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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED:  September 30, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM _______________ TO _________________
COMMISSION FILE NUMBER:  1-13447

nlya11.jpg

ANNALY CAPITAL MANAGEMENT INC
(Exact Name of Registrant as Specified in its Charter)

Maryland
22-3479661
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
  
1211 Avenue of the Americas 
New York,
New York
10036
(Address of principal executive offices)(Zip Code)
(212) 696-0100
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per shareNLYNew York Stock Exchange
6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred StockNLY.FNew York Stock Exchange
6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred StockNLY.GNew York Stock Exchange
6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred StockNLY.INew York Stock Exchange
8.875% Series J Fixed-Rate Cumulative Redeemable Preferred StockNLY.JNew York Stock Exchange







Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑    No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer☑Accelerated
filer		☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes ☐    No  ☑

The number of shares of the registrant’s Common Stock outstanding on October 24, 2025 was 683,031,214.


WEBSITE AND SOCIAL MEDIA DISCLOSURE
We use our website (www.annaly.com) and LinkedIn account (www.linkedin.com/company/annaly-capital-management) as channels of distribution of company information. The information we post through these channels may be deemed material. Accordingly, investors should monitor these channels, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive email alerts and other information about Annaly when you enroll your email address by visiting the “News & Insights” section of our website, then clicking on “Subscribe” and completing the email notification form. Our website, any alerts and social media channels are not incorporated into this quarterly report on Form 10-Q.


ANNALY CAPITAL MANAGEMENT, INC.
FORM 10-Q
TABLE OF CONTENTS
  
Page
 


ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands, except per share data)
 September 30,December 31,
2025
2024 (1)
(Unaudited)
Assets  
Cash and cash equivalents (includes pledged assets of $1,776,349 and $1,202,880, respectively) (2)
$2,096,696 $1,488,027 
Securities (includes pledged assets of $76,380,480 and $67,692,062, respectively) (3)
85,062,725 69,756,447 
Loans, net (includes pledged assets of $3,954,154 and $2,754,028, respectively) (4)
4,008,299 3,546,902 
Mortgage servicing rights (includes pledged assets of $3,164,697 and $2,460,252, respectively)
3,476,181 2,909,134 
Interests in MSR35,833 — 
Assets transferred or pledged to securitization vehicles29,512,309 21,973,188 
Derivative assets47,899 225,351 
Reverse repurchase agreements35,004 — 
Receivable for unsettled trades185,916 2,201,447 
Principal and interest receivable959,435 1,069,038 
Intangible assets, net7,398 9,416 
Other assets433,877 377,434 
Total assets$125,861,572 $103,556,384 
Liabilities and stockholders’ equity  
Liabilities  
Repurchase agreements$75,118,963 $65,688,923 
Other secured financing1,025,000 750,000 
Debt issued by securitization vehicles26,601,790 19,540,678 
Participations issued1,831,657 1,154,816 
U.S. Treasury securities sold, not yet purchased2,442,570 2,470,629 
Derivative liabilities199,100 59,586 
Payable for unsettled trades2,604,278 308,282 
Interest payable285,080 268,317 
Dividends payable476,737 375,932 
Other liabilities279,818 242,269 
Total liabilities110,864,993 90,859,432 
Stockholders’ equity  
Preferred stock, par value $0.01 per share, 75,000,000 and 63,500,000 authorized, 74,500,000 and 63,500,000 issued and outstanding, respectively
1,802,480 1,536,569 
Common stock, par value $0.01 per share, 1,456,750,000 and 1,468,250,000 authorized, 681,052,317 and 578,357,118 issued and outstanding, respectively
6,811 5,784 
Additional paid-in capital27,352,976 25,257,716 
Accumulated other comprehensive income (loss)(624,387)(1,017,682)
Accumulated deficit(13,626,983)(13,173,146)
Total stockholders’ equity14,910,897 12,609,241 
Noncontrolling interests85,682 87,711 
Total equity14,996,579 12,696,952 
Total liabilities and equity$125,861,572 $103,556,384 
(1)Derived from the audited consolidated financial statements at December 31, 2024.
(2)Includes cash of consolidated Variable Interest Entities (“VIEs”) of $5.6 million and $2.8 million at September 30, 2025 and December 31, 2024, respectively.
(3)Excludes $2.9 billion and $2.2 billion at September 30, 2025 and December 31, 2024, respectively, of non-Agency mortgage-backed securities in consolidated VIEs pledged as collateral and eliminated from the Company’s Consolidated Statements of Financial Condition. 
(4)Includes $10.9 million and $10.0 million of residential mortgage loans held for sale at September 30, 2025 and December 31, 2024, respectively.
See notes to consolidated financial statements.
1

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(dollars in thousands, except per share data)
(Unaudited)
 For The Three Months Ended September 30,For The Nine Months Ended September 30,
 2025202420252024
Net interest income  
Interest income$1,532,497 $1,229,341 $4,268,498 $3,501,154 
Interest expense1,256,747 1,215,940 3,499,577 3,440,646 
Net interest income275,750 13,401 768,921 60,508 
Net servicing income
Servicing and related income141,356 122,583 423,461 358,182 
Servicing and related expense15,104 12,988 43,788 37,821 
Net servicing income126,252 109,595 379,673 320,361 
Other income (loss)
Net gains (losses) on investments and other561,927 1,723,713 1,456,242 160,841 
Net gains (losses) on derivatives(92,308)(1,754,010)(1,458,960)53,621 
Other, net13,959 27,438 37,169 75,596 
Total other income (loss)483,578 (2,859)34,451 290,058 
General and administrative expenses
Compensation expense38,393 34,453 112,273 96,448 
Other general and administrative expenses11,947 9,468 36,149 30,934 
Total general and administrative expenses50,340 43,921 148,422 127,382 
Income (loss) before income taxes835,240 76,216 1,034,623 543,545 
Income taxes(7,823)(6,135)884 4,853 
Net income (loss)843,063 82,351 1,033,739 538,692 
Net income (loss) attributable to noncontrolling interests10,618 15,906 19,971 18,838 
Net income (loss) attributable to Annaly832,445 66,445 1,013,768 519,854 
Dividends on preferred stock (1)
41,127 41,628 115,544 115,847 
Net income (loss) available (related) to common stockholders$791,318 $24,817 $898,224 $404,007 
Net income (loss) per share available (related) to common stockholders  
Basic$1.21 $0.05 $1.45 $0.80 
Diluted$1.20 $0.05 $1.44 $0.80 
Weighted average number of common shares outstanding  
Basic656,335,974 515,729,658 621,484,893 505,800,723 
Diluted657,856,427 516,832,152 622,768,481 506,618,143 
Other comprehensive income (loss)  
Net income (loss)$843,063 $82,351 $1,033,739 $538,692 
Unrealized gains (losses) on available-for-sale securities113,281 428,955 311,717 92,843 
Reclassification adjustment for net (gains) losses included in net income (loss)2,378 15,769 81,578 530,354 
Other comprehensive income (loss)115,659 444,724 393,295 623,197 
Comprehensive income (loss)958,722 527,075 1,427,034 1,161,889 
Comprehensive income (loss) attributable to noncontrolling interests10,618 15,906 19,971 18,838 
Comprehensive income (loss) attributable to Annaly948,104 511,169 1,407,063 1,143,051 
Dividends on preferred stock (1)
41,127 41,628 115,544 115,847 
Comprehensive income (loss) attributable to common stockholders$906,977 $469,541 $1,291,519 $1,027,204 
(1) The three and nine months ended September 30, 2025 include cumulative and undeclared dividends of $3.7 million on the Company's 8.875% Series J Fixed-Rate Cumulative Redeemable Preferred Stock (the “Series J Preferred Stock”) as of September 30, 2025.
See notes to consolidated financial statements.


2

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in thousands, except per share data)
(Unaudited)
For The Three Months Ended September 30,For The Nine Months Ended September 30,
2025202420252024
Preferred stock
Beginning of period
$1,536,569 $1,536,569 $1,536,569 $1,536,569 
Issuance
265,911 — 265,911 — 
End of period$1,802,480 $1,536,569 $1,802,480 $1,536,569 
Common stock
Beginning of period
$6,421 $5,010 $5,784 $5,001 
Issuance
390 570 1,021 576 
Stock-based award activity
— — 6 3 
End of period$6,811 $5,580 $6,811 $5,580 
Additional paid-in capital
Beginning of period
$26,520,657 $23,694,663 $25,257,716 $23,672,391 
Issuance
822,731 1,148,881 2,078,388 1,159,774 
Stock-based award activity
9,588 8,060 16,872 19,439 
End of period$27,352,976 $24,851,604 $27,352,976 $24,851,604 
Accumulated other comprehensive income (loss)
Beginning of period
$(740,046)$(1,156,927)$(1,017,682)$(1,335,400)
Unrealized gains (losses) on available-for-sale securities
113,281 428,955 311,717 92,843 
Reclassification adjustment for net (gains) losses included in net income (loss)2,378 15,769 81,578 530,354 
End of period$(624,387)$(712,203)$(624,387)$(712,203)
Accumulated deficit
Beginning of period$(13,942,302)$(12,898,191)$(13,173,146)$(12,622,768)
Net income (loss) attributable to Annaly
832,445 66,445 1,013,768 519,854 
Dividends declared on preferred stock (1)
(37,466)(41,628)(111,883)(115,847)
Dividends and dividend equivalents declared on common stock and stock-based awards (1)
(479,660)(364,914)(1,355,722)(1,019,527)
End of period$(13,626,983)$(13,238,288)$(13,626,983)$(13,238,288)
Total stockholder’s equity$14,910,897 $12,443,262 $14,910,897 $12,443,262 
Noncontrolling interests
Beginning of period
$93,064 $81,780 $87,711 $89,298 
Net income (loss) attributable to noncontrolling interests
10,618 15,906 19,971 18,838 
Equity contributions from (distributions to) noncontrolling interests
(18,000)(999)(22,000)(11,449)
End of period$85,682 $96,687 $85,682 $96,687 
Total equity$14,996,579 $12,539,949 $14,996,579 $12,539,949 
(1) Refer to the “Capital Stock” Note for dividends per share for each class of shares.
See notes to consolidated financial statements.



3

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
 For The Nine Months Ended September 30,
 20252024
Cash flows from operating activities  
Net income (loss)$1,033,739 $538,692 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Amortization of premiums and discounts of investments, net176,712 95,697 
Amortization of securitized debt premiums and discounts and deferred financing costs(18,577)7,127 
Depreciation, amortization and other noncash expenses26,090 23,180 
Net (gains) losses on investments and derivatives571,804 731,542 
Income (loss) from unconsolidated joint ventures(573)(3,119)
Payments on purchases of loans held for sale(154,086)(37,978)
Proceeds from sales and repayments of loans held for sale153,190 38,063 
Proceeds from U.S. Treasury securities4,855,429 6,083,273 
Payments on U.S. Treasury securities(4,977,675)(6,181,017)
Net receipts (payments) on derivatives(1,735,541)(967,289)
Net change in  
Other assets(23,252)(8,787)
Interest receivable107,289 176,430 
Interest payable16,763 (11,540)
Other liabilities17,256 17,910 
Net cash provided by (used in) operating activities48,568 502,184 
Cash flows from investing activities  
Payments on purchases of securities(26,670,451)(22,984,768)
Proceeds from sales of securities11,727,813 17,254,884 
Principal payments on securities5,855,619 4,875,202 
Payments on purchases and origination of loans(12,662,479)(9,304,025)
Proceeds from sales of loans1,221,545 414,706 
Principal payments on loans3,827,244 1,625,155 
Payments on purchases of MSR(710,020)(701,418)
Proceeds from sales of MSR1,871 66,269 
Payments on purchases of interests in MSR(32,240)— 
Proceeds from reverse repurchase agreements510,513,471 442,510,370 
Payments on reverse repurchase agreements(510,548,475)(442,510,370)
Distributions in excess of cumulative earnings from unconsolidated joint ventures6,669 19,264 
Net cash provided by (used in) investing activities(17,469,433)(8,734,731)
Cash flows from financing activities  
Proceeds from repurchase agreements and other secured financing5,139,522,507 4,316,726,746 
Payments on repurchase agreements and other secured financing(5,129,802,568)(4,314,490,574)
Proceeds from issuances of securitized debt10,220,521 8,236,251 
Principal payments on securitized debt(3,210,527)(1,478,171)
Payments on purchases of securitized debt(260,618)— 
Payment of deferred financing cost(10,921)(2,783)
Proceeds from participations issued5,461,827 2,984,799 
Payments on repurchases of participations issued(4,773,265)(3,605,523)
Principal payments on participations issued(67,519)(40,805)
Net contributions (distributions) from (to) noncontrolling interests(22,000)(11,449)
Net proceeds from stock offerings, direct purchases and dividend reinvestments2,345,320 1,160,350 
Settlement of stock-based awards in satisfaction of withholding tax requirements(13,936)(6,157)
Dividends paid(1,359,287)(1,092,126)
Net cash provided by (used in) financing activities18,029,534 8,380,558 
Net (decrease) increase in cash and cash equivalents608,669 148,011 
Cash and cash equivalents including cash pledged as collateral, beginning of period1,488,027 1,412,148 
Cash and cash equivalents including cash pledged as collateral, end of period$2,096,696 $1,560,159 
Supplemental disclosure of cash flow information  
Interest received$3,090,755 $2,787,729 
Interest paid (excluding interest paid on interest rate swaps)$2,564,763 $2,907,352 
Net interest received (paid) on interest rate swaps$912,571 $1,353,022 
Taxes received (paid)$(353)$(1,127)
Noncash investing and financing activities
Receivable for unsettled trades$185,916 $766,341 
Payable for unsettled trades$2,604,278 $1,885,286 
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment$393,295 $623,197 
Dividends declared, not yet paid$476,737 $362,731 
Derecognition of assets of consolidated VIEs$285,612 $— 
Derecognition of securitized debt of consolidated VIEs$260,785 $— 
See notes to consolidated financial statements.
4

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. DESCRIPTION OF BUSINESS
Annaly Capital Management, Inc. (the “Company” or “Annaly”) is a Maryland corporation that commenced operations on February 18, 1997. The Company is a leading diversified capital manager with investment strategies across mortgage finance. The Company owns a portfolio of real estate related investments, including mortgage pass-through certificates, collateralized mortgage obligations, credit risk transfer (“CRT”) securities, other securities representing interests in or obligations backed by pools of mortgage loans, residential mortgage loans and mortgage servicing rights (“MSR”). The Company’s principal business objective is to generate net income for distribution to its stockholders and optimize its returns through prudent management of its diversified investment strategies.
Annaly is an internally-managed company that has elected to be taxed as a Real Estate Investment Trust (“REIT”) as defined under the Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder (the “Code”).
The Company’s three investment groups are primarily comprised of the following:
Investment GroupsDescription
Annaly Agency GroupInvests in Agency mortgage-backed securities (“MBS”) collateralized by residential mortgages which are guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae and complementary investments within the Agency market, including Agency commercial MBS.
Annaly Residential Credit GroupInvests primarily in non-Agency residential whole loans and securitized products within the residential and commercial markets.
Annaly Mortgage Servicing Rights Group
Invests in MSR, which provide the right to service residential mortgage loans in exchange for a portion of the interest payments made on the loans.

2. BASIS OF PRESENTATION
The accompanying consolidated financial statements and related notes of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
The accompanying consolidated financial statements and related notes are unaudited and should be read in conjunction with the audited consolidated financial statements included in the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Form 10-K”). The consolidated financial information as of December 31, 2024 has been derived from audited consolidated financial statements included in the Company’s 2024 Form 10-K.
The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported balance sheet amounts and/or disclosures at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
In the opinion of management, all normal, recurring adjustments have been included for a fair presentation of this interim financial information. Interim period operating results may not be indicative of the operating results for a full year.

3. SIGNIFICANT ACCOUNTING POLICIES
The Company’s significant accounting policies are described below or are included elsewhere in these notes to the consolidated financial statements.
Principles of Consolidation – The consolidated financial statements include the accounts of the entities where the Company has a controlling financial interest. In order to determine whether the Company has a controlling financial interest, it first evaluates whether an entity is a voting interest entity (“VOE”) or a variable interest entity (“VIE”). All intercompany balances and transactions have been eliminated in consolidation.
Voting Interest Entities – A VOE is an entity that has sufficient equity and in which equity investors have a controlling financial interest. The Company consolidates VOEs where it has a majority of the voting equity of such VOE.
Variable Interest Entities – A VIE is defined as an entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. A VIE is required to be consolidated by its primary beneficiary, which is defined as the party that has both (i) the power to control the activities that most significantly impact the VIE’s
5

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
economic performance and (ii) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
The Company performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE causes the Company’s consolidation conclusion to change. Refer to the “Variable Interest Entities” Note for further information.
Equity Method Investments - For entities that are not consolidated, but where the Company has significant influence over the operating or financial decisions of the entity, the Company accounts for the investment under the equity method of accounting. In accordance with the equity method of accounting, the Company will recognize its share of earnings or losses of the investee in the period in which they are reported by the investee. The Company also considers whether there are any indicators of other-than-temporary impairment of joint ventures accounted for under the equity method. These investments are included in Other assets with income or loss included in Other, net.
Cash and Cash Equivalents – Cash and cash equivalents include cash on hand, cash held in money market funds on an overnight basis and cash pledged as collateral with counterparties. Cash deposited with clearing organizations is carried at cost, which approximates fair value. Cash and securities deposited with clearing organizations and collateral held in the form of cash on margin with counterparties to the Company’s interest rate swaps and other derivatives totaled $1.8 billion and $1.2 billion at September 30, 2025 and December 31, 2024, respectively.
Fair Value Measurements and the Fair Value Option – The Company reports various investments at fair value, including certain eligible financial instruments elected to be accounted for under the fair value option (“FVO”). The Company chooses to elect the FVO in order to simplify the accounting treatment for certain financial instruments. Items for which the FVO has been elected are presented at fair value in the Consolidated Statements of Financial Condition and any change in fair value is recorded in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). For additional information regarding financial instruments for which the Company has elected the FVO refer to the table in the “Financial Instruments” Note.
Refer to the “Fair Value Measurements” Note for a complete discussion on the methodology utilized by the Company to estimate the fair value of certain financial instruments.
Offsetting Assets and Liabilities - The Company elected to present all derivative instruments on a gross basis as discussed in the “Derivative Instruments” Note. Reverse repurchase and repurchase agreements are presented net in the Consolidated Statements of Financial Condition if they meet the offsetting criteria. Refer to the “Secured Financing” Note for further discussion on reverse repurchase and repurchase agreements.
Derivative Instruments – Derivatives are recognized as either assets or liabilities at fair value in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). The changes in the estimated fair value are presented within Net gains (losses) on derivatives. None of the Company’s derivative transactions have been designated as hedging instruments for accounting purposes. Refer to the “Derivative Instruments” Note for further discussion.
Stock-Based Compensation – The Company measures compensation expense for stock-based awards at fair value, which is generally based on the grant-date fair value of the Company’s common stock. Compensation expense is recognized ratably over the vesting or requisite service period of the award. Stock-based awards that contain market-based conditions are valued using a model.
Compensation expense for awards with performance conditions is recognized based on the probable outcome of the performance condition at each reporting date. Compensation expense for awards with market conditions is recognized irrespective of the probability of the market condition being achieved and is not reversed if the market condition is not met. Stock-based awards that do not require future service (i.e., vested awards) are expensed immediately. Forfeitures are recorded when they occur. The Company generally issues new shares of common stock upon delivery of stock-based awards.
Interest Income - The Company recognizes interest income primarily on Residential Securities (as defined in the “Securities” Note), residential mortgage loans, commercial investments and reverse repurchase agreements. Interest accrued but not received is recognized as Interest receivable in the Consolidated Statements of Financial Condition. Interest income is presented as a separate line item in the Consolidated Statements of Comprehensive Income (Loss).
6

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
For its securities, the Company recognizes coupon income, which is a component of interest income, based upon the outstanding principal amounts of the financial instruments and their contractual terms. In addition, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities (other than interest-only securities, multifamily and reverse mortgages), taking into account estimates of future principal prepayments in the calculation of the effective yield. The Company recalculates the effective yield as differences between anticipated and actual prepayments occur. Using third party model and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security’s acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date, which results in a cumulative premium amortization adjustment in each period. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period.
Premiums or discounts associated with the purchase of Agency interest-only securities, reverse mortgages and residential credit securities are amortized or accreted into interest income based upon current expected future cash flows with any adjustment to yield made on a prospective basis.
Premiums or discounts associated with the purchase of multifamily securities are amortized or accreted into interest income based upon their contractual payment terms. If a prepayment occurs, an adjustment is made to the unpaid principal balance and unamortized premium or discount in the current period and the original effective yield continues to be applied.
Premiums and discounts associated with the purchase of residential mortgage loans and with those transferred or pledged to securitization trusts are primarily amortized or accreted into interest income over their estimated remaining lives using the effective interest rates inherent in the estimated cash flows from the mortgage loans. Amortization of premiums and accretion of discounts are presented in Interest income in the Consolidated Statements of Comprehensive Income (Loss).
If collection of a loan’s principal or interest is in doubt or the loan is 90 days or more past due, interest income is not accrued. For nonaccrual status loans carried at fair value or held for sale, interest is not accrued but is recognized on a cash basis. For nonaccrual status loans carried at amortized cost, if collection of principal is not in doubt but collection of interest is in doubt, interest income is recognized on a cash basis. If collection of principal is in doubt, any interest received is applied against principal until collectability of the remaining balance is no longer in doubt; at that point, any interest income is recognized on a cash basis. Generally, a loan is returned to accrual status when the borrower has resumed paying the full amount of the scheduled contractual obligation, if all principal and interest amounts contractually due are reasonably assured of repayment within a reasonable period of time and there is a sustained period of repayment performance by the borrower.
The Company has made an accounting policy election not to measure an allowance for loans losses for accrued interest receivable. If interest receivable is deemed to be uncollectible or not collected within 90 days of its contractual due date for commercial loans carried at amortized cost, it is written off through a reversal of interest income. Any interest written off that is recovered is recognized as interest income.
Refer to the “Interest Income and Interest Expense” Note for further discussion of interest income.
Income Taxes – The Company has elected to be taxed as a REIT and intends to comply with the provisions of the Code, with respect thereto. As a REIT, the Company will not incur federal income tax to the extent that it distributes its taxable income to its stockholders. The Company and certain of its direct and indirect subsidiaries have made separate joint elections to treat these subsidiaries as taxable REIT subsidiaries (“TRSs”). As such, each of these TRSs is taxable as a domestic C corporation and subject to federal, state and local income taxes based upon its taxable income. Refer to the “Income Taxes” Note for further discussion on income taxes.
Recent Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). The Company reviewed recently issued ASUs and determined that they were not expected to have a significant impact on the Company’s consolidated financial statements when adopted or did not have a significant impact on the Company’s consolidated financial statements upon adoption.
7

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
4. FINANCIAL INSTRUMENTS
The following table presents characteristics for certain of the Company’s financial instruments at September 30, 2025 and December 31, 2024.
Financial Instruments (1)
Balance Sheet Line ItemType / FormMeasurement BasisSeptember 30, 2025December 31, 2024
Assets(dollars in thousands)
Securities
Agency mortgage-backed securities (2)
Fair value, with unrealized gains (losses) through other comprehensive income$7,248,273 $8,234,911 
Securities
Agency mortgage-backed securities (3)
Fair value, with unrealized gains (losses) through earnings76,069,546 59,199,157 
SecuritiesResidential credit risk transfer securitiesFair value, with unrealized gains (losses) through earnings330,647 754,915 
SecuritiesNon-agency mortgage-backed securitiesFair value, with unrealized gains (losses) through earnings1,414,259 1,493,186 
SecuritiesCommercial real estate debt investments - CMBSFair value, with unrealized gains (losses) through earnings— 74,278 
Total securities85,062,725 69,756,447 
Loans, netResidential mortgage loansFair value, with unrealized gains (losses) through earnings4,008,299 3,546,902 
Interests in MSRInterest in net servicing cash flowsFair value, with unrealized gains (losses) through earnings35,833 — 
Assets transferred or pledged to securitization vehiclesResidential mortgage loansFair value, with unrealized gains (losses) through earnings29,512,309 21,973,188 
Reverse repurchase agreementsReverse repurchase agreementsAmortized cost35,004 — 
Liabilities
Repurchase agreementsRepurchase agreementsAmortized cost$75,118,963 $65,688,923 
Other secured financingLoansAmortized cost1,025,000 750,000 
Debt issued by securitization vehiclesSecuritiesFair value, with unrealized gains (losses) through earnings26,601,790 19,540,678 
Participations issuedParticipations issuedFair value, with unrealized gains (losses) through earnings1,831,657 1,154,816 
U.S. Treasury securities sold, not yet purchasedSecuritiesFair value, with unrealized gains (losses) through earnings2,442,570 2,470,629 
(1) Receivable for unsettled trades, Principal and interest receivable, Payable for unsettled trades, Interest payable and Dividends payable are accounted for at cost. Interests in MSR are considered financial instruments whereas directly held MSR are considered servicing assets or obligations.
(2) Includes Agency pass-through, collateralized mortgage obligation (“CMO”) and multifamily securities purchased prior to July 1, 2022.
(3) Includes interest-only securities and reverse mortgages and, effective July 1, 2022, newly purchased Agency pass-through, CMO and multifamily securities.
5. SECURITIES
The Company’s investments in securities include agency, credit risk transfer, non-agency and commercial mortgage-backed securities. The Company designates its securities as trading, available-for-sale or held-to-maturity depending upon the type of security and the Company’s intent and ability to hold such security to maturity. Securities classified as available-for-sale and trading are reported at fair value on a recurring basis.
Available-for-sale debt securities are carried at fair value, with changes in fair value recognized in other comprehensive income, unless the fair value option is elected in which case changes in fair value are recognized in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). Effective July 1, 2022, the Company elected the fair value option for any newly purchased Agency mortgage-backed securities in order to simplify the accounting for these securities. During the three and nine months ended September 30, 2025, $621.8 million and $1.6 billion, respectively, of unrealized gains (losses) on the Agency mortgage-backed securities, for which the fair value option was elected, were reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss). During the three and nine months ended September 30, 2024, $1.7 billion and $762.8 million, respectively, of unrealized gains (losses) on the Agency mortgage-backed securities, for which the fair value option was elected, were reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss). Agency mortgage-backed securities purchased prior to July 1, 2022, are still classified as available-for-sale with changes in fair value recognized in other comprehensive income. The Company has also elected the fair value option for CRT securities, interest only securities, Non-Agency and commercial mortgage-backed securities in order to simplify the accounting. Transactions for regular-way securities are recorded on trade date, including to-be-announced (“TBA”) securities that meet the regular-way
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
securities scope exception from derivative accounting. Gains and losses on disposals of securities are recorded on trade date based on the specific identification method.
Impairment – Management evaluates available-for-sale securities where the fair value option has not been elected and held-to-maturity debt securities for impairment at least quarterly, and more frequently when economic or market conditions warrant such evaluation. When the fair value of an available-for-sale security is less than its amortized cost, the security is considered impaired. For securities that are impaired, the Company determines if it (1) has the intent to sell the security, (2) is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, or (3) does not expect to recover the entire amortized cost basis of the security. Further, the security is analyzed for credit loss (the difference between the present value of cash flows expected to be collected and the amortized cost basis). The credit loss, if any, will then be recognized in the Consolidated Statements of Comprehensive Income (Loss) as a securities loss provision and reflected as an allowance for credit losses on securities in the Consolidated Statements of Financial Condition, while the balance of losses related to other factors will be recognized as a component of Other comprehensive income (loss). When the fair value of a held-to-maturity security is less than the cost, the Company performs an analysis to determine whether it expects to recover the entire cost basis of the security.
Agency Mortgage-Backed Securities - The Company invests in mortgage pass-through certificates, collateralized mortgage obligations and other MBS representing interests in or obligations backed by pools of residential or multifamily mortgage loans and certificates. Many of the underlying loans and certificates are guaranteed by the Government National Mortgage Association (“Ginnie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”) or the Federal National Mortgage Association (“Fannie Mae”) (collectively, “Agency mortgage-backed securities”). 
Agency mortgage-backed securities may include forward contracts for Agency mortgage-backed securities purchases or sales of a generic pool, on a to-be-announced basis. TBA securities without intent to accept delivery (“TBA derivatives”) are accounted for as derivatives as discussed in the “Derivative Instruments” Note.
CRT Securities - CRT securities are risk sharing instruments issued by Fannie Mae and Freddie Mac, and similarly structured transactions arranged by third party market participants. CRT securities are designed to synthetically transfer mortgage credit risk from Fannie Mae and Freddie Mac to private investors.
Non-Agency Mortgage-Backed Securities - The Company invests in non-Agency mortgage-backed securities such as those issued in prime loan, prime jumbo loan, non-qualified mortgage loan (“Non-QM”), small balance commercial loan (“SBC”), non-performing loan (“NPL”), re-performing loan (“RPL”) and residential transition loan (“RTL”) securitizations.
Agency mortgage-backed securities, non-Agency mortgage-backed securities and residential CRT securities are referred to herein as “Residential Securities.” Although the Company generally intends to hold most of its Residential Securities until maturity, it may, from time to time, sell any of its Residential Securities as part of the overall management of its portfolio.
Commercial Mortgage-Backed Securities (“Commercial Securities”) - The Company invests in Commercial Securities such as conduit, credit CMBS, single-asset single borrower and collateralized loan obligations.
The following table represents a rollforward of the activity for the Company’s securities for the nine months ended September 30, 2025:
Agency
Securities		Residential Credit SecuritiesCommercial
Securities		Total
(dollars in thousands)
Beginning balance January 1, 2025
$67,434,068 $2,248,101 $74,278 $69,756,447 
Purchases28,423,701 541,147 — 28,964,848 
Sales
(9,340,711)(392,498)(41,814)(9,775,023)
Principal paydowns(5,185,889)(633,432)(32,451)(5,851,772)
(Amortization) / accretion(117,471)(4,798)(80)(122,349)
Fair value adjustment2,104,121 (13,614)67 2,090,574 
Ending balance September 30, 2025
$83,317,819 $1,744,906 $— $85,062,725 






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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The following tables present the Company’s securities portfolio that were carried at their fair value at September 30, 2025 and December 31, 2024:
 September 30, 2025
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$76,814,459 $1,411,294 $(1,292,553)$76,933,200 $742,793 $(973,432)$76,702,561 
Adjustable-rate pass-through123,092 7,773 (34)130,831 1,788 (5,333)127,286 
CMO2,845 13 — 2,858 — (115)2,743 
Interest-only4,724,425 625,831 — 625,831 36,966 (88,472)574,325 
Multifamily (1)
34,199,391 563,100 (14,128)5,872,077 72,841 (34,014)5,910,904 
Total agency securities$115,864,212 $2,608,011 $(1,306,715)$83,564,797 $854,388 $(1,101,366)$83,317,819 
Residential credit       
Credit risk transfer$312,945 $1,111 $(3,031)$311,025 $19,648 $(26)$330,647 
Non-QM319,048 270 (2,534)316,784 3,393 (8,069)312,108 
Prime (2)
2,324,593 31,472 (9,940)127,699 3,468 (696)130,471 
SBC194,277 22 (10,549)183,750 5,110 (5,512)183,348 
NPL/RPL451,673 3,438 (21,882)433,229 4,675 (2,536)435,368 
RTL174,097 16 (544)173,569 1,226 (40)174,755 
Prime jumbo (>=2010 vintage) (3)
11,908,492 101,317 (30,632)164,056 18,321 (4,168)178,209 
Total residential credit securities$15,685,125 $137,646 $(79,112)$1,710,112 $55,841 $(21,047)$1,744,906 
Total residential securities$131,549,337 $2,745,657 $(1,385,827)$85,274,909 $910,229 $(1,122,413)$85,062,725 
Commercial
Commercial securities$— $— $— $— $— $— $— 
Total securities$131,549,337 $2,745,657 $(1,385,827)$85,274,909 $910,229 $(1,122,413)$85,062,725 
 December 31, 2024
 Principal /
Notional		Remaining PremiumRemaining DiscountAmortized
Cost		Unrealized
Gains		Unrealized
Losses		Estimated Fair Value
Agency(dollars in thousands)
Fixed-rate pass-through$65,010,762 $1,329,117 $(1,178,444)$65,161,435 $130,742 $(2,242,503)$63,049,674 
Adjustable-rate pass-through157,123 11,936 (42)169,017 2,216 (8,995)162,238 
CMO87,467 1,459 — 88,926 — (15,242)73,684 
Interest-only3,437,570 493,803 — 493,803 14,843 (127,914)380,732 
Multifamily (1)
26,216,351 514,726 (11,830)3,844,575 7,644 (110,454)3,741,765 
Reverse mortgages24,916 2,499 — 27,415 — (1,440)25,975 
Total agency investments$94,934,189 $2,353,540 $(1,190,316)$69,785,171 $155,445 $(2,506,548)$67,434,068 
Residential credit       
Credit risk transfer$707,169 $1,608 $(3,581)$705,196 $49,819 $(100)$754,915 
Non-QM172,368 35 (1,724)170,679 2,694 (8,481)164,892 
Prime (2)
1,881,111 27,484 (10,416)100,039 2,857 (779)102,117 
SBC253,045 12 (11,624)241,433 3,632 (11,493)233,572 
NPL/RPL702,720 4,540 (21,897)685,363 3,168 (6,091)682,440 
RTL151,100 — (134)150,966 1,030 (144)151,852 
Prime jumbo (>=2010 vintage) (3)
10,334,669 84,431 (30,385)146,285 17,072 (5,044)158,313 
Total residential credit securities$14,202,182 $118,110 $(79,761)$2,199,961 $80,272 $(32,132)$2,248,101 
Total residential securities$109,136,371 $2,471,650 $(1,270,077)$71,985,132 $235,717 $(2,538,680)$69,682,169 
Commercial
Commercial securities$74,151 $193 $— $74,344 $38 $(104)$74,278 
Total securities$109,210,522 $2,471,843 $(1,270,077)$72,059,476 $235,755 $(2,538,784)$69,756,447 
(1) Principal/Notional amount includes $28.9 billion and $22.9 billion of Agency Multifamily interest-only securities as of September 30, 2025 and December 31, 2024, respectively.
(2) Principal/Notional amount includes $2.2 billion and $1.8 billion of Prime interest-only securities as of September 30, 2025 and December 31, 2024, respectively.
(3) Principal/Notional amount includes $11.8 billion and $10.2 billion of Prime Jumbo interest-only securities as of September 30, 2025 and December 31, 2024, respectively.


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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The following table presents the Company’s Agency mortgage-backed securities portfolio by issuing Agency at September 30, 2025 and December 31, 2024: 
September 30, 2025December 31, 2024
Investment Type(dollars in thousands)
Fannie Mae$79,289,917 $63,211,517 
Freddie Mac3,887,883 4,115,085 
Ginnie Mae140,019 107,466 
Total$83,317,819 $67,434,068 
Actual maturities of the Company’s Residential Securities are generally shorter than stated contractual maturities because actual maturities of the portfolio are affected by periodic payments and prepayments of principal on the underlying mortgages.
The following table summarizes the Company’s Residential Securities at September 30, 2025 and December 31, 2024, according to their estimated weighted average life classifications:
 September 30, 2025December 31, 2024
Estimated Fair ValueAmortized
Cost		Estimated Fair ValueAmortized
Cost
Estimated weighted average life(dollars in thousands)
Less than one year$271,081 $268,967 $407,856 $408,090 
Greater than one year through five years5,251,891 5,193,314 1,308,898 1,325,093 
Greater than five years through ten years77,747,853 78,033,301 66,027,670 68,242,391 
Greater than ten years1,791,900 1,779,327 1,937,745 2,009,558 
Total$85,062,725 $85,274,909 $69,682,169 $71,985,132 
The estimated weighted average lives of the Residential Securities at September 30, 2025 and December 31, 2024 in the table above are based upon projected principal prepayment rates. The actual weighted average lives of the Residential Securities could be longer or shorter than projected.
The following table presents the gross unrealized losses and estimated fair value of the Company’s Agency mortgage-backed securities, accounted for as available-for-sale where the fair value option has not been elected, by length of time that such securities have been in a continuous unrealized loss position at September 30, 2025 and December 31, 2024.
 September 30, 2025December 31, 2024
 
Estimated Fair Value (1)
Gross Unrealized Losses (1)
Number of Securities (1)
Estimated Fair Value (1)
Gross Unrealized Losses (1)
Number of Securities (1)
 (dollars in thousands)
Less than 12 months$12,781 $(208)3 $49,820 $(1,477)34 
12 Months or more7,093,209 (629,117)1,292 8,054,162 (1,020,427)1,377 
Total$7,105,990 $(629,325)1,295 $8,103,982 $(1,021,904)1,411 
(1) Excludes interest-only mortgage-backed securities and reverse mortgages, and effective July 1, 2022, newly purchased Agency pass-through, CMOs and multifamily securities.
The decline in value of these securities is solely due to market conditions and not the quality of the assets.  Substantially all of the Agency mortgage-backed securities have an actual or implied credit rating that is the same as that of the U.S. government. An impairment has not been recognized in earnings related to these investments because the decline in value is not related to credit quality, the Company currently has not made a decision to sell the securities nor is it more likely than not that the securities will be required to be sold before recovery.
During the three and nine months ended September 30, 2025, the Company disposed of $1.3 billion and $9.7 billion amortized cost basis of Residential Securities, respectively. During the three and nine months ended September 30, 2024, the Company disposed of $2.8 billion and $16.0 billion amortized cost basis of Residential Securities, respectively. The following table presents the Company’s net gains (losses) from the disposal of Residential Securities for the three and nine months ended September 30, 2025 and 2024, which is included in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
 Gross Realized GainsGross Realized LossesNet Realized Gains (Losses)
For the three months ended(dollars in thousands)
September 30, 2025$11,353 $(9,554)$1,799 
September 30, 2024$26,983 $(35,258)$(8,275)
For the nine months ended
September 30, 2025$85,463 $(164,028)$(78,565)
September 30, 2024$67,209 $(888,683)$(821,474)

6. LOANS
The Company invests in residential loans. Loans are classified as either held for investment or held for sale. Loans are eligible to be accounted for under the fair value option. If loans are elected under the fair value option, they are carried at fair value with changes in fair value recognized in earnings. Otherwise, loans held for investment are carried at cost less impairment and loans held for sale are accounted for at the lower of cost or fair value.
Excluding loans transferred or pledged to securitization vehicles, as of September 30, 2025 and December 31, 2024, the Company had $4.0 billion and $3.5 billion, respectively, of loans for which the fair value option was elected. If the Company intends to sell or securitize the loans and the securitization vehicle is not expected to be consolidated, the loans are classified as held for sale. Any origination fees and costs or purchase premiums or discounts are deferred and recognized upon sale. The Company determines the fair value of loans held for sale on an individual loan basis. The carrying value of the Company’s residential loans held for sale was $10.9 million and $10.0 million at September 30, 2025 and December 31, 2024, respectively.
The following table presents the activity of the Company’s loan investments, excluding loans transferred or pledged to securitization vehicles, for the nine months ended September 30, 2025:
Residential Loans
(dollars in thousands)
Beginning balance January 1, 2025
$3,546,902 
Purchases / originations / draws (1)
12,841,249 
Sales and transfers (2)
(12,205,575)
Principal payments(217,068)
Gains / (losses)58,550 
(Amortization) / accretion(15,759)
Ending balance September 30, 2025
$4,008,299 
(1) Includes residential loans acquired from exercise of optional redemption provisions of securitization vehicles with a carrying value of $290.4 million during the nine months ended September 30, 2025.
(2) Includes transfer of residential loans to securitization vehicles with a carrying value of $10.9 billion during the nine months ended September 30, 2025.

Residential
The Company’s residential mortgage loans are primarily comprised of performing adjustable-rate and fixed-rate whole loans. The Company’s residential loans are accounted for under the fair value option with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss). The Company also consolidates securitization trusts in which it retained securities because it also has certain powers and rights to direct the activities of such trusts. Refer to the “Variable Interest Entities” Note for further information related to the Company’s consolidated residential mortgage loan trusts.
The mortgage loans are secured by first or second liens on primarily one-to-four family residential properties. A subsidiary of the Company has engaged a third party to act as its custodian, agent and bailee for the purposes of receiving and holding certain documents, instruments and papers related to the residential mortgage loans it purchases. Pursuant to the custodial agreement, the custodian segregates and maintains continuous custody of all documents constituting the mortgage file with respect to each mortgage loan owned by the subsidiary in secure and fire resistant facilities and in a manner consistent with the standard of care employed by prudent mortgage loan document custodians. At or prior to the funding of any residential mortgage loan, the related seller, pursuant to the terms of our mortgage loan purchase agreement, must deliver to the custodian the mortgage loan documents including the mortgage note, the mortgage and other related loan documents. In addition, a complete credit file for the related mortgage and borrower must be delivered to the subsidiary prior to the date of purchase.
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The following table presents the fair value and the unpaid principal balances of the residential mortgage loan portfolio, including loans transferred or pledged to securitization vehicles, at September 30, 2025 and December 31, 2024:
September 30, 2025December 31, 2024
 (dollars in thousands)
Fair value$33,520,608 $25,520,090 
Unpaid principal balance$33,602,207 $26,297,725 

The following table provides information regarding the line items and amounts recognized in the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2025 and 2024 for these investments:
For the Three Months EndedFor the Nine Months Ended
September 30, 2025September 30, 2024September 30, 2025September 30, 2024
 (dollars in thousands)
Interest income$505,527 $346,031 $1,399,541 $899,867 
Net gains (losses) on disposal of investments (1)
(11,534)1,535 (35,842)(1,810)
Net unrealized gains (losses) on instruments measured at fair value through earnings (1)
174,112 558,161 508,993 469,462 
Total included in net income (loss)$668,105 $905,727 $1,872,692 $1,367,519 
(1) These amounts are presented in the line item Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (loss).
The following table provides the geographic concentrations based on the unpaid principal balances at September 30, 2025 and December 31, 2024 for the residential mortgage loans, including loans transferred or pledged to securitization vehicles:
Geographic Concentrations of Residential Mortgage Loans
September 30, 2025December 31, 2024
Property location% of BalanceProperty location% of Balance
California39.7%California39.5%
New York11.2%New York10.9%
Florida9.1%Florida10.1%
Texas5.4%Texas5.4%
All other (none individually greater than 5%)34.6%All other (none individually greater than 5%)34.1%
Total100.0%100.0%
The following table provides additional data on the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, at September 30, 2025 and December 31, 2024:
 September 30, 2025December 31, 2024
 
Portfolio
Range
Portfolio Weighted
Average
Portfolio
Range
Portfolio Weighted Average
 (dollars in thousands)
Unpaid principal balance
$1 - $4,396
$463
$1 - $4,396
$471
Interest rate
2.00% - 18.00%
6.66%
2.00% - 18.00%
6.43%
Maturity9/1/2029 - 10/1/20659/26/20537/1/2029 - 12/1/20642/3/2053
FICO score at loan origination
549 - 850
760
549 - 850
758
Loan-to-value ratio at loan origination
1% - 100%
67%
2% - 100%
68%
At September 30, 2025 and December 31, 2024, approximately 14% and 16%, respectively, of the carrying value of the Company’s residential mortgage loans, including loans transferred or pledged to securitization vehicles, were adjustable-rate. At September 30, 2025, the aggregate fair value and unpaid principal balance of loans ninety days or more past due and in nonaccrual status was $423.1 million (of which $384.9 million has been pledged or transferred to securitization vehicles), and $426.2 million, respectively.  The non-accrual balances represent approximately 1% of the total loan portfolio. The weighted average loan-to-value ratio at loan origination for loans in non-accrual status was 73%. The recorded investment of residential mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process according to the requirements of the applicable jurisdiction was $181.2 million at September 30, 2025.


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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
7. MORTGAGE SERVICING RIGHTS
MSR represent the rights and obligations associated with servicing pools of residential mortgage loans. The Company and its subsidiaries do not originate or directly service residential mortgage loans. Rather, these activities are carried out by duly licensed subservicers who perform substantially all servicing functions for the loans underlying the MSR. The Company generally intends to hold the MSR as investments and elected to account for all of its investments in MSR at fair value. As such, they are recognized at fair value in the accompanying Consolidated Statements of Financial Condition with changes in the estimated fair value presented as a component of Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
The following table presents activity related to MSR for the three and nine months ended September 30, 2025 and 2024:  
 Mortgage Servicing RightsThree Months EndedNine Months Ended
September 30, 2025September 30, 2024September 30, 2025September 30, 2024
 (dollars in thousands)
Fair value, beginning of period$3,281,190 $2,785,614 $2,909,134 $2,122,196 
Purchases (1)
283,437 64,750 719,468 701,377 
Sales— (68,635)— (69,703)
Change in fair value due to:
Changes in valuation inputs or assumptions (2)
(28,647)(42,752)12,585 63,286 
Other changes, including realization of expected cash flows(59,799)(45,920)(165,006)(124,099)
Fair value, end of period$3,476,181 $2,693,057 $3,476,181 $2,693,057 
(1) Includes adjustments to original purchase price from early payoffs, defaults, or loans that were delivered but were deemed to not be acceptable.
(2) Principally represents changes in discount rates and prepayment speed inputs used in valuation model, primarily due to changes in interest rates.

8. VARIABLE INTEREST ENTITIES
The Company’s exposure to the obligations of its VIEs is generally limited to the Company’s investment in the VIEs of $3.0 billion at September 30, 2025. Assets of the VIEs may only be used to settle obligations of the VIEs. Creditors of the VIEs have no recourse to the general credit of the Company. The Company is not contractually required to provide and has not provided any form of financial support to the VIEs. No gains or losses were recognized upon consolidation of existing VIEs. Interest income and expense are recognized using the effective interest method.
Residential Securitizations
The Company also invests in residential mortgage-backed securities issued by entities that are VIEs because they do not have sufficient equity at risk for the entities to finance their activities without additional subordinated financial support from other parties. The Company is not the primary beneficiary because it does not have the power to direct the activities that most significantly impact the VIEs’ economic performance. For these entities, the Company’s maximum exposure to loss is the amortized cost basis of the securities it owns and it does not provide any liquidity arrangements, guarantees or other commitments to these VIEs. Refer to the “Securities” Note for further information on Residential Securities.
OBX Trusts
Residential securitizations are issued by entities generally referred to collectively as the “OBX Trusts.” These securitizations represent financing transactions that provide non-recourse financing to the Company and are collateralized by residential mortgage loans purchased by the Company. Residential securitizations closed as of September 30, 2025 are included in the following table:
14

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
SecuritizationDate of ClosingFace Value at Closing
(dollars in thousands)
OBX 2025-NQM1January 2025$618,433 
OBX 2025-NQM2February 2025$719,218 
OBX 2025-NQM3February 2025$577,442 
OBX 2025-NQM4March 2025$625,807 
OBX 2025-HE1March 2025$216,455 
OBX 2025-NQM5March 2025$334,879 
OBX 2025-NQM6April 2025$553,236 
OBX 2025-NQM7April 2025$572,441 
OBX 2025-J1May 2025$325,702 
OBX 2025-NQM8May 2025$595,560 
OBX 2025-NQM9May 2025$275,711 
OBX 2025-NQM10June 2025$623,602 
OBX 2025-NQM11June 2025$650,072 
OBX 2025-NQM12July 2025$274,468 
OBX 2025-NQM13July 2025$662,708 
OBX 2025-NQM14August 2025$701,027 
OBX 2025-NQM15August 2025$697,303 
OBX 2025-HE2August 2025$216,324 
OBX 2025-J2September 2025$304,395 
OBX 2025-NQM16September 2025$708,473 
OBX 2025-NQM17September 2025$298,662 
The Company is deemed to be the primary beneficiary and consolidates the OBX Trusts because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. Although the residential mortgage loans have been sold for bankruptcy and state law purposes, the transfers of the residential mortgage loans to the OBX Trusts did not qualify for sale accounting and are reflected as intercompany secured borrowings that are eliminated upon consolidation. Effective August 1, 2022, upon initial consolidation of new securitization entities, the Company elected to apply the measurement alternative for consolidated collateralized financing entities in order to simplify the accounting and valuation processes. The liabilities of these securitization entities are deemed to be more observable and are used to measure the fair value of the assets.
As of September 30, 2025 and December 31, 2024, a total carrying value of $26.3 billion and $19.5 billion, respectively, of bonds were held by third parties and the Company retained $3.0 billion and $2.3 billion, respectively, of MBS, which were eliminated in consolidation. The contractual principal amount of the OBX Trusts’ debt held by third parties was $26.8 billion and $20.5 billion at September 30, 2025 and December 31, 2024, respectively. During the three months ended September 30, 2025 and 2024, the Company recorded ($92.9) million and ($430.4) million, respectively, and ($322.9) million and ($339.6) million during the nine months ended September 30, 2025 and 2024, respectively, of unrealized gains (losses) on debt held by third parties issued by OBX Trusts, which is reported in Net gains (losses) on investments and other in the Company's Consolidated Statements of Comprehensive Income (Loss).
In September 2025, the Company exercised its optional redemption on OBX 2022-NQM8 and liquidated the securitization trust. Upon deconsolidation, there was a $0.4 million gain recognized in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss).
Structured Repurchase Transaction
The Company pledged securities retained from its OBX Trusts to a new structured repurchase transaction, OBX 2025-SR1, to diversify its financing sources. The OBX 2025-SR1 Trust is deemed to be a VIE because the entity does not have sufficient equity at risk to finance its activities without additional subordinated financial support. The Company is deemed to be the primary beneficiary and consolidates the OBX 2025-SR1 Trust because it has power to direct the activities that most significantly impact the OBX Trusts’ performance and holds a variable interest that could be potentially significant to these VIEs. The securities issued by the OBX 2025-SR1 Trust are recognized as Debt issued by securitization vehicles in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). The changes in the estimated fair value are presented within Net gains (losses) on investments and other.
The Company incurred $8.1 million and $5.0 million of costs during the three months ended September 30, 2025 and 2024, respectively, and $20.6 million and $14.0 million of costs during the nine months ended September 30, 2025 and 2024, respectively, in connection with these securitizations that were expensed as incurred.
15

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Residential Credit Fund
The Company manages a fund investing in participations in residential mortgage loans and mortgage-backed securities. The residential credit fund is deemed to be a VIE because the entity does not have sufficient equity at risk to permit the legal entity to finance its activities without additional subordinated financial support provided by any parties, including equity holders, as capital commitments are not considered equity at risk. The Company is not the primary beneficiary and does not consolidate the residential credit fund as its only interest in the fund is the management and performance fees that it earns, which are not considered variable interests in the entity. As of September 30, 2025 and December 31, 2024, the Company had outstanding participations issued in residential mortgage loans of $1.8 billion and $1.2 billion, respectively. These transfers do not meet the criteria for sale accounting and are accounted for as secured borrowings, thus the residential loans are reported as Loans, net and the associated liability is reported as Participations issued in the Consolidated Statements of Financial Condition. The Company elected the fair value option for participations issued with changes in fair value reflected in Net gains (losses) on investments and other in the Consolidated Statements of Comprehensive Income (Loss) to more accurately reflect the economics of the transfers as the underlying loans are carried at fair value through earnings.

9. DERIVATIVE INSTRUMENTS
Derivative instruments include, but are not limited to, interest rate swaps, options to enter into interest rate swaps (“swaptions”), TBA derivatives, U.S. Treasury and Secured Overnight Financing Rate (“SOFR”) futures contracts and certain forward purchase commitments. The Company may also enter into other types of mortgage derivatives such as interest-only securities, credit derivatives referencing the commercial mortgage-backed securities index and synthetic total return swaps. 
In connection with the Company’s investment/market rate risk management strategy, the Company economically hedges a portion of its interest rate risk by entering into derivative financial instrument contracts, which include interest rate swaps, swaptions and futures contracts. The Company may also enter into TBA derivatives, U.S. Treasury futures contracts, certain forward purchase commitments and credit derivatives to economically hedge its exposure to market risks. The purpose of using derivatives is to manage overall portfolio risk with the potential to generate additional income for distribution to stockholders. These derivatives are subject to changes in market values resulting from changes in interest rates, volatility, Agency mortgage-backed security spreads to U.S. Treasuries and market liquidity. The use of derivatives also creates exposure to credit risk relating to potential losses that could be recognized if the counterparties to these instruments fail to perform their obligations under the stated contract. Additionally, the Company may have to pledge cash or assets as collateral for the derivative transactions, the amount of which may vary based on the market value and terms of the derivative contract. In the case of market agreed coupon (“MAC”) interest rate swaps, the Company may make or receive a payment at the time of entering into such interest rate swaps, which represents fair value of these swaps, to compensate for the out of market nature of such interest rate swaps. Subsequent changes in fair value from inception of these interest rate swaps are reflected within Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). Similar to other interest rate swaps, the Company may have to pledge cash or assets as collateral for the MAC interest rate swap transactions. In the event of a default by the counterparty, the Company could have difficulty obtaining its pledged collateral as well as receiving payments in accordance with the terms of the derivative contracts.
Derivatives are recognized as either assets or liabilities at fair value in the Consolidated Statements of Financial Condition with changes in fair value recognized in the Consolidated Statements of Comprehensive Income (Loss). The changes in the estimated fair value are presented within Net gains (losses) on derivatives. None of the Company’s derivative transactions have been designated as hedging instruments for accounting purposes. 
The Company also maintains collateral in the form of cash on margin with counterparties to its interest rate swaps and other derivatives. In accordance with a clearing organization’s rulebook, the Company presents the fair value of centrally cleared interest rate swaps net of variation margin pledged or received under such transactions. At September 30, 2025 and December 31, 2024, ($1.9) billion and ($3.3) billion, respectively, of variation margin was reported as an adjustment to interest rate swaps, at fair value. Initial margin is reported in Cash and cash equivalents in the Consolidated Statements of Financial Condition.
Interest Rate Swap Agreements – Interest rate swap agreements are the primary instruments used to mitigate interest rate risk.  In particular, the Company uses interest rate swap agreements to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. The Company may have outstanding interest rate swap agreements where the floating leg is linked to the SOFR, the overnight index swap rate or another index. Interest rate swap agreements may or may not be cleared through a derivatives clearing organization (“DCO”). Uncleared interest rate swaps are fair valued using internal pricing models and compared to the counterparty market values. Centrally cleared interest rate swaps, including MAC interest rate swaps, are generally fair valued using the DCO’s market values. If an interest rate swap is terminated, the realized gain (loss) on the interest rate swap would be equal to the difference between the cash received or paid and fair value.
16

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Swaptions – Swaptions are purchased or sold to mitigate the potential impact of increases or decreases in interest rates.  Interest rate swaptions provide the option to enter into an interest rate swap agreement for a predetermined notional amount, stated term and pay and receive interest rates in the future. The Company’s swaptions are not centrally cleared. The premium paid or received for swaptions is reported as an asset or liability in the Consolidated Statements of Financial Condition. If a swaption expires unexercised, the realized gain (loss) on the swaption would be equal to the premium received or paid. If the Company sells or exercises a swaption, the realized gain (loss) on the swaption would be equal to the difference between the cash received or the fair value of the underlying interest rate swap received and the premium paid. The fair value of swaptions are estimated using internal pricing models and compared to the counterparty market values.
TBA Dollar Rolls – TBA dollar roll transactions are accounted for as a series of derivative transactions. The fair value of TBA derivatives is based on methods similar to those used to value Agency mortgage-backed securities.
Futures Contracts – Futures contracts are derivatives that track the prices of specific assets or benchmark rates. Short sales of futures contracts help to mitigate the potential impact of changes in interest rates on the portfolio performance. The Company maintains margin accounts which are settled daily with Futures Commission Merchants (“FCMs”). The margin requirement varies based on the market value of the open positions and the equity retained in the account. Futures contracts are fair valued based on exchange pricing.
Forward Purchase Commitments – The Company may enter into forward purchase commitments with counterparties whereby the Company commits to purchasing residential mortgage loans at a particular price, provided the residential mortgage loans close with the counterparties. The counterparties are required to deliver the committed loans on a “best efforts” basis.

The following table summarizes fair value information about the Company’s derivative assets and liabilities at September 30, 2025 and December 31, 2024:
Derivatives InstrumentsSeptember 30, 2025December 31, 2024
Assets(dollars in thousands)
Interest rate swaps$4,198 $21,226 
TBA derivatives24,074 8,635 
Futures contracts10,232 190,980 
Purchase commitments9,395 4,510 
Total derivative assets$47,899 $225,351 
Liabilities 
Interest rate swaps$25,350 $7,212 
TBA derivatives13,598 30,539 
Futures contracts157,255 16,650 
Purchase commitments2,897 5,185 
Total derivative liabilities$199,100 $59,586 














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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The following tables summarize certain characteristics of the Company’s interest rate swaps at September 30, 2025 and December 31, 2024:
September 30, 2025
Maturity
Current Notional (1)(2)
Weighted Average Pay RateWeighted Average Receive Rate
Weighted Average Years to Maturity (3)
(dollars in thousands)
0 - 3 years
$27,644,137 3.58%4.24%1.50
3 - 6 years
14,396,904 2.75%4.30%4.71
6 - 10 years
17,994,427 2.98%4.27%7.45
Greater than 10 years
1,949,430 3.37%4.26%22.27
Total / Weighted average$61,984,898 3.16%4.27%4.54
December 31, 2024
Maturity
Current Notional (1)(2)
Weighted Average
Pay Rate		Weighted Average Receive Rate
Weighted Average Years to Maturity (3)
(dollars in thousands)
0 - 3 years
$30,411,229 3.49%4.48%1.14
3 - 6 years
12,764,021 3.15%4.50%4.27
6 - 10 years
21,318,937 2.55%4.53%7.63
Greater than 10 years
1,559,384 3.40%4.41%23.25
Total / Weighted average$66,053,571 3.11%4.50%4.36
(1) As of September 30, 2025, 98% and 2% of the Company’s interest rate swaps were linked to SOFR and the Federal funds rate, respectively. As of December 31, 2024, 95% and 5% of the Company’s interest rate swaps were linked to SOFR and the Federal funds rate, respectively.
(2) As of September 30, 2025, notional amount includes $1.5 billion of forward starting pay fixed swaps. There were no forward starting swaps at December 31, 2024.
(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.

The following tables summarize certain characteristics of the Company’s TBA derivatives at September 30, 2025 and December 31, 2024:
September 30, 2025
Purchase and Sale Contracts for TBA DerivativesNotionalImplied Cost BasisImplied Market ValueNet Carrying Value
(dollars in thousands)
Purchase contracts$4,389,000 $4,207,018 $4,217,539 $10,521 
Sale contracts(215,000)(225,579)(225,624)(45)
Net TBA derivatives$4,174,000 $3,981,439 $3,991,915 $10,476 
December 31, 2024
Purchase and Sale Contracts for TBA DerivativesNotionalImplied Cost BasisImplied Market ValueNet Carrying Value
(dollars in thousands)
Purchase contracts$4,237,000 $4,239,001 $4,209,341 $(29,660)
Sale contracts(1,120,000)(1,080,943)(1,073,187)7,756 
Net TBA derivatives$3,117,000 $3,158,058 $3,136,154 $(21,904)






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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The following tables summarize certain characteristics of the Company’s futures derivatives at September 30, 2025 and December 31, 2024: 
September 30, 2025
 Notional - Long
Positions		Notional - Short
Positions		Weighted Average
Years to Maturity
 (dollars in thousands)
U.S. Treasury futures - 2 year
$— $(3,658,000)2.00
U.S. Treasury futures - 5 year
1,783,700 — 4.40
U.S. Treasury futures - 10 year and greater
— (11,869,500)11.95
Total$1,783,700 $(15,527,500)9.07
December 31, 2024
 Notional - Long
Positions		Notional - Short
Positions		Weighted Average
Years to Maturity
 (dollars in thousands)
U.S. Treasury futures - 2 year
$6,511,600 $— 1.98
U.S. Treasury futures - 5 year
1,960,500 — 4.40
U.S. Treasury futures - 10 year and greater
— (9,840,500)11.05
Total$8,472,100 $(9,840,500)7.11
The Company presents derivative contracts on a gross basis in the Consolidated Statements of Financial Condition. Derivative contracts may contain legally enforceable provisions that allow for netting or setting off receivables and payables with each counterparty.
The following tables present information about derivative assets and liabilities that are subject to such provisions and can be offset in the Company’s Consolidated Statements of Financial Condition at September 30, 2025 and December 31, 2024, respectively.
September 30, 2025
 Amounts Eligible for Offset 
 Gross AmountsFinancial InstrumentsCash CollateralNet Amounts
Assets(dollars in thousands)
Interest rate swaps, at fair value$4,198 $(971)$— $3,227 
TBA derivatives, at fair value24,074 (12,960)(9,910)1,204 
Futures contracts, at fair value10,232 (10,232)— — 
Purchase commitments9,395 — — 9,395 
Liabilities 
Interest rate swaps, at fair value$25,350 $(23,440)$— $1,910 
TBA derivatives, at fair value13,598 (9,482)— 4,116 
Futures contracts, at fair value157,255 (10,232)(147,023)— 
Purchase commitments2,897 — — 2,897 
December 31, 2024
 Amounts Eligible for Offset 
 Gross AmountsFinancial InstrumentsCash CollateralNet Amounts
Assets(dollars in thousands)
Interest rate swaps, at fair value$21,226 $(8,138)$— $13,088 
TBA derivatives, at fair value8,635 (879)(929)6,827 
Futures contracts, at fair value190,980 (16,650)— 174,330 
Purchase commitments4,510 — — 4,510 
Liabilities 
Interest rate swaps, at fair value$7,212 $(7,212)$— $— 
TBA derivatives, at fair value30,539 (19,495)— 11,044 
Futures contracts, at fair value16,650 (16,650)— — 
Purchase commitments5,185 — — 5,185 

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The effect of interest rate swaps in the Consolidated Statements of Comprehensive Income (Loss) is as follows:
Location on Consolidated Statements of Comprehensive Income (Loss)
 
Net Interest Component of Interest Rate Swaps (1)
Realized Gains (Losses) on Termination of Interest Rate Swaps (1)
Unrealized Gains (Losses) on Interest Rate Swaps (1)
For the three months ended(dollars in thousands)
September 30, 2025$191,891 $(3,187)$(188,961)
September 30, 2024$317,483 $(94,016)$(1,582,495)
For the nine months ended
September 30, 2025$569,086 $(78,768)$(1,434,745)
September 30, 2024$946,004 $(96,532)$(584,109)
(1) Included in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).
The effect of other derivative contracts in the Company’s Consolidated Statements of Comprehensive Income (Loss) is as follows:
Three Months Ended September 30, 2025
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$163,432 $(86,855)$76,577 
Futures (1)
(383,194)219,832 (163,362)
Purchase commitments— (5,266)(5,266)
Total
$(92,051)
(1) For the three months ended September 30, 2025, includes $5.1 million of realized gain and $5.8 million of unrealized gain related to SOFR futures.
Three Months Ended September 30, 2024
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$40,561 $(18,181)$22,380 
Net interest rate swaptions(21,180)(113,792)(134,972)
Futures (1)
(362,660)71,146 (291,514)
Purchase commitments— 9,124 9,124 
Total$(394,982)
(1) For the three months ended September 30, 2024, includes $35.5 million realized gain and $1.8 million of unrealized gain related to SOFR futures.
Nine Months Ended September 30, 2025
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$91,391 $32,381 $123,772 
Net interest rate swaptions(9,230)— (9,230)
Futures (1)
(314,896)(321,352)(636,248)
Purchase commitments— 7,173 7,173 
Total$(514,533)
(1) For the nine months ended September 30, 2025, includes $5.7 million of realized gain related to SOFR futures and $9.0 million of realized gain related to SOFR futures options.
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Nine Months Ended September 30, 2024
Derivative InstrumentsRealized Gain (Loss)Unrealized Gain (Loss)Amount of Gain/(Loss) Recognized in Net Gains (Losses) on Other Derivatives
(dollars in thousands)
Net TBA derivatives$15,694 $12,649 $28,343 
Net interest rate swaptions(33,511)(59,304)(92,815)
Futures (1)
(323,113)170,973 (152,140)
Purchase commitments— 4,870 4,870 
Total$(211,742)
(1) For the nine months ended September 30, 2024, includes $35.5 million of realized gain related to SOFR futures and ($6.8) million of realized loss related to SOFR futures options.
Certain of the Company’s derivative contracts are subject to International Swaps and Derivatives Association Master Agreements or other similar agreements which may contain provisions that grant counterparties certain rights with respect to the applicable agreement upon the occurrence of certain events such as (i) a decline in stockholders’ equity in excess of specified thresholds or dollar amounts over set periods of time, (ii) the Company’s failure to maintain its REIT status, (iii) the Company’s failure to comply with limits on the amount of leverage, and (iv) the Company’s stock being delisted from the New York Stock Exchange.
Upon the occurrence of any one of items (i) through (iv), or another default under the agreement, the counterparty to the applicable agreement has a right to terminate the agreement in accordance with its provisions. The aggregate fair value of all derivative instruments with the aforementioned features were in a net liability position at September 30, 2025 of $152.2 million, which represents the maximum amount the Company would be required to pay upon termination. This amount is fully collateralized.

10. FAIR VALUE MEASUREMENTS
The Company follows fair value guidance in accordance with GAAP to account for its financial instruments and MSR that are accounted for at fair value. The fair value of a financial instrument and MSR is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
GAAP requires classification of financial instruments and MSR into a three-level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
If the inputs used to measure the financial instrument and MSR fall within different levels of the hierarchy, the categorization is based on the lowest priority input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded at fair value in the Consolidated Statements of Financial Condition or disclosed in the related notes are categorized based on the inputs to the valuation techniques as follows:
Level 1 – inputs to the valuation methodology are quoted prices (unadjusted) for identical assets and liabilities in active markets.
Level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 – inputs to the valuation methodology are unobservable and significant to overall fair value.
The following is a description of the valuation methodologies used for instruments carried at fair value. These methodologies are applied to assets and liabilities across the three-level fair value hierarchy, with the observability of inputs determining the appropriate level.
Futures contracts and U.S. Treasury securities are valued using quoted prices for identical instruments in active markets and are classified as Level 1.
Residential Securities, interest rate swaps, swaptions and other derivatives are valued using quoted prices or internally estimated prices for similar assets using internal models. The Company incorporates common market pricing methods, including a spread measurement to the Treasury curve as well as underlying characteristics of the particular security including coupon, prepayment speeds, periodic and life caps, rate reset period and expected life of the security in its estimates of fair value. Fair value estimates for residential mortgage loans are generated by a discounted cash flow model and are primarily
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
based on observable market-based inputs including discount rates, prepayment speeds, delinquency levels, and credit losses. Management reviews and indirectly corroborates its estimates of the fair value derived using internal models by comparing its results to independent prices provided by dealers in the securities and/or third party pricing services. Certain liquid asset classes, such as Agency fixed-rate pass-throughs, may be priced using independent sources such as quoted prices for TBA securities.
Residential Securities, residential mortgage loans, interest rate swap and swaption markets and TBA derivatives are considered to be active markets such that participants transact with sufficient frequency and volume to provide transparent pricing information on an ongoing basis. The liquidity of the Residential Securities, residential mortgage loans, interest rate swaps, swaptions and TBA derivatives markets and the similarity of the Company’s securities to those actively traded enable the Company to observe quoted prices in the market and utilize those prices as a basis for formulating fair value measurements. Consequently, the Company has classified Residential Securities, residential mortgage loans, interest rate swaps, swaptions and TBA derivatives as Level 2.
The fair value of commercial mortgage-backed securities classified as available-for-sale is determined based upon quoted prices of similar assets in recent market transactions and requires the application of judgment due to differences in the underlying collateral. Consequently, commercial mortgage-backed securities carried at fair value are classified as Level 2.
For the fair value of debt issued by securitization vehicles, refer to the “Variable Interest Entities” Note for additional information.
The Company has classified its investments in MSR as Level 3. Fair value estimates for these investments are obtained from models, which use significant unobservable inputs in their valuations. These valuations primarily utilize discounted cash flow models that incorporate unobservable market data inputs including discount rates, prepayment rates, delinquency rates and costs to service. Model valuations are then compared to valuations obtained from third party pricing providers. Management reviews the valuations received from third party pricing providers and uses them as a point of comparison to modeled values. The valuation of MSR requires significant judgment by management and the third party pricing providers. Assumptions used for which there is a lack of observable inputs may significantly impact the resulting fair value and therefore the Company’s financial statements.
The following tables present the estimated fair values of financial instruments and MSR measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024. There were no transfers between levels of the fair value hierarchy during the periods presented.
September 30, 2025
 Level 1Level 2Level 3Total
Assets(dollars in thousands)
Securities
Agency mortgage-backed securities$— $83,317,819 $— $83,317,819 
Credit risk transfer securities— 330,647 — 330,647 
Non-Agency mortgage-backed securities— 1,414,259 — 1,414,259 
Loans
Residential mortgage loans— 4,008,299 — 4,008,299 
Mortgage servicing rights— — 3,476,181 3,476,181 
Interests in MSR— — 35,833 35,833 
Assets transferred or pledged to securitization vehicles— 29,512,309 — 29,512,309 
Derivative assets
Interest rate swaps— 4,198 — 4,198 
Other derivatives10,232 33,469 — 43,701 
Total assets$10,232 $118,621,000 $3,512,014 $122,143,246 
Liabilities
Debt issued by securitization vehicles$— $26,601,790 $— $26,601,790 
Participations issued— 1,831,657 — 1,831,657 
U.S. Treasury securities sold, not yet purchased2,442,570 — — 2,442,570 
Derivative liabilities
Interest rate swaps— 25,350 — 25,350 
Other derivatives157,255 16,495 — 173,750 
Total liabilities$2,599,825 $28,475,292 $— $31,075,117 
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
December 31, 2024
 Level 1Level 2Level 3Total
Assets(dollars in thousands)
Securities
Agency mortgage-backed securities$— $67,434,068 $— $67,434,068 
Credit risk transfer securities— 754,915 — 754,915 
Non-Agency mortgage-backed securities— 1,493,186 — 1,493,186 
   Commercial mortgage-backed securities— 74,278 — 74,278 
Loans
Residential mortgage loans— 3,546,902 — 3,546,902 
Mortgage servicing rights— — 2,909,134 2,909,134 
Assets transferred or pledged to securitization vehicles— 21,973,188 — 21,973,188 
Derivative assets
Interest rate swaps— 21,226 — 21,226 
Other derivatives190,980 13,145 — 204,125 
Total assets$190,980 $95,310,908 $2,909,134 $98,411,022 
Liabilities
Debt issued by securitization vehicles$— $19,540,678 $— $19,540,678 
Participations issued— 1,154,816 — 1,154,816 
U.S. Treasury securities sold, not yet purchased2,470,629 — — 2,470,629 
Derivative liabilities
Interest rate swaps— 7,212 — 7,212 
Other derivatives16,650 35,724 — 52,374 
Total liabilities$2,487,279 $20,738,430 $— $23,225,709 

Qualitative and Quantitative Information about Level 3 Fair Value Measurements
The Company considers unobservable inputs to be those for which market data is not available and that are developed using the best information available to us about the assumptions that market participants would use when pricing the asset. Relevant inputs vary depending on the nature of the instrument being measured at fair value. The sensitivities of significant unobservable inputs along with interrelationships between and among the significant unobservable inputs and their impact on the fair value measurements are described below. The effect of a change in a particular assumption in the sensitivity analysis below is considered independently from changes in any other assumptions. In practice, simultaneous changes in assumptions may not always have a linear effect on the inputs discussed below. Interrelationships may also exist between observable and unobservable inputs. Such relationships have not been included in the discussion below. For each of the individual relationships described below, the inverse relationship would also generally apply. For MSR, in general, increases in the discount, prepayment or delinquency rates or in annual servicing costs in isolation would result in a lower fair value measurement. A decline in interest rates could lead to higher-than-expected prepayments of mortgages underlying the Company’s investments in MSR, which in turn could result in a decline in the estimated fair value of MSR. Refer to the “Mortgage Servicing Rights” Note for additional information, including rollforwards.
The following table presents information about the significant unobservable inputs used for recurring fair value measurements for Level 3 MSR. The table does not give effect to the Company’s risk management practices that might offset risks inherent in these Level 3 investments.
Unobservable Input (1)
Range (Weighted Average) (2)
September 30, 2025December 31, 2024
Discount rate
5.1% - 11.8% (7.8%)
7.4% - 12.4% (8.4%)
Prepayment rate
4.5% - 23.8% (5.8%)
4.7% - 17.2% (5.6%)
Delinquency rate
0.2% - 3.2% (1.0%)
0.2% - 4.1% (1.3%)
Cost to service
$78 - $95 ($86)
$83 - $99 ($87)
(1) Represents rates, estimates and assumptions that the Company believes would be used by market participants when valuing these assets.
(2) Weighted average discount rate computed based on the fair value of MSR, weighted average prepayment rate, delinquency rate and cost to service based on unpaid principal balances of loans underlying the MSR.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The following table summarizes the estimated fair values for financial assets and liabilities that are not carried at fair value at September 30, 2025 and December 31, 2024.
 September 30, 2025December 31, 2024
 Carrying
Value		Fair
Value		Carrying
Value		Fair
Value
Financial liabilities
Repurchase agreements$75,118,963$75,118,963$65,688,923$65,688,923
Other secured financing1,025,0001,025,000750,000750,000
 
The carrying values of repurchase agreements and other secured financing approximate fair value and are considered Level 2 fair value measurements.

11.  INTANGIBLE ASSETS
Intangible assets, net
Finite life intangible assets are amortized over their expected useful lives. As part of the Company’s management internalization transaction, which closed on June 30, 2020, the Company recognized an intangible asset for the acquired assembled workforce of approximately $41.2 million based on the replacement cost of the employee base acquired by the Company.

The following table presents the activity of finite lived intangible assets for the nine months ended September 30, 2025.
Intangible Assets, net
(dollars in thousands)
Beginning balance January 1, 2025
$9,416 
Less: amortization expense(2,018)
Ending balance September 30, 2025
$7,398 
12. SECURED FINANCING
Reverse Repurchase and Repurchase Agreements – The Company finances a significant portion of its assets with repurchase agreements. At the inception of each transaction, the Company assessed each of the specified criteria in ASC 860, Transfers and Servicing, and has determined that each of the financing agreements should be treated as a secured financing.
The Company enters into reverse repurchase agreements to earn a yield on excess cash balances. To mitigate credit exposure, the Company monitors the market value of these securities and delivers or obtains additional collateral based on changes in market value of these securities. Generally, the Company receives or posts collateral with a fair value approximately equal to or greater than the value of the secured financing.
Reverse repurchase agreements and repurchase agreements with the same counterparty and the same maturity are presented net in the Consolidated Statements of Financial Condition when the terms of the agreements meet the criteria to permit netting. The Company reports cash flows on repurchase agreements as financing activities and cash flows on reverse repurchase agreements as investing activities in the Consolidated Statements of Cash Flows.
The Company had outstanding $75.1 billion and $65.7 billion of repurchase agreements with weighted average remaining maturities of 49 days and 32 days and weighted average rates of 4.36% and 4.76% at September 30, 2025 and December 31, 2024, respectively. In connection with its residential mortgage loans, the Company had select arrangements with counterparties to enter into repurchase agreements for $4.3 billion with remaining capacity of $2.5 billion at September 30, 2025.
At September 30, 2025 and December 31, 2024, the repurchase agreements had the following remaining maturities and collateral types: 
24

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
September 30, 2025
 Agency Mortgage-Backed SecuritiesCRTsNon-Agency Mortgage-Backed SecuritiesResidential Mortgage LoansCommercial Mortgage-Backed SecuritiesTotal Repurchase Agreements
 (dollars in thousands)
1 day$31,428,894 $— $46,133 $— $— $31,475,027 
2 to 29 days1,128,459 188,520 786,088 — — 2,103,067 
30 to 59 days13,069,517 — 544,223 445,868 — 14,059,608 
60 to 89 days22,173,764 — 574,103 211,837 — 22,959,704 
90 to 119 days4,499,627 — 79,295 — — 4,578,922 
Over 119 days (1)
2,764,725 — 536,307 1,122,103 — 4,423,135 
Total$75,064,986 $188,520 $2,566,149 $1,779,808 $— $79,599,463 
Amounts offset in accordance with netting arrangements(4,480,500)
Net amounts of Repurchase agreements as presented in the Consolidated Statements of Financial Condition$75,118,963 
December 31, 2024
 Agency Mortgage-Backed SecuritiesCRTsNon-Agency Mortgage-Backed SecuritiesResidential Mortgage LoansCommercial Mortgage-Backed SecuritiesTotal Repurchase Agreements
 (dollars in thousands)
1 day$— $— $— $— $— $— 
2 to 29 days28,603,831 405,341 861,271 — 66,010 29,936,453 
30 to 59 days34,496,443 116,087 682,037 251,357 — 35,545,924 
60 to 89 days692,255 47,583 545,684 — — 1,285,522 
90 to 119 days2,085 — 60,383 — — 62,468 
Over 119 days (1)
— — 332,040 1,139,604 — 1,471,644 
Total$63,794,614 $569,011 $2,481,415 $1,390,961 $66,010 $68,302,011 
Amounts offset in accordance with netting arrangements(2,613,088)
Net amounts of Repurchase agreements as presented in the Consolidated Statements of Financial Condition$65,688,923 
(1) Less than 1% of repurchase agreements had a remaining maturity over 1 year at September 30, 2025 and December 31, 2024.
The following table summarizes the gross amounts of reverse repurchase agreements and repurchase agreements, amounts offset in accordance with netting arrangements and net amounts of repurchase agreements and reverse repurchase agreements as presented in the Consolidated Statements of Financial Condition at September 30, 2025 and December 31, 2024. Refer to the “Derivative Instruments” Note for information related to the effect of netting arrangements on the Company’s derivative instruments.
 September 30, 2025December 31, 2024
 Reverse Repurchase AgreementsRepurchase AgreementsReverse Repurchase AgreementsRepurchase Agreements
 (dollars in thousands)
Gross amounts$4,515,504 $79,599,463 $2,613,088 $68,302,011 
Amounts offset(4,480,500)(4,480,500)(2,613,088)(2,613,088)
Netted amounts$35,004 $75,118,963 $— $65,688,923 
The fair value of collateral received in connection with reverse repurchase agreements as of September 30, 2025 was $4.5 billion, of which the Company sold $2.4 billion. The fair value of collateral received in connection with reverse repurchase agreements as of December 31, 2024 was $2.6 billion, of which the Company sold $2.5 billion. The amount of collateral sold is reported at fair value in the Company’s Consolidated Statements of Financial Condition as U.S. Treasury securities sold, not yet purchased.
Other Secured Financing - As of September 30, 2025, the Company had $2.1 billion in total committed credit facilities to finance a portion of its MSR portfolio. Outstanding borrowings under these facilities as of September 30, 2025 totaled $1.0 billion with maturities ranging between two months to two years. As of December 31, 2024, the Company had $1.6 billion in total committed credit facilities to finance a portion of its MSR portfolio. Outstanding borrowings under these facilities as of December 31, 2024 totaled $750.0 million with maturities ranging between one month to two years. The weighted average interest rate of the borrowings was 6.94% and 7.21% as of September 30, 2025 and December 31, 2024, respectively. Borrowings are reported in Other secured financing in the Company’s Consolidated Statements of Financial Condition.
25

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Investments pledged as collateral under secured financing arrangements and interest rate swaps, excluding residential mortgage loans of consolidated VIEs, had an estimated fair value and accrued interest of $81.7 billion and $374.6 million, respectively, at September 30, 2025 and $71.8 billion and $332.7 million, respectively, at December 31, 2024.

13. CAPITAL STOCK
(A)    Common Stock
The following table provides a summary of the Company’s common shares authorized, and issued and outstanding at September 30, 2025 and December 31, 2024.
Shares authorizedShares issued and outstanding
September 30, 2025December 31, 2024September 30, 2025December 31, 2024Par Value
Common stock
1,456,750,000 1,468,250,000 681,052,317 578,357,118 $0.01
In January 2022, the Company announced that its Board authorized the repurchase of up to $1.5 billion of its outstanding shares of common stock through December 31, 2024 (the “Prior Common Stock Repurchase Program”). In January 2025, the Company announced that its Board authorized the repurchase of up to $1.5 billion of its outstanding shares of common stock through December 31, 2029 (the “Current Common Stock Repurchase Program”). The Current Common Stock Repurchase Program replaced the Prior Common Stock Repurchase Program. During the three and nine months ended September 30, 2025 and 2024, no shares were repurchased under the Current Common Stock Repurchase Program or the Prior Common Stock Repurchase Program, respectively.
On September 20, 2024, the Company entered into separate Distribution Agency Agreements (collectively, the “Prior Sales Agreements”) with each of Barclays Capital Inc., BNP Paribas Securities Corp., BofA Securities, Inc., Citizens JMP Securities, LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., Morgan Stanley & Co., LLC, RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Prior Sales Agents”). Under the terms of the Prior Sales Agreements, the Company offered and sold shares of its common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Prior Sales Agents (the “Prior At-The-Market Sales Program”).
On May 8, 2025, the Company entered into separate Distribution Agency Agreements (collectively, the “Sales Agreements”) with each of Barclays Capital Inc., BNP Paribas Securities Corp., BofA Securities, Inc., BTIG, LLC, Citizens JMP Securities, LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., Morgan Stanley & Co., LLC, Piper Sandler & Co., RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC (the “Sales Agents”), which terminated and replaced the Prior Sales Agreements. Under the terms of the Sales Agreements, the Company may offer and sell shares of our common stock, having an aggregate offering price of up to $2.0 billion (the “Shares”), from time to time through any of the Sales Agents (the "Current At-The-Market Sales Program" and, together with the Prior At-The-Market Sales Program, the "at-the-market sales program").

During the three and nine months ended September 30, 2025, under the at-the-market sales program, the Company issued 39.0 million and 102.0 million shares for proceeds of $823.3 million and $2.1 billion, respectively, each net of commissions and fees. During the three and nine months ended September 30, 2024, under the at-the-market sales program, the Company issued 57.0 million and 57.6 million shares for proceeds of $1.1 billion and $1.2 billion, respectively, each net of commissions and fees.

(B)    Preferred Stock
The following is a summary of the Company’s cumulative redeemable preferred stock outstanding at September 30, 2025 and December 31, 2024. In the event of a liquidation or dissolution of the Company, the Company’s then outstanding preferred stock takes precedence over the Company’s common stock with respect to payment of dividends and the distribution of assets.
26

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Shares AuthorizedShares Issued And OutstandingCarrying ValueContractual Rate
Earliest Redemption Date (1)
Effective Date of Floating Rate Dividend Period
Floating Annual Rate (2)
September 30, 2025December 31, 2024September 30, 2025December 31, 2024September 30, 2025December 31, 2024
Fixed-rate(dollars in thousands)
Series J11,500,000 — 11,000,000 — 265,911 — 8.875%9/30/2030NANA
Fixed-to-floating rate
Series F28,800,000 28,800,000 28,800,000 28,800,000 696,910 696,910 6.95%9/30/20229/30/2022
3M Term SOFR + 4.993%
Series G17,000,000 17,000,000 17,000,000 17,000,000 411,335 411,335 6.50%3/31/20233/31/2023
3M Term SOFR + 4.172%
Series I17,700,000 17,700,000 17,700,000 17,700,000 428,324 428,324 6.75%6/30/20246/30/2024
3M Term SOFR + 4.989%
Total75,000,000 63,500,000 74,500,000 63,500,000 $1,802,480 $1,536,569 
(1) Subject to the Company’s right under limited circumstances to redeem preferred stock earlier in order to preserve its qualification as a REIT or under limited circumstances related to a change in control of the Company.
(2) For each series of fixed-to-floating rate cumulative redeemable preferred stock, the floating rate is calculated as 3-month CME Term SOFR (plus a spread adjustment of 0.26161%) plus the spread specified in the prospectus.
Each series of preferred stock has a par value of $0.01 per share and a liquidation and redemption price of $25.00, plus accrued and unpaid dividends through their redemption date. Through September 30, 2025, the Company had declared and paid all required quarterly dividends on the Company’s preferred stock.
During the three and nine months ended September 30, 2025, the Company issued 11,000,000 shares of its 8.875% Series J Preferred Stock, which included the exercise by the underwriters of their option to purchase an additional 1,000,000 shares of Series J Preferred Stock solely to cover over-allotments, for gross proceeds of $275 million before deducting the underwriting discount and other estimated offering expenses.
The Series F Fixed-to-Floating Rate Cumulative Preferred Stock, Series G Fixed-to-Floating Rate Cumulative Preferred Stock, Series I Fixed-to-Floating Rate Cumulative Preferred Stock and Series J Fixed-Rate Cumulative Preferred Stock rank senior to the common stock of the Company.
On December 31, 2024, the Board approved a repurchase plan for all of our existing outstanding Preferred Stock (as defined below) (the “Preferred Stock Repurchase Program”). Under the terms of the Preferred Stock Repurchase Program, we are authorized to repurchase up to an aggregate of 63,500,000 shares of Preferred Stock, comprised of up to (i) 28,800,000 shares of its 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series F Preferred Stock”), (ii) 17,000,000 shares of its 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series G Preferred Stock”), and (iii) 17,700,000 shares of its 6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series I Preferred Stock”, and together with Series F Preferred Stock and Series G Preferred Stock, the “Preferred Stock”). The aggregate liquidation value of the Preferred Stock that may be repurchased by the Company pursuant to the Preferred Stock Repurchase Program, as of September 30, 2025, was approximately $1.6 billion.

The Preferred Stock Repurchase Program became effective on January 1, 2025 and will expire on December 31, 2029, and replaced the Preferred Stock repurchase program, which was effective from November 2, 2022 and expired on December 31, 2024 (the “Prior Preferred Stock Repurchase Program”). No shares were repurchased with respect to the Preferred Stock Repurchase Program during the three and nine months ended September 30, 2025 or the Prior Preferred Stock Repurchase Program during the three and nine months ended September 30, 2024.










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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
(C)    Distributions to Stockholders
The following table provides a summary of the Company’s dividend distribution activity for the periods presented:
 For the Three Months Ended
For the Nine Months Ended
 September 30, 2025September 30, 2024September 30, 2025September 30, 2024
 (dollars in thousands, except per share data)
Dividends and dividend equivalents declared on common stock and share-based awards$479,660 $364,914 $1,355,722 $1,019,527 
Distributions declared per common share$0.70 $0.65 $2.10 $1.95 
Distributions paid to common stockholders after period end$476,737 $362,731 $476,737 $362,731 
Distributions paid per common share after period end$0.70 $0.65 $0.70 $0.65 
Date of distributions paid to common stockholders after period endOctober 31, 2025October 31, 2024October 31, 2025October 31, 2024
Dividends declared to series F preferred stockholders$17,190 $19,055 $51,637 $57,142 
Dividends declared per share of series F preferred stock$0.597 $0.662 $1.793 $1.984 
Dividends declared to series G preferred stockholders$9,481 $10,606 $28,172 $31,804 
Dividends declared per share of series G preferred stock$0.558 $0.624 $1.657 $1.871 
Dividends declared to series I preferred stockholders$10,795 $11,967 $32,074 $26,901 
Dividends declared per share of series I preferred stock$0.610 $0.676 $1.812 $1.520 
Dividends declared to series J preferred stockholders$— $— $— $— 
Dividends declared per share of series J preferred stock$— $— $— $— 


14.  INTEREST INCOME AND INTEREST EXPENSE
Refer to the “Significant Accounting Policies” Note for details surrounding the Company’s accounting policy related to net interest income on securities and loans.
The following table summarizes the interest income recognition methodology for Residential Securities:
 Interest Income Methodology
Agency 
Fixed-rate pass-through (1)
Effective yield (3)
Adjustable-rate pass-through (1)
Effective yield (3)
Multifamily (1)
Contractual Cash Flows
CMO (1)
Effective yield (3)
Reverse mortgages (2)
Prospective
Interest-only (2)
Prospective
Residential credit 
CRT (2)
Prospective
Non-QM (2)
Prospective
Prime (2)
Prospective
SBC (2)
Prospective
NPL/RPL (2)
Prospective
RTL (2)
Prospective
Prime jumbo (2)
Prospective
(1) Changes in fair value are recognized in Other comprehensive income (loss) in the accompanying Consolidated Statements of Comprehensive Income (Loss) for securities purchased prior to July 1, 2022. Effective July 1, 2022, changes in fair value are recognized in Net gains (losses) on investments and other in the accompanying Consolidated Statements of Comprehensive Income (Loss) for newly purchased securities.
(2) Changes in fair value are recognized in Net gains (losses) on investments and other in the accompanying Consolidated Statements of Comprehensive Income (Loss).
(3) Effective yield is recalculated for differences between estimated and actual prepayments and the amortized cost is adjusted as if the new effective yield had been applied since inception.



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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The following table presents the components of the Company’s interest income and interest expense for the three and nine months ended September 30, 2025 and 2024.
 For the Three Months Ended
For the Nine Months Ended
 September 30, 2025September 30, 2024September 30, 2025September 30, 2024
Interest income(dollars in thousands)
Agency securities$949,511 $789,403 $2,645,630 $2,331,698 
Residential credit securities33,462 49,863 110,522 156,754 
Residential mortgage loans (1)
505,527 346,031 1,399,541 899,867 
Commercial investment portfolio (1)
— 2,240 1,218 8,235 
Reverse repurchase agreements43,997 41,804 111,587 104,600 
Total interest income$1,532,497 $1,229,341 $4,268,498 $3,501,154 
Interest expense  
Repurchase agreements$852,175 $942,780 $2,388,876 $2,722,304 
Debt issued by securitization vehicles349,959 234,299 945,934 596,128 
Participations issued28,651 17,834 86,433 57,841 
U.S. Treasury securities sold, not yet purchased25,962 21,027 78,334 64,373 
Total interest expense1,256,747 1,215,940 3,499,577 3,440,646 
Net interest income$275,750 $13,401 $768,921 $60,508 
(1) Includes assets transferred or pledged to securitization vehicles.

15.  NET INCOME (LOSS) PER COMMON SHARE
The following table presents a reconciliation of net income (loss) and shares used in calculating basic and diluted net income (loss) per share for the three and nine months ended September 30, 2025 and 2024.
 For the Three Months Ended
For the Nine Months Ended
 September 30, 2025September 30, 2024September 30, 2025September 30, 2024
 (dollars in thousands, except per share data)
Net income (loss)$843,063 $82,351 $1,033,739 $538,692 
Net income (loss) attributable to noncontrolling interests10,618 15,906 19,971 18,838 
Net income (loss) attributable to Annaly 832,445 66,445 1,013,768 519,854 
Dividends on preferred stock (1)
41,127 41,628 115,544 115,847 
Net income (loss) available (related) to common stockholders$791,318 $24,817 $898,224 $404,007 
Weighted average shares of common stock outstanding-basic656,335,974 515,729,658 621,484,893 505,800,723 
Add: Effect of stock awards, if dilutive1,520,453 1,102,494 1,283,588 817,420 
Weighted average shares of common  stock outstanding-diluted657,856,427 516,832,152 622,768,481 506,618,143 
Net income (loss) per share available (related) to common share
Basic$1.21 $0.05 $1.45 $0.80 
Diluted$1.20 $0.05 $1.44 $0.80 
(1) The three and nine months ended September 30, 2025 include cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025.
The computations of diluted net income (loss) per share available (related) to common share for the three and nine months ended September 30, 2025 exclude approximately 1 thousand shares and 0 shares, respectively, and for the three and nine months ended September 30, 2024 exclude 0 shares and approximately 2 thousand shares, respectively, of potentially dilutive restricted stock units and performance stock units because their effect would have been anti-dilutive.

16.  INCOME TAXES
For the three months ended September 30, 2025, the Company was qualified to be taxed as a REIT under Code Sections 856 through 860. As a REIT, the Company will not incur federal income tax to the extent that it distributes its taxable income to its stockholders. To maintain qualification as a REIT, the Company must distribute at least 90% of its annual REIT taxable income to its stockholders and meet certain other requirements that relate to, among other things, assets it may hold, income it may generate and its stockholder composition. It is generally the Company’s policy to distribute 100% of its REIT taxable income.
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
To the extent there is any undistributed REIT taxable income at the end of a year, the Company distributes such shortfall within the next year as permitted by the Code.
The Company and certain of its direct and indirect subsidiaries, including Annaly TRS, Inc. and certain subsidiaries of joint ventures, have made separate joint elections to treat these subsidiaries as TRSs. As such, each of these TRSs is taxable as a domestic C corporation and subject to federal, state and local income taxes based upon their taxable income.
The provisions of ASC 740, Income Taxes (“ASC 740”), clarify the accounting for uncertainty in income taxes recognized in financial statements and prescribe a recognition threshold and measurement attribute for uncertain tax positions taken or expected to be taken on a tax return. ASC 740 also requires that interest and penalties related to unrecognized tax benefits be recognized in the financial statements. The Company does not have any unrecognized tax benefits that would affect its financial position. Thus, no accruals for penalties and interest were deemed necessary at September 30, 2025 and December 31, 2024.
The state and local tax jurisdictions for which the Company is subject to tax-filing obligations recognize the Company’s status as a REIT and, therefore, the Company generally does not pay income tax in such jurisdictions. The Company may, however, be subject to certain minimum state and local tax filing fees as well as certain excise, franchise or business taxes. The Company’s TRSs are subject to federal, state and local taxes. The Company’s federal, state and local tax returns from 2021 and forward remain open for examination.
During the three and nine months ended September 30, 2025, the Company recorded ($7.8) million and $0.9 million, respectively, of income tax expense/(benefit) attributable to its TRSs. During the three and nine months ended September 30, 2024, the Company recorded ($6.1) million and $4.9 million, respectively, of income tax expense/(benefit) attributable to its TRSs. Income tax expense/(benefit) consists of the following:

 For the Three Months Ended
For the Nine Months Ended
 September 30, 2025September 30, 2024September 30, 2025September 30, 2024
 (dollars in thousands)(dollars in thousands)
Current Tax Expense (Benefit)
Federal$20 $— $20 $— 
State and local— 28 13 41 
Total current income tax expense (benefit)$20 $28 $33 $41 
Deferred Tax Expense (Benefit)
Federal$(6,862)$(5,393)$745 $4,210 
State and local(981)(770)106 602 
Total deferred income tax expense (benefit)$(7,843)$(6,163)$851 $4,812 
Total income tax expense (benefit)$(7,823)$(6,135)$884 $4,853 
The difference between the Company's reported income tax provision and the U.S. federal statutory rate of 21.0% and state income tax rates is as follows:        
 For the Three Months Ended
For the Nine Months Ended
 September 30, 2025September 30, 2024September 30, 2025September 30, 2024
Statutory federal income tax rate21.0%21.0%21.0%21.0%
Non-taxable REIT income(22.6%)(3.2%)(20.7%)(19.9%)
State and local taxes3.0%3.0%3.0%3.0%
VIE and Other(2.4%)(28.9%)(3.2%)(3.2%)
Change in valuation allowance—%—%—%—%
Total provision(1.0%)(8.1%)0.1%0.9%
As of September 30, 2025, the Company recorded a net deferred tax asset of $89.4 million resulting primarily from loss carryforwards and securitization gains, and a net deferred tax liability of $159.3 million resulting primarily from unrealized gains on MSR, residential mortgage loans, and interest rate swaps, which are included in Other assets and Other liabilities, respectively, in the Consolidated Statements of Financial Condition. As of September 30, 2025, no valuation allowance was established.
As of September 30, 2025, the Company's TRSs had approximately $97.9 million of net operating loss carryforwards for federal income tax purposes which may be available to offset future taxable income, including approximately $7.9 million of
30

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
net operating loss carryforwards that are subject to an annual limitation under Internal Revenue Code Section 382 and $90.0 million that can be carried forward indefinitely.
As of September 30, 2025, the Company's TRSs had approximately $30.4 million of capital loss carryforwards for federal income tax purposes which can be carried back three years and forward up to five years to offset capital gains.

17.  SEGMENTS
The Company operates in three reportable segments further described in the Description of Business Note. The accounting policies applied to the segments are the same as those described in the summary of significant accounting policies, with the exception of allocations between segments related to net interest income and other comprehensive income (loss), which are reflected in Other income (loss), and allocations between segments related to investment balances, which are presented net of associated financings in Total Assets. These allocations are made to reflect the economic hedging relationship between investments within different operating segments. Activities that are not directly attributable or not allocated to any of the three current operating segments (such as investments in commercial mortgage-backed securities, preferred stock dividends and corporate existence costs) are reported under Corporate and Other as reconciling items to the Company’s consolidated financial statements. The tables below summarize the result of operations and total assets by segment that are provided to the Chief Operating Decision Maker (CODM), which is the Company’s Operating Committee. Comprehensive income is the measure of segment profit or loss that is determined in accordance with the measurement principles used in measuring the corresponding amounts in the consolidated financial statements and is a key determinant of the Company’s economic return (computed as the change in stockholders’ equity attributable to common stockholders plus common stock dividends declared divided by the prior period’s stockholders’ equity attributable to common stockholders), a measure which is used by the CODM to evaluate segment results and is one of the factors considered in determining capital allocation among the segments.
The following tables present the reportable operating segments related to the Company’s results of operations for the three and nine months ended September 30, 2025 and 2024:
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Three Months Ended September 30, 2025
 AgencyResi-creditMSRCorporate & OtherConsolidated
(dollars in thousands)
Interest income$992,588 $539,909 $— $— $1,532,497 
Interest expense811,177 445,570 — — 1,256,747 
Net interest income181,411 94,339 — — 275,750 
Servicing and related income— — 141,356 — 141,356 
Servicing and related expense— — 15,104 — 15,104 
Net servicing income— — 126,252 — 126,252 
Other income (loss)495,445 32,343 (45,910)1,700 483,578 
Less: Total general and administrative expenses17,827 16,755 9,423 6,335 50,340 
Income (loss) before income taxes659,029 109,927 70,919 (4,635)835,240 
Income taxes(281)(7,158)(341)(43)(7,823)
Net income (loss)659,310 117,085 71,260 (4,592)843,063 
Less: Net income (loss) attributable to noncontrolling interest— 10,618 — — 10,618 
Net income (loss) attributable to Annaly659,310 106,467 71,260 (4,592)832,445 
Dividends on preferred stock— — — 41,127 41,127 
Net income (loss) available (related) to common stockholders659,310 106,467 71,260 (45,719)791,318 
Unrealized gains (losses) on available-for-sale securities113,281 — — — 113,281 
Reclassification adjustment for net (gains) losses included in net income (loss)2,378 — — — 2,378 
Other comprehensive income (loss)115,659 — — — 115,659 
Comprehensive income (loss)774,969 117,085 71,260 (4,592)958,722 
Comprehensive income (loss) attributable to noncontrolling interests— 10,618 — — 10,618 
Comprehensive income (loss) attributable to Annaly$774,969 $106,467 $71,260 $(4,592)$948,104 
Noncash investing and financing activities:
Receivable for unsettled trades179,767 — 6,149 — 185,916 
Payable for unsettled trades2,497,495 22,067 84,716 — 2,604,278 
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment115,659 — — — 115,659 
Dividends declared, not yet paid— — — 476,737 476,737 
Total assets
Total assets$85,802,242 $35,811,143 $4,147,960 $100,227 $125,861,572 
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Three Months Ended September 30, 2024
 AgencyResi-creditMSRCorporate & OtherConsolidated
(dollars in thousands)
Interest income$830,407 $396,694 $— $2,240 $1,229,341 
Interest expense885,982 328,440 — 1,518 1,215,940 
Net interest income(55,575)68,254 — 722 13,401 
Servicing and related income— — 122,583 — 122,583 
Servicing and related expense— — 12,988 — 12,988 
Net servicing income— — 109,595 — 109,595 
Other income (loss)(6,658)36,028 (33,967)1,738 (2,859)
Less: Total general and administrative expenses16,154 13,868 8,876 5,023 43,921 
Income (loss) before income taxes(78,387)90,414 66,752 (2,563)76,216 
Income taxes23 (8,263)2,126 (21)(6,135)
Net income (loss)(78,410)98,677 64,626 (2,542)82,351 
Less: Net income (loss) attributable to noncontrolling interest— 15,906 — — 15,906 
Net income (loss) attributable to Annaly(78,410)82,771 64,626 (2,542)66,445 
Dividends on preferred stock— — — 41,628 41,628 
Net income (loss) available (related) to common stockholders(78,410)82,771 64,626 (44,170)24,817 
Unrealized gains (losses) on available-for-sale securities428,955 — — — 428,955 
Reclassification adjustment for net (gains) losses included in net income (loss)15,769 — — — 15,769 
Other comprehensive income (loss)444,724 — — — 444,724 
Comprehensive income (loss)366,314 98,677 64,626 (2,542)527,075 
Comprehensive income (loss) attributable to noncontrolling interests— 15,906 — — 15,906 
Comprehensive income (loss) attributable to Annaly$366,314 $82,771 $64,626 $(2,542)$511,169 
Noncash investing and financing activities:
Receivable for unsettled trades727,124 — 39,217 — 766,341 
Payable for unsettled trades1,811,196 — 74,090 — 1,885,286 
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment444,724 — — — 444,724 
Dividends declared, not yet paid— — — 362,731 362,731 
Total assets
Total assets$71,699,019 $26,235,097 $3,371,113 $210,766 $101,515,995 
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Nine Months Ended September 30, 2025
 AgencyResi-creditMSRCorporate & OtherConsolidated
(dollars in thousands)
Interest income$2,755,055 $1,512,225 $— $1,218 $4,268,498 
Interest expense2,260,746 1,237,966 — 865 3,499,577 
Net interest income494,309 274,259 — 353 768,921 
Servicing and related income— — 423,461 — 423,461 
Servicing and related expense— — 43,788 — 43,788 
Net servicing income— — 379,673 — 379,673 
Other income (loss)75,668 44,240 (88,243)2,786 34,451 
Less: Total general and administrative expenses51,694 48,178 28,059 20,491 148,422 
Income (loss) before income taxes518,283 270,321 263,371 (17,352)1,034,623 
Income taxes(121)(15,899)17,002 (98)884 
Net income (loss)518,404 286,220 246,369 (17,254)1,033,739 
Less: Net income (loss) attributable to noncontrolling interest— 19,971 — — 19,971 
Net income (loss) attributable to Annaly518,404 266,249 246,369 (17,254)1,013,768 
Dividends on preferred stock— — — 115,544 115,544 
Net income (loss) available (related) to common stockholders518,404 266,249 246,369 (132,798)898,224 
Unrealized gains (losses) on available-for-sale securities311,717 — — — 311,717 
Reclassification adjustment for net (gains) losses included in net income (loss)81,578 — — — 81,578 
Other comprehensive income (loss)393,295 — — — 393,295 
Comprehensive income (loss)911,699 286,220 246,369 (17,254)1,427,034 
Comprehensive income (loss) attributable to noncontrolling interests— 19,971 — — 19,971 
Comprehensive income (loss) attributable to Annaly$911,699 $266,249 $246,369 $(17,254)$1,407,063 
Noncash investing and financing activities:
Receivable for unsettled trades179,767 — 6,149 — 185,916 
Payable for unsettled trades2,497,495 22,067 84,716 — 2,604,278 
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment393,295 — — — 393,295 
Dividends declared, not yet paid— — — 476,737 476,737 
Total assets
Total assets$85,802,242 $35,811,143 $4,147,960 $100,227 $125,861,572 
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Nine Months Ended September 30, 2024
 AgencyResi-creditMSRCorporate & OtherConsolidated
(dollars in thousands)
Interest income$2,433,672 $1,059,247 $— $8,235 $3,501,154 
Interest expense2,563,077 872,118 — 5,451 3,440,646 
Net interest income(129,405)187,129 — 2,784 60,508 
Servicing and related income— — 358,182 — 358,182 
Servicing and related expense— — 37,821 — 37,821 
Net servicing income— — 320,361 — 320,361 
Other income (loss)109,384 189,851 (12,513)3,336 290,058 
Less: Total general and administrative expenses47,604 39,690 25,977 14,111 127,382 
Income (loss) before income taxes(67,625)337,290 281,871 (7,991)543,545 
Income taxes748 (9,966)14,195 (124)4,853 
Net income (loss)(68,373)347,256 267,676 (7,867)538,692 
Less: Net income (loss) attributable to noncontrolling interest— 18,838 — — 18,838 
Net income (loss) attributable to Annaly(68,373)328,418 267,676 (7,867)519,854 
Dividends on preferred stock— — — 115,847 115,847 
Net income (loss) available (related) to common stockholders(68,373)328,418 267,676 (123,714)404,007 
Unrealized gains (losses) on available-for-sale securities92,843 — — — 92,843 
Reclassification adjustment for net (gains) losses included in net income (loss)530,354 — — — 530,354 
Other comprehensive income (loss)623,197 — — — 623,197 
Comprehensive income (loss)554,824 347,256 267,676 (7,867)1,161,889 
Comprehensive income (loss) attributable to noncontrolling interests— 18,838 — — 18,838 
Comprehensive income (loss) attributable to Annaly$554,824 $328,418 $267,676 $(7,867)$1,143,051 
Noncash investing and financing activities:
Receivable for unsettled trades727,124 — 39,217 — 766,341 
Payable for unsettled trades1,811,196 — 74,090 — 1,885,286 
Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment623,197 — — — 623,197 
Dividends declared, not yet paid— — — 362,731 362,731 
Total assets
Total assets$71,699,019 $26,235,097 $3,371,113 $210,766 $101,515,995 


18.  RISK MANAGEMENT
The primary risks to the Company are liquidity and funding risk, investment/market risk, credit risk and operational risk. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the Company’s control. Changes in the general level of interest rates can affect net interest income, which is the difference between the interest income earned on interest earning assets and the interest expense incurred in connection with the interest bearing liabilities, by affecting the spread between the interest earning assets and interest bearing liabilities. Changes in the level of interest rates can also affect the value of the interest earning assets and the Company’s ability to realize gains from the sale of these assets. A decline in the value of the interest earning assets pledged as collateral for borrowings under repurchase agreements and derivative contracts could result in the counterparties demanding additional collateral or liquidating some of the existing collateral to reduce borrowing levels.
The Company may seek to mitigate the potential financial impact of these risks by entering into interest rate agreements such as interest rate swaps, interest rate swaptions and other hedges.
Weakness in the mortgage market, the shape of the yield curve, changes in the expectations for the volatility of future interest rates and deterioration of financial conditions in general may adversely affect the performance and market value of the Company’s investments. This could negatively impact the Company’s book value. Furthermore, if many of the Company’s lenders are unwilling or unable to provide additional financing, the Company could be forced to sell its investments at an inopportune time when prices are depressed. The Company has established policies and procedures for mitigating risks, including conducting scenario and sensitivity analyses and utilizing a range of hedging strategies.
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
The payment of principal and interest on the Freddie Mac and Fannie Mae Agency mortgage-backed securities, which exclude CRT securities issued by Freddie Mac and Fannie Mae, is guaranteed by those respective agencies and the payment of principal and interest on Ginnie Mae Agency mortgage-backed securities is backed by the full faith and credit of the U.S. government.
The Company faces credit risk on the portions of its portfolio which are not guaranteed by the respective Agency or by the full faith and credit of the U.S. government. The Company is exposed to credit risk on commercial mortgage-backed securities, residential mortgage loans, CRT securities and other non-Agency mortgage-backed securities. MSR values may also be adversely impacted by rising borrower delinquencies which would reduce servicing income and increase overall costs to service the underlying mortgage loans. The Company is exposed to risk of loss if an issuer, borrower or counterparty fails to perform its obligations under contractual terms. The Company has established policies and procedures for mitigating credit risk, including reviewing and establishing limits for credit exposure, limiting transactions with specific counterparties, pre-purchase due diligence, maintaining qualifying collateral, continually assessing the creditworthiness of issuers, borrowers and counterparties, credit rating monitoring and active servicer oversight.
The Company depends on third party service providers to perform various business processes related to its operations, including mortgage loan servicers and sub-servicers. The Company’s vendor management policy establishes procedures for engaging, onboarding and monitoring the performance of third party vendors. For mortgage loan servicers and sub-servicers, these procedures include assessing a vendor’s financial health as well as oversight of its compliance with applicable laws and regulations, cybersecurity and business continuity programs and security of personal information.

19.  LEASE COMMITMENTS AND CONTINGENCIES
The Company’s operating leases are primarily comprised of corporate office leases with remaining lease terms of approximately two years and seventeen years. The corporate office leases include options to extend for up to five years, however the extension terms were not included in the operating lease liability calculation. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. The lease cost for the three and nine months ended September 30, 2025 was $1.5 million and $4.2 million, respectively. The lease cost for the three and nine months ended September 30, 2024 was $0.8 million and $2.5 million, respectively.

Supplemental information related to leases as of and for the nine months ended September 30, 2025 was as follows:
Operating LeasesClassificationSeptember 30, 2025
Assets(dollars in thousands)
Operating lease right-of-use assetsOther assets$26,814 
Liabilities
Operating lease liabilities (1)
Other liabilities$31,606 
Lease term and discount rate
Weighted average remaining lease term16.4 years
Weighted average discount rate (1)
7.0%
Cash paid for amounts included in the measurement of lease liabilities
   Operating cash flows from operating leases$3,086 
(1) For the Company’s leases that do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at adoption date in determining the present value of lease payments.
The following table provides details related to maturities of lease liabilities:
Maturity of Lease Liabilities
Years ending December 31,(dollars in thousands)
2025 (remaining)$63 
2026261 
20272,503 
20283,854 
20293,831 
Later years52,041 
Total lease payments$62,553 
Less imputed interest30,947 
Present value of lease liabilities$31,606 
36

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 1. Financial Statements
Contingencies
From time to time, the Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, the ultimate disposition of these matters will not have a material effect on the Company’s consolidated financial statements. There were no material contingencies at September 30, 2025 and December 31, 2024.

20.  SUBSEQUENT EVENTS
In October 2025, the Company completed and closed three securitizations of residential mortgage loans: OBX 2025-NQM18, with a face value of $743.2 million and OBX 2025-J3, with a face value of $359.4 million, and OBX 2025-NQM19, with a face value of $707.2 million. These securitizations represent financing transactions which provided non-recourse financing to the Company collateralized by residential mortgage loans purchased by the Company.


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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements contained in this quarterly report, and certain statements contained in our future filings with the Securities and Exchange Commission (the “SEC” or the “Commission”), in our press releases or in our other public or stockholder communications 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 the Company’s 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, 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 the Company’s assets; changes in business conditions and the general economy; the Company’s ability to grow its residential credit business; the Company's ability to grow its mortgage servicing rights business; credit risks related to the Company’s investments in credit risk transfer securities and residential mortgage-backed securities and related residential mortgage credit assets; risks related to investments in mortgage servicing rights; the Company’s ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting the Company’s business; the Company’s ability to maintain its qualification as a REIT for U.S. federal income tax purposes; the Company’s ability to maintain its exemption from registration under the Investment Company Act of 1940; and operational risks or risk management failures by us or critical third parties, including cybersecurity incidents. 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.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our most recent annual report on Form 10-K. All references to “Annaly,” “we,” “us,” or “our” mean Annaly Capital Management, Inc. and all entities owned by us, except where it is made clear that the term means only the parent company.  Refer to the section titled “Glossary of Terms” located at the end of this Item 2 for definitions of commonly used terms in this quarterly report on Form 10-Q.


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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
INDEX TO ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Page
Earnings Available for Distribution, Earnings Available for Distribution Attributable to Common Stockholders, Earnings Available for Distribution Per Average Common Share and Annualized EAD Return on Average Equity
Unrealized Gains and Losses - Available-for-Sale Investments
Maturity Profile and Interest Rate Sensitivity
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Overview
We are a leading diversified capital manager with investment strategies across mortgage finance. Our principal business objective is to generate net income for distribution to our stockholders and optimize our returns through prudent management of our diversified investment strategies. We are an internally-managed Maryland corporation founded in 1997 that has elected to be taxed as a REIT. Our common stock is listed on the New York Stock Exchange under the symbol “NLY.”
We use our capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities.
For a full discussion of our business, refer to the section titled “Business Overview” in our most recent Annual Report on Form 10-K.

Business Environment
The U.S. economy remained resilient in the third quarter of 2025 (“Q3 2025”), with growth roughly on pace with the prior quarter (“Q2 2025”) ahead of a government shutdown that began October 1, 2025, which has delayed official economic data for September. Growth was supported by healthy consumer spending, particularly from high earners, and strong business investment related to artificial intelligence (“AI”), despite lingering uncertainty around tariffs and immigration. Inflation remained well above the Federal Reserve’s (the “Fed”) inflation target, though the anticipated uptick in goods inflation resulting from higher tariffs has been more muted than expected thus far. However, labor market conditions weakened, with hiring slowing to roughly 30,000 jobs per month for the period between June and August 2025. Although the unemployment rate has moved only slightly higher over the same period, the Fed cut interest rates at its Federal Open Market Committee (“FOMC”) meeting in September as the outlook highlights growing risks to the Fed’s employment mandate.
U.S. Treasury yields fell modestly in Q3 2025 and the yield curve steepened, as markets expected modestly lower policy rates going forward. In addition, concerns about the U.S. debt outlook eased following the passage of tax reform in Congress in early July 2025, robust tariff revenues – currently are running at approximately $30 billion per month – and a shift in Treasury issuance towards the front-end of the yield curve. The reduced concerns led to lower Treasury term premia and a widening in swap spreads, which benefited our portfolio given the current allocation of swaps in our hedge book. In addition, interest rate volatility declined to the lowest levels since the onset of the Fed’s hiking cycle in 2022, providing another benefit to our portfolio by lowering convexity costs and helping to tighten Agency MBS spreads.
In this environment, Annaly generated earnings available for distribution of $0.73 per share, thereby outearning our current dividend, which was raised in the first quarter of the year, for the fourth consecutive quarter – and delivered an economic return of 8.1% for Q3 2025 and 11.5% for 2025 year-to-date. Annaly’s economic leverage decreased slightly to 5.7x while cash and unencumbered Agency MBS totaled $5.9 billion, with total assets available for financing increasing to $8.8 billion during the quarter. Moreover, we remained opportunistic in the capital markets by raising approximately $1.1 billion of equity in the third quarter, including $823 million through our at-the-market sales program. We also issued Annaly’s first preferred stock issuance since 2019, and the first non-rated residential mortgage REIT preferred issuance since September 2022, raising $275 million in gross proceeds before deducting the underwriting discount and other estimated offering expenses. While all three of our businesses grew over the quarter, most of the new capital was deployed into MBS given lower realized interest rate and mortgage basis volatility and still historically attractive spreads relative to swap hedges.
Our Agency MBS portfolio ended the quarter at $87.3 billion in market value, up 10% quarter-over-quarter, as MBS performance was supported by the constructive macro backdrop. Early in the quarter, we added MBS in line with our accretive capital raise across the coupon stack and added roughly $1.1 billion in Agency CMBS. However, as higher coupons started to look more attractive, we favored specified pools in 5.5% and 6.0% coupons to further our methodical portfolio construction of recent quarters. As of September 30, 2025, nearly three-quarters of our 6.0% coupon specified pool holdings and 95% of our 6.5% coupon specified pool holdings have medium-to-high quality characteristics that provide call protection as rates rally.
Supply and demand technical factors continued to improve in the Agency MBS sector as fixed income flows were an estimated 50% higher than the same quarter a year ago. In addition, CMO creation has been running at over $30 billion per month, which has helped distribute MBS supply to a wider range of investors. Mortgage spreads tightened by 8 to 12 basis points (“bps”) relative to Treasury hedges over the course of the quarter, with lower and intermediate coupons showing the strongest performance. As mortgage rates declined to the lowest levels in nearly a year, investors increased their prepayment expectations on recently issued higher coupon mortgages, in turn shortening the duration of the securities and negatively impacting their return potential. This quickly shifted investor demand from production coupons to lower and intermediate coupons, with little recent production driving them to outperform.
Within our hedge portfolio, we added hedges alongside new asset purchases, with a bias toward swap hedges in the front end of the yield curve. The additional interest income from hedging with swaps provides adequate compensation for assuming the risk
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
of swap spread tightening. Further out the curve our hedge allocation is more balanced between swap and Treasury-based hedges, though our hedge allocation increased modestly in Q3 2025.
Overall, we remain optimistic with respect to the Agency MBS sector. While spreads have tightened meaningfully in Q3 2025, it was achieved with minimal support from banks or overseas investors. The continuation of the Fed cutting cycle should make MBS more attractive for the overseas community and potential regulatory reform is anticipated to help spur bank demand. Interest rate volatility should remain subdued as the Fed continues their path towards a neutral policy setting, while a steeper curve is likely to reduce option costs for our MBS portfolio.
Our Residential Credit business saw its portfolio increase by $265 million to $6.9 billion in economic market value of assets during the quarter. Investment grade assets in the residential credit market tightened during the quarter with Non-QM “AAA”-rated securities roughly 15 bps tighter, providing a supportive backdrop for securitization issuance, which is running at the second largest gross issuance since 2008 at $160 billion year-to-date. Within this environment, we believe Onslow Bay’s securitization platform continues to be well positioned to benefit from the growth of the private label market, demonstrated by closing a record eight securitizations for $3.9 billion in unpaid principal balance (“UPB”) in Q3 2025, generating $479 million of high yielding, proprietary securities for Annaly and our joint venture. Onslow Bay has now priced 24 securitizations, including 3 after the end of the third quarter, representing $12.4 billion of UPB since the beginning of 2025, solidifying Annaly as the largest non-bank issuer in the residential credit market.
The strong securitization volumes came as the Onslow Bay correspondent channel also achieved record setting quarterly volumes across both loan locks and fundings, while remaining disciplined regarding our credit strategy. The correspondent channel locked $6.2 billion and funded $4.0 billion in whole loans in Q3 2025 with the quarter end locked pipeline representing a 765 weighted-average FICO score, a 68% weighted-average combined loan-to-value ratio and over 96% first lien exposure. In addition, Annaly redeemed OBX 2022-NQM8 during the quarter, exercising the transaction’s three-year call as we expect there to be significant embedded value in our late 2022 vintage and 2023 vintage Non-QM issuances given current securitization cost of funds and pricing in the Non-QM whole loan market.
The housing market continues to experience little to slightly negative home price appreciation on a year-over-year basis, as consistently elevated mortgage rates weigh on affordability. We expect continued pressure on housing into the winter seasonals as “available for sale” inventory has increased, although cumulative depreciation should be modest given the longer-term, positive housing market fundamentals. For now, we intend to remain disciplined by maintaining a high credit quality portfolio with a continued focus on manufacturing proprietary assets through our market leading correspondent channel. Approximately 75% of our residential credit exposure is comprised of OBX securities and residential whole loans, providing full control over both the acquisition and management of the assets.
In our mortgage servicing rights (“MSR”) business, we purchased roughly $17 billion in UPB across three bulk packages and our flow network during the quarter. In addition, we announced a new partnership with PennyMac Financial Services (“Pennymac”), adding another industry leading mortgage originator and servicer to our existing set of “best-in-class” subservicing and recapture partners. As part of this new relationship, we agreed to purchase $12 billion of low note rate MSR from Pennymac, whereby Pennymac will perform all subservicing and recapture responsibilities for the portfolio sold.
Meanwhile, we believe our MSR portfolio should remain insulated against a potential spike in refinancing activity, as the aggregate borrower is approximately 300 bps out of the money with a 3.27% note rate and the portfolio continues to exhibit highly predictable, durable cash flows, paying 4.6 CPR over the last three months ended September 30, 2025. The associated fundamentals remained positive as well, evidenced by the portfolio’s serious delinquencies being unchanged at 50 bps, escrow balances increasing 7% year-over-year, better-than-expected float income, and declining subservicing costs given increased technological investments across our servicing partners.
Looking ahead, we remain optimistic about our portfolio’s ability to deliver attractive risk-adjusted returns. We expect our investment strategies to be well-positioned for the balance of 2025 given declining macro-volatility, additional expected Fed interest rate cuts and healthy fixed income demand. While our outlook remains positive, we have carefully built our portfolio to guard against uncertainty and are flexible in the current investing climate with historically low leverage and significant liquidity. We believe Annaly’s diversified housing finance model has yielded proven results, having generated a 13% average annual economic return over the trailing three year period since scaling each business.
Economic return, earnings available for distribution and economic leverage are non-GAAP financial measures. Refer to "Non-GAAP Financial Measures" for additional information, including a reconciliation to their most directly comparable GAAP results.
Economic Environment
Delays in official economic data releases due to the ongoing government shutdown have limited our ability to gauge the current state of the U.S. economy. Nonetheless, real economic growth appears to have remained strong in Q3 2025 with the Bloomberg median economists’ forecast indicating that gross domestic product rose 2.7% on a seasonally adjusted annualized rate
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
(“SAAR”), above the 1.6% SAAR average growth seen in the first half of 2025. Measures of consumption through the month of August show healthy consumer spending with consumption growth tracking 2.8% SAAR in the third quarter – a growth rate consistent with the 2.9% SAAR expansion in 2024 and a rebound from the 1.5% SAAR gain in the first six months of the year. However, consumers – especially lower income consumers – seem cautious as low savings rates, a slowing labor market, and declining confidence appear to weigh on spending behavior going forward. Of note, nonresidential investment activity – particularly related to AI – rebounded in the third quarter while residential investment activity remained muted.
The labor market continued to slow in Q3 2025. According to the Bureau of Labor Statistics, seasonally adjusted total non-farm payroll employment rose an average of 55,500 workers per month in the first two months of the third quarter, below the nearly 83,000 workers per month gained in the first half of 2025 or the nearly 168,000 workers per month gained in 2024. The unemployment rate has gradually ticked up, reaching 4.3% as of August – the highest reading since October 2021. Yet, the supply and demand for workers remained in balance with the ratio of job openings per unemployed at 0.98 in August, compared to 1.42 in December 2023. At the same time, wage growth, as measured by the year-over-year change in Average Hourly Earnings, dropped moderately to 3.7% in August from 3.9% at the beginning of the year.
Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditures (“PCE”) Price Index, remain above the Fed’s 2% inflation target, and disinflationary progress has stalled. Total PCE prices over the 12 months ended in August increased marginally to 2.7% compared to the 2.6% recorded by the same metric in June. Core PCE inflation, which excludes volatile food and energy prices, also ticked up to 2.9% in August from 2.8% in June. While tariff-related inflation pressures have been uneven and overall lower-than-expected, the inflation trend has leveled off, driven by rising goods prices and sticky services prices. Moreover, the forecast for inflation remains uncertain due to the most significant increase in the effective tariff rate in decades, whose full impact has yet to materialize.
The Fed conducts monetary policy with a dual mandate: full employment and price stability. Despite the slow progress on inflation, the FOMC cut the target range for the Federal Funds rate by 25 bps to 4.00% - 4.25% at their September meeting given the weakness in the labor market. Updated forecasts from the FOMC showed a median of two additional 25 bps cuts for the remainder of 2025, and one 25 bp per year in 2026 and 2027. Fed Chair Jerome Powell highlighted that the risk of weak employment growth had risen, which justified a lower rate path under their risk management framework but also argued for maintaining a restrictive stance while the FOMC assesses the appropriate monetary policy response. The updated economic forecast now expects higher growth and gradual improvement in the unemployment rate across the projection horizon while inflation projections for 2026 rose. Meanwhile, regarding the FOMC’s balance sheet policy, the Fed did not make any additional announcements and maintained its monthly redemption cap of Treasury and Agency MBS holdings at $5 billion and $35 billion, respectively.
The continued resilience of the U.S. economy supported strong financial market performance in the third quarter, with both equities and bonds rebounding from tariff-related concerns in Q2 2025. Equity market strength was driven by the ongoing AI boom, solid corporate earnings, and the Fed’s rate cut. Meanwhile, the Fed’s easing bias pushed interest rate expectations lower, particularly at the front end of the Treasury curve, while longer-dated Treasuries continued to reflect caution around fiscal risks and persistent inflation. The 10-year Treasury yield ended the quarter at 4.15%, down 8 bps from the prior quarter, and interest rate volatility fell to its lowest levels in many years. In this low volatility environment the mortgage basis, defined as the spread between the 30-year Agency MBS coupon and 10-year U.S. Treasury rate, tightened by 20 bps over the quarter.

The following table presents interest rates and spreads at each date presented:
 September 30, 2025June 30, 2025December 31, 2024September 30, 2024
30-Year mortgage current coupon5.20%5.48%5.83%4.96%
Mortgage basis105 bps125 bps126 bps118 bps
10-Year U.S. Treasury rate4.15%4.23%4.57%3.78%
OIS SOFR Swaps
1-Month4.13%4.33%4.32%4.86%
6-Month3.83%4.15%4.25%4.31%


Income Tax Reform
On July 4, 2025, H.R. 1, also known as the One Big Beautiful Bill Act (the “OBBB”), was signed into law. The OBBB makes material changes to U.S. tax law, including some provisions that affect the taxation of REITs and their investors. In particular, the OBBB (i) permanently extends the 20% deduction for “qualified REIT dividends” for individuals and other non-corporate
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
taxpayers under Section 199A of the Code and (ii) increases the percentage limit under the REIT asset test applicable to taxable REIT subsidiaries from 20% to 25% for taxable years beginning after December 31, 2025. The results of the OBBB changes are not expected to have a material effect on the Company’s financial operations or related disclosures.

Results of Operations
The results of our operations are affected by various factors, many of which are beyond our control. Certain of such risks and uncertainties are described herein (see “Special Note Regarding Forward-Looking Statements” above) and in Part I, Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K and in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q.
This Management Discussion and Analysis section contains analysis and discussion of financial results computed in accordance with U.S. generally accepted accounting principles (“GAAP”) and non-GAAP measurements. To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide non-GAAP financial measures to enhance investor understanding of our period-over-period operating performance and business trends, as well as for assessing our performance versus that of industry peers.
Refer to the “Non-GAAP Financial Measures” section for additional information.



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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Net Income (Loss) Summary
The following table presents financial information related to our results of operations as of and for the three and nine months ended September 30, 2025 and 2024.
 
As of and for the Three Months Ended September 30,
As of and for the Nine Months Ended September 30,
 2025202420252024
 (dollars in thousands, except per share data)
Interest income$1,532,497 $1,229,341 $4,268,498 $3,501,154 
Interest expense1,256,747 1,215,940 3,499,577 3,440,646 
Net interest income275,750 13,401 768,921 60,508 
Servicing and related income141,356 122,583 423,461 358,182 
Servicing and related expense15,104 12,988 43,788 37,821 
Net servicing income126,252 109,595 379,673 320,361 
Other income (loss)483,578 (2,859)34,451 290,058 
Less: Total general and administrative expenses50,340 43,921 148,422 127,382 
Income (loss) before income taxes835,240 76,216 1,034,623 543,545 
Income taxes(7,823)(6,135)884 4,853 
Net income (loss)843,063 82,351 1,033,739 538,692 
Less: Net income (loss) attributable to noncontrolling interests10,618 15,906 19,971 18,838 
Net income (loss) attributable to Annaly832,445 66,445 1,013,768 519,854 
Less: Dividends on preferred stock (1)
41,127 41,628 115,544 115,847 
Net income (loss) available (related) to common stockholders$791,318 $24,817 $898,224 $404,007 
Net income (loss) per share available (related) to common stockholders
Basic$1.21 $0.05 $1.45 $0.80 
Diluted$1.20 $0.05 $1.44 $0.80 
Weighted average number of common shares outstanding
Basic656,335,974 515,729,658 621,484,893 505,800,723 
Diluted657,856,427 516,832,152 622,768,481 506,618,143 
Other information
Investment portfolio at period-end$122,095,347 $97,742,854 $122,095,347 $97,742,854 
Average total assets$119,001,732 $97,592,286 $111,668,799 $94,973,839 
Average equity$14,235,471 $11,901,427 $13,563,101 $11,661,014 
GAAP leverage at period-end (2)
7.1:16.9:17.1:16.9:1
GAAP capital ratio at period-end (3)
11.9%12.4%11.9%12.4%
Annualized return (loss) on average total assets2.83%0.34%1.23%0.76%
Annualized return (loss) on average equity (4)
23.69%2.77%10.16%6.16%
Net interest margin (5)
0.97%0.06%0.96%0.09%
Average yield on interest earning assets (6)
5.40%5.16%5.34%5.07%
Average GAAP cost of interest bearing liabilities (7)

4.73%5.42%4.75%5.42%
Net interest spread0.67%(0.26%)0.59%(0.35%)
Weighted average experienced CPR for the period8.6%7.6%8.1%7.0%
Weighted average projected long-term CPR at period-end10.4%11.9%10.4%11.9%
Common stock book value per share$19.25 $19.54 $19.25 $19.54 
Non-GAAP metrics *
Interest income (excluding PAA)$1,550,887 $1,250,706 $4,295,322 $3,512,200 
Economic interest expense (7)
$1,051,717 $882,244 $2,892,293 $2,459,504 
Economic net interest income (excluding PAA)$499,170 $368,462 $1,403,029 $1,052,696 
Premium amortization adjustment cost (benefit)$18,390 $21,365 $26,824 $11,046 
Earnings available for distribution (8)
$519,882 $382,509 $1,471,645 $1,117,610 
Earnings available for distribution per average common share (1)
$0.73 $0.66 $2.18 $1.98 
Annualized EAD return on average equity (excluding PAA)14.70%12.95%14.56%12.88%
Economic leverage at period-end (2)
5.7:15.7:15.7:15.7:1
Economic capital ratio at period-end (3)
14.8%14.6%14.8%14.6%
Net interest margin (excluding PAA) (5)
1.70%1.52%1.70%1.51%
Average yield on interest earning assets (excluding PAA) (6)
5.46%5.25%5.37%5.09%
Average economic cost of interest bearing liabilities (7)
3.96%3.93%3.93%3.87%
Net interest spread (excluding PAA)1.50%1.32%1.44%1.22%
 
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information.
(1) The three and nine months ended September 30, 2025 include cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025.
(2) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced (“TBA”) derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us and are excluded from economic leverage.
(3) GAAP capital ratio is computed as total equity divided by total assets. Economic capital ratio is computed as total equity divided by total economic assets. Total economic assets include the implied market value of TBA derivatives and net of debt issued by securitization vehicles and participations issued.
(4) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 5.92% and 0.69% for the three months ended September 30, 2025 and 2024, respectively, and 7.62% and 4.62% for the the nine months ended September 30, 2025 and 2024, respectively.
(5) Net interest margin represents our interest income less interest expense divided by the average interest earning assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of our interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract 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, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).
(8) Excludes dividends on preferred stock.

GAAP
Net income (loss) was $843.1 million, which includes $10.6 million attributable to noncontrolling interests, or $1.21 per average basic common share, for the three months ended September 30, 2025, compared to $82.4 million, which includes $15.9 million attributable to noncontrolling interests, or $0.05 per average basic common share, for the same period in 2024. We attribute the majority of the change in net income (loss) to favorable changes in net gains (losses) on derivatives, net interest income, and net servicing income, partially offset by an unfavorable change in net gains (losses) on investments and other. Net gains (losses) on derivatives was ($92.3) million for the three months ended September 30, 2025 compared to ($1.8) billion for the same period in 2024. Net interest income for the three months ended September 30, 2025 was $275.8 million, compared to $13.4 million for the same period in 2024. Net servicing income for the three months ended September 30, 2025 was $126.3 million, compared to $109.6 million for the same period in 2024. Net gains (losses) on investments and other was $561.9 million for the three months ended September 30, 2025, compared to $1.7 billion for the same period in 2024.
Net income (loss) was $1.0 billion, which includes $20.0 million attributable to noncontrolling interests, or $1.45 per average basic common share, for the nine months ended September 30, 2025, compared to $538.7 million, which includes $18.8 million attributable to noncontrolling interests, or $0.80 per average basic common share, for the same period in 2024. We attribute the majority of the change in net income (loss) to favorable changes in net gains (losses) on investments and other, net interest income, and net servicing income, partially offset by an unfavorable change in net gains (losses) on derivatives. Net gains (losses) on investments and other was $1.5 billion for the nine months ended September 30, 2025, compared to $160.8 million for the same period in 2024. Net interest income for the nine months ended September 30, 2025 was $768.9 million, compared to $60.5 million for the same period in 2024. Net servicing income for the nine months ended September 30, 2025 was $379.7 million, compared to $320.4 million for the same period in 2024. Net gains on derivatives for the nine months ended September 30, 2025 was ($1.5) billion, compared to $53.6 million for the same period in 2024. Refer to the section titled “Other income (loss)” located within this Item 2 for additional information related to these changes.

Non-GAAP
Earnings available for distribution were $519.9 million, or $0.73 per average common share, for the three months ended September 30, 2025, compared to $382.5 million, or $0.66 per average common share, for the same period in 2024. The change in earnings available for distribution during the three months ended September 30, 2025, compared to the same period in 2024, was primarily due to higher coupon income, resulting from higher residential mortgage loan and securities balances and purchasing securities higher up in the coupon stack. This change was partially offset by an unfavorable change in the net interest component of interest rate swaps and higher interest expense resulting from higher securitized debt balances from new securitizations and higher average rates, partially offset by lower interest expense on repurchase agreements from lower average rates despite higher average repurchase agreement balances.
45

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Earnings available for distribution were $1.5 billion, or $2.18 per average common share, for the nine months ended September 30, 2025, compared to $1.1 billion, or $1.98 per average common share, for the same period in 2024. The change in earnings available for distribution during the nine months ended September 30, 2025, compared to the same period in 2024, was primarily due to higher coupon income, resulting from higher residential mortgage loan and securities balances and purchasing securities higher up in the coupon stack, and higher net servicing income on higher balances. This change was partially offset by an unfavorable change in the net interest component of interest rate swaps, higher interest expense resulting from higher securitized debt balances from new securitizations and higher average rates, partially offset by lower interest expense on repurchase agreements from lower average rates despite higher average repurchase agreement balances.
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide the following non-GAAP financial measures:
•earnings available for distribution (“EAD”);
•earnings available for distribution attributable to common stockholders;
•earnings available for distribution per average common share;
•annualized EAD return on average equity;
•economic leverage;
•economic capital ratio;
•interest income (excluding PAA);
•economic interest expense;
•economic net interest income (excluding PAA);
•average yield on interest earning assets (excluding PAA);
•average economic cost of interest bearing liabilities;
•net interest margin (excluding PAA); and
•net interest spread (excluding PAA).

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 our results and operations, non-GAAP financial measures also have limitations. For example, we may calculate our non-GAAP metrics, such as earnings available for distribution, or the PAA, differently than our 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 we 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 our period-over-period operating performance and business trends, as well as for assessing our performance versus that of industry peers. Additional information pertaining to our use of these non-GAAP financial measures, including discussion of how each such measure may be useful to investors, and reconciliations to their most directly comparable GAAP results are provided below.

Earnings Available for Distribution, Earnings Available for Distribution Attributable to Common Stockholders, Earnings Available for Distribution Per Average Common Share and Annualized EAD Return on Average Equity
Our principal business objective is to generate net income for distribution to our stockholders and optimize our returns through prudent management of our diversified investment strategies. We generate net income by earning a net interest spread on our investment portfolio, which is a function of interest income from our investment portfolio less financing, hedging and operating costs. Earnings available for distribution, which is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD 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-EAD income (loss) items), and excludes (g) the PAA 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 our Agency mortgage-backed securities, is used by management and, we believe, used by analysts and investors to measure our progress in achieving our principal business objective. 
We seek to fulfill our principal business objective through a variety of factors including portfolio construction, the degree of market risk exposure and related hedge profile, and the use and forms of leverage, all while operating within the parameters of our capital allocation policy and risk governance framework.
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
We believe these non-GAAP measures provide management and investors with additional details regarding our underlying operating results and investment portfolio trends by (i) making adjustments to account for the disparate reporting of changes in fair value where certain instruments are reflected in GAAP net income (loss) while others are reflected in other comprehensive income (loss), and (ii) by excluding certain unrealized, non-cash or episodic components of GAAP net income (loss) in order to provide additional transparency into the operating performance of our portfolio. In addition, EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends. Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders’ equity, provides investors with additional detail on the earnings available for distribution generated by our invested equity capital.
The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented:
 
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
 2025202420252024
 (dollars in thousands, except per share data)
GAAP net income (loss)$843,063 $82,351 $1,033,739 $538,692 
Adjustments to exclude reported realized and unrealized (gains) losses
Net (gains) losses on investments and other (1)
(560,957)(1,724,051)(1,454,781)(161,057)
Net (gains) losses on derivatives (2)
284,199 2,071,493 2,028,046 892,383 
Other adjustments
Amortization of intangibles673 673 2,018 2,019 
Non-EAD (income) loss allocated to equity method investments (3)
376 1,465 120 1,158 
Transaction expenses and non-recurring items (4)
8,117 4,966 20,605 14,032 
Income tax effect of non-EAD income (loss) items(6,742)(9,248)1,616 (2,150)
TBA dollar roll income (5)
9,019 (1,132)27,546 729 
MSR amortization (6)
(72,081)(62,480)(203,318)(169,201)
EAD attributable to noncontrolling interests(4,175)(2,893)(10,770)(10,041)
Premium amortization adjustment cost (benefit)18,390 21,365 26,824 11,046 
Earnings available for distribution *
519,882 382,509 1,471,645 1,117,610 
Dividends on preferred stock (7)
41,127 41,628 115,544 115,847 
Earnings available for distribution attributable to common stockholders *
$478,755 $340,881 $1,356,101 $1,001,763 
GAAP net income (loss) per average common share (7)
$1.21 $0.05 $1.45 $0.80 
Earnings available for distribution per average common share * (7)
$0.73 $0.66 $2.18 $1.98 
Annualized GAAP return (loss) on average equity (8)
23.69%2.77%10.16%6.16%
Annualized EAD return on average equity *
14.70%12.95%14.56%12.88 %
* Represents a non-GAAP financial measure. Refer to the disclosure within this section above for additional information on non-GAAP financial measures.
(1) Includes write-downs or recoveries which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss).
(2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $191.9 million and $317.5 million for the three months ended September 30, 2025 and 2024, respectively, and $569.1 million and $946.0 million for the nine months ended September 30, 2025 and 2024, respectively.
(3) Represents unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other, net in the Consolidated Statements of Comprehensive Income (Loss).
(4) Represents costs incurred in connection with securitizations of residential whole loans.
(5) TBA dollar roll income represents a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).
(6) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period.
(7) The three and nine months ended September 30, 2025 include cumulative and undeclared dividends of $3.7 million on the Company's Series J Preferred Stock as of September 30, 2025.
(8) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 5.92% and 0.69% for the three months ended September 30, 2025 and 2024, respectively, and 7.62% and 4.62% for the the nine months ended September 30, 2025 and 2024, respectively.

From time to time, we enter into TBA forward contracts as an alternate means of investing in and financing Agency MBS. A TBA contract is an agreement to purchase or sell, for future delivery, an Agency MBS with a specified issuer, term and coupon. A TBA dollar roll represents a transaction where TBA contracts with the same terms but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the “drop”. The drop is a reflection of the expected net interest income from an investment in similar Agency MBS, net of an implied financing cost, that would be foregone as a result of settling the contract in the later month rather than in the earlier month. The drop between the current settlement month price and the forward settlement month price occurs because in the TBA dollar roll market, the party providing the financing is the party that would retain all principal and interest payments accrued during the financing period. Accordingly, TBA dollar roll income
47

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
generally represents the economic equivalent of the net interest income earned on the underlying Agency MBS less an implied financing cost.
TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions. The fair value of TBA derivatives is based on methods similar to those used to value Agency MBS. We record TBA derivatives at fair value in our Consolidated Statements of Financial Condition and recognize periodic changes in fair value in Net gains (losses) on derivatives in our Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives.
TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract. Although accounted for as derivatives, TBA dollar rolls capture the economic equivalent of net interest income, or carry, on the underlying Agency MBS (interest income less an implied cost of financing). TBA dollar roll income is reported as a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

Premium Amortization Expense
In accordance with GAAP, we amortize or accrete premiums or discounts into interest income for our Agency MBS, excluding interest-only securities, multifamily and reverse mortgages, taking into account estimates of future principal prepayments in the calculation of the effective yield. We recalculate the effective yield as differences between anticipated and actual prepayments occur. Using third party models and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security’s acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period.
Our GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of our non-GAAP metrics exclude the effect of the PAA, which quantifies the component of premium amortization representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term Constant Prepayment Rate (“CPR”).
The following table illustrates the impact of the PAA on premium amortization expense for our Residential Securities portfolio for the periods presented:
 
For the Three Months Ended September 30,
For the Nine Months Ended September 30,
 2025202420252024
 (dollars in thousands)
Premium amortization expense$36,719 $53,448 $122,269 $90,617 
Less: PAA cost (benefit)18,390 21,365 26,824 11,046 
Premium amortization expense (excluding PAA)$18,329 $32,083 $95,445 $79,571 

Economic Leverage and Economic Capital Ratios
We use capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities. Our capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for our stockholders while maintaining appropriate liquidity to support our business and meet our financial obligations under periods of market stress. To maintain our desired capital profile, we utilize a mix of debt and equity funding. Debt funding may include the use of repurchase agreements, loans, securitizations, participations issued, lines of credit, asset backed lending facilities, corporate bond issuance, convertible bonds or other liabilities. Equity capital primarily consists of common and preferred stock.
Our economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and U.S Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us and are excluded from economic leverage.
The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating our economic leverage ratio for the periods presented:
48

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
As of
September 30, 2025September 30, 2024
Economic leverage ratio reconciliation
(dollars in thousands)
Repurchase agreements
$75,118,963 $64,310,276 
Other secured financing
1,025,000 600,000 
Debt issued by securitization vehicles
26,601,790 18,709,118 
Participations issued
1,831,657 467,006 
U.S. Treasury securities sold, not yet purchased2,442,570 2,043,519 
Total GAAP debt
$107,019,980 $86,129,919 
Less Non-recourse debt:
Debt issued by securitization vehicles
$(26,601,790)$(18,709,118)
Participations issued
(1,831,657)(467,006)
Total recourse debt$78,586,533 $66,953,795 
Plus / (Less):
Cost basis of TBA derivatives
3,981,439 3,333,873 
Payable for unsettled trades2,604,278 1,885,286 
Receivable for unsettled trades(185,916)(766,341)
Economic debt *
$84,986,334 $71,406,613 
Total equity
$14,996,579 $12,539,949 
Economic leverage ratio *
5.7:15.7:1
* Represents a non-GAAP financial measure. Refer to the disclosure within this section above for additional information on non-GAAP financial measures.
The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating our economic capital ratio for the periods presented:
As of
September 30, 2025September 30, 2024
Economic capital ratio reconciliation
(dollars in thousands)
Total GAAP assets
$125,861,572 $101,515,995 
Less:
Gross unrealized gains on TBA derivatives (1)
(24,074)(2,869)
Debt issued by securitization vehicles
(26,601,790)(18,709,118)
Participations issued(1,831,657)(467,006)
Plus:
Implied market value of TBA derivatives
3,991,915 3,328,141 
Total economic assets *
$101,395,966 $85,665,143 
Total equity
$14,996,579 $12,539,949 
Economic capital ratio (2) *
14.8%14.6%
* Represents a non-GAAP financial measure. Refer to the disclosure within this section above for additional information on non-GAAP financial measures.
(1) Included in Derivative assets in the Consolidated Statements of Financial Condition.
(2) Economic capital ratio is computed as total equity divided by total economic assets.
Interest Income (excluding PAA), Economic Interest Expense and Economic Net Interest Income (excluding PAA)
Interest income (excluding PAA) represents interest income excluding the effect of the premium amortization adjustment, and serves as the basis for deriving average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA), which are discussed below. We believe this measure provides management and investors with additional detail to enhance their understanding of our operating results and trends by excluding the component of premium amortization expense representing the cumulative effect of quarter-over-quarter changes in estimated long-term prepayment speeds related to our Agency MBS (other than interest-only securities, multifamily and reverse mortgages), which can obscure underlying trends in the performance of the portfolio.
Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss). We use interest rate swaps to manage our exposure to changing interest rates on repurchase agreements by economically hedging cash flows associated with these borrowings. Accordingly, adding the net interest component of interest rate swaps to interest
49

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of our financing strategy. We may use MAC interest rate swaps in which we may receive or make a payment at the time of entering into such interest rate swap to compensate for the off-market nature of such interest rate swap. In accordance with GAAP, upfront payments associated with MAC interest rate swaps are not reflected in the net interest component of interest rate swaps, which is presented in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).
Similarly, economic net interest income (excluding PAA), as computed below, provides investors with additional information to enhance their understanding of the net economics of our primary business operations.
The following tables present a reconciliation of GAAP interest income and GAAP interest expense to non-GAAP interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA), respectively, for the periods presented:
Interest Income (excluding PAA)
 GAAP Interest IncomePAA Cost
(Benefit)
Interest Income (excluding PAA) *
For the three months ended(dollars in thousands)
September 30, 2025$1,532,497 $18,390 $1,550,887 
September 30, 2024$1,229,341 $21,365 $1,250,706 
For the nine months ended
September 30, 2025$4,268,498 $26,824 $4,295,322 
September 30, 2024$3,501,154 $11,046 $3,512,200 
* Represents a non-GAAP financial measure. Refer to disclosures within this section above for additional information on non-GAAP financial measures.
Economic Interest Expense and Economic Net Interest Income (excluding PAA)
 GAAP
Interest
Expense		Add: Net Interest Component of Interest Rate Swaps and Net Interest on Initial Margin
Economic Interest
Expense * (1)
GAAP Net
Interest
Income		Less: Net Interest Component
of Interest Rate Swaps and Net Interest on Initial Margin		Economic
Net Interest
Income *		Add: PAA
Cost
(Benefit)		Economic Net Interest Income (excluding PAA) *
For the three months ended(dollars in thousands)
September 30, 2025$1,256,747 $(205,030)$1,051,717 $275,750 $(205,030)$480,780 $18,390 $499,170 
September 30, 2024$1,215,940 $(333,696)$882,244 $13,401 $(333,696)$347,097 $21,365 $368,462 
For the nine months ended
September 30, 2025$3,499,577 $(607,284)$2,892,293 $768,921 $(607,284)$1,376,205 $26,824 $1,403,029 
September 30, 2024$3,440,646 $(981,142)$2,459,504 $60,508 $(981,142)$1,041,650 $11,046 $1,052,696 
* Represents a non-GAAP financial measure. Refer to disclosures within this section above for additional information on non-GAAP financial measures.
(1) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).












50

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Experienced and Projected Long-Term CPR
Prepayment speeds, as reflected by the CPR and interest rates vary according to the type of investment, conditions in financial markets, competition and other factors, none of which can be predicted with any certainty. In general, as prepayment speeds and expectations of prepayment speeds on our Agency MBS portfolio increase, related purchase premium amortization increases, thereby reducing the yield on such assets. The following table presents the weighted average experienced CPR and weighted average projected long-term CPR on our Agency MBS portfolio as of and for the periods presented.
 
Experienced CPR (1)
Projected Long-term CPR (2)
For the three months ended
September 30, 20258.6%10.4%
September 30, 20247.6%11.9%
For the nine months ended
September 30, 20258.1%10.4%
September 30, 20247.0%11.9%
(1) For the three and nine months ended September 30, 2025 and 2024, respectively.
(2) At September 30, 2025 and 2024, respectively.

Average Yield on Interest Earning Assets (excluding PAA), Net Interest Spread (excluding PAA), Net Interest Margin (excluding PAA) and Average Economic Cost of Interest Bearing Liabilities
Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances, provide management with additional measures of our profitability that management relies upon in monitoring the performance of the business.
Disclosure of these measures, which are presented below, provides investors with additional detail regarding how management evaluates our performance.
Net Interest Spread (excluding PAA)
 
Average Interest Earning
    Assets (1)
Interest Income (excluding PAA) *
Average Yield on Interest Earning Assets (excluding PAA) *
Average Interest Bearing Liabilities (2)
Economic Interest Expense * (2)
Average Economic Cost of Interest Bearing Liabilities * (2)
Economic Net Interest Income (excluding PAA) *
Net Interest Spread (excluding PAA) *
For the three months ended(dollars in thousands)
September 30, 2025$113,522,223 $1,550,887 5.46%$103,994,302 $1,051,717 3.96%$499,170 1.50%
September 30, 2024$95,379,071 $1,250,706 5.25%$87,819,655 $882,244 3.93%$368,462 1.32%
For the nine months ended
September 30, 2025$106,592,290 $4,295,322 5.37%$97,090,093 $2,892,293 3.93%$1,403,029 1.44%
September 30, 2024$92,042,244 $3,512,200 5.09%$83,467,666 $2,459,504 3.87%$1,052,696 1.22%
* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information.
(1) Based on amortized cost.
(2) 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, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).







51

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Net Interest Margin (excluding PAA)
 
Interest Income (excluding PAA) *
TBA Dollar Roll Income (1)
Economic Interest Expense * (2)
SubtotalAverage Interest Earnings AssetsAverage TBA Contract BalancesSubtotalNet Interest Margin (excluding PAA) *
For the three months ended(dollars in thousands)
September 30, 2025$1,550,887 9,019 (1,051,717)$508,189 $113,522,223 6,356,708 $119,878,931 1.70%
September 30, 2024$1,250,706 (1,132)(882,244)$367,330 $95,379,071 973,713 $96,352,784 1.52%
For the nine months ended
September 30, 2025$4,295,322 27,546 (2,892,293)$1,430,575 $106,592,290 5,733,408 $112,325,698 1.70%
September 30, 2024$3,512,200 729 (2,459,504)$1,053,425 $92,042,244 707,431 $92,749,675 1.51%
* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information.
(1) TBA dollar roll income represents a component of Net gains (losses) on derivatives.
(2) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities
Typically, our largest expense is the cost of interest bearing liabilities and the net interest component of interest rate swaps. The following table shows our average interest bearing liabilities and average economic cost of interest bearing liabilities as compared to average one-month and average six-month SOFR for the periods presented.
Average Economic Cost of Interest Bearing Liabilities
 Average
Interest Bearing
Liabilities		Interest Bearing Liabilities at
Period End
Economic
Interest
Expense * (1)
Average Economic
Cost of
Interest
Bearing
Liabilities *
Average
One-
Month
Term SOFR 		Average
Six-
Month
Term SOFR		Average
One-Month Term SOFR
Relative to
Average Six-
Month Term SOFR 		Average Economic Cost
of Interest
Bearing
Liabilities
Relative to
Average One-
Month Term SOFR		Average Economic Cost
of Interest
Bearing
Liabilities
Relative to
Average Six-Month Term SOFR
For the three months ended
September 30, 2025$103,994,302 $105,994,980 $1,051,717 3.96%4.29%4.05%0.24%(0.33%)(0.09%)
September 30, 2024$87,819,655 $85,529,919 $882,244 3.93%5.22%4.82%0.40%(1.29%)(0.89%)
For the nine months ended
September 30, 2025$97,090,093 $105,994,980 $2,892,293 3.93%4.31%4.16%0.15%(0.38%)(0.23%)
September 30, 2024$83,467,666 $85,529,919 $2,459,504 3.87%5.29%5.10%0.19%(1.42%)(1.23%)
* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information.
(1) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Economic interest expense increased by $169.5 million for the three months ended September 30, 2025, compared to the same period in 2024, primarily due to the reduction in the net interest component of interest rate swaps, which was $191.9 million for the three months ended September 30, 2025, compared to $317.5 million for the same period in 2024. Adding to this increase was higher interest expense on increased securitized debt balances from new securitizations, partially offset by lower interest expense on repurchase agreements from lower average rates despite higher average balances.
Economic interest expense increased by $432.8 million for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the reduction in the net interest component of interest rate swaps, which was $569.1 million for the nine months ended September 30, 2025, compared to $946.0 million for the same period in 2024. Adding to this increase was higher securitized debt balances from new securitizations, partially offset by lower interest expense on repurchase agreements from lower average rates despite higher average balances.
We do not manage our portfolio to have a pre-designated amount of borrowings at quarter or year end. Our borrowings at period end are a snapshot of our borrowings as of a date, and this number may differ from average borrowings over the period
52

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
for a number of reasons. The mortgage-backed securities we own pay principal and interest towards the end of each month and the mortgage-backed securities we purchase are typically settled during the beginning of the month. As a result, depending on the amount of mortgage-backed securities we have committed to purchase, we may retain the principal and interest we receive in the prior month, or we may use it to pay down our borrowings. Moreover, we generally use interest rate swaps, swaptions and other derivative instruments to hedge our portfolio, and as we pledge or receive collateral under these agreements, our borrowings on any given day may be increased or decreased. Our average borrowings during a quarter may differ from period end borrowings as we implement our portfolio management strategies and risk management strategies over changing market conditions by increasing or decreasing leverage. Additionally, these numbers may differ during periods when we conduct equity capital raises, as in certain instances we may purchase additional assets and increase leverage in anticipation of an equity capital raise. Since our average borrowings and period end borrowings can be expected to differ, we believe our average borrowings during a period provide a more accurate representation of our exposure to the risks associated with leverage than our period end borrowings.
At September 30, 2025 and December 31, 2024, the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and MSR. All of our Residential Securities are currently accepted as collateral for these borrowings. However, we limit our borrowings, and thus our potential asset growth, in order to maintain unused borrowing capacity and maintain the liquidity and strength of our balance sheet.

Other Income (Loss)
For the Three Months Ended September 30, 2025 and 2024

Net Gains (Losses) on Investments and Other
Net gains (losses) on disposal of investments was ($87.8) million for the three months ended September 30, 2025, compared to ($169.1) million for the same period in 2024. For the three months ended September 30, 2025, we disposed of Residential Securities with a carrying value of $1.3 billion for an aggregate net gain (loss) of $1.8 million. For the same period in 2024, we disposed of Residential Securities with a carrying value of $2.8 billion for an aggregate net gain (loss) of ($8.3) million. Realized gains (losses) on U.S. Treasury securities sold, not yet purchased was ($26.0) million for the three months ended September 30, 2025, compared to ($117.1) million for the same period in 2024.
Net unrealized gains (losses) on instruments measured at fair value through earnings was $649.7 million for the three months ended September 30, 2025, compared to $1.9 billion for the same period in 2024, primarily due to unfavorable changes in unrealized gains (losses) on Agency MBS of ($1.2) billion, securitized residential whole loans of consolidated VIEs of ($385.3) million, non-Agency MBS of ($27.0) million, and U.S. Treasury securities sold, not yet purchased of ($19.4) million, partially offset by favorable changes in residential securitized debt of consolidated VIEs of $336.4 million and MSR of $13.4 million.
Net Gains (Losses) on Derivatives
Net gains (losses) on interest rate swaps for the three months ended September 30, 2025 was ($0.3) million, compared to ($1.4) billion for the same period in 2024, primarily attributable to favorable changes in unrealized gains (losses) on interest rate swaps and realized gains (losses) on termination or maturity of interest rate swaps, partially offset by an unfavorable change in net interest component of interest rate swaps. Unrealized gains (losses) on interest rate swaps was ($189.0) million for the three months ended September 30, 2025, compared to ($1.6) billion for the same period in 2024. Realized gains (losses) on termination or maturity of interest rate swaps was ($3.2) million for the three months ended September 30, 2025, compared to ($94.0) million for the same period in 2024, which reflected our termination or maturity of fixed-rate payer and receiver interest rate swaps with notional amounts of $1.6 billion and $68.0 million, respectively, compared to $5.1 billion notional amount of fixed-rate payer interest rate swaps for the same period in 2024. Net interest component on interest rate swaps was $191.9 million for the three months ended September 30, 2025, compared to $317.5 million for the same period in 2024.
Net gains (losses) on other derivatives was ($92.1) million for the three months ended September 30, 2025, compared to ($395.0) million for the same period in 2024. The change in net gains (losses) on other derivatives was primarily due to favorable changes in net gains (losses) on interest rate swaptions, which was $0.0 million for the three months ended September 30, 2025, compared to ($135.0) million for the same period in 2024, net gains (losses) on futures, which was ($163.4) million for the three months ended September 30, 2025, compared to ($291.5) million for the same period in 2024, and net gains (losses) on TBA derivatives, which was $76.6 million for the three months ended September 30, 2025, compared to $22.4 million for the same period in 2024, partially offset by an unfavorable change in net gains (losses) on purchase commitments,
53

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
which was ($5.3) million for the three months ended September 30, 2025, compared to $9.1 million for the same period in 2024.
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, 2025 was $14.0 million, compared to $27.4 million for the same period in 2024, primarily attributable to an increase in MSR financing expenses, a decrease in net interest income on initial margin related to interest rate swaps, and an increase in securitization related costs, partially offset by an increase in advisory income, and interest on custodial balances.

For the Nine Months Ended September 30, 2025 and 2024

Net Gains (Losses) on Investments and Other
Net gains (losses) on disposal of investments and other was ($220.7) million for the nine months ended September 30, 2025, compared to ($1.1) billion for the same period in 2024. For the nine months ended September 30, 2025, we disposed of Residential Securities with a carrying value of $9.7 billion for an aggregate net gain (loss) of ($78.6) million. For the same period in 2024, we disposed of Residential Securities with a carrying value of $16.0 billion for an aggregate net gain (loss) of ($821.5) million. Realized gains (losses) on U.S. Treasury securities sold, not yet purchased was $17.8 million for the nine months ended September 30, 2025, compared to ($126.0) million for the same period in 2024.
Net unrealized gains (losses) on instruments measured at fair value through earnings was $1.7 billion for the nine months ended September 30, 2025, compared to $1.2 billion for the same period in 2024, primarily due to favorable changes on Agency MBS of $856.6 million, residential whole loans of $29.2 million, securitized debt of consolidated VIEs of $15.6 million, and securitized residential whole loans of consolidated VIEs of $9.2 million, partially offset by unfavorable changes in U.S. Treasury securities sold, not yet purchased of ($229.5) million, non-Agency MBS of ($102.2) million, MSR of ($63.0) million, CRT securities of ($34.6) million, and participations issued of ($16.2) million.

Net Gains (Losses) on Derivatives
Net gains (losses) on interest rate swaps for the nine months ended September 30, 2025 was ($944.4) million, compared to $265.4 million for the same period in 2024, attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps and the change in the net interest component of interest rate swaps, partially offset by favorable changes in realized gains (losses) on termination of interest rate swaps. Unrealized gains (losses) on interest rate swaps was ($1.4) billion for the nine months ended September 30, 2025, compared to ($584.1) million for the same period in 2024. Net interest component on interest rate swaps was $569.1 million for the nine months ended September 30, 2025, compared to $946.0 million for the same period in 2024. Realized gains (losses) on termination of interest rate swaps was ($78.8) million for the nine months ended September 30, 2025, compared to ($96.5) million for the same period in 2024, which reflected our termination of fixed-rate payer and receiver interest rate swaps with notional amounts of $17.1 billion and $3.2 billion, respectively, compared to fixed-rate payer and receiver interest rate swaps with notional amounts of $7.7 billion and $3.3 billion, respectively, for the same period in 2024.
Net gains (losses) on other derivatives was ($514.5) million for the nine months ended September 30, 2025, compared to ($211.7) million for the same period in 2024. The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was ($636.2) million for the nine months ended September 30, 2025, compared to ($152.1) million for the same period in 2024, partially offset by favorable changes in TBA derivatives, which was $123.8 million for the nine months ended September 30, 2025, compared to $28.3 million for the same period in 2024, and net gains (losses) on interest rate swaptions, which was ($9.2) million for the nine months ended September 30, 2025, compared to ($92.8) million for the same period in 2024.

Other, Net
Other, net for the nine months ended September 30, 2025 was $37.2 million, compared to $75.6 million for the same period in 2024, primarily attributable to an increase in MSR financing expenses, a decrease in net interest income on initial margin related to interest rate swaps, and an increase in securitization related costs, partially offset by an increase in interest on custodial balances, advisory income, and conduit transaction fees.
54

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
General and Administrative Expenses
General and administrative (“G&A”) expenses consist of compensation and other expenses. The following table shows our total G&A expenses as compared to average total assets and average equity for the periods presented.
G&A Expenses and Operating Expense Ratios
 Total G&A
Expenses 		Total G&A Expenses/Average AssetsTotal G&A Expenses/Average Equity
For the three months ended(dollars in thousands)
September 30, 2025$50,340 0.17 %1.41 %
September 30, 2024$43,921 0.18 %1.48 %
For the nine months ended
September 30, 2025$148,422 0.18%1.46%
September 30, 2024$127,382 0.18%1.46%

G&A expenses were $50.3 million for the three months ended September 30, 2025, an increase of $6.4 million compared to the same period in 2024. The change in the period was primarily due to an increase in compensation expenses and higher expenses related to professional fees, rent and technology.
G&A expenses were $148.4 million for the nine months ended September 30, 2025, an increase of $21.0 million compared to the same period in 2024. The change in the period was primarily due to an increase in compensation expenses and higher expenses related to rent, professional fees and technology.

Return on Average Equity
The following table shows the components of our annualized return on average equity for the periods presented.
Components of Annualized Return on Average Equity
 
Economic Net Interest Income/ Average Equity (1)
Net Servicing Income/Average Equity
Other Income (Loss)/Average Equity (2)
G&A Expenses/ Average EquityIncome
Taxes/ Average Equity		Return on
Average Equity
For the three months ended      
September 30, 202513.14%3.55%8.19%(1.41%)0.22%23.69%
September 30, 202411.12%3.68%(10.76%)(1.48%)0.21%2.77%
For the nine months ended
      
September 30, 202513.15%3.73%(5.25%)(1.46%)(0.01%)10.16%
September 30, 202411.51%3.66%(7.49%)(1.46%)(0.06%)6.16%
(1) Economic net interest income includes the net interest component of interest rate swaps and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss).
(2) Other income (loss) excludes the net interest component of interest rate swaps.

Unrealized Gains and Losses - Available-for-Sale Investments
The unrealized fluctuations in market values of our available-for-sale Agency MBS, for which the fair value option is not elected, do not impact our GAAP net income (loss) but rather are reflected on our balance sheet by changing the carrying value of the asset and stockholders’ equity under accumulated other comprehensive income (loss). As a result of this fair value accounting treatment, our book value and book value per share are likely to fluctuate far more than if we used amortized cost accounting. As a result, comparisons with companies that use amortized cost accounting for some or all of their balance sheet may not be meaningful.
The following table shows cumulative unrealized gains and losses on our available-for-sale investments reflected in the Consolidated Statements of Financial Condition.
55

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
 September 30, 2025December 31, 2024
 (dollars in thousands)
Unrealized gain$4,937 $4,221 
Unrealized loss(629,324)(1,021,903)
Accumulated other comprehensive income (loss)$(624,387)$(1,017,682)
Unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on our potential earnings and dividends: positive changes will increase our equity base and allow us to increase our borrowing capacity while negative changes tend to reduce borrowing capacity. A very large negative change in the net fair value of our available-for-sale Residential Securities might impair our liquidity position, requiring us to sell assets with the potential result of realized losses upon sale.
The fair value of these securities being less than amortized cost at September 30, 2025 is solely due to market conditions and not the quality of the assets. Substantially all of the Agency MBS have an actual or implied credit rating that is the same as that of the U.S. government. The investments do not require an allowance for credit losses because we currently have the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that we will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. Also, we are guaranteed payment of the principal and interest amounts of the securities by the respective issuing Agency.

Financial Condition
Total assets were $125.9 billion and $103.6 billion at September 30, 2025 and December 31, 2024, respectively. The change was primarily due to increases in securities of $15.3 billion, securitized residential whole loans of consolidated VIEs of $7.5 billion, cash and cash equivalents of $608.7 million, mortgage servicing rights of $567.0 million, and residential mortgage loans of $461.4 million, partially offset by decreases in receivables for unsettled trades of $2.0 billion, derivative assets of $177.5 million and principal and interest receivable of $109.6 million. Our portfolio composition, net equity allocation and debt-to-net equity ratio by asset class were as follows at September 30, 2025.
 Agency MBS
Residential Credit (1)
MSRTotal
Assets(dollars in thousands)
Fair value$83,317,819 $35,265,514 $3,512,014 $122,095,347 
Implied market value of derivatives (2)
3,991,915 — — 3,991,915 
Debt
Repurchase agreements70,609,233 4,509,730 — 75,118,963 
Implied cost basis of derivatives (2)
3,981,439 — — 3,981,439 
Other secured financing— — 1,025,000 1,025,000 
Debt issued by securitization vehicles— 26,601,790 — 26,601,790 
Participations issued— 1,831,657 — 1,831,657 
U.S. Treasury securities sold, not yet purchased2,472,871 24,368 (54,669)2,442,570 
Net forward purchases2,317,728 22,067 78,567 2,418,362 
Other
Net other assets / liabilities1,638,416 286,848 403,834 2,329,098 
Net equity allocated$9,566,879 $2,562,750 $2,866,950 $14,996,579 

Net equity allocated (%)64%17%19%100%
Debt/net equity ratio (3)
7.6:112.9:10.3:17.1:1
(1) Fair value includes residential loans held for sale, commercial assets and liabilities and assets and liabilities associated with non-controlling interests.
(2) Derivatives include TBA contracts under Agency MBS.
(3) Represents the debt/net equity ratio as determined using amounts in the Consolidated Statements of Financial Condition.
Residential Securities
Substantially all of our Agency MBS at September 30, 2025 and December 31, 2024 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties. Our mortgage-backed securities were largely Fannie Mae, Freddie Mac or Ginnie Mae pass through certificates or CMOs, which have an actual or implied credit rating that is the same as that of the U.S. government. We carry all of our Agency MBS at fair value in the Consolidated Statements of Financial Condition.
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
We accrete discount balances as an increase to interest income over the expected life of the related interest earning assets and we amortize premium balances as a decrease to interest income over the expected life of the related interest earning assets. At September 30, 2025 and December 31, 2024 we had in our Consolidated Statements of Financial Condition a total of $1.4 billion and $1.3 billion, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities acquired at a price below principal value) and a total of $2.7 billion and $2.5 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities acquired at a price above principal value).
The weighted average experienced prepayment speed on our Agency MBS portfolio for the three months ended September 30, 2025 and 2024 was 8.6% and 7.6%, respectively. The weighted average experienced prepayment speed on our Agency MBS portfolio for the nine months ended September 30, 2025 and 2024 was 8.1% and 7.0%, respectively. The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of September 30, 2025 and 2024 was 10.4% and 11.9%, respectively.
Given our current portfolio composition, if mortgage principal prepayment rates were to increase over the life of our mortgage-backed securities, all other factors being equal, our net interest income would decrease during the life of these mortgage-backed securities as we would be required to amortize our net premium balance into income over a shorter time period. Similarly, if mortgage principal prepayment rates were to decrease over the life of our mortgage-backed securities, all other factors being equal, our net interest income would increase during the life of these mortgage-backed securities as we would amortize our net premium balance over a longer time period.

The following table presents our Residential Securities that were carried at fair value at September 30, 2025 and December 31, 2024.
 September 30, 2025December 31, 2024
 Estimated Fair Value
Agency
Fixed-rate pass-through$76,702,561 $63,049,674 
Adjustable-rate pass-through127,286 162,238 
CMO2,743 73,684 
Interest-only574,325 380,732 
Multifamily5,910,904 3,741,765 
Reverse mortgages— 25,975 
Total agency securities$83,317,819 $67,434,068 
Residential credit 
Credit risk transfer$330,647 $754,915 
Non-QM312,108 164,892 
Prime130,471 102,117 
SBC183,348 233,572 
NPL/RPL435,368 682,440 
RTL174,755 151,852 
Prime jumbo (>= 2010 vintage)178,209 158,313 
Total residential credit securities$1,744,906 $2,248,101 
Total Residential Securities$85,062,725 $69,682,169 









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Item 2. Management’s Discussion and Analysis
The following table summarizes certain characteristics of our Residential Securities (excluding interest-only mortgage-backed securities) and interest-only mortgage-backed securities at September 30, 2025 and December 31, 2024.
 September 30, 2025December 31, 2024
Residential Securities (1)
(dollars in thousands)  
Principal amount$83,915,079 $70,783,559 
Net premium80,312 110,212 
Amortized cost83,995,391 70,893,771 
Amortized cost / principal amount100.10%100.16%
Carrying value83,836,013 68,717,038 
Carrying value / principal amount99.91%97.08%
Weighted average coupon rate5.09%5.02%
Weighted average yield5.02%4.96%
Adjustable-rate Residential Securities (1)
Principal amount$495,051 $951,400 
Weighted average coupon rate8.14%8.41%
Weighted average yield7.72%7.59%
Weighted average term to next adjustment (2)
5 Months6 Months
Weighted average lifetime cap (3)
9.46%9.33%
Principal amount at period end as % of total residential securities0.59%1.34%
Fixed-rate Residential Securities (1)
Principal amount$83,420,028 $69,832,159 
Weighted average coupon rate5.07%4.97%
Weighted average yield5.00%4.93%
Principal amount at period end as % of total residential securities99.41%98.66%
Interest-only Residential Securities
Notional amount$47,634,258 $38,352,812 
Net premium1,279,518 1,091,361 
Amortized cost1,279,518 1,091,361 
Amortized cost / notional amount2.69%2.85%
Carrying value1,226,712 965,131 
Carrying value / notional amount2.58%2.52%
Weighted average coupon rate0.57%0.46%
Weighted average yield3.74%2.40%
(1) Excludes interest-only MBS.
(2) Excludes non-Agency MBS and CRT securities.
(3) Excludes non-Agency MBS and CRT securities as this attribute is not applicable to these asset classes.
The following tables summarize certain characteristics of our Residential Credit portfolio at September 30, 2025.
Payment Structure
Investment Characteristics (1)
ProductEstimated Fair ValueSeniorSubordinateCouponCredit Enhancement60+
Delinquencies
3M VPR (2)
(dollars in thousands)
Credit risk transfer$330,647 $— $330,647 9.27%1.54%1.14%6.25%
Non-QM312,108 — 312,108 7.06%7.71%3.30%17.08%
Prime130,471 110,013 20,458 6.02%18.84%3.59%5.13%
SBC183,348 20,618 162,730 7.26%25.67%14.83%22.16%
NPL/RPL435,368 117,239 318,129 7.31%21.06%51.68%6.64%
RTL174,755 145,478 29,277 7.19%18.93%4.80%59.25%
Prime jumbo (>=2010 vintage)178,209 107,341 70,868 5.05%1.07%0.85%7.34%
Total/weighted average$1,744,906 $500,689 $1,244,217 7.40%13.83%17.52%16.35%
(1) Investment characteristics exclude the impact of interest-only securities.
(2) Represents the 3 month voluntary prepayment rate (“VPR”).
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Item 2. Management’s Discussion and Analysis
Bond Coupon
ProductARMFixedFloaterInterest-OnlyEstimated Fair Value
(dollars in thousands)
Credit risk transfer$— $— $330,647 $— $330,647 
Non-QM1,320 310,788 — — 312,108 
Prime— 98,701 — 31,770 130,471 
SBC— 176,868 6,480 — 183,348 
NPL/RPL— 424,118 11,195 55 435,368 
RTL— 174,755 — — 174,755 
Prime jumbo (>=2010 vintage)— 51,622 19,246 107,341 178,209 
Total$1,320 $1,236,852 $367,568 $139,166 $1,744,906 

Contractual Obligations
The following table summarizes the effect on our liquidity and cash flows from contractual obligations at September 30, 2025. The table does not include the effect of net interest rate payments on our interest rate swap agreements. The net swap payments will fluctuate based on monthly changes in the receive rate. At September 30, 2025, the interest rate swaps had a net fair value of ($21.2) million.
 Within One
Year		One to Three
Years		Three to Five
Years		More than
Five Years		Total
 (dollars in thousands)
Repurchase agreements$74,840,852 $278,111 $— $— $75,118,963 
Interest expense on repurchase agreements (1)
449,527 6,146 — — 455,673 
Other secured financing250,000 775,000 — — 1,025,000 
Interest expense on other secured financing (1)
57,833 20,935 — — 78,768 
Debt issued by securitization vehicles (principal)— — — 27,098,983 27,098,983 
Interest expense on debt issued by securitization vehicles1,499,940 2,999,880 2,999,880 46,555,027 54,054,727 
Participations issued (principal)— — — 1,772,035 1,772,035 
Interest expense on participations issued120,655 241,310 241,310 2,978,253 3,581,528 
Long-term operating lease obligations259 5,465 7,662 49,167 62,553 
Total$77,219,066 $4,326,847 $3,248,852 $78,453,465 $163,248,230 
(1) Interest expense on repurchase agreements and other secured financing calculated based on rates at September 30, 2025.
In the coming periods, we expect to continue to finance our Residential Securities in a manner that is largely consistent with our current operations via repurchase agreements. We may use securitization structures, credit facilities, or other term financing structures to finance certain of our assets. During the nine months ended September 30, 2025, we received $5.9 billion from principal repayments and $11.7 billion in cash from disposal of Securities. During the nine months ended September 30, 2024, we received $4.9 billion from principal repayments and $17.3 billion in cash from disposal of Securities.
Commitments and Contractual Obligations with Unconsolidated Entities
We do not have any commitments or contractual obligations arising from arrangements with unconsolidated entities that have or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.

Capital Management

Maintaining a strong balance sheet that can support the business even in times of economic stress and market volatility is of critical importance to our business strategy. A strong and robust capital position is essential to executing our investment strategy. Our capital strategy is predicated on a strong capital position, which enables us to execute our investment strategy regardless of the market environment. Our capital policy defines the parameters and principles supporting a comprehensive capital management practice.
The major risks impacting capital are liquidity and funding risk, investment/market risk, credit risk, counterparty risk, operational risk and compliance, regulatory and legal risk. For further discussion of the risks we are subject to, please see Part I,
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Item 2. Management’s Discussion and Analysis
Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K and in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q.
Capital requirements are based on maintaining levels above approved thresholds, ensuring the quality of our capital appropriately reflects our asset mix, market and funding structure. In the event we fall short of our internal thresholds, we will consider appropriate actions which may include asset sales, changes in asset mix, reductions in asset purchases or originations, issuance of capital or other capital enhancing or risk reduction strategies.

Stockholders’ Equity
The following table provides a summary of total stockholders’ equity at September 30, 2025 and December 31, 2024:
 September 30, 2025December 31, 2024
Stockholders’ equity(dollars in thousands)
6.95% Series F fixed-to-floating rate cumulative redeemable preferred stock$696,910 $696,910 
6.50% Series G fixed-to-floating rate cumulative redeemable preferred stock411,335 411,335 
6.75% Series I fixed-to-floating rate cumulative redeemable preferred stock428,324 428,324 
8.875% Series J fixed-rate cumulative redeemable preferred stock265,911 — 
Common stock6,811 5,784 
Additional paid-in capital27,352,976 25,257,716 
Accumulated other comprehensive income (loss)(624,387)(1,017,682)
Accumulated deficit(13,626,983)(13,173,146)
Total stockholders’ equity$14,910,897 $12,609,241 
Capital Stock
Common Stock
In January 2022, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2024 (the “Prior Common Stock Repurchase Program”). In January 2025, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding shares of common stock through December 31, 2029 (the “Current Common Stock Repurchase Program”). The Current Common Stock Repurchase Program replaced the Prior Common Stock Repurchase Program. During the three and nine months ended September 30, 2025 and 2024, no shares were repurchased under the Current Common Stock Repurchase Program or the Prior Common Stock Repurchase Program, respectively.

Purchases made pursuant to the Current Common Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The authorization does not obligate us to acquire any particular amount of common stock and the program may be suspended or discontinued at our discretion without prior notice.
On September 20, 2024, we entered into separate Distribution Agency Agreements (collectively, the “Prior Sales Agreements”) with each of Barclays Capital Inc., BNP Paribas Securities Corp., BofA Securities, Inc., Citizens JMP Securities, LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., Morgan Stanley & Co., LLC, RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Prior Sales Agents”). Under the terms of the Prior Sales Agreements, we offered and sold shares of our common stock, having an aggregate offering price of up to $1.5 billion, from time to time through any of the Prior Sales Agents (the “Prior At-The-Market Sales Program”).
On May 8, 2025, we entered into separate Distribution Agency Agreements (collectively, the “Sales Agreements”) with each of Barclays Capital Inc., BNP Paribas Securities Corp., BofA Securities, Inc., BTIG, LLC, Citizens JMP Securities, LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Keefe, Bruyette & Woods, Inc., Morgan Stanley & Co., LLC, Piper Sandler & Co., RBC Capital Markets, LLC, UBS Securities LLC and Wells Fargo Securities, LLC (the “Sales Agents”), which terminated and replaced the Prior Sales Agreements. Under the terms of the Sales Agreements, we may offer and sell shares of our common stock, having an aggregate offering price of up to $2.0 billion (the “Shares”), from time to time through any of the Sales Agents (the "Current At-The-Market Sales Program" and, together with the Prior At-The-Market Sales Program, the "at-the-market sales program").

During the three and nine months ended September 30, 2025, under the at-the-market sales program, we issued 39.0 million and 102.0 million shares for proceeds of $823.3 million and $2.1 billion, respectively, each net of commissions and fees. During the
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Item 2. Management’s Discussion and Analysis
three and nine months ended September 30, 2024, under the at-the-market sales program, we issued 57.0 million and 57.6 million shares for proceeds of $1.1 billion and $1.2 billion, respectively, each net of commissions and fees. Refer to the “Capital Stock” Note located within Item 1 for additional information related to the at-the-market sales program.

Preferred Stock
On December 31, 2024, the Board approved a repurchase plan for all of our existing outstanding Preferred Stock (as defined below) (the “Preferred Stock Repurchase Program”). Under the terms of the Preferred Stock Repurchase Program, we are authorized to repurchase up to an aggregate of 63,500,000 shares of Preferred Stock, comprised of up to (i) 28,800,000 shares of our 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series F Preferred Stock”), (ii) 17,000,000 shares of our 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series G Preferred Stock”), and (iii) 17,700,000 shares of our 6.75% Series I Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series I Preferred Stock”, and together with Series F Preferred Stock and Series G Preferred Stock, the “Preferred Stock”). The aggregate liquidation value of the Preferred Stock that may be repurchased by us pursuant to the Preferred Stock Repurchase Program, as of September 30, 2025, was approximately $1.6 billion.
The Preferred Stock Repurchase Program became effective on January 1, 2025 and will expire on December 31, 2029, and replaced the Preferred Stock repurchase program, which was effective from November 2, 2022 and expired on December 31, 2024 (the “Prior Preferred Stock Repurchase Program”). No shares were repurchased with respect to the Preferred Stock Repurchase Program during the three and nine months ended September 30, 2025 and the Prior Preferred Stock Repurchase Program during the three and nine months ended September 30, 2024.
Purchases made pursuant to the Current Preferred Stock Repurchase Program will be made in either the open market or in privately negotiated transactions from time to time as permitted by securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us in our discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The authorization does not obligate us to acquire any particular amount of Preferred Stock and the program may be suspended or discontinued at our discretion without prior notice.
During the three and nine months ended September 30, 2025, we issued 11,000,000 shares of our Series J Preferred Stock, which included the exercise by the underwriters of their option to purchase an additional 1,000,000 shares of Series J Preferred Stock solely to cover over-allotments, for gross proceeds of $275 million before deducting the underwriting discount and other estimated offering expenses.


Leverage and Capital
We believe that it is prudent to maintain conservative GAAP leverage ratios and economic leverage ratios as there may be continued volatility in the mortgage and credit markets. Our capital policy governs our capital and leverage position including setting limits. Based on the guidelines, we generally expect to maintain an economic leverage ratio of less than 10:1. Our actual economic leverage ratio varies from time to time based upon various factors, including our management’s opinion of the level of risk of our assets and liabilities, our liquidity position, our level of unused borrowing capacity, the availability of credit, over-collateralization levels required by lenders when we pledge assets to secure borrowings and our assessment of domestic and international market conditions.
Our GAAP leverage ratio at September 30, 2025 and December 31, 2024 was 7.1:1 and 7.1:1, respectively. Our economic leverage ratio, which is computed as the sum of Recourse Debt, cost basis of TBA derivatives outstanding, and net forward purchases (sales) of investments divided by total equity was 5.7:1 and 5.5:1, at September 30, 2025 and December 31, 2024, respectively. Our GAAP capital ratio at September 30, 2025 and December 31, 2024 was 11.9% and 12.3%, respectively. Our economic capital ratio, which represents our ratio of stockholders’ equity to total economic assets (inclusive of the implied market value of TBA derivatives and net of debt issued by securitization vehicles and participations issued), was 14.8% and 14.8% at September 30, 2025 and December 31, 2024, respectively. Economic leverage ratio and economic capital ratio are non-GAAP financial measures. Refer to the “Non-GAAP Financial Measures” section for additional information, including reconciliations to their most directly comparable GAAP results.
 
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Item 2. Management’s Discussion and Analysis
Risk Management
We are subject to a variety of risks in the ordinary conduct of our business. The effective management of these risks is of critical importance to the overall success of Annaly. The objective of our risk management framework is to identify, measure and monitor these risks.
Our risk management framework is intended to facilitate a holistic, enterprise-wide view of risk. We believe we have built a strong and collaborative risk management culture throughout Annaly focused on awareness which supports appropriate understanding and management of our key risks. Each employee is accountable for identifying, monitoring and managing risk within their area of responsibility.



Risk Appetite
We maintain a firm-wide risk appetite statement which defines the types and levels of risk we are willing to take in order to achieve our business objectives, and reflects our risk management philosophy. We engage in risk activities based on our core expertise that aim to enhance value for our stockholders. Our activities focus on income generation and capital preservation through proactive portfolio management, supported by a conservative liquidity and leverage posture.
The risk appetite statement asserts the following key risk parameters to guide our investment management activities:
Risk ParameterDescription
Portfolio CompositionWe will maintain a portfolio comprised of target assets approved by our Board and in accordance with our capital allocation policy.
LeverageWe generally expect to maintain an economic leverage ratio no greater than 10:1 considerate of our overall capital allocation framework.
Liquidity RiskWe will seek to maintain an unencumbered asset portfolio sufficient to meet our liquidity needs under adverse market conditions.
Interest Rate RiskWe will seek to manage interest rate risk to protect the portfolio from adverse rate movements utilizing derivative instruments targeting both income and capital preservation.
Credit RiskWe will seek to manage credit risk by making investments which conform to our specific investment policy parameters and optimize risk-adjusted returns.
Capital PreservationWe will seek to protect our capital base through disciplined risk management practices.
Operational RiskWe will seek to limit impacts to our business through disciplined operational risk management practices addressing areas including but not limited to, management of key third party relationships (i.e. originators, sub-servicers), human capital management, cybersecurity and technology related matters, business continuity and financial reporting risk.
Compliance, Regulatory and LegalWe will seek to comply with regulatory requirements needed to maintain our REIT status and our exemption from registration under the Investment Company Act and the licenses and approvals of our regulated and licensed subsidiaries.
Governance
Risk management begins with our Board, through the review and oversight of the risk management framework, and executive management, through the ongoing formulation of risk management practices and related execution in managing risk. The Board exercises its oversight of risk management primarily through the Risk Committee and Audit Committee with support from the other Board Committees. The Risk Committee is responsible for oversight of our risk governance structure, risk management (operational and market risk) and risk assessment guidelines and policies and our risk appetite. The Audit Committee is responsible for oversight of the quality and integrity of our accounting, internal controls and financial reporting practices, including independent auditor selection, evaluation and review, and oversight of the internal audit function. The Risk Committee and the Audit Committee jointly oversee practices and policies related to cybersecurity and receive regular reports from management throughout the year on cybersecurity and related risks. The Management Development and Compensation Committee is responsible for oversight of risk related to our compensation policies and practices and other human capital matters such as succession and culture. The Nominating/Corporate Governance Committee assists the Board in its oversight of our corporate governance framework and the annual self-evaluation of the Board, and the Corporate Responsibility Committee assists the Board in its oversight of any matters that may present reputational or environmental sustainability risk to us. The full Board has overall responsibility for this oversight, and the Corporate Responsibility Committee meets jointly with other Committees from time to time in order to review areas of shared responsibility.
Risk assessment and risk management are the responsibility of our management. A series of management committees has oversight or decision-making responsibilities for risk management activities. Membership of these committees is reviewed
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Item 2. Management’s Discussion and Analysis
regularly to ensure the appropriate personnel are engaged in the risk management process. Three primary management committees have been established to provide a comprehensive framework for risk management. The management committees responsible for our risk management include the Enterprise Risk Committee (“ERC”), Asset / Liability Committee (“ALCO”) and the Financial Reporting and Disclosure Committee (“FRDC”). Each of these committees reports to our management Operating Committee, which is responsible for oversight and management of our operations, including oversight and approval authority over all aspects of our enterprise risk management. 
Audit Services is an independent function with reporting lines to the Audit Committee. Audit Services is responsible for performing our internal audit activities, which includes independently assessing and validating key controls within the risk management framework.
Our compliance group is responsible for oversight of our regulatory compliance. Our Chief Compliance Officer has reporting lines to the Audit Committee.
Description of Risks
We are subject to a variety of risks due to the business we operate. Risk categories are an important component of a robust enterprise-wide risk management framework.
We have identified the following primary categories that we utilize to identify, assess, measure and monitor risk.
RiskDescription
Liquidity and Funding RiskRisk to earnings, capital or business resulting from our inability to meet our obligations when they come due without incurring unacceptable losses because of inability to liquidate assets or obtain adequate funding.
Investment/Market RiskRisk to earnings, capital or business resulting in the decline in value of our assets or an increase in the costs of financing caused by changes in market variables, such as interest rates, which affect the values of investment securities and other investment instruments.
Credit RiskRisk to earnings, capital or business resulting from an obligor’s failure to meet the terms of any contract or otherwise failure to perform as agreed. This risk is present in lending and investing activities.
Counterparty RiskRisk to earnings, capital or business resulting from a counterparty’s failure to meet the terms of any contract or otherwise failure to perform as agreed. This risk is present in funding, hedging and investing activities.
Operational RiskRisk to earnings, capital, reputation or business arising from inadequate or failed internal processes or systems (including business continuity planning), human factors or external events. This risk also applies to our use of proprietary and third party models, software vendors and data providers, and oversight of third party service providers such as sub-servicers, due diligence firms etc.
Compliance, Regulatory and Legal RiskRisk to earnings, capital, reputation or conduct of business arising from violations of, or nonconformance with internal and external applicable rules and regulations, losses resulting from lawsuits or adverse judgments, or from changes in the regulatory environment that may impact our business model.

Liquidity and Funding Risk Management
Our liquidity and funding risk management strategy is designed to ensure the availability of sufficient resources to support our business and meet our financial obligations under both normal and adverse market and business environments. Our liquidity and funding risk management practices consist of the following primary elements:
ElementDescription
FundingAvailability of diverse and stable sources of funds.
Excess LiquidityExcess liquidity primarily in the form of unencumbered assets and cash.
Maturity ProfileDiversity and tenor of liabilities and modest use of leverage.
Stress TestingScenario modeling to measure the resiliency of our liquidity position.
Liquidity Management PoliciesComprehensive policies including monitoring, risk limits and an escalation protocol.

Funding
Our primary financing sources are repurchase agreements provided through counterparty arrangements and through our wholly-owned subsidiary, Arcola Securities, Inc. (“Arcola”), other secured financing, debt issued by securitization vehicles, mortgages, credit facilities, note sales and various forms of equity. We maintain excess liquidity by holding unencumbered liquid assets that could be either used to collateralize additional borrowings or sold.
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Item 2. Management’s Discussion and Analysis
We seek to conservatively manage our repurchase agreement funding position through a variety of methods including diversity, breadth and depth of counterparties and maintaining a staggered maturity profile.
Arcola provides direct access to third party funding as a FINRA member broker-dealer. Arcola borrows funds through the General Collateral Finance Repo service offered by the FICC, with FICC acting as the central counterparty. In addition, Arcola may borrow funds through direct repurchase agreements.
To reduce our liquidity risk we maintain a laddered approach to our repurchase agreements. At September 30, 2025 and December 31, 2024, the weighted average days to maturity was 49 days and 32 days, respectively.
Our repurchase agreements generally provide that in the event of a margin call we must provide additional securities or cash on the same business day that a margin call is made. Should prepayment speeds on the mortgages underlying our Agency and Residential mortgage-backed securities and/or market interest rates or other factors move suddenly and cause declines in the market value of assets posted as collateral, resulting margin calls may cause an adverse change in our liquidity position. We have continued to diversify our financing profile adding new non-mark-to-market facilities and financing options under existing facilities for our Residential Credit operating segment.
At September 30, 2025, we had total financial assets and cash pledged against existing liabilities of $80.3 billion. The weighted average haircut was approximately 3% on repurchase agreements. The quality and character of the Residential Securities that we pledge as collateral under the repurchase agreements and interest rate swaps did not materially change at September 30, 2025, compared to the same period in 2024, and our counterparties did not materially alter any requirements, including required haircuts, related to the collateral we pledge under repurchase agreements and interest rate swaps during the three months ended September 30, 2025.
The following table presents our quarterly average and quarter-end repurchase agreement and reverse repurchase agreement balances outstanding for the periods presented:
 Repurchase AgreementsReverse Repurchase Agreements
 Average Daily
Amount Outstanding		Ending Amount OutstandingAverage Daily
Amount Outstanding		Ending Amount Outstanding
For the three months ended(dollars in thousands)
September 30, 2025$74,041,222 $75,118,963 $3,871,747 $35,004 
June 30, 202567,699,628 66,541,378 3,434,050 — 
March 31, 202566,724,268 61,659,460 2,721,386 — 
December 31, 202468,092,016 65,688,923 2,778,970 — 
September 30, 202467,092,629 64,310,276 3,041,120 — 
June 30, 202463,043,218 60,787,994 2,322,479 — 
March 31, 202464,027,388 58,975,232 2,323,485 — 
December 31, 202361,924,576 62,201,543 1,340,204 — 
September 30, 202366,020,036 64,693,821 257,097 — 
Our committed facility warehouse lines provide financing for our MSR portfolio for liquidity purposes. We maintain a conservative approach to these facilities, generally over-collateralizing the lines against margin calls.
The following table provides information on our repurchase agreements and other secured financing by maturity date at September 30, 2025. The weighted average remaining maturity on our repurchase agreements and other secured financing was 54 days at September 30, 2025:
 September 30, 2025
 Principal BalanceWeighted Average Rate% of Total
 (dollars in thousands)
1 day$26,994,527 4.38%35.4%
2 to 29 days2,103,067 4.90%2.8%
30 to 59 days14,059,608 4.38%18.5%
60 to 89 days23,209,704 4.27%30.5%
90 to 119 days4,578,922 4.18%6.0%
Over 119 days (1)
5,198,135 5.06%6.8%
Total$76,143,963 4.40%100.0%
(1) Approximately 1% of the total repurchase agreements and other secured financing had a remaining maturity over 1 year.
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We also finance our investments in residential mortgage loans through the issuance of securitization transactions sponsored by our wholly-owned subsidiary Onslow Bay Financial LLC (“Onslow Bay”) under the Onslow Bay private-label securitization program. In order to increase financing optionality for our Onslow Bay platform, during the quarter we renewed or extended existing facilities and upsized one facility by $100 million.
The following table presents our outstanding debt balances and associated weighted average rates and days to maturity at September 30, 2025:
  Weighted Average Rate  
 Principal BalanceAs of Period EndFor the Quarter
Weighted Average
Days to Maturity (1)
 (dollars in thousands)
Repurchase agreements$75,118,963 4.36%4.50%49
Other secured financing1,025,000 6.94%7.00%399
Debt issued by securitization vehicles (2)
27,098,983 5.54%5.30%12,974
Participations issued (2)
1,772,035 6.65%6.58%10,835
Total indebtedness$105,014,981    
(1) Determined based on estimated weighted-average lives of the underlying debt instruments.
(2) Non-recourse to Annaly.
Excess Liquidity
Our primary source of liquidity is the availability of unencumbered assets which may be provided as collateral to support additional funding needs. We target minimum thresholds of available, unencumbered assets to maintain excess liquidity. The following table illustrates our asset portfolio available to support potential collateral obligations and funding needs.
Assets are considered encumbered if pledged as collateral against an existing liability, and therefore are no longer available to support additional funding. An asset is considered unencumbered if it has not been pledged or securitized. The following table also provides the carrying amount of our encumbered and unencumbered financial assets at September 30, 2025:
 Encumbered AssetsUnencumbered AssetsTotal
Financial assets(dollars in thousands)
Cash and cash equivalents$1,776,349 $320,347 $2,096,696 
Reverse repurchase agreements (1)
35,004 — 35,004 
Investments, at carrying value (2)
Agency mortgage-backed securities75,369,462 5,610,031 80,979,493 
Credit risk transfer securities253,257 77,390 330,647 
Non-agency mortgage-backed securities757,761 634,432 1,392,193 
Residential mortgage loans (3)
33,177,126 343,482 33,520,608 
MSR3,164,697 311,484 3,476,181 
Interests in MSR— 35,833 35,833 
Other assets (4)
— 50,506 50,506 
Total financial assets$114,533,656 $7,383,505 $121,917,161 
(1) The collateral received in connection with reverse repurchase agreements was repledged as of September 30, 2025.
(2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported in the Consolidated Statements of Financial Condition.
(3) Includes assets transferred or pledged to securitization vehicles.
(4) Includes commercial real estate investments and interests in certain joint ventures.

We maintain liquid assets in order to satisfy our current and future obligations in normal and stressed operating environments. These are held as the primary means of liquidity risk mitigation. The composition of our liquid assets is also considered and is subject to certain parameters. The composition is monitored for concentration risk, including in respect of our deposits of our cash and cash equivalents, and asset type. We believe the assets we consider liquid can be readily converted into cash, through liquidation or by being used as collateral in financing arrangements (including as additional collateral to support existing financial arrangements). Our balance sheet also generates liquidity on an on-going basis through mortgage principal and interest repayments and net earnings held prior to payment of dividends. The following table presents our liquid assets as a percentage of total assets at September 30, 2025:
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Carrying Value (1)
 Liquid assets(dollars in thousands)
Cash and cash equivalents$2,096,696 
Residential Securities (2)
82,702,278 
Residential mortgage loans (3)
4,008,299 
Total liquid assets$88,807,273 
Percentage of liquid assets to carrying amount of encumbered and unencumbered financial assets (4)
96.12%
(1) Carrying value approximates the market value of assets. The assets listed in this table include $80.3 billion of assets that have been pledged as collateral against existing liabilities at September 30, 2025. Please refer to the Encumbered and Unencumbered Assets table for related information.
(2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported in the Consolidated Statements of Financial Condition.
(3) Excludes securitized residential mortgage loans transferred or pledged to consolidated VIEs carried at fair value of $29.5 billion.
(4) Denominator is computed based on the carrying amount of encumbered and unencumbered financial assets, excluding assets transferred or pledged to securitization vehicles, of $29.5 billion.

Maturity Profile and Interest Rate Sensitivity
We consider the profile of our assets, liabilities and derivatives when managing both liquidity risk as well as investment/market risk. We determine the amount of liquid assets that are required to be held by monitoring several liquidity metrics. We utilize several modeling techniques to analyze our current and potential obligations including the expected cash flows from our assets, liabilities and derivatives. The following table illustrates the expected final maturities and cash flows of our assets, liabilities and derivatives. The table is based on a static portfolio and assumes no reinvestment of asset cash flows and no future liabilities are entered into. In assessing the maturity of our assets, liabilities and off-balance sheet obligations, we use the stated maturities, or our prepayment expectations for assets and liabilities that exhibit prepayment characteristics. Cash and cash equivalents are included in the ‘Less than 3 Months’ maturity bucket, as they are typically held for a short period of time.
With respect to each maturity bucket, our maturity gap is considered negative when the amount of maturing liabilities exceeds the amount of maturing assets. A negative gap increases our liquidity risk as we must enter into future liabilities.
Our interest rate sensitivity gap is the difference between interest earning assets and interest bearing liabilities maturing or re-pricing within a given time period. Unlike the calculation of maturity gap, interest rate sensitivity gap includes the effect of our interest rate swaps. A gap is considered positive when the amount of interest-rate sensitive assets exceeds the amount of interest-rate sensitive liabilities. A gap is considered negative when the amount of interest-rate sensitive liabilities exceeds interest-rate sensitive assets. During a period of rising interest rates, a negative gap would tend to adversely affect net interest income, while a positive gap would tend to result in an increase in net interest income. During a period of falling interest rates, a negative gap would tend to result in an increase in net interest income, while a positive gap would tend to affect net interest income adversely. Because different types of assets and liabilities with the same or similar maturities may react differently to changes in overall market rates or conditions, changes in interest rates may affect net interest income positively or negatively even if assets and liabilities were perfectly matched in each maturity category. The amount of assets and liabilities utilized to compute our interest rate sensitivity gap was determined in accordance with the contractual terms of the assets and liabilities, except that adjustable-rate loans and securities are included in the period in which their interest rates are first scheduled to adjust and not in the period in which they mature. The effects of interest rate swaps, whereby we generally pay a fixed rate and receive a floating rate and effectively lock in our financing costs for a longer term, are also reflected in our interest rate sensitivity gap.
The interest rate sensitivity of our assets and liabilities in the following table at September 30, 2025 could vary substantially based on actual prepayment experience.
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 Less than 3
Months		3-12
 Months		More than 1 Year to 3 Years3 Years and OverTotal
Financial assets(dollars in thousands)
Cash and cash equivalents$2,096,696 $— $— $— $2,096,696 
Reverse repurchase agreements— — — 35,004 35,004 
    Agency mortgage-backed securities (principal)— 115 62,162 82,201,224 82,263,501 
    Residential credit risk transfer securities (principal)4,664 5,841 57,466 244,974 312,945 
    Non-agency mortgage-backed securities (principal)27,867 229,566 439,841 641,359 1,338,633 
    Commercial mortgage-backed securities (principal)— — — — — 
Total securities32,531 235,522 559,469 83,087,557 83,915,079 
Loans (principal)
— — — 3,878,557 3,878,557 
Assets transferred or pledged to securitization vehicles (principal)— — — 29,723,650 29,723,650 
Total financial assets - maturity2,129,227 235,522 559,469 116,724,768 119,648,986 
    Effect of utilizing reset dates (1)
30,290,520 547,022 683,950 (31,521,492)— 
Total financial assets - interest rate sensitive$32,419,747 $782,544 $1,243,419 $85,203,276 $119,648,986 
Financial liabilities
    Repurchase agreements$66,116,906 $8,723,946 $278,111 $— $75,118,963 
    Debt issued by securitization vehicles (principal)
— — — 27,098,983 27,098,983 
    Participations issued (principal)— — — 1,772,035 1,772,035 
U.S. Treasury securities sold, not yet purchased2,442,570 — — — 2,442,570 
Total financial liabilities - maturity68,559,476 8,723,946 278,111 28,871,018 106,432,551 
    Effect of utilizing reset dates (1)(2)
(59,158,681)1,205,554 26,168,855 31,784,272 — 
Total financial liabilities - interest rate sensitive$9,400,795 $9,929,500 $26,446,966 $60,655,290 $106,432,551 
Maturity gap$(66,430,249)$(8,488,424)$281,358 $87,853,750 $13,216,435 
Cumulative maturity gap$(66,430,249)$(74,918,673)$(74,637,315)$13,216,435 
Interest rate sensitivity gap$23,018,952 $(9,146,956)$(25,203,547)$24,547,986 $13,216,435 
Cumulative rate sensitivity gap$23,018,952 $13,871,996 $(11,331,551)$13,216,435 
(1)Maturity gap utilizes stated maturities, or prepayment expectations for assets that exhibit prepayment characteristics, while interest rate sensitivity gap utilizes reset dates, if applicable.
(2)Includes effect of interest rate swaps.
The methodologies we employ for evaluating interest rate risk include an analysis of our interest rate “gap,” measurement of the duration and convexity of our portfolio and sensitivities to interest rates and spreads.
Stress Testing
We utilize liquidity stress testing to ensure we have sufficient liquidity under a variety of scenarios and stresses. These stress tests assist with the management of our pool of liquid assets and influence our current and future funding plans. The stresses applied include market-wide and firm-specific stresses.

Liquidity Management Policies
We utilize a comprehensive liquidity policy structure to inform our liquidity risk management practices including monitoring and measurement, along with well-defined key risk indicators. Both quantitative and qualitative targets are utilized to measure the ongoing stability and condition of the liquidity position, and include the level and composition of unencumbered assets, as well as the sustainability of the funding composition under stress conditions.
We also monitor early warning metrics designed to measure the quality and depth of liquidity sources based upon both company-specific and market conditions. The metrics assist in assessing our liquidity conditions and are integrated into our escalation protocol.

Investment/Market Risk Management
One of the primary risks we are subject to is investment/market risk. Changes in the level of interest rates can affect our net interest income, which is the difference between the income we earn on our interest earning assets and the interest expense incurred from interest bearing liabilities and derivatives. Changes in the level of interest rates and spreads can also affect the value of our assets and potential realization of gains or losses from the sale of these assets. We may utilize a variety of financial
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Item 2. Management’s Discussion and Analysis
instruments, including interest rate swaps, swaptions, options, futures and other hedges, in order to limit the adverse effects of interest rates on our results. In the case of interest rate swaps, we utilize contracts linked to SOFR but may also enter into interest rate swaps where the floating leg is linked to the overnight index swap rate or another index. In addition, we may use MAC interest rate swaps in which we may receive or make a payment at the time of entering such interest rate swap to compensate for the off-market nature of such interest rate swap. MAC interest rate swaps offer price transparency, flexibility and more efficient portfolio administration through compression which is the process of reducing the number of unique interest rate swap contracts and replacing them with fewer contracts containing market defined terms. Our portfolio and the value of our portfolio, including derivatives, may be adversely affected as a result of changing interest rates and spreads.
We simulate a wide variety of interest rate scenarios in evaluating our risk. Scenarios are run to capture our sensitivity to changes in interest rates, spreads and the shape of the yield curve. We also consider the assumptions affecting our analysis such as those related to prepayments. In addition to predefined interest rate scenarios, we utilize Value-at-Risk measures to estimate potential losses in the portfolio over various time horizons utilizing various confidence levels. The following tables estimate the potential changes in economic net interest income over a twelve month period and the immediate effect on our portfolio market value (inclusive of derivative instruments), should interest rates instantaneously increase or decrease by 25, 50 or 75 basis points, and the effect of portfolio market value if mortgage option-adjusted spreads instantaneously increase or decrease by 5, 15 or 25 basis points (assuming shocks are parallel and instantaneous). All changes to income and portfolio market value are measured as percentage changes from the projected net interest income and portfolio value at the base interest rate scenario. The net interest income simulations incorporate the interest expense effect of rate resets on liabilities and derivatives as well as the amortization expense and reinvestment of principal based on the prepayments on our securities, which varies based on the level of rates. The results assume no management actions in response to the rate or spread changes. The following table presents estimates at September 30, 2025. Actual results could differ materially from these estimates.
Change in Interest Rate (1)
Estimated Percentage Change in Portfolio Value (2)
Estimated Change as a
% on NAV (2)(3)
Projected Percentage Change in Economic Net Interest Income (4)
-75 Basis points(0.2%)(1.7%)(2.4%)
-50 Basis points—%(0.3%)(1.3%)
-25 Basis points—%0.2%(0.4%)
+25 Basis points(0.1%)(0.9%)(0.3%)
+50 Basis points(0.3%)(2.4%)(1.1%)
+75 Basis points(0.6%)(4.4%)(2.6%)
MBS Spread Shock (1)
Estimated Change in
Portfolio Market Value (2)
Estimated Change as a
 % on NAV (2)(3)
 
-25 Basis points1.3%9.7% 
-15 Basis points0.8%5.8% 
-5 Basis points0.3%1.9% 
+5 Basis points(0.3%)(1.9%) 
+15 Basis points(0.8%)(5.7%) 
+25 Basis points(1.3%)(9.5%) 
(1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction with inputs from our internal investment professionals. Actual results could differ materially from these estimates.
(2) Scenarios include securities, residential mortgage loans, MSR and derivative instruments.
(3) NAV represents book value of equity.
(4) Scenarios include securities, residential mortgage loans, repurchase agreements, other secured financing and interest rate swaps. Economic net interest income includes the net interest component of interest rate swaps and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).
Credit Risk Management
Key risk parameters have been established to specify our credit risk appetite. We seek to manage credit risk by making investments which conform to the firm’s specific investment policy parameters and optimize risk-return attributes.
While we do not expect to encounter credit risk in our Agency mortgage-backed securities, we face credit risk on the non-Agency mortgage-backed securities and CRT securities in our portfolio. In addition, we are also exposed to credit risk on residential mortgage loans and commercial real estate investments. MSR values may also be impacted through reduced servicing fees and higher costs to service the underlying mortgage loans due to borrower performance. Generally, we are subject to risk of loss if an issuer or borrower fails to perform its contractual obligations. We have established policies and procedures for mitigating credit risk, including establishing and reviewing limits for credit exposure. In the case of residential mortgage loans and MSR, we may engage a third party to perform due diligence on a sample of loans that we believe sufficiently represents the entire pool. Once an investment is made, our ongoing surveillance process includes regular reviews, analysis and oversight of investments by our investment personnel and appropriate committee. We review credit and other risks
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Item 2. Management’s Discussion and Analysis
of loss associated with each investment. Our management monitors the overall portfolio risk and determines estimates of provision for loss. Additionally, ALCO has oversight of our credit risk exposure.
Our portfolio composition, based on balance sheet values, at September 30, 2025 and December 31, 2024 was as follows:
September 30, 2025December 31, 2024
Category
Agency mortgage-backed securities68.2%68.6%
Credit risk transfer securities0.3%0.8%
Non-agency mortgage-backed securities1.2%1.5%
Residential mortgage loans (1)
27.5%26.0%
Commercial mortgage-backed securities—%0.1%
Mortgage servicing rights (2)
2.8%3.0%
(1) Includes assets transferred or pledged to securitization vehicles.
(2) Includes interests in MSR.

Counterparty Risk Management
Our use of repurchase and derivative agreements and trading activities create exposure to counterparty risk relating to potential losses that could be recognized if the counterparties to these agreements fail to perform their obligations under the contracts. In the event of default by a counterparty, we could have difficulty obtaining our assets pledged as collateral. A significant portion of our investments are financed with repurchase agreements by pledging our Residential Securities as collateral to the applicable lender. The collateral we pledge generally exceeds the amount of the borrowings under each agreement. If the counterparty to the repurchase agreement defaults on its obligations and we are not able to recover our pledged asset, we are at risk of losing the over-collateralization or haircut. The amount of this exposure is the difference between the amount loaned to us plus interest due to the counterparty and the fair value of the collateral pledged by us to the lender including accrued interest receivable on such collateral.
We also use interest rate swaps and other derivatives that are not centrally cleared to manage interest rate risk. Under these agreements, we pledge securities and cash as collateral or settle variation margin payments as part of a margin arrangement.
If a counterparty were to default on its obligations, we would be exposed to a loss to a derivative counterparty to the extent that the amount of our securities or cash pledged exceeded the unrealized loss on the associated derivative and we were not able to recover the excess collateral. Additionally, we would be exposed to a loss to a derivative counterparty to the extent that our unrealized gains on derivative instruments exceeded the amount of the counterparty’s securities or cash pledged to us.
We monitor our exposure to counterparties across several dimensions including by type of arrangement, collateral type, counterparty type, ratings and geography. Additionally, ALCO has oversight of our counterparty exposure. The following table summarizes our exposure to counterparties by geography at September 30, 2025:
Number of Counterparties
Secured Financing (1)
Interest Rate Swaps at Fair Value
Exposure (2)
Geography(dollars in thousands)
North America21 $58,667,332 $(16,217)$3,885,242 
Europe10 13,002,589 (4,935)948,449 
Asia (non-Japan)1 488,886 — 15,377 
Japan4 3,985,156 — 871,114 
Total36 $76,143,963 $(21,152)$5,720,182 
(1) Includes repurchase agreements and other secured financing.
(2) Represents the amount of cash and/or securities pledged as collateral to each counterparty less the aggregate of repurchase agreement and other secured financing and derivatives for each counterparty.

Operational Risk Management
We are subject to operational risk in each of our business and support functions. Operational risk may arise from internal or external sources including human error, fraud, systems issues, process change, vendors, business interruptions and other external events. We manage operational risk through a variety of tools including processes, policies and procedures that cover topics such as business continuity, personal conduct, cybersecurity and vendor management. Other tools include Risk and Control Self Assessment (“RCSA”) testing, including disaster recovery/testing; systems controls, including access controls; training, including phishing exercises and cybersecurity awareness training; and monitoring, which includes the use of key risk
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Item 2. Management’s Discussion and Analysis
indicators. Our Operational Risk Management team conducts a disaster recovery exercise on an annual basis and periodically conducts other operational risk tabletop exercises. Employee-level lines of defense against operational risk include proper segregation of incompatible duties, activity-level internal controls over financial reporting, the empowerment of business units to identify and mitigate operational risk sources, testing by our internal audit staff, and our overall governance framework.
Operational Risk Management responsibilities are overseen by the ERC. The ERC is responsible for supporting the Operating Committee in the implementation, ongoing monitoring, and evaluation of the effectiveness of the enterprise-wide risk management framework. This oversight authority includes review of the strategies, processes, policies, and practices established by management to identify, assess, measure, and manage enterprise-wide risk.
Cybersecurity is part of our enterprise-wide risk management framework. Processes for assessing, identifying and managing cybersecurity risks include cybersecurity risk assessments, use of key risk indicators, vendor cybersecurity risk management, employee training, including phishing exercises and cybersecurity awareness training, penetration testing, evaluation of cybersecurity insurance and periodic engagements by our internal audit department, which validates whether our cybersecurity program and information security practices align with relevant parts of the National Institute of Standards and Technology (“NIST”) framework. We periodically engage penetration testing companies and law firms to assist in these processes. When we do so, we hire reputable companies, limit their access to only information necessary for the specific purpose and maintain security controls around confidential information, including personal information. We also maintain a Cybersecurity Incident Response Plan (“Response Plan”) with processes to identify, contain, mitigate and escalate cybersecurity incidents, utilizing cross-functional expertise and external resources as needed. We conduct periodic tabletop exercises to test our Response Plan and our reaction to various business disruption events, and the results of these tabletop exercises are reported to the Cybersecurity Committee and the ERC.
We also have processes in place to oversee and identify material risks from cybersecurity threats associated with our use of third party service providers upon which we depend to perform various business processes related to our operations, including mortgage loan servicers and sub-servicers. Our vendor management and IT policies establish procedures for engaging, onboarding and monitoring the performance of third party vendors. For mortgage loan servicers and sub-servicers, these procedures include assessing a vendor’s financial health as well as oversight of its compliance with applicable laws and regulations, cybersecurity and business continuity programs and security of personal information. We also have processes to evaluate and classify cybersecurity risk related to sensitive data held by key third party service providers on their systems.
The Cybersecurity Committee has primary responsibility for these processes to manage cybersecurity risks, under the oversight of the ERC. Daily monitoring of cybersecurity defenses is performed by the IT Infrastructure Team and any issues are escalated to the Cybersecurity Committee as needed. The Cybersecurity Committee regularly meets to discuss both routine oversight of cybersecurity processes, policies and procedures and management of any cyber-specific events, including escalation to the ERC, the executive leadership team and/or the Board, as appropriate.
The Cybersecurity Committee includes representatives from Operational Risk Management, Information Technology, Legal, Mortgage Operations and Internal Controls. Certain members of the Cybersecurity Committee have relevant qualifications such as extensive work experience implementing data security measures, developing cybersecurity policies and procedures and assessing, managing and reporting cybersecurity risk. Members also participate in cybersecurity-related professional organizations that discuss industry threats, challenges and solutions to cybersecurity issues.
The Cybersecurity Committee regularly discusses cybersecurity risk management and best practices with the ERC and with the Audit and Risk Committees of our Board. The Audit and Risk Committees jointly oversee processes, practices and policies related to cybersecurity and receive joint and individual presentations from management and external experts on cyber technology-related risks. Two members of our Board have completed the Carnegie Mellon/NACD Cyber-Risk Oversight Program and earned the CERT Certificate in Cybersecurity Oversight and one member of our Board has completed the NACD Master Class: Cyber-Risk Oversight Program.
To date, we have not detected any risks from cybersecurity threats that have materially affected us. However, even though we take steps to employ reasonable cybersecurity defenses, not every cybersecurity incident can be prevented or detected. We also may be held responsible for cybersecurity threats affecting our third party service providers, including servicers and sub-servicers, some of whom have reported breaches in the past. Therefore, while we are not aware of any cybersecurity threats or incidents that are reasonably likely to have a material effect on our business strategy, results of operations, the likelihood and severity of such risks are difficult to predict. For further discussion, please see the risk factors titled “We are highly dependent on information systems and networks, many of which are operated by third parties” and “Cyberattacks or other information security breaches of our Company’s, service providers’ or counterparties’ systems or network affect our business, reputation and financial condition” in Part I, Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K and in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q.

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Item 2. Management’s Discussion and Analysis
Compliance, Regulatory and Legal Risk Management
Our business is organized as a REIT, and we seek to continue to meet the requirements for taxation as a REIT. The determination that we are a REIT requires an analysis of various factual matters and circumstances. Accordingly, we closely monitor our REIT status within our risk management program. We also regularly assess our risk management in respect of our regulated and licensed subsidiaries, which include our registered broker-dealer subsidiary Arcola, our subsidiary that is registered with the SEC as an investment adviser under the Investment Advisers Act and our subsidiary that operates as a licensed mortgage aggregator and master servicer.
The financial services industry is highly regulated and receives significant attention from regulators, which may impact both our company and our business strategy. Our investments in residential whole loans and MSR require us to comply with applicable state and federal laws and regulations and maintain appropriate governmental licenses, approvals and exemptions. We proactively monitor the potential impact regulation may have both directly and indirectly on us. We maintain a process to actively monitor both actual and potential legal action that may affect us. Our risk management framework is designed to identify, measure and monitor these risks under oversight of the ERC.
We currently rely on the exemption from registration provided by Section 3(c)(5)(C) of the Investment Company Act, and we seek to continue to meet the requirements for this exemption from registration. The determination that we qualify for this exemption from registration depends on various factual matters and circumstances. Accordingly, in conjunction with our legal department, we closely monitor our compliance with Section 3(c)(5)(C) of the Investment Company Act within our risk management program. Compliance with Section 3(c)(5)(C) of the Investment Company Act is monitored by the FRDC.


Critical Accounting Estimates
The preparation of our consolidated financial statement in accordance with generally accepted accounting principles in the United States requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ materially from these estimates and changes in assumptions could have a significant effect on the consolidated financial statements. Our critical accounting policies that require us to make significant judgments or estimates are described below. For more information on these critical accounting policies and other significant accounting policies, refer to the Note titled “Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in Item 1. “Financial Statements.”


Valuation of Financial Instruments

Residential Securities
Description: We carry Residential Securities at estimated fair value. There is an active market for our Agency mortgage-backed securities, CRT securities and non-Agency mortgage-backed securities.
Judgments and Uncertainties: Since we primarily invest in securities that can be valued using quoted prices for actively traded assets, there is a high degree of observable inputs and less subjectivity in measuring fair value. Internal fair values are determined using quoted prices from the TBA securities market, the Treasury curve and the underlying characteristics of the individual securities, which may include coupon, periodic and life caps, reset dates and the expected life of the security. While prepayment rates may be difficult to predict and require estimation and judgment in the valuation of Agency mortgage-backed securities, we use several third party models to validate prepayment speeds used in fair value measurements of Residential Securities. All internal fair values are compared to external pricing sources and/or dealer quotes to determine reasonableness. Additionally, securities used as collateral for repurchase agreements are priced daily by counterparties to ensure sufficient collateralization, providing additional verification of our internal pricing.
Sensitivity of Estimates to Change: Changes in underlying assumptions used in estimating fair value impact the carrying value of the Residential Securities as well as their yield. For example, an increase in CPR would decrease the carrying value and yield of our Agency mortgage-backed securities. Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds. Refer to the Experienced and Projected Long-Term CPR, Financial Condition – Residential Securities and the interest rate sensitivity and interest rate and MBS spread shock analysis and discussions within this Item 2 for further information.

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Item 2. Management’s Discussion and Analysis
Residential Mortgage Loans
Description: We elected to account for Residential Mortgage Loans at fair value. There is an active market for the residential whole loans in which we invest.
Judgments and Uncertainties: Since we primarily invest in residential loans that can be valued using actively quoted prices for similar assets, there are observable inputs in measuring fair value. Internal fair values are determined using quoted prices for similar market transactions, the swap curve and the underlying characteristics of the individual loans, which may include loan term, coupon, and reset dates. While prepayment rates may be difficult to predict and are a significant estimate requiring judgment in the valuation of residential whole loans, we validate prepayment speeds against those provided by independent pricing analytic providers specializing in residential mortgage loans. Internal fair values are generally compared to external pricing sources to determine reasonableness.
Sensitivity of Estimates to Change: Changes to model assumptions, including prepayment speeds may significantly impact the fair value estimate of residential mortgage loans as well as unrealized gains and losses and yield on these assets. Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds. Refer to the interest rate sensitivity and interest rate shock analysis and discussions within this Item 2 for further information.


MSR
Description: We elected to account for MSR at fair value. The market for MSR is considered less active and transparent compared to securities. As such fair value estimates for our investment in MSR are obtained from models, which use significant unobservable inputs in their valuations.
Judgments and Uncertainties: These valuations primarily utilize discounted cash flow models that incorporate unobservable market data inputs including prepayment rates, delinquency levels, costs to service and discount rates. Model valuations are then compared to valuations obtained from third party pricing providers. Management reviews the valuations received from third party pricing providers and uses them as a point of comparison to modeled values. The valuation of MSR requires significant judgment by management and the third party pricing providers.
Sensitivity of Estimates to Change: Changes in the underlying assumptions used to estimate the fair value of MSR impact the carrying value as well as the related unrealized gains and losses recognized. For further discussion of the sensitivity of the model inputs refer to the Note titled “Fair Value Measurements” in the Notes to the Consolidated Financial Statements included in Item 1. “Financial Statements.”

Interest Rate Swaps
Description: We are required to account for derivative assets and liabilities at fair value, which may or may not be cleared through a derivative clearing organization. We value our cleared interest rate swaps using the prices provided by the derivatives clearing organization. We value uncleared derivatives using internal models with prices compared to counterparty marks.
Judgments and Uncertainties: We use the overnight indexed swap (“OIS”) curve, the SOFR curve, or SOFR forward rates as an input to value substantially all of our uncleared interest rate swaps. Consistent with market practice, we exchange collateral (also called margin) based on the fair values of our interest rate swaps. Through this margining process, we may be able to compare our recorded fair value with the fair value calculated by the counterparty or derivatives clearing organization, providing additional verification of our recorded fair value of the uncleared interest rate swaps.
Sensitivity of Estimates to Change: Changes in the OIS curve will impact the carrying value of our interest rate swap assets and liabilities. Our valuations are most sensitive to changes in interest rate, which also impacts prepayment speeds. Refer to the interest rate sensitivity and interest rate shock analysis and discussions within this Item 2 for further information.
Revenue Recognition
Description: Interest income from coupon payments is accrued based on the outstanding principal amounts of the Residential Securities and their contractual terms. Premiums and discounts associated with the purchase of the Residential Securities are amortized or accreted into interest income over the projected lives of the securities using the interest method. Gains or losses on sales of Residential Securities are recorded on trade date based on the specific identification method.
Judgments and Uncertainties: To aid in determining projected lives of the securities, we use third party model and market information to project prepayment speeds. Our prepayment speed projections incorporate underlying loan characteristics (i.e., coupon, term, original loan size, original loan-to-value ratio, etc.) and market data, including interest rate and home price index
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
forecasts and expert judgment. Prepayment speeds vary according to the type of investment, conditions in the financial markets and other factors and cannot be predicted with any certainty.
Sensitivity of Estimates to Change: Changes to model assumptions, including interest rates and other market data, as well as periodic revisions to the model will cause changes in the results. Adjustments are made for actual prepayment activity as it relates to calculating the effective yield. The sensitivity of changes in interest rates to our economic net interest income is included in the interest rate shock analysis and discussions within this Item 2 for further information.

Consolidation of Variable Interest Entities
Description: We are required to determine if it is required to consolidate entities in which it holds a variable interest.
Judgments and Uncertainties: Determining whether an entity has a controlling financial interest in a VIE requires significant judgment related to assessing the purpose and design of the VIE and determination of the activities that most significantly impact its economic performance. We must also identify explicit and implicit variable interests in the entity and consider our involvement in both the design of the VIE and its ongoing activities. To determine whether consolidation of the VIE is required, we must apply judgment to assess whether we have the power to direct the most significant activities of the VIE and whether we have either the rights to receive benefits or the obligation to absorb losses that could be potentially significant to the VIE.

Use of Estimates
The use of GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from those estimates.
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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Glossary of Terms
A
Adjustable-Rate Loan / Security
A loan / security on which interest rates are adjusted at regular intervals according to predetermined criteria. The adjustable interest rate is tied to an objective, published interest rate index.

Agency
Refers to a federally chartered corporation, such as the Federal National Mortgage Association, or the Federal Home Loan Mortgage Corporation, or an agency of the U.S. Government, such as the Government National Mortgage Association.

Agency Mortgage-Backed Securities
Refers to residential mortgage-backed securities that are issued or guaranteed by an Agency.

Amortization
Liquidation of a debt through installment payments.  Amortization also refers to the process of systematically reducing a recognized asset or liability (e.g., a purchase premium or discount for a debt security) with an offset to earnings.

Average GAAP Cost of Interest Bearing Liabilities and Average Economic Cost of Interest Bearing Liabilities
Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities is a non-GAAP financial measure that 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.

Average Life
On a mortgage-backed security, the average time to receipt of each dollar of principal, weighted by the amount of each principal prepayment, based on prepayment assumptions.

Average Yield on Interest Earnings Assets and Average Yield on Interest Earnings Assets (excluding PAA)
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 a non-GAAP financial measure that is calculated using annualized interest income (excluding PAA).






B
Basis Point (“bp” or “bps”)
One hundredth of one percent, used in expressing differences in interest rates.  One basis point is 0.01% of yield. For example, a bond’s yield that changed from 3.00% to 3.50% would be said to have moved 50 basis points.

Benchmark
A bond or an index referencing a basket of bonds whose terms are used for comparison with other bonds of similar maturity. The global financial market typically looks to U.S. Treasury securities as benchmarks.

Beneficial Owner
One who benefits from owning a security, even if the security’s title of ownership is in the name of a broker or bank.

Board
Refers to the board of directors of Annaly.

Bond
The written evidence of debt, bearing a stated rate or stated rates of interest, or stating a formula for determining that rate, and maturing on a date certain, on which date and upon presentation a fixed sum of money plus interest (usually represented by interest coupons attached to the bond) is payable to the holder or owner. Bonds are long-term securities with an original maturity of greater than one year.

Book Value Per Share
Calculated by summing common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit and dividing that number by the total common shares outstanding.

Broker
Generic name for a securities firm engaged in both buying and selling securities on behalf of customers or its own account.


C
Capital Buffer
Includes unencumbered financial assets which can be either sold or utilized as collateral to meet liquidity needs.

Capital Ratio (GAAP Capital Ratio)
Calculated as total stockholders’ equity divided by total assets. 



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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Carry
The amount an asset earns over its hedging and financing costs. A positive carry happens when the rate on the securities being financed is greater than the rate on the funds borrowed. A negative carry is when the rate on the funds borrowed is greater than the rate on the securities that are being financed.

Collateral
Securities, cash or property pledged by a borrower or party to a derivative contract to secure payment of a loan or derivative. If the borrower fails to repay the loan or defaults under the derivative contract, the secured party may take ownership of the collateral.

Collateralized Loan Obligation (“CLO”)
A securitization collateralized by loans and other debt instruments.

Collateralized Mortgage Obligation (“CMO”)
A multiclass bond backed by a pool of mortgage pass-through securities or mortgage loans.

Commodity Futures Trading Commission (“CFTC”)
An independent U.S. federal agency established by the Commodity Futures Trading Commission Act of 1974. The CFTC regulates the swaps, commodity futures and options markets. Its goals include the promotion of competitive and efficient futures markets and the protection of investors against manipulation, abusive trade practices and fraud.

Commercial Mortgage-Backed Security (“CMBS” or “Commercial Securities”)
Securities collateralized by a pool of mortgages on commercial real estate in which all principal and interest from the mortgages flow to certificate holders in a defined sequence or manner.

Constant Prepayment Rate (“CPR”)
The percentage of outstanding mortgage loan principal that prepays in one year, based on the annualization of the Single Monthly Mortality, which reflects the outstanding mortgage loan principal that prepays in one month.

Convexity
A measure of the change in a security’s duration with respect to changes in interest rates. The more convex a security is, the more its duration will change with interest rate changes. Negative convexity refers to the properties of an MBS in which the relationship between price and yield is not linear. Compared to a comparable duration treasury bond, the price of an MBS security increases less when yields fall and decreases more when yields rise, due to changes in expected prepayment behavior from the underlying borrower.

Counterparty
One of two entities in a transaction. For example, in the bond market a counterparty can be a state or local government, a broker-dealer or a corporation.

Coupon
The interest rate on a bond that is used to compute the amount of interest due on a periodic basis.

Credit and Counterparty Risk
Risk to earnings, capital or business, resulting from an obligor’s or counterparty’s failure to meet the terms of any contract or otherwise failure to perform as agreed. Credit and counterparty risk is present in lending, investing, funding and hedging activities.

Credit Derivatives
Derivative instruments that have one or more underlyings related to the credit risk of a specified entity (or group of entities) or an index that exposes the seller to potential loss from specified credit-risk related events. An example is credit derivatives referencing the commercial mortgage-backed securities index.
 
Credit Risk Transfer (“CRT”) Securities
Credit Risk Transfer securities are risk sharing transactions issued by Fannie Mae and Freddie Mac and similarly structured transactions arranged by third party market participants. The securities issued in the CRT sector are designed to synthetically transfer mortgage credit risk from Fannie Mae, Freddie Mac and/or third parties to private investors.

Current Face
The current remaining monthly principal on a mortgage security. Current face is computed by multiplying the original face value of the security by the current principal balance factor.


D
Dealer
Person or organization that underwrites, trades and sells securities, e.g., a principal market-maker in securities.

Default Risk
Possibility that a bond issuer will fail to pay principal or interest when due.

Derivative
A financial product that derives its value from the price, price fluctuations and price expectations of an underlying instrument, index or reference pool (e.g. futures contracts, options, interest rate swaps, interest rate swaptions and certain to-be-announced securities).



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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Discount Price
When the dollar price is below face value, it is said to be selling at a discount.

Duration
The weighted maturity of a fixed-income investment’s cash flows, used in the estimation of the price sensitivity of fixed-income securities for a given change in interest rates.


E
Earnings available for distribution (“EAD”) and Earnings available for distribution Per Average Common Share
Non-GAAP financial measure defined as the sum of (a) economic net interest income, (b) TBA dollar roll income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD 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-EAD 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 our Agency mortgage-backed securities. Earnings available for distribution per average common share is a non-GAAP financial measure calculated by dividing earnings available for distribution by average basic common shares for the period.

This metric was previously labeled Core Earnings (excluding PAA) and Core Earnings (excluding PAA) Per Average Common Share). The definition of EAD is identical to the definition of Core Earnings (excluding PAA) from prior reporting periods.

Economic Capital
A measure of the risk a firm is subject to.  It is the amount of capital a firm needs as a buffer to protect against risk.  It is a probabilistic measure of potential future losses at a given confidence level over a given time horizon.

Economic Capital Ratio
Non-GAAP financial measure that is calculated as total stockholders’ equity divided by total economic assets. Total economic assets includes the implied market value of TBA derivatives and are net of debt issued by securitization vehicles and participations issued.







Economic Interest Expense
Non-GAAP financial measure that is comprised of GAAP interest expense, the net interest component of interest rate swaps and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss).

Economic Leverage Ratio (Economic Debt-to-Equity Ratio)
Non-GAAP financial measure that is calculated as the sum of recourse debt, cost basis of TBA derivatives outstanding and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us and are excluded from this measure.

Economic Net Interest Income
Non-GAAP financial measure that is composed of GAAP interest income less Economic Interest Expense.

Economic Return
Refers to the Company’s change in book value plus dividends declared divided by the prior period’s book value.

Encumbered Assets
Assets on the company’s balance sheet which have been pledged as collateral against a liability.


F
Face Amount
The par value (i.e., principal or maturity value) of a security appearing on the face of the instrument.

Factor
A decimal value reflecting the proportion of the outstanding principal balance of a mortgage security, which changes over time, in relation to its original principal value.

Fannie Mae
Federal National Mortgage Association.

Federal Deposit Insurance Corporation (“FDIC”)
An independent agency created by the U.S. Congress to maintain stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.


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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Federal Funds Rate
The interest rate charged by banks on overnight loans of their excess reserve funds to other banks.

Federal Housing Financing Agency (“FHFA”)
The FHFA is an independent regulatory agency that oversees vital components of the secondary mortgage market including Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

Financial Industry Regulatory Authority, Inc. (“FINRA”)
FINRA is a non-governmental organization tasked with regulating all business dealings conducted between dealers, brokers and all public investors.

Fixed-Rate Mortgage
A mortgage featuring level monthly payments, determined at the outset, which remain constant over the life of the mortgage.

Fixed Income Clearing Corporation (“FICC”)
The FICC is an agency that deals with the confirmation, settlement and delivery of fixed-income assets in the U.S. The agency ensures the systematic and efficient settlement of U.S. Government securities and mortgage-backed security transactions in the market.

Floating Rate Bond
A bond for which the interest rate is adjusted periodically according to a predetermined formula, usually linked to an index.

Floating Rate CMO
A CMO tranche which pays an adjustable rate of interest tied to a representative interest rate index such as the SOFR, the Constant Maturity Treasury or the Cost of Funds Index.

Freddie Mac
Federal Home Loan Mortgage Corporation.

Futures Contract
A legally binding agreement to buy or sell a commodity or financial instrument in a designated future month at a price agreed upon at the initiation of the contract by the buyer and seller. Futures contracts are standardized according to the quality, quantity, and delivery time and location for each commodity. A futures contract differs from an option in that an option gives one of the counterparties a right and the other an obligation to buy or sell, while a futures contract represents an obligation of both counterparties, one to deliver and the other to accept delivery. A futures contract is part of a class of financial instruments called derivatives.



G
GAAP
U.S. generally accepted accounting principles.

Ginnie Mae
Government National Mortgage Association.


H
Hedge
An investment made with the intention of minimizing the impact of adverse movements in interest rates or securities prices.


I
Initial Margin
Cash or securities provided by a party to collateralize its obligations under a transaction that is not based on changes in the value of such transaction since the trade was executed.

In-the-Money
Description for an option that has intrinsic value and can be sold or exercised for a profit; a call option is in-the-money when the strike price (execution price) is below the market price of the underlying security.

Interest Bearing Liabilities
Refers to repurchase agreements, debt issued by securitization vehicles, U.S. Treasury securities sold, not yet purchased and credit facilities. Average interest bearing liabilities is based on daily balances.

Interest Earning Assets
Refers to Residential Securities, U.S. Treasury securities, reverse repurchase agreements, commercial real estate debt and residential mortgage loans. Average interest earning assets is based on daily balances.

Interest-Only (IO) Bond
The interest portion of mortgage, Treasury or bond payments, which is separated and sold individually from the principal portion of those same payments.

Interest Rate Risk
The risk that an investment’s value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. As market interest rates rise, the value of current fixed income investment holdings declines. Diversifying, deleveraging and hedging techniques are utilized to mitigate this risk. Interest rate risk is a form of market risk.


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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Interest Rate Swap
A binding agreement between counterparties to exchange periodic interest payments on some predetermined dollar principal, which is called the notional principal amount. For example, one party will pay fixed and receive a variable rate.

Interest Rate Swaption
Options on interest rate swaps. The buyer of a swaption has the right to enter into an interest rate swap agreement at some specified date in the future. The swaption agreement will specify whether the buyer of the swaption will be a fixed-rate receiver or a fixed-rate payer.
 
Interests in MSR
Represents agreements to purchase all, or a component of, net servicing cash flows.

International Swaps and Derivatives Association (“ISDA”) Master Agreement
Standardized contract developed by ISDA used as an umbrella under which bilateral derivatives contracts are entered into.

Inverse IO Bond
An interest-only bond whose coupon is determined by a formula expressing an inverse relationship to a benchmark rate, such as SOFR. As the benchmark rate changes, the IO coupon adjusts in the opposite direction. When the benchmark rate is relatively low, the IO pays a relatively high coupon payment, and vice versa.

Investment/Market Risk
Risk to earnings, capital or business resulting in the decline in value of our assets caused from changes in market variables, such as interest rates, which affect the values of Residential Securities and other investment instruments.

Investment Advisers Act
Refers to the Investment Advisers Act of 1940, as amended.

Investment Company Act
Refers to the Investment Company Act of 1940, as amended.


L
Leverage
The use of borrowed money to increase investing power and economic returns.






Leverage Ratio (GAAP Leverage Ratio or Debt-to-Equity Ratio)
Calculated as total debt to total stockholders’ equity. For purposes of calculating this ratio total debt includes repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us.

LIBOR (London Interbank Offered Rate)
A rate previously used as a benchmark for financial transactions. All tenors of LIBOR relevant to us are either no longer published or are no longer representative.

Liquidity Risk
Risk to earnings, capital or business arising from our inability to meet our obligations when they come due without incurring unacceptable losses because of inability to liquidate assets or obtain adequate funding.

Long-Term CPR
Our projected prepayment speeds for certain Agency mortgage-backed securities using third party model and market information. Our prepayment speed projections incorporate underlying loan characteristics (e.g., coupon, term, original loan size, original loan-to-value ratio, etc.) and market data, including interest rate and home price index forecasts.  Changes to model assumptions, including interest rates and other market data, as well as periodic revisions to the model will cause changes in the results.

Long-Term Debt
Debt which matures in more than one year.


M
Market Agreed Coupon (“MAC”) Interest Rate Swap
An interest rate swap contract structure with pre-defined, market agreed terms, developed by SIFMA and ISDA with the purpose of promoting liquidity and simplified administration.

Monetary Policy
Action taken by the Federal Open Market Committee of the Federal Reserve System to influence the money supply or interest rates.

Mortgage-Backed Security (“MBS”)
A security representing a direct interest in a pool of mortgage loans. The pass-through issuer or servicer collects the payments on the loans in the pool and “passes through” the principal and interest to the security holders on a pro rata basis.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Mortgage Loan
A mortgage loan granted by a bank, thrift or other financial institution that is based solely on real estate as security and is not insured or guaranteed by a government agency.

Mortgage Servicing Rights (“MSR”)
Contractual agreements constituting the right to service an existing mortgage where the holder receives the benefits and bears the costs and risks of servicing the mortgage.


N
NAV
Net asset value.

Net Interest Income
Represents interest income earned on our portfolio investments, less interest expense paid for borrowings.

Net Interest Margin and Net Interest Margin (excluding PAA)
Net interest margin represents our interest income less interest expense divided by average interest earning assets. Net interest margin (excluding PAA) is a non-GAAP financial measure that represents the sum of our interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract balances.

Net Interest Spread and Net Interest Spread (excluding PAA)
Net interest spread represents the average yield on interest earning assets less the average GAAP cost of interest bearing liabilities. Net interest spread (excluding PAA) is a non-GAAP financial measure that represents the average yield on interest earning assets (excluding PAA) less the average economic cost of interest bearing liabilities.

Non-Performing Loan (“NPL”)
A loan that is close to defaulting or is in default.

Non-Qualified Mortgage (“Non-QM”)
A loan that does not conform to the strict standards set by the Consumer Financial Protection Bureau for a Qualified Mortgage.

Notional Amount
A stated principal amount in a derivative contract on which the contract is based.


O
Operational Risk
Risk to earnings, capital, reputation or business arising from inadequate or failed internal processes or systems, human factors or external events.
Option Contract
A contract in which the buyer has the right, but not the obligation, to buy or sell an asset at a set price on or before a given date. Buyers of call options bet that a security will be worth more than the price set by the option (the strike price), plus the price they pay for the option itself. Buyers of put options bet that the security’s price will drop below the price set by the option. An option is part of a class of financial instruments called derivatives, which means these financial instruments derive their value from the worth of an underlying investment.

Original Face
The face value or original principal amount of a security on its issue date.

Out-of-the-Money
Description for an option that has no intrinsic value and would be worthless if it expired today; for a call option, this situation occurs when the strike price is higher than the market price of the underlying security; for a put option, this situation occurs when the strike price is less than the market price of the underlying security.

Overnight Index Swaps (“OIS”)
An interest rate swap in which a fixed rate is exchanged for an overnight floating rate.

Over-The-Counter (“OTC”) Market
A securities market that is conducted by dealers throughout the country through negotiation of price rather than through the use of an auction system as represented by a stock exchange.


P
Par
Price equal to the face amount of a security; 100%.

Par Amount
The principal amount of a bond or note due at maturity. Also known as par value.

Pass-Through Security
A securitization structure where a GSE or other entity “passes” the amount collected from the borrowers every month to the investor, after deducting fees and expenses.

Pool
A collection of mortgage loans assembled by an originator or master servicer as the basis for a security. In the case of Ginnie Mae, Fannie Mae, or Freddie Mac mortgage pass-through securities, pools are identified by a number assigned by the issuing agency.




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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Premium
The amount by which the price of a security exceeds its principal amount. When the dollar price of a bond is above its face value, it is said to be selling at a premium.

Premium Amortization Adjustment (“PAA”)
The cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to our Agency mortgage-backed securities.

Prepayment
The unscheduled partial or complete payment of the principal amount outstanding on a mortgage loan or other debt before it is due.

Prepayment Risk
The risk that falling interest rates will lead to increased prepayments of mortgage or other loans, forcing the investor to reinvest at lower prevailing rates.

Prepayment Speed
The estimated rate at which mortgage borrowers will pay off the mortgages that underlie an MBS.

Primary Market
Market for offers or sales of new bonds by the issuer.

Prime Rate
The indicative interest rate on loans that banks quote to their best commercial customers.

Principal and Interest
The term used to refer to regularly scheduled payments or prepayments of principal and payments of interest on a mortgage or other security.


R
Rate Reset
The adjustment of the interest rate on a floating-rate security according to a prescribed formula.

Real Estate Investment Trust (“REIT”)
A special purpose investment vehicle that provides investors with the ability to participate directly in the ownership or financing of real-estate related assets by pooling their capital to purchase and manage mortgage loans and/or income property.









Recourse Debt
Debt on which the economic borrower is obligated to repay the entire balance regardless of the value of the pledged collateral. By contrast, the economic borrower’s obligation to repay non-recourse debt is limited to the value of the pledged collateral. Recourse debt consists of repurchase agreements, other secured financing and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us and are excluded from this measure.

Reinvestment Risk
The risk that interest income or principal repayments will have to be reinvested at lower rates in a declining rate environment.

Re-Performing Loan (“RPL”)
A type of loan in which payments were previously delinquent by at least 90 days but have resumed.

Repurchase Agreement
The sale of securities to investors with the agreement to buy them back at a higher price after a specified time period; a form of short-term borrowing. For the party on the other end of the  transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement.

Residential Credit Securities
Refers to CRT securities and non-Agency mortgage-backed securities.

Residential Securities
Refers to Agency mortgage-backed securities, CRT securities and non-Agency mortgage-backed securities.

Residential Transition Loan (“RTL”)
A short-term loan primarily for the purpose of financing the construction or renovation of a residential property.

Residual
In securitizations, the residual is the tranche that collects any cash flow from the collateral that remains after obligations to the other tranches have been met.

Return on Average Equity
Calculated by taking earnings divided by average stockholders’ equity.

Reverse Repurchase Agreement
Refer to Repurchase Agreement. The buyer of securities effectively provides a collateralized loan to the seller.

Risk Appetite Statement
Defines the types and levels of risk we are willing to take in order to achieve our business objectives, and reflects our risk management philosophy.


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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
S
Secondary Market
Ongoing market for bonds previously offered or sold in the primary market.

Secured Overnight Financing Rate (“SOFR”)
Broad measure of the cost of borrowing cash overnight collateralized by Treasury securities and was chosen by the Alternative Reference Rate Committee as the preferred benchmark rate to replace dollar LIBOR.

Settlement Date
The date securities must be delivered and paid for to complete a transaction.

Short-Term Debt
Generally, debt which matures in one year or less. However, certain securities that mature in up to three years may be considered short-term debt.

Small Balance Commercial (“SBC”)
A business-purpose loan secured by commercial or mixed-use real estate or by 1-4 unit residential properties owned for investment purposes. The average loan size of SBC securitizations is generally less than $1mm, in contrast to large balance commercial loans which generally start at $40mm and above.

Spread
When buying or selling a bond through a brokerage firm, investors will be charged a commission or spread, which is the difference between the market price and cost of purchase, and sometimes a service fee. Spreads differ based on several factors including liquidity.


T
Tangible Economic Return
Refers to the Company’s change in tangible book value (calculated by summing common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit less intangible assets) plus dividends declared divided by the prior period’s tangible book value.

Target Assets
Includes Agency mortgage-backed securities, to-be-announced forward contracts, CRT securities, MSR, non-Agency mortgage-backed securities, residential mortgage loans, and commercial real estate investments.

Taxable REIT Subsidiary (“TRS”)
An entity that is owned directly or indirectly by a REIT and has jointly elected with the REIT to be treated as a TRS for tax purposes. Annaly and certain of its direct and indirect subsidiaries have made separate joint elections to treat these subsidiaries as TRSs.
Term SOFR
The term secured overnight financing rate published by the Chicago Mercantile Exchange, which is used as a benchmark for financial transactions.

To-Be-Announced (“TBA”) Securities
A contract for the purchase or sale of a mortgage-backed security to be delivered at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date but does not include a specified pool number and number of pools.

TBA Dollar Roll Income
TBA dollar roll income is defined as the difference in price between two TBA contracts with the same terms but different settlement dates. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the “drop”. TBA dollar roll income represents the equivalent of interest income on the underlying security less an implied cost of financing.

Total Return
Investment performance measure over a stated time period which includes coupon interest, interest on interest, and any realized and unrealized gains or losses.

Total Return Swap
A derivative instrument where one party makes payments at a predetermined rate (either fixed or variable) while receiving a return on a specific asset (generally an equity index, loan or bond) held by the counterparty.


U
Unencumbered Assets
Assets on our balance sheet which have not been pledged as collateral against an existing liability.

U.S. Government-Sponsored Enterprise (“GSE”) Obligations
Obligations of Agencies originally established or chartered by the U.S. government to serve public purposes as specified by the U.S. Congress, such as Fannie Mae and Freddie Mac; these obligations are not explicitly guaranteed as to the timely payment of principal and interest by the full faith and credit of the U.S. government.


V
Value-at-Risk (“VaR”)
A statistical technique which measures the potential loss in value of an asset or portfolio over a defined period for a given confidence interval.



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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
Item 2. Management’s Discussion and Analysis
Variable Interest Entity (“VIE”)
An entity in which equity investors (i) do not have the characteristics of a controlling financial interest, and/or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.

Variation Margin
Cash or securities provided by a party to collateralize its obligations under a transaction as a result of a change in value of such transaction since the trade was executed or the last time collateral was provided.

Volatility
A statistical measure of the variance of price or yield over time. Volatility is low if the price does not change very much over a short period of time, and high if there is a greater change.

Voting Interest Entity (“VOE”)
An entity that has sufficient equity to finance its activities without additional subordinated financial support from other parties and in which equity investors have a controlling financial interest.


W
Warehouse Lending
A line of credit extended to a loan originator to fund mortgages extended by the loan originators to property purchasers. The loan typically lasts from the time the mortgage is originated to when the mortgage is sold into the secondary market, whether directly or through a securitization.  Warehouse lending can provide liquidity to the loan origination market.

Weighted Average Coupon
The weighted average interest rate of the underlying mortgage loans or pools that serve as collateral for a security, weighted by the size of the principal loan balances.

Weighted Average Life (“WAL”)
The assumed weighted average amount of time that will elapse from the date of a security’s issuance until each dollar of principal is repaid to the investor. The WAL will change as the security ages and depending on the actual realized rate at which principal, scheduled and unscheduled, is paid on the loans underlying the MBS.








Y
Yield-to-Maturity
The expected rate of return of a bond if it is held to its maturity date; calculated by taking into account the current market price, stated redemption value, coupon payments and time to maturity and assuming all coupons are reinvested at the same rate; equivalent to the internal rate of return.











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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are contained within the section titled “Risk Management” of Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 4. CONTROLS AND PROCEDURES
Our management, including our Chief Executive Officer (the CEO) and Chief Financial Officer (the CFO), reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act) as of the end of the period covered by this report. Based on that review and evaluation, the CEO and CFO have concluded that our current disclosure controls and procedures, as designed, (1) were effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure and (2) were effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. 
There have been no changes in our internal controls over financial reporting that occurred during the three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
From time to time, we are involved in various claims and legal actions arising in the ordinary course of business. As of September 30, 2025, we were not party to any pending material legal proceedings.

ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in Item 1A. “Risk Factors” of our most recent annual report on Form 10-K. The materialization of any risks and uncertainties identified in our Special Note Regarding Forward-Looking Statements contained in this report together with those previously disclosed in our most recent annual report on Form 10-K or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Special Note Regarding Forward-Looking Statements” in this quarterly report or our most recent annual report on Form 10-K.


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
In January 2025, we announced that our Board authorized the repurchase of up to $1.5 billion of our outstanding common shares through December 31, 2029 (the “Current Common Stock Repurchase Program”). No shares were repurchased with respect to this share repurchase program during the quarter ended September 30, 2025. As of September 30, 2025, the maximum dollar value of shares that may yet be repurchased under this program was $1.5 billion.
ITEM 5. OTHER INFORMATION
During the quarter ended September 30, 2025, no director or officer of the Company adopted, modified or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement.
Articles of Restatement
On October 27, 2025, the Board approved a restatement of every provision of the Company's charter currently in effect and filed Articles of Restatement reflecting the same with the State Department of Assessments and Taxation of Maryland on the following day. The Articles of Restatement do not amend any provision of the charter of the Company. No vote of the stockholders was required in connection with the approval and filing of the Articles of Restatement.
A copy of the Articles of Restatement is filed as Exhibit 3.1 to this Quarterly Report on Form 10-Q.

ITEM 6. EXHIBITS
Exhibits:

The exhibits required by this item are set forth on the Exhibit Index attached hereto. 

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Exhibit NumberExhibit Description
   
101.INS XBRL
The instance document does not appear in the interactive data file because its Extensible Business Reporting Language (XBRL) tags are embedded within the Inline XBRL document. The following documents are formatted in Inline XBRL: (i) Consolidated Statements of Financial Condition at September 30, 2025 (Unaudited) and December 31, 2024 (Derived from the audited Consolidated Statement of Financial Condition at December 31, 2024); (ii) Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the three and nine months ended September 30, 2025 and 2024; (iii) Consolidated Statements of Stockholders’ Equity (Unaudited) for the three and nine months ended September 30, 2025 and 2024; (iv) Consolidated Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2025 and 2024; and (v) Notes to Consolidated Financial Statements (Unaudited).
101.SCH XBRLTaxonomy Extension Schema Document †
101.CAL XBRLTaxonomy Extension Calculation Linkbase Document †
101.DEF XBRLAdditional Taxonomy Extension Definition Linkbase Document Created †
101.LAB XBRLTaxonomy Extension Label Linkbase Document †
101.PRE XBRLTaxonomy Extension Presentation Linkbase Document †
104
The cover page for the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025 (formatted in Inline XBRL and contained in Exhibit 101).
† Submitted electronically herewith.
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  ANNALY CAPITAL MANAGEMENT, INC.
   
Dated:October 30, 2025
By: /s/ David L. Finkelstein
  David L. Finkelstein
  Chief Executive Officer, Co-Chief Investment Officer and Director (Principal Executive Officer)
   
Dated:  October 30, 2025
By: /s/ Serena Wolfe
  Serena Wolfe
  Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)



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