Annaly Capital Management, Inc. Reports 1st Quarter 2022 Results

Annaly Capital Management, Inc. (NYSE: NLY) ("Annaly" or the "Company") today announced its financial results for the quarter ended March 31, 2022.

Financial Highlights

• GAAP net income of $1.37 per average common share for the quarter
• Earnings available for distribution (“EAD”) of $0.28 per average common share for the quarter; unchanged from the prior quarter with dividend coverage of over 125%
• Economic return of (12.3%) for the first quarter
• Annualized GAAP return on average equity of 65.6% and annualized EAD return on average equity of 14.0%
• Book value per common share of $6.77
• GAAP leverage of 5.3x, up from 4.7x in the prior quarter; economic leverage of 6.4x, up from 5.7x in the prior quarter
• Declared quarterly common stock cash dividend of $0.22 per share

Business Highlights

Investment and Strategy

• Total assets of $84.4 billion, including $76.1 billion in highly liquid Agency portfolio⁽¹⁾
• Due to meaningful spread widening and market volatility, Annaly's Agency portfolio decreased 6% during the first quarter; however, notional holdings were roughly unchanged and portfolio activity focused on rotating upwards in coupon
• Hedge ratio increased from 95% to 109% as a result of a higher notional hedge portfolio; hedge activity focused on active delta hedging throughout the quarter and moving interest rate hedges further out the curve given higher rate environment
• Annaly's Mortgage Servicing Rights ("MSR") platform grew assets by 91% to $1.2 billion during the first quarter with MSR representing 9% of dedicated equity capital⁽²⁾
• Annaly’s Residential Credit portfolio decreased 6% during the quarter to $4.4 billion,⁽¹⁾ driven by residential whole loan securitization activity as a result of strong production from the whole loan correspondent channel
  • During the quarter, the correspondent channel achieved over $1 billion in aggregated expanded credit loans since launching last April
• Announced an agreement to sell Annaly's Middle Market Lending portfolio for approximately $2.4 billion; portfolio sale enhances Annaly's focus on all aspect of the housing finance market⁽³⁾

Financing and Capital

• $7.2 billion of unencumbered assets, including cash and unencumbered Agency MBS of $4.0 billion
• Average GAAP cost of interest bearing liabilities increased 10 basis points to 0.48% and average economic cost of interest bearing liabilities increased 14 basis points to 0.89%
• Annaly Residential Credit Group is now the second largest non-bank issuer of Prime Jumbo and Expanded Credit MBS with six securitizations totaling ~$2.5 billion in proceeds during the first quarter⁽⁴⁾
• Annaly Residential Credit Group expanded credit facility capacity by $250 million subsequent to quarter end

Corporate Responsibility & Governance

• Published disclosures outlining climate-related risks and opportunities across our business in the short-, medium-and long-term horizons taking into consideration the recommendations of the Task Force on Climate-related Financial Disclosures (“TCFD”)
• Amended bylaws to lower the threshold for shareholders to call a special meeting

“The market environment during the first quarter of 2022 was one of the most challenging for fixed-income in decades, characterized by exceptional volatility with substantial spread widening and a notable increase in benchmark rates,” remarked David Finkelstein, Annaly’s Chief Executive Officer and President. “While our portfolio continued to generate strong earnings, our book value was not immune to the effects of Agency MBS underperformance resulting from market turbulence. We remain disciplined given our expectation for continued volatility, though we are encouraged by the improvement in new investment returns provided by wider spreads, greater certainty of mortgage cash flows in a lower prepayment environment and additional clarity with respect to quantitative tightening.

Further, the announced sale of our Middle Market Lending portfolio subsequent to quarter end marks a significant strategic achievement that is accretive to Annaly's stockholders. Combined with the recent disposition of our Commercial Real Estate business and the expansion of our MSR and Residential Credit businesses, the transaction enables Annaly to deploy additional capital into our core housing finance strategy and continue to build on synergies between our Agency, MSR and Residential Credit portfolios.”

(1)		Total portfolio represents Annaly’s investments that are on-balance sheet as well as investments that are off-balance sheet in which Annaly has economic exposure. Assets exclude assets transferred or pledged to securitization vehicles of $7.8 billion, include TBA purchase contracts (market value) of $18.3 billion, CMBX derivatives (market value) of $0.4 billion and $0.9 billion of retained securities that are eliminated in consolidation and are shown net of participations issued totaling $0.8 billion.
(2)		Includes limited partnership interests in two MSR funds, one of which is reported in Other Assets.
(3)		Annaly announced the sale of its Middle Market Lending portfolio on April 25, 2022. The transaction represents substantially all of the Middle Market Lending assets held on balance sheet as well as assets managed for third parties. Subject to customary closing conditions, the transfer of the Middle Market Lending portfolio is expected to be completed by end of the second quarter of 2022. For more information, please see the 8-K filing.
(4)		Issuer ranking data from Inside Nonconforming Markets as of April 9, 2022.

Financial Performance

The following table summarizes certain key performance indicators as of and for the quarters ended March 31, 2022, December 31, 2021 and March 31, 2021:

		March 31, 2022				December 31, 2021				March 31, 2021
Book value per common share		$	6.77			$	7.97			$	8.95
GAAP leverage at period-end (1)		5.3:1				4.7:1				4.6:1
GAAP net income (loss) per average common share (2)		$	1.37			$	0.27			$	1.23
Annualized GAAP return (loss) on average equity			65.62	%			12.44	%			49.87	%
Net interest margin (3)			3.20	%			1.97	%			3.39	%
Average yield on interest earning assets (4)			3.61	%			2.31	%			3.76	%
Average GAAP cost of interest bearing liabilities (5)			0.48	%			0.38	%			0.42	%
Net interest spread			3.13	%			1.93	%			3.34	%
Non-GAAP metrics *
Earnings available for distribution per average common share (2)		$	0.28			$	0.28			$	0.29
Annualized EAD return on average equity			14.01	%			13.10	%			12.53	%
Economic leverage at period-end (1)		6.4:1				5.7:1				6.1:1
Net interest margin (excluding PAA) (3)			2.04	%			2.03	%			1.91	%
Average yield on interest earning assets (excluding PAA) (4)			2.62	%			2.63	%			2.71	%
Average economic cost of interest bearing liabilities (5)			0.89	%			0.75	%			0.87	%
Net interest spread (excluding PAA)			1.73	%			1.88	%			1.84	%

*		Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information.
(1)		GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued and mortgages payable divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements and other secured financing (excluding certain non-recourse credit facilities). Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, participations issued, and mortgages payable are non-recourse to the Company and are excluded from economic leverage.
(2)		Net of dividends on preferred stock.
(3)		Net interest margin represents interest income less interest expense divided by average Interest Earning Assets. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average Interest Earning Assets plus average outstanding TBA contract and CMBX balances. PAA represents the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities.
(4)		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).
(5)		Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.

Updates to Financial Disclosures

Beginning with the quarter ended March 31, 2022, in light of the continued growth of its mortgage servicing rights portfolio, the Company enhanced its financial disclosures by separately reporting servicing income and servicing expense in its Consolidated Statements of Comprehensive Income (Loss). Servicing income and servicing expense were previously included within Other income (loss). As a result of this change, prior periods have been adjusted to conform to the current presentation.

In addition, the Company consolidated certain line items in its Consolidated Statements of Comprehensive Income (Loss) in an effort to streamline and simplify its financial presentation. Amounts previously reported under Net interest component of interest rate swaps, Realized gains (losses) on termination or maturity of interest rate swaps, Unrealized gains (losses) on interest rate swaps and Net gains (losses) on other derivatives are combined into a single line item titled Net gains (losses) on derivatives. Similarly, amounts previously reported under Net gains (losses) on disposal of investments and other and Net unrealized gains (losses) on instruments measured at fair value through earnings are combined into a single line item titled Net gains (losses) on investments and other. As a result of these changes, prior periods have been adjusted to conform to the current presentation.

Commencing with the Company’s financial results for the quarter ended June 30, 2021 and for subsequent reporting periods, the Company has relabeled “Core Earnings (excluding PAA)” as “Earnings Available for Distribution” (“EAD”). Earnings Available for Distribution, which is a non-GAAP financial measure intended to supplement the Company’s financial results computed in accordance with U.S. generally accepted accounting principles (“GAAP”), has replaced the Company’s prior presentation of Core Earnings (excluding PAA). In addition, Core Earnings (excluding PAA) results from prior reporting periods have been relabeled Earnings Available for Distribution. In line with evolving industry practices, the Company believes the term Earnings Available for Distribution more accurately reflects the principal purpose of the measure than the term Core Earnings (excluding PAA) and serves as a useful indicator for investors in evaluating the Company’s performance and its ability to pay dividends.

The definition of Earnings Available for Distribution is identical to the definition of Core Earning (excluding PAA) from prior reporting periods. As such, Earnings Available for Distribution is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding depreciation expense related to commercial real estate and 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 ("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 the Company’s Agency mortgage-backed securities.

Earnings Available for Distribution should not be considered a substitute for, or superior to, GAAP net income. Please refer to the "Non-GAAP Financial Measures" section for a detailed discussion of Earnings Available for Distribution.

In addition, beginning with the quarter ended June 30, 2021, the Company began classifying certain portfolio activity- or volume-related expenses (including but not limited to brokerage and commission fees, due diligence costs and securitization expenses) as Other income (loss) rather than Other general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss) to better reflect the nature of the items. As such, prior periods have been conformed to the current presentation.

Other Information

This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, risks and uncertainties related to the COVID-19 pandemic, including as related to adverse economic conditions on real estate-related assets and financing conditions; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; operational risks or risk management failures by us or critical third parties, including cybersecurity incidents; our ability to grow our residential credit business; the sale of our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets and corporate debt; risks related to investments in mortgage servicing rights; our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; and our ability to maintain our exemption from registration under the Investment Company Act. 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.

Annaly is a leading diversified capital manager with investment strategies across mortgage finance. Annaly’s principal business objective is to generate net income for distribution to its stockholders and to optimize its returns through prudent management of its diversified investment strategies. Annaly is internally managed and has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Additional information on the company can be found at www.annaly.com.

Annaly routinely posts important information for investors on the Company’s website, www.annaly.com. Annaly intends to use this webpage as a means of disclosing material, non-public information, for complying with the Company’s disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. Annaly encourages investors, analysts, the media and others interested in Annaly to monitor the Company’s website, in addition to following Annaly’s press releases, SEC filings, public conference calls, presentations, webcasts and other information it posts from time to time on its website. To sign-up for email-notifications, please visit the "Investors" section of our website, www.annaly.com, then click on "Investor Resources" and select "Email Alerts" to complete the email notification form. The information contained on, or that may be accessed through, the Company’s webpage is not incorporated by reference into, and is not a part of, this document.

The Company prepares a supplemental investor presentation and a financial summary for the benefit of its shareholders. Both the First Quarter 2022 Investor Presentation and the First Quarter 2022 Financial Summary can be found at the Company’s website (www.annaly.com) in the Investors section under Investor Presentations.

Conference Call

The Company will hold the first quarter 2022 earnings conference call on April 28, 2022 at 9:00 a.m. Eastern Time. Participants are encouraged to pre-register for the conference call to receive a unique PIN to gain immediate access to the call and bypass the live operator. Pre-registration may be completed by accessing the pre-registration link found on the homepage or "Investors" section of the Company's website at www.annaly.com, or by using the following link: https://dpregister.com/sreg/10164945/f20d8f5d22. Pre-registration may be completed at any time, including up to and after the call start time.

For participants who would like to join the call but have not pre-registered, access is available by dialing 844-735-3317 within the U.S., or 412-317-5703 internationally, and requesting the "Annaly Earnings Call."

There will also be an audio webcast of the call on www.annaly.com. A replay of the call will be available for one week following the conference call. The replay number is 877-344-7529 for domestic calls and 412-317-0088 for international calls and the conference passcode is 4986417. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on Investors, then select Email Alerts and complete the email notification form.

Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (dollars in thousands, except per share data)
		March 31, 2022				December 31, 2021 (1)				September 30, 2021				June 30, 2021				March 31, 2021
		(unaudited)								(unaudited)				(unaudited)				(unaudited)
Assets
Cash and cash equivalents		$	955,840			$	1,342,090			$	1,046,300			$	1,380,456			$	1,122,793
Securities			60,727,637				63,655,674				65,622,352				69,032,335				71,849,437
Loans, net			3,617,818				4,242,043				3,580,521				3,563,008				2,603,343
Mortgage servicing rights			1,108,937				544,562				572,259				202,616				113,080
Interests in MSR			85,653				69,316				57,530				49,035				—
Assets transferred or pledged to securitization vehicles			7,809,307				6,086,308				4,738,481				4,073,156				3,768,922
Assets of disposal group held for sale			—				194,138				238,042				3,302,001				4,400,723
Derivative assets			964,075				170,370				331,395				181,889				891,474
Receivable for unsettled trades			407,225				2,656				42,482				14,336				144,918
Principal and interest receivable			246,739				234,983				234,810				250,210				259,655
Goodwill and intangible assets, net			23,110				24,241				25,371				26,502				37,337
Other assets			238,793				197,683				172,890				300,761				177,907
Total assets		$	76,185,134			$	76,764,064			$	76,662,433			$	82,376,305			$	85,369,589
Liabilities and stockholders’ equity
Liabilities
Repurchase agreements		$	52,626,503			$	54,769,643			$	55,475,420			$	60,221,067			$	61,202,477
Other secured financing			914,255				903,255				729,555				909,655				922,605
Debt issued by securitization vehicles			6,711,953				5,155,633				3,935,410				3,315,087				3,044,725
Participations issued			775,432				1,049,066				641,006				315,810				180,527
Liabilities of disposal group held for sale			—				154,956				159,508				2,362,690				3,319,414
Derivative liabilities			826,972				881,537				912,134				900,259				939,622
Payable for unsettled trades			1,992,568				147,908				571,540				154,405				1,070,080
Interest payable			80,870				91,176				109,586				173,721				100,949
Dividends payable			321,423				321,142				318,986				317,714				307,671
Other liabilities			456,388				94,423				91,421				66,721				213,924
Total liabilities			64,706,364				63,568,739				62,944,566				68,737,129				71,301,994
Stockholders’ equity
Preferred stock, par value $0.01 per share (2)			1,536,569				1,536,569				1,536,569				1,536,569				1,536,569
Common stock, par value $0.01 per share (3)			14,610				14,597				14,499				14,442				13,985
Additional paid-in capital			20,321,952				20,313,832				20,228,366				20,178,692				19,754,826
Accumulated other comprehensive income (loss)			(2,465,482	)			958,410				1,638,638				1,780,275				2,002,231
Accumulated deficit			(7,980,407	)			(9,653,582	)			(9,720,270	)			(9,892,863	)			(9,251,804	)
Total stockholders’ equity			11,427,242				13,169,826				13,697,802				13,617,115				14,055,807
Noncontrolling interests			51,528				25,499				20,065				22,061				11,788
Total equity			11,478,770				13,195,325				13,717,867				13,639,176				14,067,595
Total liabilities and equity		$	76,185,134			$	76,764,064			$	76,662,433			$	82,376,305			$	85,369,589

(1)		Derived from the audited consolidated financial statements at December 31, 2021.
(2)		6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 28,800,000 shares authorized, issued and outstanding. 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock - Includes 17,000,000 shares authorized, issued and outstanding. 6.75% Series I Preferred Stock - Includes 17,700,000 shares authorized, issued and outstanding.
(3)		Includes 2,936,500,000 shares authorized. Includes 1,461,012,252 shares issued and outstanding at March 31, 2022; 1,459,736,258 shares issued and outstanding at December 31, 2021; 1,449,935,017 shares issued and outstanding at September 30, 2021; 1,444,156,029 shares issued and outstanding at June 30, 2021; 1,398,502,906 shares issued and outstanding at March 31, 2021.

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (dollars in thousands, except per share data) (Unaudited)
		For the quarters ended
		March 31, 2022				December 31, 2021				September 30, 2021				June 30, 2021				March 31, 2021
Net interest income
Interest income		$	655,850			$	422,780			$	412,972			$	383,906			$	763,378
Interest expense			74,922				61,785				50,438				61,047				75,973
Net interest income			580,928				360,995				362,534				322,859				687,405
Net servicing income
Servicing and related income			34,715				31,322				17,948				10,519				9,229
Servicing and related expense			3,757				4,290				3,012				2,603				2,297
Net servicing income			30,958				27,032				14,936				7,916				6,932
Other income (loss)
Net gains (losses) on investments and other			(159,804	)			(40,473	)			102,819				20,207				38,405
Net gains (losses) on derivatives			1,642,028				135,359				84,950				(581,962	)			1,169,383
Loan loss (provision) reversal			(608	)			(194	)			6,134				(494	)			139,620
Business divestiture-related gains (losses)			(354	)			(16,514	)			(14,009	)			1,527				(249,563	)
Other, net			3,058				(415	)			1,285				(6,241	)			6,536
Total other income (loss)			1,484,320				77,763				181,179				(566,963	)			1,104,381
General and administrative expenses
Compensation and management fee			33,002				27,061				27,859				32,013				31,518
Other general and administrative expenses			12,762				13,640				16,023				21,513				16,387
Total general and administrative expenses			45,764				40,701				43,882				53,526				47,905
Income (loss) before income taxes			2,050,442				425,089				514,767				(289,714	)			1,750,813
Income taxes			26,548				6,629				(6,767	)			5,134				(321	)
Net income (loss)			2,023,894				418,460				521,534				(294,848	)			1,751,134
Net income (loss) attributable to noncontrolling interests			1,639				2,979				2,290				794				321
Net income (loss) attributable to Annaly			2,022,255				415,481				519,244				(295,642	)			1,750,813
Dividends on preferred stock			26,883				26,883				26,883				26,883				26,883
Net income (loss) available (related) to common stockholders		$	1,995,372			$	388,598			$	492,361			$	(322,525	)		$	1,723,930
Net income (loss) per share available (related) to common stockholders
Basic		$	1.37			$	0.27			$	0.34			$	(0.23	)		$	1.23
Diluted		$	1.36			$	0.27			$	0.34			$	(0.23	)		$	1.23
Weighted average number of common shares outstanding
Basic			1,461,363,637				1,454,138,154				1,445,315,914				1,410,239,138				1,399,210,925
Diluted			1,462,451,965				1,455,411,503				1,446,357,867				1,410,239,138				1,400,000,727
Other comprehensive income (loss)
Net income (loss)		$	2,023,894			$	418,460			$	521,534			$	(294,848	)		$	1,751,134
Unrealized gains (losses) on available-for-sale securities			(3,568,679	)			(685,699	)			(113,451	)			(191,541	)			(1,428,927	)
Reclassification adjustment for net (gains) losses included in net income (loss)			144,787				5,471				(28,186	)			(30,415	)			56,823
Other comprehensive income (loss)			(3,423,892	)			(680,228	)			(141,637	)			(221,956	)			(1,372,104	)
Comprehensive income (loss)			(1,399,998	)			(261,768	)			379,897				(516,804	)			379,030
Comprehensive income (loss) attributable to noncontrolling interests			1,639				2,979				2,290				794				321
Comprehensive income (loss) attributable to Annaly			(1,401,637	)			(264,747	)			377,607				(517,598	)			378,709
Dividends on preferred stock			26,883				26,883				26,883				26,883				26,883
Comprehensive income (loss) attributable to common stockholders		$	(1,428,520	)		$	(291,630	)		$	350,724			$	(544,481	)		$	351,826

Key Financial Data

The following table presents key metrics of the Company’s portfolio, liabilities and hedging positions, and performance as of and for the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021:

		March 31, 2022				December 31, 2021				March 31, 2021
Portfolio related metrics
Fixed-rate Residential Securities as a percentage of total Residential Securities			97	%			97	%			97	%
Adjustable-rate and floating-rate Residential Securities as a percentage of total Residential Securities			3	%			3	%			3	%
Weighted average experienced CPR for the period			16.7	%			21.4	%			23.9	%
Weighted average projected long-term CPR at period-end			9.5	%			12.7	%			11.8	%
Liabilities and hedging metrics
Weighted average days to maturity on repurchase agreements outstanding at period-end			68				52				88
Hedge ratio (1)			109	%			95	%			75	%
Weighted average pay rate on interest rate swaps at period-end (2)			0.70	%			0.59	%			0.80	%
Weighted average receive rate on interest rate swaps at period-end (2)			0.50	%			0.08	%			0.34	%
Weighted average net rate on interest rate swaps at period-end (2)			0.20	%			0.51	%			0.46	%
GAAP leverage at period-end (3)		5.3:1				4.7:1				4.6:1
GAAP capital ratio at period-end (4)			15.1	%			17.2	%			16.5	%
Performance related metrics
Book value per common share		$	6.77			$	7.97			$	8.95
GAAP net income (loss) per average common share (5)		$	1.37			$	0.27			$	1.23
Annualized GAAP return (loss) on average equity			65.62	%			12.44	%			49.87	%
Net interest margin (6)			3.20	%			1.97	%			3.39	%
Average yield on interest earning assets (7)			3.61	%			2.31	%			3.76	%
Average GAAP cost of interest bearing liabilities (8)			0.48	%			0.38	%			0.42	%
Net interest spread			3.13	%			1.93	%			3.34	%
Dividend declared per common share		$	0.22			$	0.22			$	0.22
Annualized dividend yield (9)			12.50	%			11.25	%			10.23	%
Non-GAAP metrics *
Earnings available for distribution per average common share (5)		$	0.28			$	0.28			$	0.29
Annualized EAD return on average equity (excluding PAA)			14.01	%			13.10	%			12.53	%
Economic leverage at period-end (3)		6.4:1				5.7:1				6.1:1
Economic capital ratio at period end (4)			13.1	%			14.4	%			13.7	%
Net interest margin (excluding PAA) (6)			2.04	%			2.03	%			1.91	%
Average yield on interest earning assets (excluding PAA) (7)			2.62	%			2.63	%			2.71	%
Average economic cost of interest bearing liabilities (8)			0.89	%			0.75	%			0.87	%
Net interest spread (excluding PAA)			1.73	%			1.88	%			1.84	%

*		Represents a non-GAAP financial measure. Please refer to the "Non-GAAP Financial Measures" section for additional information.
(1)		Measures total notional balances of interest rate swaps, interest rate swaptions (excluding receiver swaptions) and futures relative to repurchase agreements, other secured financing and cost basis of TBA derivatives outstanding; excludes MSR and the effects of term financing, both of which serve to reduce interest rate risk. Additionally, the hedge ratio does not take into consideration differences in duration between assets and liabilities.
(2)		Excludes forward starting swaps.
(3)		GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued and mortgages payable divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced ("TBA") and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements and other secured financing (excluding certain non-recourse credit facilities). Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, participations issued, and mortgages payable are non-recourse to the Company and are excluded from economic leverage.
(4)		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 are net of debt issued by securitization vehicles.
(5)		Net of dividends on preferred stock.
(6)		Net interest margin represents interest income less interest expense divided by average interest earning assets. Net interest margin (excluding PAA) represents the sum of interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average TBA contract and CMBX balances.
(7)		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).
(8)		Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps.
(9)		Based on the closing price of the Company’s common stock of $7.04, $7.82 and $8.60 at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

The following table contains additional information on our investment portfolio as of the dates presented:

		For the quarters ended
		March 31, 2022			December 31, 2021			March 31, 2021
Agency mortgage-backed securities		$	57,787,141		$	60,525,605		$	69,637,229
Residential credit risk transfer securities			845,809			936,228			930,983
Non-agency mortgage-backed securities			1,737,333			1,663,336			1,277,104
Commercial mortgage-backed securities			357,354			530,505			4,121
Total securities		$	60,727,637		$	63,655,674		$	71,849,437
Residential mortgage loans		$	1,650,151		$	2,272,072		$	528,868
Residential mortgage loan warehouse facility			—			980			—
Corporate debt			1,967,667			1,968,991			2,074,475
Total loans, net		$	3,617,818		$	4,242,043		$	2,603,343
Mortgage servicing rights		$	1,108,937		$	544,562		$	113,080
Interests in MSR		$	85,653		$	69,316		$	—
Agency mortgage-backed securities transferred or pledged to securitization vehicles		$	544,991		$	589,873		$	598,118
Residential mortgage loans transferred or pledged to securitization vehicles			7,264,316			5,496,435			3,170,804
Assets transferred or pledged to securitization vehicles		$	7,809,307		$	6,086,308		$	3,768,922
Assets of disposal group held for sale		$	—		$	194,138		$	4,400,723
Total investment portfolio		$	73,349,352		$	74,792,041		$	82,735,505

Non-GAAP Financial Measures

To supplement its consolidated financial statements, which are prepared and presented in accordance with U.S. generally accepted accounting principles ("GAAP"), the Company provides the following non-GAAP 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 the Company’s results and operations, non-GAAP financial measures also have limitations. For example, the Company may calculate its non-GAAP metrics, such as earnings available for distribution, or the PAA, differently than its peers making comparative analysis difficult. Additionally, in the case of non-GAAP measures that exclude the PAA, the amount of amortization expense excluding the PAA is not necessarily representative of the amount of future periodic amortization nor is it indicative of the term over which the Company will amortize the remaining unamortized premium. Changes to actual and estimated prepayments will impact the timing and amount of premium amortization and, as such, both GAAP and non-GAAP results.

These non-GAAP measures provide additional detail to enhance investor understanding of the Company’s period-over-period operating performance and business trends, as well as for assessing the Company’s performance versus that of industry peers. Additional information pertaining to the Company’s 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

The Company's principal business objective is to generate net income for distribution to its stockholders and to preserve capital through prudent selection of investments and continuous management of its portfolio. The Company generates net income by earning a net interest spread on its investment portfolio, which is a function of interest income from its 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 and CMBX coupon income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding depreciation expense related to commercial real estate and 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 ("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 the Company’s Agency mortgage-backed securities is used by the Company's management and, the Company believes, used by analysts and investors to measure its progress in achieving its principal business objective.

The Company seeks to fulfill this 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 the Company's capital allocation policy and risk governance framework.

The Company believes these non-GAAP measures provide management and investors with additional details regarding the Company’s 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 the Company’s portfolio. In addition, EAD serves as a useful indicator for investors in evaluating the Company's 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 the Company’s 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 quarters ended
		March 31, 2022				December 31, 2021				March 31, 2021
		(dollars in thousands, except per share data)
GAAP net income (loss)		$	2,023,894			$	418,460			$	1,751,134
Net income (loss) attributable to noncontrolling interests			1,639				2,979				321
Net income (loss) attributable to Annaly			2,022,255				415,481				1,750,813
Adjustments to exclude reported realized and unrealized (gains) losses
Net (gains) losses on investments and other			159,804				40,473				(38,405	)
Net (gains) losses on derivatives (1)			(1,704,569	)			(194,256	)			(1,249,130	)
Loan loss provision (reversal) (2)			812				1,931				(144,870	)
Business divestiture-related (gains) losses			354				16,514				249,563
Other adjustments
Depreciation expense related to commercial real estate and amortization of intangibles (3)			1,130				1,144				7,324
Non-EAD (income) loss allocated to equity method investments (4)			(9,920	)			(2,345	)			(9,680	)
Transaction expenses and non-recurring items (5)			3,350				1,533				695
Income tax effect of non-EAD income (loss) items			27,091				8,380				4,334
TBA dollar roll income and CMBX coupon income (6)			129,492				119,657				98,933
MSR amortization (7)			(19,652	)			(25,864	)			(15,488	)
Plus:
Premium amortization adjustment cost (benefit)			(179,516	)			57,395				(214,570	)
Earnings available for distribution *			430,631				440,043				439,519
Dividends on preferred stock			26,883				26,883				26,883
Earnings available for distribution attributable to common stockholders *		$	403,748			$	413,160			$	412,636
GAAP net income (loss) per average common share		$	1.37			$	0.27			$	1.23
Earnings available for distribution per average common share *		$	0.28			$	0.28			$	0.29
Annualized GAAP return (loss) on average equity			65.62	%			12.44	%			49.87	%
Annualized EAD return on average equity *			14.01	%			13.10	%			12.53	%

*		Represents a non-GAAP financial measure.
(1)		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 ($62.5) million, ($58.9) million and ($79.7) million for the quarters ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
(2)		Includes $0.2 million, $1.7 million and ($5.3) million of loss provision (reversal) on the Company’s unfunded loan commitments for the quarters ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss).
(3)		Includes depreciation and amortization expense related to equity method investments.
(4)		The Company excludes non-EAD (income) loss allocated to equity method investments, which represents the unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other, net.
(5)		The quarters ended March 31, 2022, December 31, 2021 and March 31, 2021 include costs incurred in connection with securitizations of residential whole loans.
(6)		TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives. CMBX coupon income totaled $1.1 million, $1.1 million and $1.5 million for the quarters ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
(7)		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.

From time to time, the Company enters into TBA forward contracts as an alternate means of investing in and financing Agency mortgage-backed securities. A TBA contract is an agreement to purchase or sell, for future delivery, an Agency mortgage-backed security 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 mortgage-backed securities, 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 generally represents the economic equivalent of the net interest income earned on the underlying Agency mortgage-backed security 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 mortgage-backed securities. The Company records TBA derivatives at fair value on its Consolidated Statements of Financial Condition and recognizes periodic changes in fair value in Net gains (losses) on derivatives in the 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 mortgage-backed security (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).

The CMBX index is a synthetic tradable index referencing a basket of 25 commercial mortgage-backed securities ("CMBS") of a particular rating and vintage. The CMBX index allows investors to take a long exposure (referred to as selling protection) or short exposure (referred to as buying protection) on the respective basket of CMBS securities and is structured as a "pay-as-you-go" contract whereby the protection buyer pays to the protection seller a standardized running coupon on the contracted notional amount. The Company reports income (expense) on CMBX positions in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). The coupon payments received or paid on CMBX positions are equivalent to interest income (expense) and therefore included in earnings available for distribution.

Premium Amortization Expense

In accordance with GAAP, the Company amortizes or accretes premiums or discounts into interest income for its Agency mortgage-backed securities, excluding 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. 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.

The Company’s GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of the Company’s 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 CPR.

The following table illustrates the impact of the PAA on premium amortization expense for the Company’s Residential Securities portfolio and residential securities transferred or pledged to securitization vehicles, for the quarters ended March 31, 2022, December 31, 2021, and March 31, 2021:

		For the quarters ended
		March 31, 2022				December 31, 2021			March 31, 2021
		(dollars in thousands)
Premium amortization expense (accretion)		$	(25,353	)		$	219,172		$	(11,891	)
Less: PAA cost (benefit)			(179,516	)			57,395			(214,570	)
Premium amortization expense (excluding PAA)		$	154,163			$	161,777		$	202,679

Economic leverage and economic capital ratios

The Company uses capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on its assets and the cost of its borrowings and hedging activities. The Company’s capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for its stockholders while maintaining appropriate liquidity to support its business and meet the Company’s financial obligations under periods of market stress. To maintain its desired capital profile, the Company utilizes 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, mortgages payable or other liabilities. Equity capital primarily consists of common and preferred stock.

The Company’s economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements and other secured financing (excluding certain non-recourse credit facilities). Certain credit facilities (included within other secured financing), debt issued by securitization vehicles, participations issued, and mortgages payable are non-recourse to the Company and are excluded from economic leverage.

The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating the Company’s economic leverage ratio for the periods presented:

		As of
		March 31, 2022				December 31, 2021				March 31, 2021
Economic leverage ratio reconciliation		(dollars in thousands)
Repurchase agreements		$	52,626,503			$	54,769,643			$	61,202,477
Other secured financing			914,255				903,255				922,605
Debt issued by securitization vehicles			6,711,953				5,155,633				3,044,725
Participations issued			775,432				1,049,066				180,527
Debt included in liabilities of disposal group held for sale			—				112,144				3,260,788
Total GAAP debt		$	61,028,143			$	61,989,741			$	68,611,122
Less Non-Recourse Debt:
Credit facilities (1)		$	(914,255	)		$	(903,255	)		$	(922,605	)
Debt issued by securitization vehicles			(6,711,953	)			(5,155,633	)			(3,044,725	)
Participations issued			(775,432	)			(1,049,066	)			(180,527	)
Non-recourse debt included in liabilities of disposal group held for sale			—				(112,144	)			(2,968,620	)
Total recourse debt		$	52,626,503			$	54,769,643			$	61,494,645
Plus / (Less):
Cost basis of TBA and CMBX derivatives		$	19,006,949			$	20,690,768			$	23,538,792
Payable for unsettled trades			1,992,568				147,908				1,070,080
Receivable for unsettled trades			(407,225	)			(2,656	)			(144,918	)
Economic debt *		$	73,218,795			$	75,605,663			$	85,958,599
Total equity		$	11,478,770			$	13,195,325			$	14,067,595
Economic leverage ratio *		6.4:1				5.7:1				6.1:1

*		Represents a non-GAAP financial measure.
(1)		Included in Other secured financing in the Company’s Consolidated Statements of Financial Condition.

The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating the Company’s economic capital ratio for the periods presented:

		As of
		March 31, 2022				December 31, 2021				March 31, 2021
Economic capital ratio reconciliation		(dollars in thousands)
Total GAAP assets		$	76,185,134			$	76,764,064			$	85,369,589
Less:
Gross unrealized gains on TBA derivatives (1)			(24,757	)			(52,693	)			(17,404	)
Debt issued by securitization vehicles (2)			(6,711,953	)			(5,155,633	)			(5,587,281	)
Plus:
Implied market value of TBA derivatives			18,284,708				20,338,633				22,793,892
Total economic assets *		$	87,733,132			$	91,894,371			$	102,558,796
Total equity		$	11,478,770			$	13,195,325			$	14,067,595
Economic capital ratio (3)			13.1	%			14.4	%			13.7	%

*		Represents a non-GAAP financial measure.
(1)		Included in Derivative assets in the Company’s Consolidated Statements of Financial Condition.
(2)		Includes debt issued by securitization vehicles reported in Liabilities of disposal group held for sale in the Company's Consolidated Statements of Financial Condition.
(3)		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 PAA, 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. The Company believes this measure provides management and investors with additional detail to enhance their understanding of the Company’s operating results and trends by excluding the component of premium amortization expense representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities (other than interest-only securities, multifamily and reverse mortgages), which can obscure underlying trends in the performance of the portfolio.

Economic interest expense includes GAAP interest expense and the net interest component of interest rate swaps. The Company uses interest rate swaps to manage its exposure to changing interest rates on its repurchase agreements by economically hedging cash flows associated with these borrowings. Accordingly, adding the net interest component of interest rate swaps to interest expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of the Company's financing strategy. The Company may use market agreed coupon (“MAC”) interest rate swaps in which the Company 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 in the Company's Consolidated Statements of Comprehensive Income (Loss). The Company did not enter into any MAC interest rate swaps during the quarter ended March 31, 2022.

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.

		For the quarters ended
		March 31, 2022				December 31, 2021			March 31, 2021
Interest income (excluding PAA) reconciliation		(dollars in thousands)
GAAP interest income		$	655,850			$	422,780		$	763,378
Premium amortization adjustment			(179,516	)			57,395			(214,570	)
Interest income (excluding PAA) *		$	476,334			$	480,175		$	548,808
Economic interest expense reconciliation
GAAP interest expense		$	74,922			$	61,785		$	75,973
Add:
Net interest component of interest rate swaps			62,541				58,897			79,747
Economic interest expense *		$	137,463			$	120,682		$	155,720
Economic net interest income (excluding PAA) reconciliation
Interest income (excluding PAA) *		$	476,334			$	480,175		$	548,808
Less:
Economic interest expense *			137,463				120,682			155,720
Economic net interest income (excluding PAA) *		$	338,871			$	359,493		$	393,088
* Represents a non-GAAP financial measure.

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 and CMBX coupon income less interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average TBA contract and CMBX balances, provide management with additional measures of the Company’s 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 the Company’s performance.

		For the quarters ended
		March 31, 2022				December 31, 2021				March 31, 2021
Economic metrics (excluding PAA)		(dollars in thousands)
Average interest earning assets		$	72,590,876			$	73,134,966			$	81,121,340
Interest income (excluding PAA) *		$	476,334			$	480,175			$	548,808
Average yield on interest earning assets (excluding PAA) *			2.62	%			2.63	%			2.71	%
Average interest bearing liabilities		$	61,865,292			$	63,342,740			$	72,002,031
Economic interest expense *		$	137,463			$	120,682			$	155,720
Average economic cost of interest bearing liabilities *			0.89	%			0.75	%			0.87	%
Economic net interest income (excluding PAA) *		$	338,871			$	359,493			$	393,088
Net interest spread (excluding PAA) *			1.73	%			1.88	%			1.84	%
Interest income (excluding PAA) *		$	476,334			$	480,175			$	548,808
TBA dollar roll income and CMBX coupon income			129,492				119,657				98,933
Economic interest expense *			(137,463	)			(120,682	)			(155,720	)
Subtotal		$	468,363			$	479,150			$	492,021
Average interest earnings assets		$	72,590,876			$	73,134,966			$	81,121,340
Average TBA contract and CMBX balances			19,229,537				21,159,120				21,865,969
Subtotal		$	91,820,413			$	94,294,086			$	102,987,309
Net interest margin (excluding PAA) *			2.04	%			2.03	%			1.91	%
* Represents a non-GAAP financial measure.

 

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