ANNALY CAPITAL MANAGEMENT INC

For the Three Months Ended June 30, 2024 and 2023

Net Gains (Losses) on Investments and Other

Net gains (losses) on disposal of investments was ($336.0) million for the three months ended June 30, 2024, compared to ($610.4) million for the same period in 2023. For the three months ended June 30, 2024, we disposed of Residential Securities with a carrying value of $5.2 billion for an aggregate net gain (loss) of ($375.0) million. For the same period in 2023, we disposed of Residential Securities, with a carrying value of $8.4 billion for an aggregate net gain (loss) of ($599.2) million.

Net unrealized gains (losses) on instruments measured at fair value through earnings was ($232.8) million for the three months ended June 30, 2024, compared to ($698.6) million for the same period in 2023, primarily due to favorable changes in unrealized gains (losses) on Agency MBS of $498.0 million and securitized residential whole loans of consolidated VIEs of $172.6 million, partially offset by unfavorable changes in residential securitized debt of consolidated VIEs of ($125.7) million, U.S. Treasury securities sold, not yet purchased of ($44.9) million, and MSR of ($28.2) million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the three months ended June 30, 2024 was $414.6 million compared to $1.3 billion for the same period in 2023, primarily attributable to unfavorable changes in unrealized and realized gains (losses) on interest rate swaps and net interest component of interest rate swaps. Unrealized gains (losses) on interest rate swaps was $97.5 million for the three months ended June 30, 2024, compared to $841.7 million for the same period in 2023. Realized gains (losses) on termination of interest rate swaps was $18.7 million for the three months ended June 30, 2024, compared to $48.1 million for the same period in 2023, which reflected our termination of fixed-rate payer and receiver interest rate swaps with notional amounts of $410.0 million and $3.0 billion, compared to notional amounts of $820.8 million of fixed-rate payer interest rate swaps for the same period in 2023. Net interest component on interest rate swaps was $298.4 million for the three months ended June 30, 2024, compared to $425.3 million for the same period in 2023.

Net gains (losses) on other derivatives was $15.9 million for the three months ended June 30, 2024, compared to $160.2 million for the same period in 2023. The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was $2.3 million for the three months ended June 30, 2024, compared to $171.2 million for the same period in 2023, and net gains (losses) on interest rate swaptions, which was $11.5 million for the three months ended June 30, 2024, compared to $53.4 million for the same period in 2023, partially offset by a favorable change in net gains (losses) on TBA derivatives, which was ($0.3) million for the three months ended June 30, 2024, compared to ($61.5) million for the same period in 2023.

Other, Net

Other, net includes brokerage and commission fees, due diligence costs, securitization expenses, and interest on custodial balances. We also report in Other, net items whose amounts, either individually or in the aggregate, would not, in the opinion of management, be meaningful to readers of the financial statements. Given the nature of certain components of this line item, balances may fluctuate from period to period. Other, net for the three months ended June 30, 2024 was $24.8 million compared to $9.1 million for the same period in 2023, primarily attributable to an increase in interest on custodial balances and decrease in asset write-downs, partially offset by an increase in securitization related costs and MSR financing expenses.

For the Six Months Ended June 30, 2024 and 2023

Net Gains (Losses) on Investments and Other

Net gains (losses) on disposal of investments and other was ($881.9) million for the six months ended June 30, 2024 compared to ($1.1) billion for the same period in 2023. For the six months ended June 30, 2024, we disposed of Residential Securities with a carrying value of $13.3 billion for an aggregate net gain (loss) of ($813.2) million. For the same period in 2023, we disposed of Residential Securities with a carrying value of $13.6 billion for an aggregate net gain (loss) of ($1.1) billion.

Net unrealized gains (losses) on instruments measured at fair value through earnings was ($680.9) million for the six months ended June 30, 2024 compared to ($175.2) million for the same period in 2023, primarily due to unfavorable changes in unrealized gains (losses) on Agency MBS of ($600.9) million, securitized residential whole loans of consolidated VIEs of ($122.3) million, residential whole loans of ($59.1) million, and mortgage servicing rights of ($16.9) million, partially offset by favorable changes on securitized debt of consolidated VIEs of $172.2 million, U.S. Treasury securities sold, not yet purchased of $88.4 million, and participations issued of $29.3 million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the six months ended June 30, 2024 was $1.6 billion compared to $598.8 million for the same period in 2023, attributable to favorable changes in unrealized gains (losses) on interest rate swaps and realized gains (losses) on termination of interest rate swaps, partially offset by the change in the net interest component of interest rate swaps. Unrealized gains (losses) on interest rate swaps was $998.4 million for the six months ended June 30, 2024 compared to ($114.6) million for the same period in 2023. Realized gains (losses) on termination of interest rate swaps was ($2.5) million for the six months ended June 30, 2024, compared to ($97.7) million for the same period in 2023, which reflected our termination of fixed-rate payer and receiver interest rate swaps with notional amounts of $2.7 billion and $3.3 billion, compared to fixed-rate payer and receiver interest rate swaps with notional amounts of $3.1 billion and $6.3 billion for the same period in 2023. Net interest component on interest rate swaps was $628.5 million for the six months ended June 30, 2024 compared to $811.0 million for the same period in 2023.

Net gains (losses) on other derivatives was $183.2 million for the six months ended June 30, 2024 compared to ($24.2) million for the same period in 2023. The change in net gains (losses) on other derivatives was primarily due to favorable changes in net gains (losses) on futures, which was $139.4 million for the six months ended June 30, 2024 compared to ($25.3) million for the same period in 2023, and net gains (losses) on interest rate swaptions, which was $42.2 million for the six months ended June 30, 2024 compared to $9.7 million for the same period in 2023.

Other, Net

Other, net for the six months ended June 30, 2024 was $48.2 million compared to $24.6 million for the same period in 2023, primarily attributable to an increase in interest on custodial balances and decrease in asset write-downs, partially offset by an increase in securitization related costs and MSR financing expenses.