ANNALY CAPITAL MANAGEMENT INC

The second quarter of 2026 (“Q2 2026”) was characterized by continued robust U.S. economic growth, supported by consumer spending and technology-related investment, with labor market momentum improving relative to the softer trends experienced in the second half of 2025. Inflation remained elevated, driven by energy shocks stemming from developments in the Middle East, residual effects from tariffs, and demand for computing equipment related to artificial intelligence (“AI”). Against this backdrop, Federal Reserve (the “Fed”) officials discussed the potential for interest rate hikes, and interest rates rose over the quarter, led by the front end of the yield curve, as market pricing shifted from an expectation of roughly two 25 basis point (“bps”) cuts this year to the possibility of at least one hike.

In this environment, Annaly generated a portfolio economic return of 5.5% in Q2 2026, with earnings available for distribution (“EAD”) of $0.79 per share, once again exceeding the quarterly common stock dividend, which was increased to $0.75 per share. This marked the ninth consecutive quarter in which EAD surpassed the dividend. Economic leverage stood at 5.6x, and the Company raised approximately $447 million of common equity through our at-the-market (“ATM”) sales program during the quarter.

Agency mortgage-backed security (“MBS”) spreads tightened during the quarter, aided by a de-escalation of tensions in the Middle East that reduced implied volatility across financial markets. Agency MBS technicals remained favorable, with fixed income fund inflows through the first half of 2026 (“1H 2026”) running at more than double the pace of the prior three years. Overseas investors purchased approximately $65 billion of Agency MBS year-to-date, a marked shift from the net reductions recorded in the first halves of 2024 and 2025, while collateralized mortgage obligation (“CMO”) floater creation in 1H 2026 reached its highest level since 2011. Elevated interest rates continued to limit the supply of fixed-rate MBS.

During the quarter, we shifted our portfolio exposure up in coupon, reducing approximately $4 billion of 4.5% coupon holdings in favor of 5.5% and 6.0% coupons, while new capital was invested primarily in production coupons and Agency commercial mortgage-backed securities (“CMBS”). Our Agency portfolio grew by $2.8 billion during the quarter to $95.0 billion (including TBA exposure), representing 57% of the firm’s capital. Specified pool holdings declined by four percentage points as a share of the aggregate portfolio over 1H 2026, reflecting improved dollar-roll implied financing, elevated valuations, strong early-year demand from the government-sponsored enterprises (“GSEs”), lower rate volatility, and a more benign prepayment outlook. Specified pool valuations became more attractive as the GSEs slowed their purchases and became opportunistic sellers. We expect future Agency investments to be more balanced across to-be-announced (“TBA”) securities and specified pools going forward, even as cheapest-to-deliver pool convexity continued to deteriorate.

Our Residential Credit portfolio ended the quarter at $10.4 billion in market value (on an economic basis), an increase of $35 million quarter-over-quarter, and represented approximately 22% of firm capital. Residential credit spreads moved in line with broader credit markets, with “AAA”-rated spreads ending the quarter at 130 bps over the curve, approximately 10 bps tighter than at the onset, though residential credit modestly underperformed corporate credit amid record non-Agency gross issuance, which exceeded $150 billion year-to-date and was up approximately 50% year-over-year, putting private-label gross issuance on pace for its largest year since 2007.

Our correspondent channel produced $6.7 billion of locks and $5.1 billion of fundings during the quarter, while we purchased $7.1 billion of loans, including whole-loan bulk purchases and partnership securitizations, a quarterly record. The quarter-end locked pipeline reflected a weighted average FICO score of 765 and a combined loan-to-value ratio of 67%. Annaly remained the largest issuer of expanded credit mortgages and the second-largest issuer overall, closing 13 securitizations totaling $6.8 billion in unpaid principal balance (“UPB”) during the quarter, which generated approximately $613 million of proprietary investments. Year-to-date, our securitization platform priced 26 securitizations totaling $14.5 billion across eight forms of residential collateral, including two $1 billion new-origination Non-QM transactions, the largest Non-QM transactions in several years. Our residential credit portfolio continued to benefit from scale across loan sourcing, capital markets, originator relationships, and securitization.

In our mortgage servicing rights (“MSR”) business, the portfolio decreased modestly to $4.1 billion in market value during the quarter (including unsettled commitments), with capital allocation remaining at 21% of firm capital. During the quarter, Annaly committed to purchase approximately $200 million of MSR and committed to sell nearly $220 million of MSR across two bulk pools, monetizing assets that had become more economic for holders with large servicing platforms. Bulk supply decreased modestly from the first quarter but is expected to remain healthy through year-end, supported by originator profitability constraints and industry consolidation. Our flow channel acquired a record $31 million in market value during the quarter, helping us acquire current-coupon MSR and offset portfolio paydowns. Year-to-date, Annaly was the largest buyer of conventional MSR by servicing transfers and ranked fifth among non-bank Agency MBS servicers.