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| EX-99.1 - EXHIBIT 99.1 - ANNALY CAPITAL MANAGEMENT INC | a2020q2nlyex991.htm |
| 8-K - 8-K - ANNALY CAPITAL MANAGEMENT INC | a2020q2nly8-kearningsr.htm |
Second Quarter 2020 Financial Summary July 29, 2020
Important Notices This presentation is issued by Annaly Capital Management, Inc. ("Annaly"), an internally managed publicly traded company that has elected to be taxed as a real estate investment trust for federal income tax purposes, and is being furnished in connection with Annaly’s Second Quarter 2020 quarterly report. This presentation is provided for investors in Annaly for informational purposes only and is not an offer to sell, or a solicitation of an offer to buy, any security or instrument. Forward-Looking Statements This presentation, other written or oral communications, and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms or the negative of those terms. Such statements include those relating to our future performance, macro outlook, the interest rate and credit environments, tax reform and future opportunities. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, risks and uncertainties related to the COVID-19 pandemic, including as related to adverse economic conditions on real estate-related assets and financing conditions; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities (“MBS”) and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow our commercial real estate business; our ability to grow our residential credit business; our ability to grow our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights ("MSR"); our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; and the risk that the expected benefits, including long-term cost savings, of the Internalization are not achieved. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. We do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law. We routinely post important information for investors on our website, www.annaly.com. We intend to use this webpage as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. Annaly encourages investors, analysts, the media and others interested in Annaly to monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations, webcasts and other information we post from time to time on our website. To sign-up for email- notifications, please visit the “Email Alerts” section of our website, www.annaly.com, under the “Investors” section and enter the required information to enable notifications. The information contained on, or that may be accessed through, our webpage is not incorporated by reference into, and is not a part of, this document. Past performance is no guarantee of future results. There is no guarantee that any investment strategy referenced herein will work under all market conditions. Prior to making any investment decision, you should evaluate your ability to invest for the long-term, especially during periods of downturns in the market. You alone assume the responsibility of evaluating the merits and risks associated with any potential investment or investment strategy referenced herein. To the extent that this material contains reference to any past specific investment recommendations or strategies which were or would have been profitable to any person, it should not be assumed that recommendations made in the future will be profitable or will equal the performance of such past investment recommendations or strategies. The information contained herein is not intended to provide, and should not be relied upon for accounting, legal or tax advice or investment recommendations for Annaly or any of its affiliates. Regardless of source, information is believed to be reliable for purposes used herein, but Annaly makes no representation or warranty as to the accuracy or completeness thereof and does not take any responsibility for information obtained from sources outside of Annaly. Certain information contained in the presentation discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. Non-GAAP Financial Measures This presentation includes certain non-GAAP financial measures, including core earnings excluding the premium amortization adjustment (“PAA”). We believe the non-GAAP financial measures are useful for management, investors, analysts, and other interested parties in evaluating our performance but should not be viewed in isolation and are not a substitute for financial measures computed in accordance with U.S. generally accepted accounting principles (“GAAP”). In addition, we may calculate our non-GAAP metrics, such as core earnings (excluding PAA), or the PAA, differently than our peers making comparative analysis difficult. Please see the section entitled “Non-GAAP Reconciliations” in the attached Appendix for a reconciliation to the most directly comparable GAAP financial measures. 1
Financial Snapshot Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2020 3/31/2020 GAAP net income (loss) per average common share (1) $0.58 ($2.57) Core earnings (excluding PAA) per average common share *(1) $0.27 $0.21 Income Statement Annualized GAAP return (loss) on average equity 25.84% (102.17%) Annualized core return on average equity (excluding PAA)* 12.82% 9.27% Book value per common share $8.39 $7.50 Leverage at period-end (2) 5.5x 6.4x Balance Sheet Economic leverage at period-end *(3) 6.4x 6.8x Capital ratio at period-end (4) 13.0% 12.3% Securities $77,805,743 $79,357,596 Loans, net 3,972,671 4,068,189 Mortgage servicing rights 227,400 280,558 Portfolio Assets transferred or pledged to securitization vehicles 7,690,451 7,671,662 Real estate, net 746,067 751,738 Total residential and commercial investments $90,442,332 $92,129,743 Net interest margin (5) 1.89% 0.18% GAAP Average yield on interest earning assets (6) 2.77% 1.91% Key Statistics Average GAAP cost of interest bearing liabilities (7) 0.96% 1.86% Net interest spread 1.81% 0.05% Net interest margin (excluding PAA) *(5) 1.88% 1.18% Non-GAAP Average yield on interest earning assets (excluding PAA) *(6) 3.01% 2.91% Key Statistics Average economic cost of interest bearing liabilities *(7) 1.29% 1.91% Net interest spread (excluding PAA) * 1.72% 1.00% Operating expenses to core earnings (excluding PAA) *(8) 15.68% 21.31% Efficiency Annualized operating expenses as a % of average total assets (8) 0.28% 0.25% Annualized operating expenses as a % of average total equity (8) 2.01% 1.98% * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 2
Portfolio Data Unaudited, dollars in thousands For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Agency mortgage-backed securities $76,761,800 $78,456,846 $112,893,367 $114,462,524 $118,202,040 Credit risk transfer securities 362,901 222,871 531,322 474,765 491,969 Non-agency mortgage-backed securities 619,840 585,954 1,135,868 1,015,921 1,097,752 Commercial mortgage-backed securities 61,202 91,925 273,023 140,851 135,108 Total securities $77,805,743 $79,357,596 $114,833,580 $116,094,061 $119,926,869 Residential mortgage loans $1,168,521 $1,268,083 $1,647,787 $1,219,402 $1,061,124 Commercial real estate debt and preferred equity 618,886 649,843 669,713 611,429 623,705 Corporate debt 2,185,264 2,150,263 2,144,850 2,115,783 1,792,837 Loans held for sale — — — — 68,802 Portfolio- Total loans, net $3,972,671 $4,068,189 $4,462,350 $3,946,614 $3,546,468 Related Mortgage servicing rights $227,400 $280,558 $378,078 $386,051 $425,328 Data Agency mortgage-backed securities transferred or pledged to securitization vehicles $1,832,708 $1,803,608 $1,122,588 $— $— Residential mortgage loans transferred or pledged to securitization vehicles 2,832,502 3,027,188 2,598,374 2,376,731 2,106,981 Commercial real estate debt investments transferred or pledged to securitization vehicles 2,150,623 1,927,575 2,345,120 2,311,413 2,104,601 Commercial real estate debt and preferred equity transferred or pledged to securitization vehicles 874,618 913,291 936,378 — — Assets transferred or pledged to securitization vehicles $7,690,451 $7,671,662 $7,002,460 $4,688,144 $4,211,582 Real estate, net $746,067 $751,738 $725,638 $725,508 $733,196 Total residential and commercial investments $90,442,332 $92,129,743 $127,402,106 $125,840,378 $128,843,443 Total assets $93,458,653 $96,917,274 $130,295,081 $128,956,120 $131,800,776 Average TBA contract and CMBX balances $18,628,343 $9,965,142 $6,878,502 $9,248,502 $12,757,975 % Fixed-rate 98% 99% 97% 97% 96% Residential % Adjustable-rate 2% 1% 3% 3% 4% Securities Weighted average experienced CPR for the period 19.5% 13.6% 17.8% 14.6% 11.2% Summary Portfolio Weighted average projected long-term CPR at period-end 18.0% 17.7% 13.9% 16.3% 14.5% Statistics Net premium and discount balance in Residential Securities $3,679,639 $3,815,149 $5,185,797 $5,262,316 $5,625,788 Net premium and discount balance as % of stockholders' equity 26.68% 30.03% 32.84% 34.58% 35.83% 3
Financing and Capital Data Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Repurchase agreements $67,163,598 $72,580,183 $101,740,728 $102,682,104 $105,181,241 Other secured financing 1,538,996 1,805,428 4,455,700 4,466,030 4,127,989 Debt issued by securitization vehicles 6,458,130 6,364,949 5,622,801 3,856,082 3,470,168 Mortgages payable 508,565 484,762 485,005 485,657 498,772 Total debt $75,669,289 $81,235,322 $112,304,234 $111,489,873 $113,278,170 Financing Data Total liabilities $79,661,050 $84,209,744 $114,498,737 $113,732,416 $116,093,369 Cumulative redeemable preferred stock $1,982,026 $1,982,026 $1,982,026 $1,982,026 $2,110,346 Common equity(1) 11,811,440 10,721,399 13,809,991 13,237,270 13,592,335 Total Annaly stockholders' equity 13,793,466 12,703,425 15,792,017 15,219,296 15,702,681 Non-controlling interests 4,137 4,105 4,327 4,408 4,726 Total equity $13,797,603 $12,707,530 $15,796,344 $15,223,704 $15,707,407 Weighted average days to maturity of repurchase agreements 74 48 65 45 70 Weighted average rate on repurchase agreements, for the quarter(2)(3) 0.79% 1.78% 2.09% 2.53% 2.66% Weighted average rate on repurchase agreements, at period-end(3) 0.49% 1.23% 2.03% 2.48% 2.69% Leverage at period-end 5.5x 6.4x 7.1x 7.3x 7.2x Economic leverage at period-end * 6.4x 6.8x 7.2x 7.7x 7.6.x Key Capital and Capital ratio at period-end 13.0% 12.3% 12.0% 11.2% 11.4% Hedging Metrics Book value per common share $8.39 $7.50 $9.66 $9.21 $9.33 Total common shares outstanding 1,407,662 1,430,424 1,430,106 1,437,964 1,456,263 Hedge ratio(4) 40% 19% 75% 73% 74% Weighted average pay rate on interest rate swaps, at period-end 1.01% 1.63% 1.84% 1.88% 2.12% Weighted average receive rate on interest rate swaps, at period-end 0.75% 1.16% 1.89% 2.16% 2.46% Weighted average net rate on interest rate swaps, at period-end 0.26% 0.47% (0.05%) (0.28%) (0.34%) * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 4
Income Statement Data Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Total interest income $584,812 $555,026 $1,074,214 $919,299 $927,598 Total interest expense 186,032 503,473 620,058 766,905 750,217 Net interest income $398,780 $51,553 $454,156 $152,394 $177,381 Total economic interest expense *(1) $250,593 $517,453 $574,837 $678,439 $666,564 Economic net interest income * $334,219 $37,573 $499,377 $240,860 $261,034 Total interest income (excluding PAA) * $636,554 $845,748 $990,322 $1,036,451 $1,067,361 Summary Income Economic net interest income (excluding PAA) * $385,961 $328,295 $415,485 $358,012 $400,797 Statement GAAP net income (loss) $856,234 ($3,640,189) $1,209,742 ($747,169) ($1,776,413) GAAP net income (loss) available (related) to common stockholders (2) $820,693 ($3,675,764) $1,174,165 ($783,210) ($1,808,752) GAAP net income (loss) per average common share (2) $0.58 ($2.57) $0.82 ($0.54) ($1.24) Core earnings (excluding PAA) * $424,580 $330,218 $409,157 $341,931 $391,153 Core earnings (excluding PAA) available to common stockholders *(2) $389,071 $294,709 $373,648 $305,780 $358,731 Core earnings (excluding PAA) per average common share *(2) $0.27 $0.21 $0.26 $0.21 $0.25 PAA cost (benefit) $51,742 $290,722 ($83,892) $117,152 $139,763 * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 5
Key Earnings Metrics Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Dividends declared per common share $0.22 $0.25 $0.25 $0.25 $0.25 Total common and preferred dividends declared (1) $345,481 $393,328 $393,203 $396,187 $396,388 Annualized GAAP return (loss) on average equity 25.84% (102.17%) 31.20% (19.32%) (45.13%) Annualized GAAP return (loss) on average equity per unit of economic leverage 4.04% (15.03%) 4.33% (2.51%) (5.94%) Key GAAP Earnings Metrics Net interest margin 1.89% 0.18% 1.49% 0.48% 0.58% Average yield on interest earning assets 2.77% 1.91% 3.53% 2.89% 3.03% Average GAAP cost of interest bearing liabilities 0.96% 1.86% 2.17% 2.58% 2.71% Net interest spread 1.81% 0.05% 1.36% 0.31% 0.32% Annualized core return on average equity (excluding PAA) * 12.82% 9.27% 10.56% 8.85% 9.94% Annualized core return on average equity per unit of economic leverage (excluding PAA) * 2.00% 1.36% 1.47% 1.15% 1.31% Net interest margin (excluding PAA) * 1.88% 1.18% 1.41% 1.10% 1.28% Key Non-GAAP Earnings Metrics Average yield on interest earning assets (excluding PAA) * 3.01% 2.91% 3.25% 3.26% 3.48% Average economic cost of interest bearing liabilities * 1.29% 1.91% 2.01% 2.28% 2.41% Net interest spread (excluding PAA) * 1.72% 1.00% 1.24% 0.98% 1.07% * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 6
Components of Economic Net Interest Income * Unaudited, dollars in thousands For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Interest income: Residential Securities $457,684 $410,380 $923,653 $784,228 $777,891 Residential mortgage loans 42,871 47,557 47,377 37,673 35,025 Commercial investment portfolio 84,208 95,676 97,366 87,946 92,131 Reverse repurchase agreements 49 1,413 5,818 9,452 22,551 Total interest income $584,812 $555,026 $1,074,214 $919,299 $927,598 Economic interest expense: Economic Net Interest Income * Repurchase agreements $136,962 $434,021 $550,283 $699,838 $683,647 Net interest component of interest rate swaps 64,561 13,980 (45,221) (88,466) (83,653) Debt issued by securitization vehicles 38,757 42,119 39,099 34,524 34,151 Other 10,313 27,333 30,676 32,543 32,419 Total economic interest expense * $250,593 $517,453 $574,837 $678,439 $666,564 Economic net interest income * $334,219 $37,573 $499,377 $240,860 $261,034 PAA cost (benefit) 51,742 290,722 (83,892) 117,152 139,763 Economic net interest income (excluding PAA) * $385,961 $328,295 $415,485 $358,012 $400,797 * Represents a non-GAAP financial measure. 7
GAAP Net Income to Core Earnings (excluding PAA)* Reconciliation Unaudited, dollars in thousands For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 GAAP net income (loss) $856,234 ($3,640,189) $1,209,742 ($747,169) ($1,776,413) Net income (loss) attributable to noncontrolling interests 32 66 68 (110) (83) Net income (loss) attributable to Annaly 856,202 (3,640,255) 1,209,674 (747,059) (1,776,330) Adjustments to exclude reported realized and unrealized (gains) losses: Realized (gains) losses on termination or maturity of interest rate swaps 1,521,732 397,561 4,615 682,602 167,491 Unrealized (gains) losses on interest rate swaps (1,494,628) 2,827,723 (782,608) 326,309 1,276,019 Net (gains) losses on disposal of investments and other (246,679) (206,583) (17,783) (66,522) 38,333 Net (gains) losses on other derivatives (170,916) (206,426) 42,312 16,888 506,411 Net unrealized (gains) losses on instruments measured at fair value through earnings (254,772) 730,160 5,636 1,091 4,881 Loan loss provision (1) 72,544 99,993 7,362 3,504 — Core Earnings Other adjustments: (excluding PAA)* (2) Reconciliation Depreciation expense related to commercial real estate and amortization of intangibles 8,714 7,934 9,823 9,974 10,147 Non-core (income) loss allocated to equity method investments (3) 4,218 19,398 (3,979) 4,541 11,327 Transaction expenses and non-recurring items (4) 1,075 7,245 3,634 2,622 3,046 Income tax effect of non-core income (loss) items 3,353 (23,862) (418) (2,762) (3,507) TBA dollar roll income and CMBX coupon income (5) 97,524 44,904 36,901 15,554 33,229 MSR amortization (6) (25,529) (18,296) (22,120) (21,963) (19,657) Plus: Premium amortization adjustment cost (benefit) 51,742 290,722 (83,892) 117,152 139,763 Core earnings (excluding PAA) * 424,580 330,218 409,157 341,931 391,153 Dividends on preferred stock (7) 35,509 35,509 35,509 36,151 32,422 Core earnings (excluding PAA) attributable to common stockholders * $389,071 $294,709 $373,648 $305,780 $358,731 * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 8
Quarter-Over-Quarter Changes in Key Metrics Unaudited For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Book value per common share, beginning of period $7.50 $9.66 $9.21 $9.33 $9.67 Net income (loss) available (related) to common stockholders 0.58 (2.57) 0.82 (0.54) (1.24) Other comprehensive income (loss) attributable to common stockholders 0.51 0.69 (0.12) 0.66 1.15 Book Value Common dividends declared (0.22) (0.25) (0.25) (0.25) (0.25) Rollforward Issuance / buyback of common stock / redemption of preferred stock 0.02 — — 0.01 — Other adjustment (1) — (0.03) — — — Book value per common share, end of period $8.39 $7.50 $9.66 $9.21 $9.33 Prior quarter net interest margin 0.18% 1.49% 0.48% 0.58% 0.79% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.03% (0.04%) 0.02% (0.02%) 0.03% Net Interest Margin Net amortization of premiums 0.83% (1.58%) 0.62% (0.12%) (0.15%) GAAP interest expense 0.85% 0.31% 0.37% 0.04% (0.09%) Current quarter net interest margin 1.89% 0.18% 1.49% 0.48% 0.58% Prior quarter net interest spread 0.05% 1.36% 0.31% 0.32% 0.44% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets 0.03% (0.04%) 0.02% (0.02%) 0.03% Net Interest Spread Net amortization of premiums 0.83% (1.58%) 0.62% (0.12%) (0.15%) Average GAAP cost of interest bearing liabilities 0.90% 0.31% 0.41% 0.13% 0.00% Current quarter net interest spread 1.81% 0.05% 1.36% 0.31% 0.32% Detailed endnotes are included within the Appendix at the end of this presentation. 9
Quarter-Over-Quarter Changes in Key Metrics (continued) Unaudited For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Prior quarter net interest margin (excluding PAA) * 1.18% 1.41% 1.10% 1.28% 1.51% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (including average TBA dollar roll and CMBX balances) (0.39%) (0.14%) 0.08% 0.09% 0.12% Net Interest Margin (excluding PAA)* Net amortization of premiums (excluding PAA) 0.18% (0.26%) (0.04%) (0.20%) (0.01%) TBA dollar roll income and CMBX coupon income 0.24% 0.03% 0.07% (0.05%) (0.02%) Interest expense and net interest component of interest rate swaps 0.67% 0.14% 0.20% (0.02%) (0.32%) Current quarter net interest margin (excluding PAA) * 1.88% 1.18% 1.41% 1.10% 1.28% Prior quarter net interest spread (excluding PAA) * 1.00% 1.24% 0.98% 1.07% 1.30% Quarter-over-quarter changes in contribution: Net Interest Spread Coupon on average interest earning assets 0.03% (0.04%) 0.02% (0.02%) 0.03% * (excluding PAA) Net amortization of premiums (excluding PAA) 0.07% (0.30%) (0.03%) (0.20%) 0.00% Average economic cost of interest bearing liabilities 0.62% 0.10% 0.27% 0.13% (0.26%) Current quarter net interest spread (excluding PAA) * 1.72% 1.00% 1.24% 0.98% 1.07% * Represents a non-GAAP financial measure. 10
Quarter-Over-Quarter Changes in Annualized Return on Average Equity Unaudited For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Prior quarter annualized GAAP return (loss) on average equity (102.17%) 31.20% (19.32%) (45.13%) (22.72%) Quarter-over-quarter changes in contribution: Coupon income (7.00%) 0.88% (1.36%) 1.67% 2.00% Net amortization of premiums and accretion of discounts 9.08% (13.00%) 5.29% (1.46%) (1.61%) Interest expense and net interest component of interest rate swaps 6.96% 0.30% 2.72% (0.61%) (3.19%) Annualized GAAP Return (Loss) on Realized gains (losses) on termination or maturity of interest rate swaps (34.77%) (11.04%) 17.54% (13.40%) 11.48% Average Equity Unrealized gains (losses) on interest rate swaps 124.48% (99.56%) 28.62% 23.98% (21.97%) Realized and unrealized gains (losses) on investments and other derivatives 29.20% (8.12%) (2.04%) 15.22% (9.64%) Loan loss provision 0.71% (2.60%) (0.10%) (0.09%) 0.15% Other(1) (0.65%) (0.23%) (0.15%) 0.50% 0.37% Current quarter annualized GAAP return (loss) on average equity 25.84% (102.17%) 31.20% (19.32%) (45.13%) Prior quarter annualized core return on average equity (excluding PAA) * 9.27% 10.56% 8.85% 9.94% 11.59% Quarter-over-quarter changes in contribution: Coupon income (7.00%) 0.88% (1.36%) 1.67% 2.00% Annualized Core Return on Average Net amortization of premiums (excluding PAA) 2.48% (2.68%) 0.09% (1.98%) (0.25%) Equity (excluding Interest expense and net interest component of interest rate swaps 6.96% 0.30% 2.72% (0.61%) (3.19%) PAA)* TBA dollar roll income and CMBX coupon income 1.68% 0.31% 0.56% (0.44%) (0.18%) Other(2) (0.57%) (0.10%) (0.30%) 0.27% (0.03%) Current quarter core return on annualized average equity (excluding PAA) * 12.82% 9.27% 10.56% 8.85% 9.94% * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. 11
Residential Investments & TBA Derivative Overview as of June 30, 2020 Unaudited, dollars in thousands Agency Fixed-Rate Securities (Pools) Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Years to Maturity Face Value % (3) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value <=15 years (1) $4,222,504 6.0% 3.13% 101.6% 110.7% 11.9% $4,673,352 20 years 3,019,573 4.3% 3.17% 103.4% 106.5% 13.7% 3,215,849 >=30 years (2) 63,277,685 89.7% 3.85% 104.6% 109.9% 20.0% 69,534,018 Total/Weighted Avg. $70,519,762 100.0% 3.78% 104.4% 109.8% 19.5% $77,423,219 TBA Contracts Weighted Avg. Implied Cost Implied Market Type Notional Value % (4) Coupon Basis Value 15-year $2,253,000 12.3% 2.11% $2,327,402 $2,337,049 30-year 16,128,000 87.7% 2.54% 16,703,103 16,811,652 Total/Weighted Avg. $18,381,000 100.0% 2.49% $19,030,505 $19,148,701 Agency Adjustable-Rate Securities Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Months to Reset Face Value % (3) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value 0 - 24 months $468,704 76.2% 3.57% 101.3% 105.5% 24.0% $494,373 25 - 40 months 49,958 8.1% 2.53% 99.0% 104.1% 14.1% 52,005 41 - 60 months 4,770 0.8% 2.94% 100.9% 105.7% 14.5% 5,044 61 - 90 months 91,440 14.9% 2.97% 101.2% 106.0% 26.4% 96,933 Total/Weighted Avg. $614,872 100.0% 3.39% 101.1% 105.4% 23.5% $648,355 Detailed endnotes are included within the Appendix at the end of this presentation. 12
Residential Investments & TBA Derivative Overview as of June 30, 2020 (continued) Unaudited, dollars in thousands Agency Interest-Only Collateralized Mortgage-Backed Obligations Current Notional Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Type Value % (1) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value Interest-only $1,283,842 38.2% 3.38% 14.3% 8.6% 17.3% $110,761 Inverse interest-only 2,079,254 61.8% 5.91% 21.9% 19.8% 18.3% 412,173 Total/Weighted Avg. $3,363,096 100.0% 4.94% 19.0% 15.5% 17.9% $522,934 Mortgage Servicing Rights Unpaid Excess Weighted Avg. Principal Weighted Avg. Servicing Loan Age Estimated Type Balance Coupon Spread (months) Fair Value Total/Weighted Avg. $31,209,219 3.82% 0.24% 51 $227,400 Residential Credit Portfolio Current Face / Weighted Avg. Weighted Avg. Weighted Avg. Estimated Sector Notional Value % (2) Coupon Amortized Cost Fair Value Fair Value Credit Risk Transfer $423,284 7.3% 4.65% 99.1% 85.7% $362,901 Alt-A 106,758 1.8% 3.69% 80.8% 84.9% 90,652 Prime 179,368 3.6% 4.22% 94.2% 98.7% 177,045 Prime Interest-only 280,259 0.1% 0.46% 1.0% 0.7% 1,932 Subprime 135,160 2.4% 1.05% 84.6% 89.3% 120,687 NPL/RPL 191,529 3.7% 3.96% 99.7% 99.5% 190,515 Prime Jumbo 39,977 0.7% 3.83% 88.4% 89.0% 35,587 Prime Jumbo Interest-only 448,980 0.1% 0.37% 1.8% 0.8% 3,422 Residential Mortgage Loans 3,989,923 80.3% 4.90% 101.2% 100.3% 4,001,023 Total/Weighted Avg. $5,795,238 100.0% 4.69% $4,983,764 Detailed endnotes are included within the Appendix at the end of this presentation. 13
Residential Credit Investments Detail as of June 30, 2020 (1) Unaudited, dollars in thousands Payment Structure Investment Characteristics Estimated Credit Product Fair Value Senior Subordinate Coupon Enhancement 60+ Delinquencies 3M VPR Agency Credit Risk Transfer $347,845 $— $347,845 4.61% 0.62% 1.98% 30.31% Private Label Credit Risk Transfer 15,056 — 15,056 5.64% 17.66% 0.21% 21.28% Alt-A 90,652 25,742 64,910 3.69% 8.08% 19.03% 15.36% Prime 177,045 29,042 148,003 4.22% 8.44% 10.98% 19.10% Prime Interest-only 1,932 1,932 — 0.46% —% 4.12% 42.15% Subprime 120,687 69,078 51,609 1.05% 8.55% 19.54% 5.61% Re-Performing Loan Securitizations 190,515 59,238 131,277 3.96% 26.56% 28.43% 6.18% Prime Jumbo 35,587 — 35,587 3.83% 1.87% 3.35% 45.14% Prime Jumbo Interest-only 3,422 3,422 — 0.37% —% 2.44% 36.04% Total (2) $982,741 $188,454 $794,287 3.88% 8.61% 12.11% 19.96% Bond Coupon Estimated Fair Product Value ARM Fixed Floater Interest Only Agency Credit Risk Transfer $347,845 $— $— $347,845 $— Private Label Credit Risk Transfer 15,056 — — 15,056 — Alt-A 90,652 28,567 46,338 15,747 — Prime 177,045 30,113 120,479 26,453 — Prime Interest-only 1,932 — — — 1,932 Subprime 120,687 — 4,088 116,501 98 Re-Performing Loan Securitizations 190,515 — 190,515 — — Prime Jumbo 35,587 — 35,587 — — Prime Jumbo Interest-only 3,422 — — — 3,422 Total $982,741 $58,680 $397,007 $521,602 $5,452 Detailed endnotes are included within the Appendix at the end of this presentation. 14
Commercial Real Estate Overview as of June 30, 2020 Unaudited, dollars in thousands GAAP Non-GAAP Number of Weighted Avg Weighted Avg Economic Levered Investment Portfolio Investments Book Values % of Portfolio LTV (1) Life (years) (2) Interest (3) Return (4) Loans Senior Mortgages 19 $496,765 11.2% 77.6% 3.5 $189,068 9.0% Mezzanine Loans 12 122,121 2.7% 75.1% 2.4 76,866 7.3% Total Loans 31 618,886 13.9% 77.1% 3.3 265,934 8.5% Securities CMBS (Credit) 2 28,557 0.6% 63.1% 5.8 11,820 15.2% SASB 14 32,645 0.7% 64.3% 4.3 7,680 7.2% Total Securities 16 $61,202 1.3% 63.7% 5.0 $19,500 12.1% Assets transferred or pledged to securitization vehicles NLY 2019-FL2 25 793,712 17.8% 83.9% 3.1 170,024 14.7% NLY 2019 - OAKS 1 80,906 1.8% 74.0% 4.6 15,072 22.4% Commercial Trusts 64 2,150,623 48.4% 44.0% 4.6 119,853 9.2% Total Assets transferred or pledged to securitization vehicles 90 $3,025,241 68.0% 55.3% 4.2 $304,949 12.9% Total Debt Investments 137 $3,705,329 83.2% 59.0% 4.1 $590,383 10.9% Equity Investments Real Estate Held for Investment 46 641,583 14.5% 253,837 11.7% Investment in Unconsolidated Joint Ventures (5) 32 104,484 2.3% 155,931 8.8% Total Equity Investments 78 746,067 16.8% 409,768 10.6% Total Investment Portfolio 215 $4,451,396 100.0% $1,000,151 10.9% Range of Implied Net Weighted Derivatives Net Notional Ratings Market Value Average Coupon CMBX (6) $495,000 AAA to BBB- $460,289 1.2% Detailed endnotes are included within the Appendix at the end of this presentation. 15
Middle Market Lending Overview as of June 30, 2020 Industry Dispersion Unaudited, dollars in thousands Industry Total (1) Size Dispersion Computer Programming, Data Processing & Other Computer Related Services 406,827 Management and Public Relations Services 277,511 Position Size Amount Percentage Industrial Inorganic Chemicals 147,622 $0 - $20 million $204,652 9.4% Miscellaneous Business Services 122,279 $20 - $40 million 442,342 20.2% Public Warehousing and Storage 116,967 $40 - $60 million 330,945 15.1% Engineering, Architectural, and Surveying 110,926 Greater than $60 million 1,207,325 55.3% Metal Cans & Shipping Containers 108,333 Total $2,185,264 100.0% Offices and Clinics of Doctors of Medicine 104,000 Surgical, Medical, and Dental Instruments and Supplies 99,657 Tenor Dispersion Electronic Components & Accessories 77,788 Remaining Term Amount Percentage Insurance Agents, Brokers and Services 70,978 One year or less $42,763 2.0% Telephone Communications 57,482 Miscellaneous Health and Allied Services, not elsewhere classified 52,177 One to three years 315,829 14.5% Miscellaneous Equipment Rental and Leasing 49,505 Three to five years 650,157 29.8% Electric Work 40,642 Greater than five years 1,176,515 53.7% Medical and Dental Laboratories 35,231 Total $2,185,264 100.0% Metal Forgings and Stampings 29,739 Research, Development and Testing Services 29,541 Lien Position Amount Percentage Home Health Care Services 28,896 First lien loans $1,357,123 62.1% Motor Vehicles and Motor Vehicle Parts and Supplies 28,415 Second lien loans 828,141 37.9% Legal Services 27,923 Total $2,185,264 100.0% Petroleum and Petroleum Products 24,745 Grocery Stores 22,948 Coating, Engraving and Allied Services 20,298 Schools and Educational Services, not elsewhere classified 19,331 Drugs 15,856 Chemicals & Allied Products 14,844 Machinery, Equipment, and Supplies 12,419 Mailing, Reproduction, Commercial Art and Photography, and Stenographic 12,356 Offices and Clinics of Other Health Practitioners 10,091 Miscellaneous Plastic Products 9,937 Total $2,185,264 16
Hedging and Liabilities as of June 30, 2020 Unaudited, dollars in thousands Current Weighted Avg. Weighted Avg. Weighted Avg. Maturity Notional (1)(2) Pay Rate Receive Rate Years to Maturity(3) 0 to 3 years $ 15,469,400 0.20% 0.42% 2.37 Interest Rate >3 to 6 years 6,215,450 0.73% 0.15% 4.09 Swaps > 6 to 10 years 5,456,500 1.51% 1.18% 8.22 Greater than 10 years 1,709,000 3.16% 0.57% 19.60 Total / Weighted Avg. $ 28,850,350 1.01% 0.75% 4.87 Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Underlying Underlying Underlying Underlying Months to Interest Rate Type Notional Fixed Rate Floating Rate Years to Maturity Expiration Swaptions Long Pay $ 4,625,000 1.60% 3M LIBOR 10.45 6.60 Long Receive $ 250,000 1.66% 3M LIBOR 10.53 6.27 Futures Weighted Avg. Years to Type Long Contracts Short Contracts Net Positions Maturity Positions U.S. Treasury Futures - 10 year & Greater $ — $ (1,847,800) $ (1,847,800) 6.87 Principal Weighted Avg. Rate Maturity Balance At Period End Repurchase Within 30 days $ 33,176,872 0.33% Agreements 30 to 59 days 4,992,032 0.67% and Other 60 to 89 days 5,436,637 0.47% Secured 90 to 119 days 8,671,500 0.58% Financing Over 120 days(4) 16,425,553 0.86% Total / Weighted Avg. $ 68,702,594 0.52% Weighted Average Rate Principal Balance At Period End For the Quarter Days to Maturity(5) Repurchase agreements $ 67,163,598 0.49% 0.79% 74 Total Indebtedness Other secured financing 1,538,996 1.99% 2.50% 990 Debt issued by securitization vehicles 6,441,326 2.30% 2.32% 7,315 Mortgages payable 514,005 3.99% 4.08% 4,274 Total indebtedness $ 75,657,925 Detailed endnotes are included within the Appendix at the end of this presentation. 17
Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity Unaudited Assumptions: ▪ The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of June 30, 2020 and March 31, 2020 ▪ The interest rate sensitivity reflects instantaneous parallel shifts in rates ▪ The MBS spread sensitivity shifts MBS spreads instantaneously and reflects exposure to MBS basis risk ▪ All tables assume no active management of the portfolio in response to rate or spread changes Interest Rate Sensitivity (1) As of June 30, 2020 As of March 31, 2020 Estimated Percentage Change in Estimated Change as a % of Estimated Percentage Change in Estimated Change as a % of Interest Rate Change (bps) Portfolio Value(2) NAV(2)(3) Portfolio Value(2) NAV(2)(3) (75) —% (0.2%) 0.1% 0.9% (50) 0.1% 0.9% 0.3% 1.9% (25) 0.3% 1.7% 0.3% 1.8% 25 (0.1%) (0.9%) (0.2%) (1.7%) 50 (0.3%) (2.3%) (0.5%) (4.0%) 75 (0.6%) (4.2%) (1.0%) (6.9%) MBS Spread Sensitivity (1) As of June 30, 2020 As of March 31, 2020 Estimated Change in Portfolio Estimated Change as a % of Estimated Change in Portfolio Estimated Change as a % of MBS Spread Shock (bps) Market Value (2) NAV(2)(3) Market Value (2) NAV(2)(3) (25) 1.3% 8.8% 1.3% 9.1% (15) 0.8% 5.3% 0.8% 5.5% (5) 0.3% 1.8% 0.2% 1.8% 5 (0.3%) (1.7%) (0.2%) (1.8%) 15 (0.8%) (5.2%) (0.7%) (5.4%) 25 (1.3%) (8.7%) (1.2%) (9.0%) Detailed endnotes are included within the Appendix at the end of this presentation. 18
Appendix
Non-GAAP Reconciliations To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company provides non-GAAP financial measures. These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP. While intended to offer a fuller understanding of the Company’s results and operations, non-GAAP financial measures also have limitations. For example, the Company may calculate its non-GAAP metrics, such as core earnings (excluding PAA), or the PAA, differently than its peers making comparative analysis difficult. Additionally, in the case of non-GAAP measures that exclude the PAA, the amount of amortization expense excluding the PAA is not necessarily representative of the amount of future periodic amortization nor is it indicative of the term over which the Company will amortize the remaining unamortized premium. Changes to actual and estimated prepayments will impact the timing and amount of premium amortization and, as such, both GAAP and non-GAAP results. These non-GAAP measures provide additional detail to enhance investor understanding of the Company’s period-over-period operating performance and business trends, as well as for assessing the Company’s performance versus that of industry peers. Additional information pertaining to these non-GAAP financial measures and reconciliations to their most directly comparable GAAP results are provided on the following pages. A reconciliation of GAAP net income (loss) to non-GAAP core earnings (excluding PAA) for the quarters ended June 30, 2020, March 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, is provided on page 8 of this financial summary. Core earnings (excluding PAA), a non-GAAP measure, is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) realized amortization of MSRs, (d) other income (loss) (excluding depreciation expense related to commercial real estate and amortization of intangibles, non-core income allocated to equity method investments and other non-core components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items) and (f) income taxes (excluding the income tax effect of non-core income (loss) items) and excludes (g) the premium amortization adjustment representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities ("PAA"). 20
Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Premium Amortization Reconciliation Premium amortization expense $270,688 $616,937 $171,447 $376,306 $318,587 Less: PAA cost (benefit) 51,742 290,722 (83,892) 117,152 139,763 Premium amortization expense (excluding PAA) $218,946 $326,215 $255,339 $259,154 $178,824 Interest Income (excluding PAA) Reconciliation GAAP interest income $584,812 $555,026 $1,074,214 $919,299 $927,598 PAA cost (benefit) 51,742 290,722 (83,892) 117,152 139,763 Interest income (excluding PAA) * $636,554 $845,748 $990,322 $1,036,451 $1,067,361 Economic Interest Expense Reconciliation GAAP interest expense $186,032 $503,473 $620,058 $766,905 $750,217 Add: Net interest component of interest rate swaps 64,561 13,980 (45,221) (88,466) (83,653) Economic interest expense * $250,593 $517,453 $574,837 $678,439 $666,564 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $636,554 $845,748 $990,322 $1,036,451 $1,067,361 Less: Economic interest expense * 250,593 517,453 574,837 678,439 666,564 Economic net interest income (excluding PAA) * $385,961 $328,295 $415,485 $358,012 $400,797 * Represents a non-GAAP financial measure. 21
Non-GAAP Reconciliations (continued) Unaudited, dollars in thousands For the quarters ended 6/30/2020 3/31/2020 12/31/2019 9/30/2019 6/30/2019 Economic Metrics (excluding PAA) Average interest earning assets $84,471,839 $116,063,895 $121,801,951 $127,207,668 $122,601,881 Interest income (excluding PAA) * $636,554 $845,748 $990,322 $1,036,451 $1,067,361 Average yield on interest earning assets (excluding PAA) * 3.01% 2.91% 3.25% 3.26% 3.48% Average interest bearing liabilities $76,712,894 $107,029,466 $111,873,379 $116,391,094 $109,628,007 Economic interest expense * 250,593 517,453 574,837 678,439 666,564 Average economic cost of interest bearing liabilities * 1.29% 1.91% 2.01% 2.28% 2.41% Economic net interest income (excluding PAA)* $385,961 $328,295 $415,485 $358,012 $400,797 Net interest spread (excluding PAA) * 1.72% 1.00% 1.24% 0.98% 1.07% Interest income (excluding PAA) * $636,554 $845,748 $990,322 $1,036,451 $1,067,361 TBA dollar roll income and CMBX coupon income 97,524 44,904 36,901 15,554 33,229 Interest expense (186,032) (503,473) (620,058) (766,905) (750,217) Net interest component of interest rate swaps (64,561) (13,980) 45,221 88,466 83,653 Subtotal $483,485 $373,199 $452,386 $373,566 $434,026 Average interest earning assets $84,471,839 $116,063,895 $121,801,951 $127,207,668 $122,601,881 Average TBA contract and CMBX balances 18,628,343 9,965,142 6,878,502 9,248,502 12,757,975 Subtotal $103,100,182 $126,029,037 $128,680,453 $136,456,170 $135,359,856 Net interest margin (excluding PAA) * 1.88% 1.18% 1.41% 1.10% 1.28% * Represents a non-GAAP financial measure. 22
Endnotes Page 2 Page 4 (continued) (1) Net of dividends on preferred stock. (4) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding receiver (2) Debt consists of repurchase agreements, other secured financing, securitized debt and mortgages swaptions) and futures relative to repurchase agreements, other secured financing and cost basis payable. Certain credit facilities (included within other secured financing), securitized debt and of TBA derivatives outstanding; excludes MSRs and the effects of term financing, both of which mortgages payable are non-recourse to the Company. serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration (3) Computed as the sum of recourse debt, cost basis of to be announced ("TBA") derivatives and credit differences in duration between assets and liabilities. derivatives referencing the commercial mortgage-backed securities index ("CMBX") outstanding and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of Page 5 repurchase agreements and other secured financing (excluding certain non-recourse credit facilities). (1) Includes GAAP interest expense and the net interest component of interest rate swaps. Securitized debt, certain credit facilities (included within other secured financing) and mortgages (2) Net of dividends on preferred stock. The quarter ended September 30, 2019 excludes, and the payable are non-recourse to the Company and are excluded from this measure. quarter ended June 30, 2019 includes, cumulative and undeclared dividends of $0.3 million on (4) Computed as the ratio of total equity to total assets (inclusive of total market value of TBA derivatives the Company's Series I Preferred Stock as of June 30, 2019. and CMBX positions and exclusive of securitized debt of consolidated variable interest entities ("VIEs")). Page 6 (5) Net interest margin represents interest income less interest expense divided by average interest earning (1) Includes dividend equivalents on share-based awards. assets. Net interest margin (excluding PAA) represents the sum of the Company's interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and Page 8 the net interest component of interest rate swaps divided by the sum of average interest earning assets (1) Includes $3.8 million and $0.7 million loss provision on the Company’s unfunded loan commitments plus average TBA contract and CMBX balances. as of June 30, 2020 and March 31, 2020, respectively, which is reported in Other income (loss) in (6) Average yield on interest earning assets represents annualized interest income divided by average the Company’s Consolidated Statement of Comprehensive Income (Loss). interest earning assets. Average interest earning assets reflects the average amortized cost of our (2) Amount includes depreciation and amortization expense related to equity method investments. investments during the period. Average yield on interest earning assets (excluding PAA) is calculated (3) The Company excludes non-core (income) loss allocated to equity method investments, which using annualized interest income (excluding PAA). represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which (7) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by is a component of Other income (loss). average interest bearing liabilities. Average interest bearing liabilities reflects the average balances (4) The quarter ended June 30, 2020 includes costs incurred in connection with the Internalization and during the period. Average economic cost of interest bearing liabilities represents annualized costs incurred in connection with the CEO transition. The quarter ended March 31, 2020 includes economic interest expense divided by average interest bearing liabilities. Economic interest expense costs incurred in connection with securitizations of Agency mortgage-backed securities and is comprised of GAAP interest expense and the net interest component of interest rate swaps. residential whole loans as well as costs incurred in connection with the Internalization and costs (8) Excludes costs incurred in connection with the Internalization and costs incurred in connection with incurred in connection with the CEO transition. The quarter ended December 31, 2019 includes the CEO transition for the quarter ended June 30, 2020 and excludes costs incurred in connection costs incurred in connection with securitizations of Agency mortgage-backed securities and with securitizations of Agency mortgage-backed securities and residential whole loans as well as residential whole loans. The quarters ended September 30, 2019 and June 30, 2019 include costs costs incurred in connection with the Internalization and costs incurred in connection with the CEO incurred in connection with securitizations of residential whole loans. transition for the quarter ended March 31, 2020. (5) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on other derivatives. CMBX coupon income totaled $1.6 million, $1.2 million, $1.3 million, $1.5 Page 4 million and $0.8 million for the quarters ended June 30, 2020, March 31, 2020, December 31, 2019, (1) Consists of common stock, additional paid-in capital, accumulated other comprehensive income September 30, 2019 and June 30, 2019. (loss) and accumulated deficit. (6) MSR amortization represents the portion of changes in fair value that is attributable to the realization (2) Utilizes an actual/360 factor. of estimated cash flows on the Company’s MSR portfolio and is reported as a component of Net (3) The average and period-end rates are net of reverse repurchase agreements. Without netting reverse unrealized gains (losses) on instruments measured at fair value. repurchase agreements, the average rate was 0.79%, 1.77%, 2.10%, 2.53% and 2.65% and the period- (7) The quarter ended September 30, 2019 excludes, and the quarter ended June 30, 2019 includes, end rate was 0.49%, 1.23%, 2.03%, 2.48% and 2.69% for the quarters ended June 30, 2020, March cumulative and undeclared dividends of $0.3 million on the Company's Series I Preferred Stock as 31, 2020, December 31, 2019, September 30, 2019 and June 30, 2019, respectively. of June 30, 2019. 23
Endnotes (continued) Page 9 Page 15 (1) Represents the opening adjustment to retained earnings upon adoption of Accounting Standards (1) Based on an internal valuation or the most recent third party appraisal, which may be prior to loan Update 2016-13 Financial instruments - Credit losses (Topic 326): Measurement of credit losses origination/purchase date or at the time of underwriting. on financial instruments, commonly referred to as CECL. (2) Maturity dates assume all of the borrowers' extension options are exercised for the loan portfolio. (3) Economic interest is a non-GAAP measure to include gross asset values less related financings. Equity Page 11 investments are adjusted to exclude depreciation and amortization and grosses up real estate investments (1) Includes other income (loss), general and administrative expenses and income taxes. accounted for under equity method accounting. (4) Levered returns for equity investments comprise a trailing twelve-month (“TTM”) distribution yield (2) Includes other income (loss) (excluding non-core items), MSR amortization (a component of Net for joint venture investments and core return for wholly owned properties. unrealized gains (losses) on instruments measured at fair value through earnings), general and (5) Includes investment in unconsolidated debt fund of $43.9 million, investments in Community administrative expenses (excluding transaction related expenses) and income taxes (excluding Investment Impact Funds of $26.6 million and a portfolio of real estate properties of $34.0 million. non-core income tax). (6) The Company sells/buys protection on CMBX tranches referencing baskets of Conduit CMBS bonds with various ratings. Positive net notional indicates selling protection and being long the exposure to Page 12 the underlying CMBS. CMBX positions are accounted for as derivatives with changes in fair value (1) Includes Agency-backed multifamily securities with an estimated fair value of $3.0 billion ($1.8 presented in Net gains (losses) on other derivatives. billion of which have been transferred or pledged to securitization vehicles). (2) Includes fixed-rate collateralized mortgage obligations with an estimated fair value of $162.7 Page 16 million. (1) All Middle Market Lending positions are floating rate. (3) Weighted by current face value. (4) Weighted by current notional value. Page 17 (1) Current notional is presented net of receiver swaps. Page 13 (2) As of June 30, 2020, 17%, 80% and 3% of the Company's interest rate swaps were linked to LIBOR, (1) Weighted by current notional value. the Federal funds rate and the Secured Overnight Financing Rate, respectively. (2) Weighted by estimated fair value. (3) 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. As such, the net weighted average years to maturity Page 14 for each maturity bucket may fall outside of the range listed. (1) Excludes residential mortgage loans. (4) Approximately 3% of the total repurchase agreements and other secured financing have a remaining (2) Total investment characteristics exclude interest-only securities. maturity over one year. (5) Determined based on estimated weighted average lives of the underlying debt instruments. Page 18 (1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction with internally derived inputs. Actual results could differ materially from these estimates. (2) Scenarios include Residential Investment Securities, residential mortgage loans, MSRs and derivative instruments. (3) Net asset value (“NAV”) represents book value of common equity. 24