ANNALY CAPITAL MANAGEMENT INC

For the Three Months Ended September 30, 2024 and 2023

Net Gains (Losses) on Investments and Other

Net gains (losses) on disposal of investments was ($169.1) million for the three months ended September 30, 2024, compared to ($616.5) million for the same period in 2023. For the three months ended September 30, 2024, we disposed of Residential Securities with a carrying value of $2.8 billion for an aggregate net gain (loss) of ($8.3) million. For the same period in 2023, we disposed of Residential Securities, with a carrying value of $6.9 billion for an aggregate net gain (loss) of ($602.6) million.

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

Net unrealized gains (losses) on instruments measured at fair value through earnings was $1.9 billion for the three months ended September 30, 2024, compared to ($2.1) billion for the same period in 2023, primarily due to favorable changes in unrealized gains (losses) on Agency MBS of $3.8 billion, securitized residential whole loans of consolidated VIEs of $953.6 million, residential credit securities of $61.6 million, U.S. Treasury securities sold, not yet purchased of $29.1 million, and residential whole loans of $23.3 million, partially offset by unfavorable changes in residential securitized debt of consolidated VIEs of ($725.3) million, MSR of ($114.2) million, and CRT securities of ($19.4) million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the three months ended September 30, 2024 was ($1.4) billion compared to $1.9 billion for the same period in 2023, primarily attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, realized gains (losses) on interest rate swaps and net interest component of interest rate swaps. Unrealized gains (losses) on interest rate swaps was ($1.6) billion for the three months ended September 30, 2024, compared to $1.5 billion for the same period in 2023. Realized gains (losses) on termination of interest rate swaps was ($94.0) million for the three months ended September 30, 2024, compared to $16.4 million for the same period in 2023, which reflected our termination of fixed-rate payer interest rate swaps with notional amounts of $5.1 billion, compared to notional amounts of $1.1 billion and $300.0 million of fixed-rate payer and receiver interest rate swaps for the same period in 2023. Net interest component on interest rate swaps was $317.5 million for the three months ended September 30, 2024, compared to $394.7 million for the same period in 2023.

Net gains (losses) on other derivatives was ($395.0) million for the three months ended September 30, 2024, compared to $240.8 million for the same period in 2023. The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was ($291.5) million for the three months ended September 30, 2024, compared to $441.0 million for the same period in 2023, and net gains (losses) on interest rate swaptions, which was ($135.0) million for the three months ended September 30, 2024, compared to ($78.9) million for the same period in 2023, partially offset by a favorable change in net gains (losses) on TBA derivatives, which was $22.4 million for the three months ended September 30, 2024, compared to ($123.7) million for the same period in 2023.

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

For the Nine Months Ended September 30, 2024 and 2023

Net Gains (Losses) on Investments and Other

Net gains (losses) on disposal of investments and other was ($1.1) billion for the nine months ended September 30, 2024 compared to ($1.7) billion for the same period in 2023. For the nine months ended September 30, 2024, we disposed of Residential Securities with a carrying value of $16.0 billion for an aggregate net gain (loss) of ($821.5) million. For the same period in 2023, we disposed of Residential Securities with a carrying value of $20.5 billion for an aggregate net gain (loss) of ($1.7) billion.

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

Net unrealized gains (losses) on instruments measured at fair value through earnings was $1.2 billion for the nine months ended September 30, 2024 compared to ($2.3) billion for the same period in 2023, primarily due to favorable changes on Agency MBS of $3.2 billion, securitized residential whole loans of consolidated VIEs of $831.3 million, U.S. Treasury securities sold, not yet purchased of $117.5 million, non-Agency MBS of $109.7 million, and participations issued of $24.3 million partially offset by unfavorable changes in unrealized gains (losses) on securitized debt of consolidated VIEs of ($553.1) million, mortgage servicing rights of ($131.1) million, CRT securities of ($56.9) million, and residential whole loans of ($35.7) million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the nine months ended September 30, 2024 was $265.4 million compared to $2.5 billion for the same period in 2023, attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, the change in the net interest component of interest rate swaps and realized gains (losses) on termination of interest rate swaps. Unrealized gains (losses) on interest rate swaps was ($584.1) million for the nine months ended September 30, 2024 compared to $1.4 billion for the same period in 2023. Net interest component on interest rate swaps was $946.0 million for the nine months ended September 30, 2024 compared to $1.2 billion for the same period in 2023. Realized gains (losses) on termination of interest rate swaps was ($96.5) million for the nine months ended September 30, 2024, compared to ($81.3) million for the same period in 2023, which reflected our termination of fixed-rate payer and receiver interest rate swaps with notional amounts of $7.7 billion and $3.3 billion, compared to fixed-rate payer and receiver interest rate swaps with notional amounts of $4.2 billion and $6.6 billion for the same period in 2023.

Net gains (losses) on other derivatives was ($211.7) million for the nine months ended September 30, 2024 compared to $216.6 million for the same period in 2023. The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was ($152.1) million for the nine months ended September 30, 2024 compared to $415.7 million for the same period in 2023, and net gains (losses) on interest rate swaptions, which was ($92.8) million for the nine months ended September 30, 2024 compared to ($69.2) million for the same period in 2023, partially offset by a favorable change in TBA derivatives, which was $28.3 million for the nine months ended September 30, 2024 compared to ($123.7) million for the same period in 2023.

Other, Net

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