Attached files
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| EX-99.1 - EX-99.1 - ANNALY CAPITAL MANAGEMENT INC | a2021q1nlyex991.htm |
| 8-K - 8-K - ANNALY CAPITAL MANAGEMENT INC | nly-20210428.htm |
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. First Quarter 2021 Financial Summary April 28, 2021
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 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 First Quarter 2021 earnings release. 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. 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 (and our outlook for our business in light of these conditions, which is uncertain); changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities 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 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 MSRs; 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; and our ability to maintain our exemption from registration under the Investment Company Act; and the timing and ultimate completion of the sale of our commercial real estate business. 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. The Company does not undertake, and specifically disclaims 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. 1 Important Notices
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 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. Divestiture of Commercial Real Estate Business On March 25, 2021, the Company announced the sale of substantially all of the assets that comprise its commercial real estate business to Slate Asset Management for $2.33 billion, which is expected to be completed by the third quarter of 2021. The Company also intends to sell nearly all of the remaining assets that are not included in the sale to Slate. As of March 31, 2021, the Company met the conditions for held-for sale accounting which requires that assets be carried at the lower of amortized cost or fair value less costs to sell. Assets and liabilities associated with the commercial real estate business are reported separately in the Company’s Consolidated Statement of Financial Condition as Assets and Liabilities of Disposal Group Held for Sale, respectively. The Company’s Consolidated Statement of Comprehensive Income (Loss) reflects a reversal of previously recognized loan loss provisions as well as business divestiture-related gains (losses), which include valuation allowances on commercial real estate assets, impairment of goodwill and estimated transaction costs. Revenues and expenses associated with the commercial real estate business will be reflected in the Company’s results of operations and key financial metrics through closing. 2 Important Notices (continued)
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Portfolio Efficiency GAAP Key Statistics Income Statement Balance Sheet For the quarters ended 3/31/2021 12/31/2020 GAAP net income (loss) per average common share (1) $1.23 $0.60 Core earnings (excluding PAA) per average common share *(1) $0.29 $0.30 Annualized GAAP return (loss) on average equity 49.87% 24.91% Annualized core return on average equity (excluding PAA)* 12.53% 13.03% Book value per common share $8.95 $8.92 Leverage at period-end (2) 4.6x 5.1x Economic leverage at period-end (3) 6.1x 6.2x Capital ratio at period-end (4) 13.7% 13.6% Securities $71,849,437 $75,652,396 Loans, net 2,603,343 3,083,821 Mortgage servicing rights 113,080 100,895 Assets transferred or pledged to securitization vehicles 3,768,922 6,910,020 Real estate, net — 656,314 Assets of disposal group held for sale ** 4,400,723 — Total residential and commercial investments $82,735,505 $86,403,446 Net interest margin (5) 3.39% 2.14% Average yield on interest earning assets (6) 3.76% 2.61% Average GAAP cost of interest bearing liabilities (7) 0.42% 0.51% Net interest spread 3.34% 2.10% Net interest margin (excluding PAA) *(5) 1.91% 1.98% Average yield on interest earning assets (excluding PAA) *(6) 2.71% 2.80% Average economic cost of interest bearing liabilities *(7) 0.87% 0.87% Net interest spread (excluding PAA) * 1.84% 1.93% Operating expenses to core earnings (excluding PAA) *(8) 11.15% 9.78% Annualized operating expenses as a % of average total assets (8) 0.23% 0.20% Annualized operating expenses as a % of average total equity (8) 1.40% 1.27% Unaudited, dollars in thousands except per share amounts 3 Financial Snapshot Non-GAAP Key Statistics ______________ * Represents a non-GAAP financial measure. ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Portfolio- Related Data Residential Securities Summary Portfolio Statistics Unaudited, dollars in thousands 4 Portfolio Data For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Agency mortgage-backed securities $69,637,229 $74,067,059 $74,915,167 $76,761,800 $78,456,846 Residential credit risk transfer securities 930,983 532,403 411,538 362,901 222,871 Non-agency mortgage-backed securities 1,277,104 972,192 717,602 619,840 585,954 Commercial mortgage-backed securities 4,121 80,742 54,678 61,202 91,925 Total securities $71,849,437 $75,652,396 $76,098,985 $77,805,743 $79,357,596 Residential mortgage loans $528,868 $345,810 $152,959 $1,168,521 $1,268,083 Commercial real estate debt and preferred equity — 498,081 573,504 618,886 649,843 Corporate debt 2,074,475 2,239,930 2,061,878 2,185,264 2,150,263 Total loans, net $2,603,343 $3,083,821 $2,788,341 $3,972,671 $4,068,189 Mortgage servicing rights $113,080 $100,895 $207,985 $227,400 $280,558 Agency mortgage-backed securities transferred or pledged to securitization vehicles $598,118 $620,347 $623,650 $1,832,708 $1,803,608 Residential mortgage loans transferred or pledged to securitization vehicles 3,170,804 3,249,251 3,588,679 2,832,502 3,027,188 Commercial real estate debt investments transferred or pledged to securitization vehicles — 2,166,073 2,174,118 2,150,623 1,927,575 Commercial real estate debt and preferred equity transferred or pledged to securitization vehicles — 874,349 882,955 874,618 913,291 Assets transferred or pledged to securitization vehicles $3,768,922 $6,910,020 $7,269,402 $7,690,451 $7,671,662 Real estate, net $— $656,314 $790,597 $746,067 $751,738 Assets of disposal group held for sale ** $4,400,723 $— $— $— $— Total residential and commercial investments $82,735,505 $86,403,446 $87,155,310 $90,442,332 $92,129,743 Total assets $85,369,589 $88,455,103 $89,192,411 $93,458,653 $96,917,274 Average TBA contract and CMBX balances $21,865,969 $20,744,672 $20,429,935 $18,628,343 $9,965,142 % Fixed-rate 97% 98% 98% 98% 99% % Adjustable-rate 3% 2% 2% 2% 1% Weighted average experienced CPR for the period 23.9% 24.7% 22.9% 19.5% 13.6% Weighted average projected long-term CPR at period-end 11.8% 16.4% 17.1% 18.0% 17.7% Net premium and discount balance in Residential Securities $4,027,581 $3,883,229 $3,702,466 $3,679,639 $3,815,149 Net premium and discount balance as % of stockholders' equity 28.65% 27.72% 26.11% 26.68% 30.03% ______________ ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Financing Data Key Capital and Hedging Metrics ______________ * Represents a non-GAAP financial measure. ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands except per share amounts 5 Financing and Capital Data For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Repurchase agreements $61,202,477 $64,825,239 $64,633,447 $67,163,598 $72,580,183 Other secured financing 922,605 917,876 861,373 1,538,996 1,805,428 Debt issued by securitization vehicles 3,044,725 5,652,982 6,027,576 6,458,130 6,364,949 Participations issued 180,527 39,198 — — — Mortgages payable — 426,256 507,934 508,565 484,762 Total debt $65,350,334 $71,861,551 $72,030,330 $75,669,289 $81,235,322 Liabilities of disposal group held for sale ** $3,319,414 $— $— $— $— Total liabilities $71,301,994 $74,433,307 $74,997,739 $79,661,050 $84,209,744 Cumulative redeemable preferred stock $1,536,569 $1,536,569 $1,982,026 $1,982,026 $1,982,026 Common equity(1) 12,519,238 12,471,747 12,200,180 11,811,440 10,721,399 Total Annaly stockholders' equity 14,055,807 14,008,316 14,182,206 13,793,466 12,703,425 Non-controlling interests 11,788 13,480 12,466 4,137 4,105 Total equity $14,067,595 $14,021,796 $14,194,672 $13,797,603 $12,707,530 Weighted average days to maturity of repurchase agreements 88 64 72 74 48 Weighted average rate on repurchase agreements, for the quarter(2)(3) 0.26% 0.35% 0.44% 0.79% 1.78% Weighted average rate on repurchase agreements, at period-end(3) 0.20% 0.32% 0.42% 0.49% 1.23% Leverage at period-end 4.6x 5.1x 5.1x 5.5x 6.4x Economic leverage at period-end 6.1x 6.2x 6.2x 6.4x 6.8.x Capital ratio at period-end 13.7% 13.6% 13.6% 13.0% 12.3% Book value per common share $8.95 $8.92 $8.70 $8.39 $7.50 Total common shares outstanding 1,398,503 1,398,241 1,402,928 1,407,662 1,430,424 Hedge ratio(4) 75% 61% 48% 40% 19% Weighted average pay rate on interest rate swaps, at period-end 0.80% 0.92% 0.91% 1.01% 1.63% Weighted average receive rate on interest rate swaps, at period-end 0.34% 0.37% 0.48% 0.75% 1.16% Weighted average net rate on interest rate swaps, at period-end 0.46% 0.55% 0.43% 0.26% 0.47%
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands except per share amounts 6 Income Statement Data For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Total interest income $763,378 $527,344 $562,443 $584,812 $555,026 Total interest expense 75,973 94,481 115,126 186,032 503,473 Net interest income $687,405 $432,863 $447,317 $398,780 $51,553 Total economic interest expense *(1) $155,720 $161,288 $177,655 $250,593 $517,453 Economic net interest income * $607,658 $366,056 $384,788 $334,219 $37,573 Total interest income (excluding PAA) * $548,808 $566,445 $596,322 $636,554 $845,748 Economic net interest income (excluding PAA) * $393,088 $405,157 $418,667 $385,961 $328,295 GAAP net income (loss) $1,751,134 $878,635 $1,015,548 $856,234 ($3,640,189) GAAP net income (loss) available (related) to common stockholders (2) $1,723,930 $841,707 $980,165 $820,693 ($3,675,764) GAAP net income (loss) per average common share (2) $1.23 $0.60 $0.70 $0.58 ($2.57) Core earnings (excluding PAA) * $439,519 $459,046 $482,323 $424,580 $330,218 Core earnings (excluding PAA) available to common stockholders *(2) $412,636 $423,537 $446,814 $389,071 $294,709 Core earnings (excluding PAA) per average common share *(2) $0.29 $0.30 $0.32 $0.27 $0.21 PAA cost (benefit) ($214,570) $39,101 $33,879 $51,742 $290,722 Summary Income Statement
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Dividends declared per common share $0.22 $0.22 $0.22 $0.22 $0.25 Total common and preferred dividends declared (1) $335,229 $343,666 $344,684 $345,481 $393,328 Annualized GAAP return (loss) on average equity 49.87% 24.91% 29.02% 25.84% (102.17%) Annualized GAAP return (loss) on average equity per unit of economic leverage 8.18% 4.02% 4.68% 4.04% (15.03%) Net interest margin 3.39% 2.14% 2.15% 1.89% 0.18% Average yield on interest earning assets 3.76% 2.61% 2.70% 2.77% 1.91% Average GAAP cost of interest bearing liabilities 0.42% 0.51% 0.60% 0.96% 1.86% Net interest spread 3.34% 2.10% 2.10% 1.81% 0.05% Annualized core return on average equity (excluding PAA) * 12.53% 13.03% 13.79% 12.82% 9.27% Annualized core return on average equity per unit of economic leverage (excluding PAA) * 2.05% 2.10% 2.22% 2.00% 1.36% Net interest margin (excluding PAA) * 1.91% 1.98% 2.05% 1.88% 1.18% Average yield on interest earning assets (excluding PAA) * 2.71% 2.80% 2.86% 3.01% 2.91% Average economic cost of interest bearing liabilities * 0.87% 0.87% 0.93% 1.29% 1.91% Net interest spread (excluding PAA) * 1.84% 1.93% 1.93% 1.72% 1.00% Key GAAP Earnings Metrics ______________ * Represents a non-GAAP financial measure. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands except per share amounts 7 Key Earnings Metrics Key Non-GAAP Earnings Metrics
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Economic Net Interest Income * ______________ * Represents a non-GAAP financial measure. Unaudited, dollars in thousands 8 Components of Economic Net Interest Income * For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Interest income: Residential Securities $644,634 $411,394 $439,502 $457,684 $410,380 Residential mortgage loans 37,109 37,323 42,508 42,871 47,557 Commercial investment portfolio 81,601 78,555 80,324 84,208 95,676 Reverse repurchase agreements 34 72 109 49 1,413 Total interest income $763,378 $527,344 $562,443 $584,812 $555,026 Economic interest expense: Repurchase agreements $42,585 $58,849 $75,386 $136,962 $434,021 Net interest component of interest rate swaps 79,747 66,807 62,529 64,561 13,980 Debt issued by securitization vehicles 26,276 29,235 32,491 38,757 42,119 Participations issued 597 78 — — — Other 6,515 6,319 7,249 10,313 27,333 Total economic interest expense * $155,720 $161,288 $177,655 $250,593 $517,453 Economic net interest income * $607,658 $366,056 $384,788 $334,219 $37,573 PAA cost (benefit) (214,570) 39,101 33,879 51,742 290,722 Economic net interest income (excluding PAA) * $393,088 $405,157 $418,667 $385,961 $328,295
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Core Earnings (excluding PAA)* Reconciliation 9 GAAP Net Income to Core Earnings (excluding PAA)* Reconciliation For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 GAAP net income (loss) $1,751,134 $878,635 $1,015,548 $856,234 ($3,640,189) Net income (loss) attributable to noncontrolling interests 321 1,419 (126) 32 66 Net income (loss) attributable to Annaly 1,750,813 877,216 1,015,674 856,202 (3,640,255) Adjustments to exclude reported realized and unrealized (gains) losses: Realized (gains) losses on termination or maturity of interest rate swaps — (2,092) 427 1,521,732 397,561 Unrealized (gains) losses on interest rate swaps (772,262) (258,236) (170,327) (1,494,628) 2,827,723 Net (gains) losses on disposal of investments and other 65,786 (9,363) (198,888) (246,679) (206,583) Net (gains) losses on other derivatives and financial instruments (476,868) (209,647) (169,316) (170,916) (206,426) Net unrealized (gains) losses on instruments measured at fair value through earnings (104,191) (51,109) (121,255) (254,772) 730,160 Loan loss provision (1) (144,870) 469 (21,818) 72,544 99,993 Business divestiture-related (gains) losses ** 249,563 — — — — Other adjustments: Depreciation expense related to commercial real estate and amortization of intangibles (2) 7,324 11,097 11,363 8,714 7,934 Non-core (income) loss allocated to equity method investments (3) (9,680) 28 (1,151) 4,218 19,398 Transaction expenses and non-recurring items (4) 695 172 2,801 1,075 7,245 Income tax effect of non-core income (loss) items 4,334 (10,984) 13,890 3,353 (23,862) TBA dollar roll income and CMBX coupon income (5) 98,933 99,027 114,092 97,524 44,904 MSR amortization (6) (15,488) (26,633) (27,048) (25,529) (18,296) Plus: Premium amortization adjustment cost (benefit) (214,570) 39,101 33,879 51,742 290,722 Core earnings (excluding PAA) * 439,519 459,046 482,323 424,580 330,218 Dividends on preferred stock 26,883 35,509 35,509 35,509 35,509 Core earnings (excluding PAA) attributable to common stockholders * $412,636 $423,537 $446,814 $389,071 $294,709 ______________ * Represents a non-GAAP financial measure. ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Book Value Rollforward Net Interest Margin Unaudited 10 Quarter-Over-Quarter Changes in Key Metrics ______________ Detailed endnotes are included within the Appendix at the end of this presentation. For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Book value per common share, beginning of period $8.92 $8.70 $8.39 $7.50 $9.66 Net income (loss) available (related) to common stockholders 1.23 0.60 0.70 0.58 (2.57) Other comprehensive income (loss) attributable to common stockholders (0.98) (0.16) (0.18) 0.51 0.69 Common dividends declared (0.22) (0.22) (0.22) (0.22) (0.25) Issuance / buyback of common stock / redemption of preferred stock — — 0.01 0.02 — Other adjustment (1) — — — — (0.03) Book value per common share, end of period $8.95 $8.92 $8.70 $8.39 $7.50 Prior quarter net interest margin 2.14% 2.15% 1.89% 0.18% 1.49% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.09%) (0.10%) (0.17%) 0.03% (0.04%) Net amortization of premiums 1.24% 0.01% 0.10% 0.83% (1.58%) GAAP interest expense 0.10% 0.08% 0.33% 0.85% 0.31% Current quarter net interest margin 3.39% 2.14% 2.15% 1.89% 0.18% Prior quarter net interest spread 2.10% 2.10% 1.81% 0.05% 1.36% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.09%) (0.10%) (0.17%) 0.03% (0.04%) Net amortization of premiums 1.24% 0.01% 0.10% 0.83% (1.58%) GAAP interest expense 0.09% 0.09% 0.36% 0.90% 0.31% Current quarter net interest spread 3.34% 2.10% 2.10% 1.81% 0.05% Net Interest Spread
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Net Interest Margin (excluding PAA)* Unaudited 11 Quarter-Over-Quarter Changes in Key Metrics (continued) ______________ * Represents a non-GAAP financial measure. For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Prior quarter net interest margin (excluding PAA) * 1.98% 2.05% 1.88% 1.18% 1.41% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (including average TBA dollar roll and CMBX balances) (0.09%) (0.11%) (0.20%) (0.39%) (0.14%) Net amortization of premiums (excluding PAA) 0.00% 0.04% 0.03% 0.18% (0.26%) TBA dollar roll income and CMBX coupon income (0.01%) (0.05%) 0.06% 0.24% 0.03% Interest expense and net interest component of interest rate swaps 0.03% 0.05% 0.28% 0.67% 0.14% Current quarter net interest margin (excluding PAA) * 1.91% 1.98% 2.05% 1.88% 1.18% Prior quarter net interest spread (excluding PAA) * 1.93% 1.93% 1.72% 1.00% 1.24% Quarter-over-quarter changes in contribution: Coupon on average interest earning assets (0.09%) (0.10%) (0.17%) 0.03% (0.04%) Net amortization of premiums (excluding PAA) (0.01%) 0.04% 0.02% 0.07% (0.30%) Interest expense and net interest component of interest rate swaps 0.01% 0.06% 0.36% 0.62% 0.10% Current quarter net interest spread (excluding PAA) * 1.84% 1.93% 1.93% 1.72% 1.00% Net Interest Spread (excluding PAA)*
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Annualized GAAP Return (Loss) on Average Equity Annualized Core Return on Average Equity (excluding PAA)* ______________ * Represents a non-GAAP financial measure. ** Please refer to Divestiture of Commercial Real Estate Business in Important Notices on page 2. Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited 12 Quarter-Over-Quarter Changes in Annualized Return on Average Equity For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Prior quarter annualized GAAP return (loss) on average equity 24.91% 29.02% 25.84% (102.17%) 31.20% Quarter-over-quarter changes in contribution: Coupon income (0.35%) (1.42%) (2.71%) (7.00%) 0.88% Net amortization of premiums and accretion of discounts 7.14% 0.30% 1.14% 9.08% (13.00%) Interest expense and net interest component of interest rate swaps 0.14% 0.50% 2.49% 6.96% 0.30% Realized gains (losses) on termination or maturity of interest rate swaps (0.06%) 0.07% 45.92% (34.77%) (11.04%) Unrealized gains (losses) on interest rate swaps 14.67% 2.46% (40.24%) 124.48% (99.56%) Realized and unrealized gains (losses) on investments and other derivatives 7.02% (6.33%) (6.31%) 29.20% (8.12%) Business divestiture-related (losses) gains ** (7.11%) 0.00% 0.00% 0.00% 0.00% Loan loss provision 4.02% (0.67%) 2.70% 0.71% (2.60%) Other(1) (0.51%) 0.98% 0.19% (0.65%) (0.23%) Current quarter annualized GAAP return (loss) on average equity 49.87% 24.91% 29.02% 25.84% (102.17%) Prior quarter annualized core return on average equity (excluding PAA) * 13.03% 13.79% 12.82% 9.27% 10.56% Quarter-over-quarter changes in contribution: Coupon income (0.35%) (1.42%) (2.71%) (7.00%) 0.88% Net amortization of premiums (excluding PAA) (0.08%) 0.45% 0.54% 2.48% (2.68%) Interest expense and net interest component of interest rate swaps 0.14% 0.50% 2.49% 6.96% 0.30% TBA dollar roll income and CMBX coupon income 0.01% (0.45%) 0.32% 1.68% 0.31% Other(2) (0.22%) 0.16% 0.33% (0.57%) (0.10%) Current quarter core return on annualized average equity (excluding PAA) * 12.53% 13.03% 13.79% 12.82% 9.27%
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 13 Residential & Other Investments Overview as of March 31, 2021 Agency Fixed-Rate Securities (Pools) Original Weighted Avg. Years to Maturity Current Face Value % (3) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value <=15 years (1) $2,686,059 4.2% 2.96% 101.7% 106.0% 17.8% $2,848,094 20 years 2,297,623 3.6% 3.14% 103.6% 106.5% 25.4% 2,447,016 >=30 years (2) 58,840,132 92.2% 3.59% 105.7% 108.8% 23.9% 64,012,393 Total/Weighted Avg. $63,823,814 100.0% 3.55% 105.5% 108.6% 23.8% $69,307,503 TBA Contracts Type Notional Value % (4) Weighted Avg. Coupon Implied Cost Basis Implied Market Value 15-year $2,503,000 11.1% 1.85% $2,563,958 $2,550,576 30-year 19,993,000 88.9% 2.31% 20,476,053 20,243,316 Total/Weighted Avg. $22,496,000 100.0% 2.26% $23,040,011 $22,793,892 Agency Adjustable-Rate Securities Weighted Avg. Months to Reset Current Face Value % (3) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value 0 - 24 months $368,220 79.5% 2.44% 100.8% 105.9% 22.0% $389,772 25 - 40 months 34,975 7.6% 2.50% 98.6% 104.0% 21.1% 36,362 41 - 60 months 59,772 12.9% 2.98% 101.1% 104.3% 45.1% 62,324 Total/Weighted Avg. $462,967 100.0% 2.51% 100.6% 105.5% 25.2% $488,458
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 14 Residential & Other Investments Overview as of March 31, 2021 (continued) Agency Interest-Only Collateralized Mortgage-Backed Obligations Type Current Notional Value % (1) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Weighted Avg. 3-Month CPR Estimated Fair Value Interest-only $947,605 32.5% 3.38% 15.7% 10.5% 26.5% $99,177 Inverse interest-only 1,616,926 55.4% 5.99% 23.9% 19.2% 27.0% 310,987 Multifamily interest-only $354,391 12.1% 1.04% 8.2% 8.2% —% $29,222 Total/Weighted Avg. $2,918,922 100.0% 4.54% 19.3% 15.1% 26.8% $439,386 Mortgage Servicing Rights Type Unpaid Principal Balance Weighted Avg. Coupon Excess Servicing Spread Weighted Avg. Loan Age (months) Estimated Fair Value Total/Weighted Avg. $13,032,347 3.86% 0.24% 58 $113,080 Residential Credit Portfolio Sector Current Face / Notional Value % (2) Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Estimated Fair Value Residential credit risk transfer $940,130 15.7% 3.18% 99.4% 99.0% $930,983 Alt-A 72,234 1.0% 3.06% 76.3% 81.0% 58,498 Prime 174,335 3.0% 4.41% 93.8% 100.5% 175,230 Prime interest-only 146,141 0.1% 0.46% 1.0% 0.7% 959 Subprime 199,639 3.2% 2.00% 91.3% 94.4% 188,498 NPL/RPL 804,824 13.7% 3.67% 99.9% 100.6% 809,404 Prime jumbo 44,309 0.7% 3.87% 88.6% 97.8% 43,349 Prime jumbo interest-only 228,483 —% 0.37% 2.5% 0.5% 1,166 Residential mortgage loans 3,557,855 62.6% 4.85% 101.0% 104.0% 3,699,672 Total/Weighted Avg. $6,167,950 100.0% 4.29% $5,907,759 Other Credit Products Type Net Notional Range of Ratings Net Weighted Avg Coupon Implied Market Value CMBX (3) $499,000 AAA to A 1.2% $500,539 Type Current Face / Notional Value Weighted Avg. Coupon Weighted Avg. Amortized Cost Weighted Avg. Fair Value Estimated Fair Value Multifamily CRT $4,000 3.86% 97.2% 103.0% $4,121
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited, dollars in thousands 15 Residential Credit Investments Detail as of March 31, 2021 (1) Product Estimated Fair Value Payment Structure Investment Characteristics Senior Subordinate Coupon Credit Enhancement 60+ Delinquencies 3M VPR Agency Credit Risk Transfer $902,239 $— $902,239 3.14% 2.05% 5.60% 46.47% Private Label Credit Risk Transfer 28,744 — 28,744 4.31% 0.82% 0.71% 22.18% Alt-A 58,498 24,388 34,110 3.06% 9.23% 19.92% 16.01% Prime 175,230 11,428 163,802 4.41% 8.25% 7.86% 33.80% Prime Interest-only 959 959 — 0.46% —% 4.99% 55.99% Subprime 188,498 88,555 99,943 2.00% 18.80% 14.14% 13.16% Re-Performing Loan Securitizations 588,694 232,281 356,413 4.15% 28.36% 24.52% 8.64% Non-Performing Loan Securitizations 220,710 220,710 — 2.39% 26.97% 68.94% 10.39% Prime Jumbo 43,349 — 43,349 3.87% 4.04% 5.02% 52.79% Prime Jumbo Interest-only 1,166 1,166 — 0.37% —% 5.74% 54.79% Total (2) $2,208,087 $579,487 $1,628,600 3.35% 13.62% 18.11% 30.63% Product Estimated Fair Value Bond Coupon ARM Fixed Floater Interest Only Agency Credit Risk Transfer $902,239 $— $84 $902,071 $84 Private Label Credit Risk Transfer 28,744 — — 28,744 — Alt-A 58,498 7,232 38,875 12,391 — Prime 175,230 38,738 131,711 4,781 — Prime Interest-only 959 — — — 959 Subprime 188,498 7,349 78,359 102,574 216 Re-Performing Loan Securitizations 588,694 — 588,694 — — Non-Performing Loan Securitizations 220,710 — 220,710 — — Prime Jumbo 43,349 — 43,349 — — Prime Jumbo Interest-only 1,166 — — — 1,166 Total $2,208,087 $53,319 $1,101,782 $1,050,561 $2,425
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands 16 Middle Market Lending Overview as of March 31, 2021 Industry Dispersion Industry Total (1) Computer Programming, Data Processing & Other Computer Related Services 375,103 Management and Public Relations Services 291,581 Industrial Inorganic Chemicals 156,782 Public Warehousing and Storage 120,473 Metal Cans & Shipping Containers 115,907 Offices and Clinics of Doctors of Medicine 74,481 Surgical, Medical, and Dental Instruments and Supplies 82,831 Electronic Components & Accessories 78,257 Engineering, Architectural, and Surveying 77,156 Miscellaneous Health and Allied Services, not elsewhere classified 70,295 Insurance Agents, Brokers and Services 65,624 Research, Development and Testing Services 62,218 Miscellaneous Food Preparations 59,009 Telephone Communications 58,694 Miscellaneous Equipment Rental and Leasing 49,641 Electric Work 40,390 Petroleum and Petroleum Products 33,836 Medical and Dental Laboratories 30,763 Schools and Educational Services, not elsewhere classified 29,183 Home Health Care Services 28,669 Metal Forgings and Stampings 27,689 Legal Services 26,358 Grocery Stores 22,906 Coating, Engraving and Allied Services 19,500 Chemicals & Allied Products 14,667 Miscellaneous Business Services 14,996 Drugs 12,622 Mailing, Reproduction, Commercial Art and Photography, and Stenographic 12,917 Machinery, Equipment, and Supplies 11,839 Offices and Clinics of Other Health Practitioners 10,088 Total $2,074,475 Size Dispersion Position Size Amount Percentage $0 - $20 million $168,690 8.1% $20 - $40 million 416,521 20.1% $40 - $60 million 436,873 21.1% Greater than $60 million 1,052,391 50.7% Total $2,074,475 100.0% Tenor Dispersion Remaining Term Amount Percentage One year or less $— —% One to three years 407,328 19.7% Three to five years 813,692 39.2% Greater than five years 853,455 41.1% Total $2,074,475 100.0% Lien Position Amount Percentage First lien loans $1,431,882 69.0% Second lien loans 642,593 31.0% Total $2,074,475 100.0% ______________ Detailed endnotes are included within the Appendix at the end of this presentation.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. 17 Unaudited, dollars in thousands Hedging and Liabilities as of March 31, 2021 Principal Balance Weighted Average Rate Days to Maturity(5)At Period End For the Quarter Repurchase agreements $ 61,202,477 0.20 % 0.26 % 88 Other secured financing 922,605 2.17 % 2.80 % 1,304 Debt issued by securitization vehicles 2,976,696 2.16 % 1.90 % 11,764 Participations issued 173,936 3.69 % 2.60 % 11,330 Total indebtedness $ 65,275,714 Maturity Current Notional (1)(2) Weighted Avg. Pay Rate Weighted Avg. Receive Rate Weighted Avg. Years to Maturity(3) 0 to 3 years $ 31,167,000 0.24 % 0.06 % 1.80 > 3 to 6 years 3,100,000 0.13 % 0.06 % 4.13 > 6 to 10 years 4,065,500 1.27 % 0.65 % 7.77 Greater than 10 years 1,484,000 3.06 % 0.33 % 20.27 Total / Weighted Avg. $ 39,816,500 0.80 % 0.34 % 3.28 Type Current Underlying Notional Weighted Avg. Underlying Fixed Rate Weighted Avg. Underlying Floating Rate Weighted Avg. Underlying Years to Maturity Weighted Avg. Months to Expiration Long Pay $ 6,050,000 1.27 % 3M LIBOR 10.27 4.04 Long Receive $ 1,000,000 1.45 % 3M LIBOR 10.95 11.43 Type Long Contracts Short Contracts Net Positions Weighted Avg. Years to Maturity U.S. Treasury Futures - 5 year $ — $ (3,425,000) $ (3,425,000) 4.42 U.S. Treasury Futures - 10 year & Greater $ — $ (15,213,500) $ (15,213,500) 7.48 Total / Weighted Avg. $ — $ (18,638,500) $ (18,638,500) 6.92 Maturity Principal Balance Weighted Avg. Rate At Period End Within 30 days $ 24,214,724 0.15 % 30 to 59 days 7,360,534 0.20 % 60 to 89 days 9,486,905 0.31 % 90 to 119 days 3,781,467 0.24 % Over 120 days(4) 17,281,452 0.32 % Total / Weighted Avg. $ 62,125,082 0.23 % Interest Rate Swaps Interest Rate Swaptions Futures Positions Repurchase Agreements and Other Secured Financing Total Indebtedness
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. ______________ Detailed endnotes are included within the Appendix at the end of this presentation. Unaudited 18 Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity Assumptions: ▪ The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of March 31, 2021 and December 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) Interest Rate Change (bps) As of March 31, 2021 As of December 31, 2020 Estimated Percentage Change in Portfolio Market Value(2) Estimated Change as a % of NAV(2)(3) Estimated Percentage Change in Portfolio Market Value(2) Estimated Change as a % of NAV(2)(3) (75) —% 0.2% (0.2%) (1.3%) (50) 0.1% 0.8% —% (0.2%) (25) 0.2% 1.1% 0.1% 0.7% 25 (0.2%) (1.3%) (0.1%) (0.5%) 50 (0.6%) (3.5%) (0.2%) (1.3%) 75 (1.1%) (6.5%) (0.4%) (2.7%) MBS Spread Sensitivity (1) MBS Spread Shock (bps) As of March 31, 2021 As of December 31, 2020 Estimated Change in Portfolio Market Value (2) Estimated Change as a % of NAV(2)(3) Estimated Change in Portfolio Market Value (2) Estimated Change as a % of NAV(2)(3) (25) 1.8% 10.5% 1.5% 9.0% (15) 1.1% 6.3% 0.9% 5.4% (5) 0.4% 2.1% 0.3% 1.8% 5 (0.4%) (2.1%) (0.3%) (1.8%) 15 (1.1%) (6.2%) (0.9%) (5.3%) 25 (1.8%) (10.2%) (1.5%) (8.9%)
Appendix
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 20 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 March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, is provided on page 9 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").
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands 21 Non-GAAP Reconciliations (continued) For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Premium Amortization Reconciliation Premium amortization expense ($11,891) $239,118 $248,718 $270,688 $616,937 Less: PAA cost (benefit) (214,570) 39,101 33,879 51,742 290,722 Premium amortization expense (excluding PAA) $202,679 $200,017 $214,839 $218,946 $326,215 Interest Income (excluding PAA) Reconciliation GAAP interest income $763,378 $527,344 $562,443 $584,812 $555,026 PAA cost (benefit) (214,570) 39,101 33,879 51,742 290,722 Interest income (excluding PAA) * $548,808 $566,445 $596,322 $636,554 $845,748 Economic Interest Expense Reconciliation GAAP interest expense $75,973 $94,481 $115,126 $186,032 $503,473 Add: Net interest component of interest rate swaps 79,747 66,807 62,529 64,561 13,980 Economic interest expense * $155,720 $161,288 $177,655 $250,593 $517,453 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $548,808 $566,445 $596,322 $636,554 $845,748 Less: Economic interest expense * 155,720 161,288 177,655 250,593 517,453 Economic net interest income (excluding PAA) * $393,088 $405,157 $418,667 $385,961 $328,295 ______________ * Represents a non-GAAP financial measure.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. Unaudited, dollars in thousands 22 Non-GAAP Reconciliations (continued) For the quarters ended 3/31/2021 12/31/2020 9/30/2020 6/30/2020 3/31/2020 Economic Metrics (excluding PAA) Average interest earning assets $81,121,340 $80,973,433 $83,286,119 $84,471,839 $116,063,895 Interest income (excluding PAA) * $548,808 $566,445 $596,322 $636,554 $845,748 Average yield on interest earning assets (excluding PAA) * 2.71% 2.80% 2.86% 3.01% 2.91% Average interest bearing liabilities $72,002,031 $72,233,239 $74,901,128 $76,712,894 $107,029,466 Economic interest expense * 155,720 161,288 177,655 250,593 517,453 Average economic cost of interest bearing liabilities * 0.87% 0.87% 0.93% 1.29% 1.91% Economic net interest income (excluding PAA)* $393,088 $405,157 $418,667 $385,961 $328,295 Net interest spread (excluding PAA) * 1.84% 1.93% 1.93% 1.72% 1.00% Interest income (excluding PAA) * $548,808 $566,445 $596,322 $636,554 $845,748 TBA dollar roll income and CMBX coupon income 98,933 99,027 114,092 97,524 44,904 Interest expense (75,973) (94,481) (115,126) (186,032) (503,473) Net interest component of interest rate swaps (79,747) (66,807) (62,529) (64,561) (13,980) Subtotal $492,021 $504,184 $532,759 $483,485 $373,199 Average interest earning assets $81,121,340 $80,973,433 $83,286,119 $84,471,839 $116,063,895 Average TBA contract and CMBX balances 21,865,969 20,744,672 20,429,935 18,628,343 9,965,142 Subtotal $102,987,309 $101,718,105 $103,716,054 $103,100,182 $126,029,037 Net interest margin (excluding PAA) * 1.91% 1.98% 2.05% 1.88% 1.18% ______________ * Represents a non-GAAP financial measure.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 23 Endnotes Page 3 (1) Net of dividends on preferred stock. (2) Debt consists of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued and mortgages payable. Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, participations issued and mortgages payable are non-recourse to the Company. (3) Computed as the sum of recourse debt, cost basis of to be announced ("TBA") derivatives and credit 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 repurchase agreements and other secured financing (excluding certain non-recourse credit facilities). Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, participations issued and mortgages payable are non-recourse to the Company and are excluded from this measure. (4) Computed as the ratio of total equity to total assets (inclusive of total market value of TBA derivatives and CMBX positions and exclusive of debt issued by securitization vehicles). (5) Net interest margin represents interest income less interest expense divided by average interest earning 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 the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average TBA contract and CMBX balances. (6) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (7) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps. (8) The quarters ended March 31, 2021 and December 31, 2020 include costs incurred in connection with securitizations of residential whole loans. Page 5 (1) Consists of common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit. (2) Utilizes an actual/360 factor. (3) The average and period-end rates are net of reverse repurchase agreements. Without netting reverse repurchase agreements, the average rate was 0.26%, 0.35%, 0.44%, 0.79% and 1.77% for the quarters ended March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020 and March 31, 2020, respectively and the period-end rate was unchanged for each period. Page 5 (continued) (4) Measures total notional balances of interest rate swaps, interest rate swaptions (excluding receiver swaptions) and futures relative to repurchase agreements, other secured financing and cost basis of TBA derivatives outstanding; excludes MSRs and the effects of term financing, both of which serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration differences in duration between assets and liabilities. Page 6 (1) Includes GAAP interest expense and the net interest component of interest rate swaps. (2) Net of dividends on preferred stock. Page 7 (1) Includes dividend equivalents on share-based awards. Page 9 (1) Includes a $5.3 million and $1.0 million reversal of loss provision on the Company’s unfunded loan commitments for the quarters ended March 31, 2021 and December 31, 2020, respectively and $0.2 million, $3.8 million and $0.7 million loss provision on the Company’s unfunded loan commitments for the quarters ended September 30, 2020, June 30, 2020 and March 31, 2020, respectively, which is reported in Other income (loss) in the Company’s Consolidated Statement of Comprehensive Income (Loss). (2) Amount includes depreciation and amortization expense related to equity method investments. (3) The Company excludes non-core (income) loss allocated to equity method investments, which represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other income (loss). (4) The quarters ended March 31, 2021, December 31, 2020 and September 30, 2020 include costs incurred in connection with securitizations of residential whole loans. The quarter ended June 30, 2020 includes costs incurred in connection with the Internalization and costs incurred in connection with the CEO search process. The quarter ended March 31, 2020 includes costs incurred in connection with securitizations of Agency mortgage- backed securities and residential whole loans as well as costs incurred in connection with the Internalization and costs incurred in connection with the CEO search process. (5) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on other derivatives. CMBX coupon income totaled $1.5 million $1.5 million, $1.5 million, $1.6 million and $1.2 million for the quarters ended March 31, 2021, December 31, 2020, September 30, 2020, June 30, 2020, and March 31, 2020. (6) MSR amortization represents the portion of changes in fair value that is attributable to the realization of estimated cash flows on the Company’s MSR portfolio and is reported as a component of Net unrealized gains (losses) on instruments measured at fair value.
© Copyright 2021 Annaly Capital Management, Inc. All rights reserved. 24 Endnotes (continued) Page 10 (1) Represents the opening adjustment to retained earnings upon adoption of Accounting Standards Update 2016-13 Financial instruments - Credit losses (Topic 326): Measurement of credit losses on financial instruments, commonly referred to as CECL. Page 12 (1) Includes other income (loss), general and administrative expenses and income taxes. (2) Includes other income (loss) (excluding non-core items), MSR amortization (a component of Net unrealized gains (losses) on instruments measured at fair value through earnings), general and administrative expenses (excluding transaction related expenses) and income taxes (excluding non-core income tax). Page 13 (1) Includes Agency-backed multifamily securities with an estimated fair value of $1.6 billion ($0.6 billion of which have been transferred or pledged to securitization vehicles). (2) Includes fixed-rate collateralized mortgage obligations with an estimated fair value of $142.9 million. (3) Weighted by current face value. (4) Weighted by current notional value. Page 14 (1) Weighted by current notional value. (2) Weighted by estimated fair value. (3) 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 the underlying CMBS. CMBX positions are accounted for as derivatives with changes in fair value presented in Net gains (losses) on other derivatives. Page 15 (1) Excludes residential mortgage loans. (2) Total investment characteristics exclude interest-only securities. Page 16 (1) All Middle Market Lending positions are floating rate. Page 17 (1) Current notional is presented net of receiver swaps. (2) As of March 31, 2021, 8%, 62% and 30% of the Company's interest rate swaps were linked to LIBOR, the Federal funds rate and the Secured Overnight Financing Rate, respectively. (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 for each maturity bucket may fall outside of the range listed. (4) 1% of the total repurchase agreements and other secured financing have a remaining 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.