, Item 1A.

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“Financial Statements.”

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

Valuation of Financial Instruments

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Additionally, securities used as collateral for repurchase agreements are priced daily by counterparties to ensure sufficient collateralization, providing additional verification of our internal pricing.

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Management’s Discussion and Analysis

Sensitivity of Estimates to Change:

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Changes in the underlying assumptions used to estimate the fair value of MSR impact the carrying value as well as the related unrealized gains and losses recognized.

For further discussion of the sensitivity of the model inputs refer to the Note titled “Fair Value Measurements” in the Notes to the Consolidated Financial Statements included in Item 1.

For further discussion of the sensitivity of the

ANNALY CAPITAL MANAGEMENT, INC.

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Management’s Discussion and Analysis

model inputs refer to the Note titled “Fair Value Measurements” in the Notes to the Consolidated Financial Statements included in Item 1.

“Financial Statements.”

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Revenue Recognition

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Management’s Discussion and Analysis

Interest income from coupon payments is accrued based on the outstanding principal amounts of the Residential Securities and their contractual terms.

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Economic Interest Expense

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 related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statement of Comprehensive Income (Loss).

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

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Assets on the company’s balance sheet which have been pledged as collateral against a liability.

Environmental, social, and governance.

The par value (i.e., principal or maturity value) of a security appearing on the face of the instrument.

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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-Q

Item 2. Management’s Discussion and Analysis