8-K

_________________________________________________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported)

August 1, 2018

          Annaly Capital Management, Inc. 

(Exact Name of Registrant as Specified in its Charter)

Maryland	1-13447	22-3479661
State or Other Jurisdiction Of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1211 Avenue of the Americas New York, New York	10036
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 696-0100

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  [ ]

Item 2.02. Results of Operations and Financial Condition

On August 1, 2018, the registrant issued a press release announcing its financial results for the quarter ended June 30, 2018. A copy of the press release is furnished as Exhibit 99.1 to this report. In addition, the registrant posted a financial summary on the Investors section of its website (www.annaly.com). A copy of the financial summary is furnished as Exhibit 99.2 to this report and incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

99.1Press Release, dated August 1, 2018, issued by Annaly Capital Management, Inc.

99.2Second Quarter 2018 Financial Summary

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

ANNALY CAPITAL MANAGEMENT, INC.
By:	/s/Glenn A. Votek
	Name: Glenn A. Votek
	Title: Chief Financial Officer

Dated: August 1, 2018

EX-99.1

ANNALY CAPITAL MANAGEMENT, INC. REPORTS 2nd QUARTER 2018 RESULTS

NEW YORK—August 1, 2018 —Annaly Capital Management, Inc. (NYSE: NLY) (the “Company” or “Annaly”) today announced its financial results for the quarter ended June 30, 2018.

Quarterly Financial Highlights

• GAAP net income of $595.9 million, $0.49 per average common share

• Core earnings (excluding PAA) were $382.8 million, $0.30 per average common share

• GAAP return on average equity was 17.20% and core return on average equity (excluding PAA) was 11.05%

• Book value per common share of $10.35

• Economic leverage of 6.4x as compared to 6.5x at March 31, 2018

• Net interest margin (excluding PAA) of 1.56%, up from 1.52% in the prior quarter

• Increased hedge ratio to 95% as compared to 94% at March 31, 2018

Business Highlights

• Increased credit capital allocation to 28%, up from 24% at the beginning of 2018, with $1.1 billion of new credit investments

• Credit strategy further enhanced by previously announced MTGE acquisition; the $900 million transaction is accretive to earnings, continues consolidation strategy and is currently expected to close during the third quarter of 2018

• Solidifying position as programmatic issuer with third quarter 2018 residential whole loan securitization following successful first quarter 2018 debut offering

• Continued to add efficient funding sources for Commercial Real Estate and Middle Market Lending, increasing capacity, improving terms and reducing cost of financing

• Enhanced corporate governance disclosure in the 2018 proxy statement, resulting in a 95% favorable say-on-pay endorsement from shareholders

• Declared 19th consecutive dividend of $0.30 per common share

“Amidst a challenging market environment, Annaly delivered another strong quarter demonstrating the durability of our business model,” commented Kevin Keyes, Chairman, Chief Executive Officer and President.  “We continued to further expand our investments into lower levered, floating rate credit cash flows while producing core earnings of $0.30 per share and core ROE at its highest return since our diversification strategy began in 2014.  The ongoing expansion of our proprietary partnerships in Residential Credit, Commercial Real Estate and Middle Market Lending enable us to source unique and complementary investment opportunities at attractive risk adjusted returns.

“During the quarter we also successfully continued our acquisition strategy with the announcement of the $900 million purchase of MTGE Investment Corp.  The transaction further enhances the scale and diversification of our investment platform, is accretive to earnings, provides immediate cost savings, increases our equity base for continued growth and reinforces Annaly’s stature as a market leading industry consolidator.”

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Financial Performance

The following table summarizes certain key performance indicators as of and for the quarters ended June 30, 2018, March 31, 2018 and June 30, 2017:

	June 30, 2018			March 31, 2018			June 30, 2017
Book value per common share	$	10.35		$	10.53		$	11.19
Economic leverage at period-end (1)	6.4:1			6.5:1			6.4:1
GAAP net income (loss) per average common share (2)	$	0.49		$	1.12		$	(0.01	)
Annualized GAAP return (loss) on average equity	17.20		%	36.86		%	0.46		%
Net interest margin (3)	1.53		%	1.94		%	1.23		%
Average yield on interest earning assets (4)	3.04		%	3.45		%	2.58		%
Average cost of interest bearing liabilities (5)	1.89		%	1.90		%	1.74		%
Net interest spread	1.15		%	1.55		%	0.84		%
Core Earnings Metrics: *
Core earnings (excluding PAA) per average common share (2)(6)	$	0.30		$	0.30		$	0.30
Core earnings per average common share (2)(6)	$	0.30		$	0.41		$	0.23
PAA cost (benefit) per average common share	$	—		$	(0.11	)	$	0.07
Annualized core return on average equity (excluding PAA)	11.05		%	10.70		%	10.54		%
Net interest margin (excluding PAA) (3)	1.56		%	1.52		%	1.53		%
Average yield on interest earning assets (excluding PAA) (4)	3.07		%	2.99		%	2.93		%
Net interest spread (excluding PAA)	1.18		%	1.09		%	1.19		%

* Represents non-GAAP financial measures. Please refer to the ‘Non-GAAP Financial Measures’ section for additional information.

(1) Computed as the sum of recourse debt, to-be-announced (“TBA”) derivative notional outstanding and net forward purchases of investments divided by total equity. Recourse debt consists of repurchase agreements and other secured financing. Securitized debt and mortgages payable are non-recourse to the Company and are excluded from this measure.

(2) Net of dividends on preferred stock.

(3) Net interest margin represents the sum of the Company's interest income plus TBA dollar roll 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 balances. Net interest margin (excluding PAA) excludes 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.

(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) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps.

(6) Core earnings is defined as net income (loss) excluding gains or losses on disposals of investments and termination or maturity of interest rate swaps, unrealized gains or losses on interest rate swaps and instruments measured at fair value through earnings, net gains and losses on other derivatives, impairment losses, net income (loss) attributable to noncontrolling interest, transaction expenses and certain other non-recurring gains or losses, and inclusive of TBA dollar roll income (a component of Net gains (losses) on other derivatives) and realized amortization of mortgage servicing rights ("MSR") (a component of net unrealized gains (losses) on instruments measured at fair value through earnings). Core earnings (excluding PAA) excludes the premium amortization adjustment.

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, 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; our ability to grow our commercial real estate business; our ability to grow our residential mortgage credit business; our ability to grow 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, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights; our ability to consummate any contemplated investment opportunities; changes in government regulations and policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940, as amended; and our ability to consummate the proposed MTGE Acquisition on a timely basis or at all, and potential business disruption following the MTGE Acquisition. 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. We do not undertake, and specifically disclaim any obligation, to publicly

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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 that invests in and finances residential and commercial assets. Annaly’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. Annaly has elected to be taxed as a real estate investment trust, or REIT, for federal income tax purposes. Annaly is externally managed by Annaly Management Company LLC. 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, in the Investors section. 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, the media and others interested in Annaly to monitor the Investors section of 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. 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 Second Quarter 2018 Investor Presentation and the Second Quarter 2018 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 second quarter 2018 earnings conference call on August 2, 2018 at 9:00 a.m. Eastern Time. The number to call is 888-317-6003 for domestic calls and 412-317-6061 for international calls. The conference passcode is 1905089. There will also be an audio webcast of the call on www.annaly.com. The 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 10121993. 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.

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Financial Statements

ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(dollars in thousands, except per share data)

	June 30, 2018			March 31, 2018			December 31, 2017 (1)			September 30, 2017			June 30, 2017
	(Unaudited)			(Unaudited)						(Unaudited)			(Unaudited)
ASSETS
Cash and cash equivalents	$	1,135,329		$	984,275		$	706,589		$	867,840		$	700,692
Investments, at fair value:
Agency mortgage-backed securities	86,593,058			88,579,097			90,551,763			85,889,131			73,963,998
Credit risk transfer securities	563,796			628,942			651,764			582,938			605,826
Non-Agency mortgage-backed securities	1,006,785			1,066,343			1,097,294			1,227,235			1,234,053
Residential mortgage loans (2)	1,666,157			1,535,685			1,438,322			895,919			779,685
Mortgage servicing rights	599,014			596,378			580,860			570,218			605,653
Commercial real estate debt investments (3)	2,857,463			2,960,323			3,089,108			3,869,110			3,972,560
Commercial real estate debt and preferred equity, held for investment	1,251,138			1,081,295			1,029,327			981,748			928,181
Loans held for sale, net	42,458			—			—			—			—
Investments in commercial real estate	477,887			480,063			485,953			470,928			474,510
Corporate debt	1,256,276			1,152,745			1,011,275			856,110			773,957
Interest rate swaps, at fair value	82,458			69,109			30,272			12,250			10,472
Other derivatives, at fair value	129,680			161,193			283,613			266,249			154,004
Reverse repurchase agreements	259,762			200,459			—			—			—
Receivable for investments sold	21,728			45,126			1,232			340,033			9,784
Accrued interest and dividends receivable	323,769			326,989			323,526			293,207			263,217
Other assets	475,230			421,448			384,117			353,708			399,456
Goodwill	71,815			71,815			71,815			71,815			71,815
Intangible assets, net	19,194			20,948			23,220			25,742			28,715
Total assets	$	98,832,997		$	100,382,233		$	101,760,050		$	97,574,181		$	84,976,578
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements	$	75,760,655		$	78,015,431		$	77,696,343		$	69,430,268		$	62,497,400
Other secured financing	3,760,487			3,830,075			3,837,528			3,713,256			3,785,543
Securitized debt of consolidated VIEs (4)	2,728,692			2,904,873			2,971,771			3,357,929			3,438,675
Mortgages payable	309,878			309,794			309,686			311,886			311,810
Interest rate swaps, at fair value	376,106			427,838			569,129			606,960			614,589
Other derivatives, at fair value	117,931			153,103			38,725			75,529			99,380
Dividends payable	349,300			347,897			347,876			326,425			305,709
Payable for investments purchased	1,108,834			91,327			656,581			5,243,868			1,043,379
Accrued interest payable	478,439			284,696			253,068			231,611			185,720
Accounts payable and other liabilities	68,819			74,264			207,770			121,231			84,948
Total liabilities	85,059,141			86,439,298			86,888,477			83,418,963			72,367,153
Stockholders’ Equity:
7.875% Series A Cumulative Redeemable Preferred Stock (5)	—			—			—			—			177,088
7.625% Series C Cumulative Redeemable Preferred Stock (6)	169,466			169,466			290,514			290,514			290,514
7.50% Series D Cumulative Redeemable Preferred Stock (7)	445,457			445,457			445,457			445,457			445,457
7.625% Series E Cumulative Redeemable Preferred Stock (8)	—			—			287,500			287,500			287,500
6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (9)	696,910			696,910			696,910			696,910			—
6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (10)	411,335			411,335			—			—			—
Common stock, par value $0.01 per share (11)	11,643			11,597			11,596			10,881			10,190
Additional paid-in capital	17,268,596			17,218,191			17,221,265			16,377,805			15,581,760
Accumulated other comprehensive income (loss)	(3,434,447		)	(3,000,080		)	(1,126,020		)	(640,149		)	(850,767		)
Accumulated deficit	(1,800,370		)	(2,015,612		)	(2,961,749		)	(3,320,160		)	(3,339,228		)
Total stockholders’ equity	13,768,590			13,937,264			14,865,473			14,148,758			12,602,514
Noncontrolling interest	5,266			5,671			6,100			6,460			6,911
Total equity	13,773,856			13,942,935			14,871,573			14,155,218			12,609,425
Total liabilities and equity	$	98,832,997		$	100,382,233		$	101,760,050		$	97,574,181		$	84,976,578

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(1) Derived from the audited consolidated financial statements at December 31, 2017.

(2) Includes securitized residential mortgage loans transferred or pledged to consolidated variable interest entities (“VIEs”) carried at fair value of $523.0 million, $560.2 million, $478.8 million, $139.8 million and $150.9 million at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

(3) Includes senior securitized commercial mortgage loans of consolidated VIEs with a carrying value of $2.5 billion, $2.7 billion, $2.8 billion, $3.6 billion and $3.7 billion at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

(4) Includes securitized debt of consolidated VIEs carried at fair value of $2.7 billion, $2.9 billion, $3.0 billion, $3.4 billion and $3.4 billion at June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, respectively.

(5) Includes 0 shares authorized, issued and outstanding at June 30, 2018, March 31, 2018 and December 31, 2017. Includes 7,412,500 authorized shares and 0 shares issued and outstanding at September 30, 2017.  Includes 7,412,500 shares authorized, issued and outstanding at June 30, 2017.

(6) Includes 12,000,000 shares authorized and 7,000,000 shares issued and outstanding at June 30, 2018and March 31, 2018. Includes 12,000,000 shares authorized, issued and outstanding at December 31, 2017. Includes 12,650,000 shares authorized and 12,000,000 shares issued and outstanding at each of September 30, 2017 and June 30, 2017.

(7) Includes 18,400,000 shares authorized, issued and outstanding.

(8) Includes 11,500,000 authorized, and 0 shares issued and outstanding at June 30, 2018and March 31, 2018. Includes 11,500,000 shares authorized, issued and outstanding at each of December 31, 2017, September 30, 2017 and June 30, 2017.

(9) Includes 28,800,000 shares authorized, issued and outstanding at June 30, 2018, March 31, 2018 and December 31, 2017.  Includes 32,200,000 shares authorized and 28,800,000 shares issued and outstanding at September 30, 2017.  Includes 0 shares authorized, issued and outstanding at June 30, 2017.

(10) Includes 19,550,000 shares authorized and 17,000,000 issued and outstanding at June 30, 2018and March 31, 2018. Includes 0 shares authorized, issued and outstanding at each of December 31, 2017, September 30, 2017 and June 30, 2017.

(11) Includes 1,909,750,000 shares authorized and 1,164,333,831 issued and outstanding at June 30, 2018. Includes 1,909,750,000 shares authorized and 1,159,657,350 issued and outstanding at March 31, 2018.  Includes 1,929,300,000 shares authorized and 1,159,585,078 issued and outstanding at December 31, 2017.  Includes 1,917,837,500 shares authorized and 1,088,083,794 shares issued and outstanding at September 30, 2017.  Includes 1,945,437,500 shares authorized and 1,019,027,880 shares issued and outstanding at June 30, 2017. 

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(dollars in thousands, except per share data)

	For the quarters ended
	June 30, 2018			March 31, 2018			December 31, 2017			September 30, 2017			June 30, 2017
Net interest income:
Interest income	$	776,806		$	879,487		$	745,423		$	622,550		$	537,426
Interest expense	442,692			367,421			318,711			268,937			222,281
Net interest income	334,114			512,066			426,712			353,613			315,145
Realized and unrealized gains (losses):
Net interest component of interest rate swaps	31,475			(48,160		)	(82,271		)	(88,211		)	(96,470		)
Realized gains (losses) on termination or maturity of interest rate swaps	—			834			(160,075		)	—			(58		)
Unrealized gains (losses) on interest rate swaps	343,475			977,285			484,447			56,854			(177,567		)
Subtotal	374,950			929,959			242,101			(31,357		)	(274,095		)
Net gains (losses) on disposal of investments	(66,117		)	13,468			7,895			(11,552		)	(5,516		)
Net gains (losses) on other derivatives	34,189			(47,145		)	121,334			154,208			(14,423		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	(48,376		)	(51,593		)	(12,115		)	(67,492		)	16,240
Subtotal	(80,304		)	(85,270		)	117,114			75,164			(3,699		)
Total realized and unrealized gains (losses)	294,646			844,689			359,215			43,807			(277,794		)
Other income (loss)	34,170			34,023			25,064			28,282			30,865
General and administrative expenses:
Compensation and management fee	45,579			44,529			44,129			41,993			38,938
Other general and administrative expenses	18,202			17,981			15,128			15,023			15,085
Total general and administrative expenses	63,781			62,510			59,257			57,016			54,023
Income (loss) before income taxes	599,149			1,328,268			751,734			368,686			14,193
Income taxes	3,262			564			4,963			1,371			(329		)
Net income (loss)	595,887			1,327,704			746,771			367,315			14,522
Net income (loss) attributable to noncontrolling interest	(32		)	(96		)	(151		)	(232		)	(102		)
Net income (loss) attributable to Annaly	595,919			1,327,800			746,922			367,547			14,624
Dividends on preferred stock (1)	31,377			33,766			32,334			30,355			23,473
Net income (loss) available (related) to common stockholders	$	564,542		$	1,294,034		$	714,588		$	337,192		$	(8,849	)
Net income (loss) per share available (related) to common stockholders:
Basic	$	0.49		$	1.12		$	0.62		$	0.31		$	(0.01	)
Diluted	$	0.49		$	1.12		$	0.62		$	0.31		$	(0.01	)
Weighted average number of common shares outstanding:
Basic	1,160,436,777			1,159,617,848			1,151,653,296			1,072,566,395			1,019,000,817
Diluted	1,160,979,451			1,160,103,185			1,152,138,887			1,073,040,637			1,019,000,817
Net income (loss)	$	595,887		$	1,327,704		$	746,771		$	367,315		$	14,522
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities	(505,130		)	(1,879,479		)	(487,597		)	195,251			261,964
Reclassification adjustment for net (gains) losses included in net income (loss)	70,763			5,419			1,726			15,367			13,360
Other comprehensive income (loss)	(434,367		)	(1,874,060		)	(485,871		)	210,618			275,324
Comprehensive income (loss)	161,520			(546,356		)	260,900			577,933			289,846
Comprehensive income (loss) attributable to noncontrolling interest	(32		)	(96		)	(151		)	(232		)	(102		)
Comprehensive income (loss) attributable to Annaly	161,552			(546,260		)	261,051			578,165			289,948
Dividends on preferred stock (1)	31,377			33,766			32,334			30,355			23,473
Comprehensive income (loss) attributable to common stockholders	$	130,175		$	(580,026	)	$	228,717		$	547,810		$	266,475

(1) The quarter ended December 31, 2017 excludes, and the quarter ended September 30, 2017 includes, cumulative and undeclared dividends of $8.3 million on the Company's Series F Preferred Stock as of September 30, 2017.

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ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(dollars in thousands, except per share data)

	For the six months ended
	June 30, 2018			June 30, 2017
Net interest income:
Interest income	$	1,656,293		$	1,125,153
Interest expense	810,113			420,706
Net interest income	846,180			704,447
Realized and unrealized gains (losses):
Net interest component of interest rate swaps	(16,685		)	(200,626		)
Realized gains (losses) on termination or maturity of interest rate swaps	834			(58		)
Unrealized gains (losses) on interest rate swaps	1,320,760			(28,383		)
Subtotal	1,304,909			(229,067		)
Net gains (losses) on disposal of investments	(52,649		)	(281		)
Net gains (losses) on other derivatives	(12,956		)	(14,104		)
Net unrealized gains (losses) on instruments measured at fair value through earnings	(99,969		)	39,923
Subtotal	(165,574		)	25,538
Total realized and unrealized gains (losses)	1,139,335			(203,529		)
Other income (loss)	68,193			62,511
General and administrative expenses:
Compensation and management fee	90,108			78,200
Other general and administrative expenses	36,183			29,651
Total general and administrative expenses	126,291			107,851
Income (loss) before income taxes	1,927,417			455,578
Income taxes	3,826			648
Net income (loss)	1,923,591			454,930
Net income (loss) attributable to noncontrolling interest	(128		)	(205		)
Net income (loss) attributable to Annaly	1,923,719			455,135
Dividends on preferred stock	65,143			46,946
Net income (loss) available (related) to common stockholders	$	1,858,576		$	408,189
Net income (loss) per share available (related) to common stockholders:
Basic	$	1.60		$	0.40
Diluted	$	1.60		$	0.40
Weighted average number of common shares outstanding:
Basic	1,160,029,575			1,018,971,942
Diluted	1,160,543,580			1,019,357,697
Net income (loss)	$	1,923,591		$	454,930
Other comprehensive income (loss):
Unrealized gains (losses) on available-for-sale securities	(2,384,609		)	202,349
Reclassification adjustment for net (gains) losses included in net income (loss)	76,182			32,777
Other comprehensive income (loss)	(2,308,427		)	235,126
Comprehensive income (loss)	(384,836		)	690,056
Comprehensive income (loss) attributable to noncontrolling interest	(128		)	(205		)
Comprehensive income (loss) attributable to Annaly	(384,708		)	690,261
Dividends on preferred stock	65,143			46,946
Comprehensive income (loss) attributable to common stockholders	$	(449,851	)	$	643,315

7

Key Metrics

The following table presents key metrics of the Company’s portfolio, liabilities and hedging positions, and performance as of and for the quarters ended June 30, 2018, March 31, 2018, and June 30, 2017:

	June 30, 2018			March 31, 2018			June 30, 2017
Portfolio Related Metrics:
Fixed-rate Residential Investment Securities as a percentage of total Residential Investment Securities	91		%	91		%	86		%
Adjustable-rate and floating-rate Residential Investment Securities as a percentage of total Residential Investment Securities	9		%	9		%	14		%
Weighted average experienced CPR for the period	10.1		%	8.9		%	10.9		%
Weighted average projected long-term CPR at period-end	9.1		%	9.2		%	10.6		%
Liabilities and Hedging Metrics:
Weighted average days to maturity on repurchase agreements outstanding at period-end	71			72			88
Hedge ratio (1)	95		%	94		%	67		%
Weighted average pay rate on interest rate swaps at period-end (2)	2.08		%	2.00		%	2.26		%
Weighted average receive rate on interest rate swaps at period-end (2)	2.31		%	2.13		%	1.28		%
Weighted average net rate on interest rate swaps at period-end (2)	(0.23		%)	(0.13		%)	0.98		%
Leverage at period-end (3)	6.0:1			6.1:1			5.6:1
Economic leverage at period-end (4)	6.4:1			6.5:1			6.4:1
Capital ratio at period-end	13.2		%	13.1		%	13.2		%
Performance Related Metrics:
Book value per common share	$	10.35		$	10.53		$	11.19
GAAP net income (loss) per average common share (5)	$	0.49		$	1.12		$	(0.01	)
Annualized GAAP return (loss) on average equity	17.20		%	36.86		%	0.46		%
Net interest margin	1.53		%	1.94		%	1.23		%
Average yield on interest earning assets (6)	3.04		%	3.45		%	2.58		%
Average cost of interest bearing liabilities (7)	1.89		%	1.90		%	1.74		%
Net interest spread	1.15		%	1.55		%	0.84		%
Dividend declared per common share	$	0.30		$	0.30		$	0.30
Annualized dividend yield (8)	11.66		%	11.51		%	9.96		%
Core Earnings Metrics *
Core earnings (excluding PAA) per average common share (5)	$	0.30		$	0.30		$	0.30
Core earnings per average common share (5)	$	0.30		$	0.41		$	0.23
PAA cost (benefit) per average common share	$	—		$	(0.11	)	$	0.07
Annualized core return on average equity (excluding PAA)	11.05		%	10.70		%	10.54		%
Net interest margin (excluding PAA)	1.56		%	1.52		%	1.53		%
Average yield on interest earning assets (excluding PAA) (6)	3.07		%	2.99		%	2.93		%
Net interest spread (excluding PAA)	1.18		%	1.09		%	1.19		%

* Represents non-GAAP financial measures. Please refer to the ‘Non-GAAP Financial Measures’ section for additional information.

(1) Measures total notional balances of interest rate swaps, interest rate swaptions and futures relative to repurchase agreements, other secured financing and TBA notional outstanding;  excludes MSRs 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) Debt consists of repurchase agreements, other secured financing, securitized debt and mortgages payable. Securitized debt and mortgages payable are non-recourse to the Company.

(4) Computed as the sum of recourse debt, TBA derivative notional outstanding and net forward purchases of investments divided by total equity.

(5) Net of dividends on preferred stock.

(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) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps.

(8) Based on the closing price of the Company’s common stock of $10.29, $10.43 and $12.05 at June 30, 2018, March 31, 2018 and June 30, 2017, respectively.

8

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:

• core earnings and core earnings (excluding PAA);

• core earnings and core earnings (excluding PAA) per average common share;

• annualized core return on average equity (excluding PAA);

• interest income (excluding PAA);

• economic interest expense;

• economic net interest income (excluding PAA);

• average yield on interest earning assets (excluding PAA);

• 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 core earnings, 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 is useful to investors, and reconciliations to their most directly comparable GAAP results are provided below.

Core earnings and core earnings (excluding PAA), core earnings and core earnings (excluding PAA) per average common share and annualized core return on average equity (excluding PAA)

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.  Core earnings, which is comprised of interest income plus TBA dollar roll incomeⁱ, less financing and hedging costs and general and administrative expenses, and core earnings (excluding PAA), are used by the Company's management and, the Company believes, used by analysts and investors to measure its progress in achieving this 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 defines “core earnings”, a non-GAAP measure, as net income (loss) excluding gains or losses on disposals of investments and termination or maturity of interest rate swaps, unrealized gains or losses on interest rate swaps and instruments measured at fair value through earnings, net gains and losses on other derivatives, impairment losses, net income (loss) attributable to noncontrolling interest, transaction expenses and certain other non-recurring gains or losses, and inclusive of TBA dollar roll income (a component of Net gains (losses) on other derivatives) and realized amortization of MSRs (a component of net unrealized gains (losses) on instruments measured at fair value through earnings). Core earnings (excluding PAA) excludes 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 the Company’s Agency mortgage-backed securities.

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. Annualized core return on average equity (excluding PAA), which is calculated by dividing core earnings (excluding PAA) over average stockholders’ equity, provides investors with additional detail on the core earnings generated by the Company’s invested equity capital.

ⁱ TBA dollar roll transactions are accounted for as derivatives, with gains and losses reflected as a component of Net gains (losses) on other derivatives in the Company’s Consolidated Statements of Comprehensive Income (Loss). TBA dollar roll income represents the economic equivalent of interest income on the underlying security less the implied cost of financing.

9

The following table presents a reconciliation of GAAP financial results to non-GAAP core earnings for the periods presented:

	For the quarters ended
	June 30, 2018			March 31, 2018			June 30, 2017
	(dollars in thousands, except per share data)
GAAP net income (loss)	$	595,887		$	1,327,704		$	14,522
Less:
Realized (gains) losses on termination or maturity of interest rate swaps	—			(834		)	58
Unrealized (gains) losses on interest rate swaps	(343,475		)	(977,285		)	177,567
Net (gains) losses on disposal of investments	66,117			(13,468		)	5,516
Net (gains) losses on other derivatives	(34,189		)	47,145			14,423
Net unrealized (gains) losses on instruments measured at fair value through earnings	48,376			51,593			(16,240		)
Transaction expenses (1)	—			1,519			—
Net (income) loss attributable to noncontrolling interest	32			96			102
Plus:
TBA dollar roll income (2)	62,491			88,353			81,051
MSR amortization (3)	(19,942		)	(21,156		)	(17,098		)
Core earnings *	375,297			503,667			259,901
Less:
Premium amortization adjustment cost (benefit)	7,516			(118,395		)	72,700
Core earnings (excluding PAA) *	$	382,813		$	385,272		$	332,601
GAAP net income (loss) per average common share	$	0.49		$	1.12		$	(0.01	)
Core earnings per average common share *	$	0.30		$	0.41		$	0.23
Core earnings (excluding PAA) per average common share *	$	0.30		$	0.30		$	0.30
Annualized GAAP return (loss) on average equity	17.20		%	36.86		%	0.46		%
Annualized core return on average equity (excluding PAA) *	11.05		%	10.70		%	10.54		%

* Represents a non-GAAP financial measure.

(1) Represents costs incurred in connection with a securitization of residential whole loans.

(2) Represents a component of Net gains (losses) on other derivatives.

(3) Represents the portion of changes in fair value that is attributable to the realization of estimated cash flows on the Company’s MSR portfolio and is reported as a component of Net unrealized gains (losses) on instruments measured at fair value.

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 as Net gains (losses) on other derivatives in the Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives (excluding interest rate swaps).

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 other derivatives in the Consolidated Statements of Comprehensive Income (Loss).

Premium Amortization Expense ("PAA")

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.

10

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 Investment Securities portfolio for the quarters ended June 30, 2018, March 31, 2018, and June 30, 2017:

	For the quarters ended
	June 30, 2018		March 31, 2018			June 30, 2017
	(dollars in thousands)
Premium amortization expense (accretion)	$	202,426	$	95,832		$	251,084
Less: PAA cost (benefit)	7,516		(118,395		)	72,700
Premium amortization expense (excluding PAA)	$	194,910	$	214,227		$	178,384
	For the quarters ended
	June 30, 2018		March 31, 2018			June 30, 2017
	(per average common share)
Premium amortization expense (accretion)	$	0.17	$	0.08		$	0.25
Less: PAA cost (benefit)	—		(0.11		)	0.07
Premium amortization expense (excluding PAA)	$	0.17	$	0.19		$	0.18

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), 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. Prior to the quarter ended March 31, 2018, economic interest expense included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all 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.

11

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
	June 30, 2018			March 31, 2018			June 30, 2017
	(dollars in thousands)
Interest Income (Excluding PAA) Reconciliation
GAAP interest income	$	776,806		$	879,487		$	537,426
Premium amortization adjustment	7,516			(118,395		)	72,700
Interest income (excluding PAA) *	$	784,322		$	761,092		$	610,126
Economic Interest Expense Reconciliation
GAAP interest expense	$	442,692		$	367,421		$	222,281
Add:
Net interest component of interest rate swaps	(31,475		)	48,160			84,252
Economic interest expense *	$	411,217		$	415,581		$	306,533
Economic Net Interest Income (Excluding PAA) Reconciliation
Interest income (excluding PAA) *	$	784,322		$	761,092		$	610,126
Less:
Economic interest expense *	411,217			415,581			306,533
Economic net interest income (excluding PAA) *	$	373,105		$	345,511		$	303,593

* Represents a non-GAAP financial measure.

Average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA)

Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA) and the average cost of 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 interest expense and the net interest component of interest rate swaps divided by the sum of average interest earning assets plus average TBA contract 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
	June 30, 2018			March 31, 2018			June 30, 2017
Economic Metrics (Excluding PAA)	(dollars in thousands)
Average interest earning assets	$	102,193,435		$	101,979,042		$	83,427,268
Interest income (excluding PAA) *	$	784,322		$	761,092		$	610,126
Average yield on interest earning assets (excluding PAA) *	3.07		%	2.99		%	2.93		%
Average interest bearing liabilities	$	87,103,807		$	87,376,452		$	70,486,779
Economic interest expense *	$	411,217		$	415,581		$	306,533
Average cost of interest bearing liabilities	1.89		%	1.90		%	1.74		%
Economic net interest income (excluding PAA) *	$	373,105		$	345,511		$	303,593
Net interest spread (excluding PAA) *	1.18		%	1.09		%	1.19		%
Interest income (excluding PAA) *	$	784,322		$	761,092		$	610,126
TBA dollar roll income	62,491			88,353			81,051
Interest expense	(442,692		)	(367,421		)	(222,281		)
Net interest component of interest rate swaps	31,475			(48,160		)	(96,470		)
Subtotal	$	435,596		$	433,864		$	372,426
Average interest earnings assets	$	102,193,435		$	101,979,042		$	83,427,268
Average TBA contract balances	9,407,819			12,050,341			14,206,869
Subtotal	$	111,601,254		$	114,029,383		$	97,634,137
Net interest margin (excluding PAA) *	1.56		%	1.52		%	1.53		%

* Represents a non-GAAP financial measure.

12

EX-99.2

Second Quarter 2018 Financial Summary August 1, 2018

Safe Harbor Notice This presentation, other written or oral communications, 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, 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 our assets; changes in business conditions and the general economy; our ability to grow our commercial real estate business; our ability to grow our residential mortgage credit business; our ability to grow 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, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights; our ability to consummate any contemplated investment opportunities; changes in government regulations and 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 of 1940, as amended and our ability to consummate the proposed MTGE Acquisition on a timely basis or at all, and potential business disruption following the MTGE Acquisition. 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. We do not undertake, and specifically disclaim 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. Past performance is no guarantee of future results. There is no guarantee that any investment strategy referenced herein will work under all market conditions. Prior to making any investment decision, you should evaluate your ability to invest for the long-term, especially during periods of downturns in the market. You alone assume the responsibility of evaluating the merits and risks associated with any potential investment or investment strategy referenced herein. To the extent that this material contains reference to any past specific investment recommendations or strategies which were or would have been profitable to any person, it should not be assumed that recommendations made in the future will be profitable or will equal the performance of such past investment recommendations or strategies. Non-GAAP Financial Measures This presentation includes certain non-GAAP financial measures, including core earnings metrics, which are presented both inclusive and exclusive of the premium amortization adjustment (“PAA”). We believe the non-GAAP financial measures are useful for management, investors, analysts, and other interested parties in evaluating our performance but should not be viewed in isolation and are not a substitute for financial measures computed in accordance with U.S. generally accepted accounting principles (“GAAP”). In addition, we may calculate non-GAAP metrics, which include core earnings, and the PAA, differently than our peers making comparative analysis difficult. Please see the section entitled “Non-GAAP Reconciliations” in the attached Appendix for a reconciliation to the most directly comparable GAAP financial measures. 1

Q2 2018 Financial Snapshot Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2018 3/31/2018 GAAP net income per average common share (1) $0.49 $1.12 Core earnings (excluding PAA) per average common share *(1)(2) $0.30 $0.30 Core earnings per average common share *(1)(2) $0.30 $0.41 Income Statement PAA cost (benefit) per average common share $— $(0.11) Annualized GAAP return (loss) on average equity 17.20% 36.86% Annualized core return on average equity (excluding PAA)* 11.05% 10.70% Book value per common share $10.35 $10.53 Leverage at period-end (3) 6.0x 6.1x Balance Sheet Economic leverage at period-end (4) 6.4x 6.5x Capital ratio at period-end (5) 13.2% 13.1% Agency mortgage-backed securities $86,593,058 $88,579,097 Mortgage servicing rights 599,014 596,378 Residential credit portfolio (6) 3,236,738 3,230,970 Portfolio Commercial real estate investments (7) 4,628,946 4,521,681 Corporate debt 1,256,276 1,152,745 Total residential and commercial investments $96,314,032 $98,080,871 Net interest margin (8) 1.53% 1.94% Net interest margin (excluding PAA) *(8) 1.56% 1.52% Average yield on interest earning assets (9) 3.04% 3.45% Key Statistics Average yield on interest earning assets (excluding PAA) *(9) 3.07% 2.99% Average cost of interest bearing liabilities (10) 1.89% 1.90% Net interest spread 1.15% 1.55% Net interest spread (excluding PAA) * 1.18% 1.09% Operating expenses to core earnings (excluding PAA) *(11) 16.66% 15.83% Efficiency Annualized operating expenses as a % of average assets (11) 0.26% 0.24% Annualized operating expenses as a % of average equity (11) 1.84% 1.69% Note: The endnotes for this page appear in the section entitled “Endnotes for Page 2” in the Appendix. 2

Portfolio Data Unaudited, dollars in thousands For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Agency mortgage-backed securities $86,593,058 $88,579,097 $90,551,763 $85,889,131 $73,963,998 Mortgage servicing rights 599,014 596,378 580,860 570,218 605,653 Residential credit portfolio (1) 3,236,738 3,230,970 3,187,380 2,706,092 2,619,564 Portfolio-Related Commercial real estate investments (1) 4,628,946 4,521,681 4,604,388 5,321,786 5,375,251 Data Corporate debt 1,256,276 1,152,745 1,011,275 856,110 773,957 Total residential and commercial investments $96,314,032 $98,080,871 $99,935,666 $95,343,337 $83,338,423 Total assets $98,832,997 $100,382,233 $101,760,050 $97,574,181 $84,976,578 Average TBA position $9,407,819 $12,050,341 $17,509,691 $19,291,834 $14,206,869 Residential Investment Securities: % Fixed-rate 91% 91% 90% 89% 86% % Adjustable-rate 9% 9% 10% 11% 14% Summary Portfolio Weighted average experienced CPR for the period 10.1% 8.9% 9.8% 10.3% 10.9% Statistics Weighted average projected long-term CPR at period-end 9.1% 9.2% 10.4% 10.4% 10.6% Net premium and discount balance in Residential Investment $5,896,755 $6,063,609 $6,024,347 $5,745,022 $5,164,105 Securities Net premium and discount balance as % of stockholders' equity 42.83% 43.51% 40.53% 40.60% 40.98% (1) Includes consolidated VIEs. 3

Financing and Capital Data Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Repurchase agreements $75,760,655 $78,015,431 $77,696,343 $69,430,268 $62,497,400 Other secured financing 3,760,487 3,830,075 3,837,528 3,713,256 3,785,543 Securitized debt of consolidated VIEs 2,728,692 2,904,873 2,971,771 3,357,929 3,438,675 Mortgages payable 309,878 309,794 309,686 311,886 311,810 Total debt $82,559,712 $85,060,173 $84,815,328 $76,813,339 $70,033,428 Financing Data Total liabilities $85,059,141 $86,439,298 $86,888,477 $83,418,963 $72,367,153 Cumulative redeemable preferred stock $1,723,168 $1,723,168 $1,720,381 $1,720,381 $1,200,559 Common equity(1) 12,045,422 12,214,096 13,145,092 12,428,377 11,401,955 Total Annaly stockholders' equity 13,768,590 13,937,264 14,865,473 14,148,758 12,602,514 Non-controlling interests 5,266 5,671 6,100 6,460 6,911 Total equity $13,773,856 $13,942,935 $14,871,573 $14,155,218 $12,609,425 Weighted average days to maturity of repurchase agreements 71 72 58 65 88 Weighted average rate on repurchase agreements, at period-end 2.17% 1.83% 1.61% 1.38% 1.38% Weighted average rate on repurchase agreements, for the quarter 1.99% 1.64% 1.41% 1.34% 1.25% Leverage at period-end 6.0x 6.1x 5.7x 5.4x 5.6x Economic leverage at period-end 6.4x 6.5x 6.6x 6.9x 6.4x Capital ratio at period-end 13.2% 13.1% 12.9% 12.3% 13.2% Key Capital and Hedging Metrics Book value per common share $10.35 $10.53 $11.34 $11.42 $11.19 Total common shares outstanding 1,164,334 1,159,657 1,159,585 1,088,084 1,019,028 Hedge ratio(2) 95% 94% 70% 67% 67% Weighted average pay rate on interest rate swaps, at period-end(3) 2.08% 2.00% 2.22% 2.27% 2.26% Weighted average receive rate on interest rate swaps, at period-end(3) 2.31% 2.13% 1.58% 1.35% 1.28% Weighted average net rate on interest rate swaps, at period-end(3) (0.23%) (0.13%) 0.64% 0.92% 0.98% (1) Consists of common stock, additional paid-in capital, accumulated other comprehensive income (loss) and accumulated deficit. (2) Measures total notional balances of interest rate swaps, interest rate swaptions and futures relative to repurchase agreements, other secured financing and to be announced (“TBA”) notional outstanding; excludes MSRs 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 4 liabilities. (3) Excludes forward starting swaps. Forward starting swaps represented $8.1 billion of the notional balance as of December 31, 2017; there were no forward starting swaps for any other period.

Income Statement Data Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Total interest income $776,806 $879,487 $745,423 $622,550 $537,426 Total interest expense 442,692 367,421 318,711 268,937 222,281 Net interest income $334,114 $512,066 $426,712 $353,613 $315,145 Total economic interest expense *(1) $411,217 $415,581 $392,668 $347,501 $306,533 Economic net interest income *(1) $365,589 $463,906 $352,755 $275,049 $230,893 Total interest income (excluding PAA) * $784,322 $761,092 $756,790 $662,449 $610,126 Economic net interest income (excluding PAA) *(1) $373,105 $345,511 $364,122 $314,948 $303,593 GAAP net income (loss) $595,887 $1,327,704 $746,771 $367,315 $14,522 Summary Income GAAP net income (loss) available (related) to common shareholders (2) $564,542 $1,294,034 $714,588 $337,192 $(8,849) Statement GAAP net income (loss) per average common share (2) $0.49 $1.12 $0.62 $0.31 ($0.01) Core earnings (excluding PAA) * $382,813 $385,272 $386,951 $353,546 $332,601 Core earnings (excluding PAA) available to common shareholders *(2) $351,436 $351,506 $354,617 $323,191 $309,128 Core earnings (excluding PAA) per average common share *(2) $0.30 $0.30 $0.31 $0.30 $0.30 Core earnings * $375,297 $503,667 $375,584 $313,647 $259,901 Core earnings available to common shareholders *(2) $343,920 $469,901 $343,250 $283,292 $236,428 Core earnings per average common share *(2) $0.30 $0.41 $0.30 $0.26 $0.23 PAA cost (benefit) $7,516 ($118,395) $11,367 $39,899 $72,700 PAA cost (benefit) per average common share $— ($0.11) $0.01 $0.04 $0.07 * Represents a non-GAAP financial measure. (1) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps. 5 (2) Net of dividends on preferred stock. The quarter ended December 31, 2017 excludes, and the quarter ended September 30, 2017 includes, cumulative and undeclared dividends of $8.3 million on the Company's Series F Preferred Stock as of September 30, 2017.

Key Earnings Metrics Unaudited, dollars in thousands except per share amounts For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Dividends declared per common share $0.30 $0.30 $0.30 $0.30 $0.30 Total common and preferred dividends declared (1) $380,677 $381,663 $388,511 $348,479 $329,182 Annualized GAAP return (loss) on average equity 17.20% 36.86% 20.58% 10.98% 0.46% Annualized GAAP return (loss) on average equity per unit of economic leverage 2.69% 5.67% 3.12% 1.59% 0.07% Annualized core return on average equity (excluding PAA) * 11.05% 10.70% 10.67% 10.57% 10.54% Annualized core return on average equity per unit of economic leverage (excluding PAA) * 1.73% 1.65% 1.62% 1.53% 1.65% Key Earnings Net interest margin 1.53% 1.94% 1.47% 1.33% 1.23% Metrics Net interest margin (excluding PAA) * 1.56% 1.52% 1.51% 1.47% 1.53% Average yield on interest earning assets 3.04% 3.45% 2.97% 2.79% 2.58% Average yield on interest earning assets (excluding PAA) * 3.07% 2.99% 3.02% 2.97% 2.93% Average cost of interest bearing liabilities (2) 1.89% 1.90% 1.83% 1.82% 1.74% Net interest spread 1.15% 1.55% 1.14% 0.97% 0.84% Net interest spread (excluding PAA) * 1.18% 1.09% 1.19% 1.15% 1.19% * Represents a non-GAAP financial measure. (1) The quarter ended December 31, 2017 includes, and the quarter ended September 30, 2017 excludes, $8.3 million of dividends on the Company's Series F Preferred Stock, which were cumulative and undeclared as of September 30, 2017. 6 (2) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps.

Components of Economic Net Interest Income Unaudited, dollars in thousands For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Interest income: Residential Investment Securities $662,750 $779,588 $654,387 $540,436 $459,308 Residential mortgage loans 18,868 15,505 10,750 8,509 7,417 Commercial investment portfolio 79,343 72,457 73,596 67,790 68,153 Reverse repurchase agreements 15,845 11,937 6,690 5,815 2,548 Total interest income $776,806 $879,487 $745,423 $622,550 $537,426 Economic interest expense: Net Interest Repurchase agreements $400,475 $331,374 $283,909 $237,669 $197,151 Income Net interest component of interest rate swaps (1) (31,475) 48,160 73,957 78,564 84,252 Securitized debt of consolidated VIEs 18,201 15,652 17,405 16,072 11,977 Participation sold — — — — 42 Other 24,016 20,395 17,397 15,196 13,111 Total economic interest expense * $411,217 $415,581 $392,668 $347,501 $306,533 Economic net interest income * $365,589 $463,906 $352,755 $275,049 $230,893 PAA cost (benefit) 7,516 (118,395) 11,367 39,899 72,700 Economic net interest income (excluding PAA) * $373,105 $345,511 $364,122 $314,948 $303,593 * Represents a non-GAAP financial measure. (1) Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps. 7

GAAP Net Income to Core Earnings Reconciliation Unaudited, dollars in thousands For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 GAAP net income (loss) $595,887 $1,327,704 $746,771 $367,315 $14,522 Less: Realized (gains) losses on termination or maturity of interest rate swaps — (834) 160,075 — 58 Unrealized (gains) losses on interest rate swaps (343,475) (977,285) (484,447) (56,854) 177,567 Net (gains) losses on disposal of investments 66,117 (13,468) (7,895) 11,552 5,516 Net (gains) losses on other derivatives (34,189) 47,145 (121,334) (154,208) 14,423 Net unrealized (gains) losses on instruments measured at fair value through earnings 48,376 51,593 12,115 67,492 (16,240) Core Earnings Transaction expenses (1) — 1,519 — — — Reconciliation Net (income) loss attributable to noncontrolling interest 32 96 151 232 102 Plus: TBA dollar roll income(2) 62,491 88,353 89,479 94,326 81,051 MSR amortization(3) (19,942) (21,156) (19,331) (16,208) (17,098) Core earnings * 375,297 503,667 375,584 313,647 259,901 Less: PAA cost (benefit) 7,516 (118,395) 11,367 39,899 72,700 Core earnings (excluding PAA) * $382,813 $385,272 $386,951 $353,546 $332,601 * Represents a non-GAAP financial measure. (1) Represents costs incurred in connection with a securitization of residential whole loans. (2) Represents a component of Net gains (losses) on other derivatives. 8 (3) Represents the portion of changes in fair value that is attributable to the realization of estimated cash flows on the Company’s mortgage servicing rights (“MSR”) portfolio and is reported as a component of Net unrealized gains (losses) on instruments measured at fair value through earnings.

Quarter-Over-Quarter Changes in Key Metrics Unaudited For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Book value per common share, beginning of period $10.53 $11.34 $11.42 $11.19 $11.23 Net income (loss) available (related) to common stockholders (1) 0.49 1.12 0.62 0.32 (0.01) Book Value Other comprehensive income (loss) attributable to common stockholders (0.37) (1.63) (0.42) 0.19 0.27 Rollforward Common dividends declared (0.30) (0.30) (0.30) (0.30) (0.30) Issuance of common stock / redemption of preferred stock 0.00 0.00 0.02 0.02 0.00 Book value per common share, end of period $10.35 $10.53 $11.34 $11.42 $11.19 Prior quarter net interest margin 1.94% 1.47% 1.33% 1.23% 1.47% Quarter-over-quarter changes in contribution: Coupon on average interest-earning assets (including average TBA dollar roll 0.08% 0.19% 0.13% (0.12%) (0.05%) balances) Net Interest Margin Net amortization of premiums (0.38%) 0.37% 0.10% 0.22% (0.18%) TBA dollar roll income (0.09%) 0.01% (0.04%) 0.01% 0.04% Interest expense and net interest component of interest rate swaps (0.02%) (0.10%) (0.05%) (0.01%) (0.05%) Current quarter net interest margin 1.53% 1.94% 1.47% 1.33% 1.23% Prior quarter net interest margin (excluding PAA) * 1.52% 1.51% 1.47% 1.53% 1.55% Quarter-over-quarter changes in contribution: Coupon on average interest-earning assets (including average TBA dollar roll 0.08% 0.19% 0.13% (0.12%) (0.05%) Net Interest balances) Margin (excluding Net amortization of premiums, excluding PAA 0.07% (0.09%) 0.00% 0.06% 0.04% PAA)* TBA dollar roll income (0.09%) 0.01% (0.04%) 0.01% 0.04% Interest expense and net interest component of interest rate swaps (0.02%) (0.10%) (0.05%) (0.01%) (0.05%) Current quarter net interest margin (excluding PAA) * 1.56% 1.52% 1.51% 1.47% 1.53% * Represents a non-GAAP financial measure. (1) For book value purposes, the quarter ended December 31, 2017 includes, and the quarter ended September 30, 2017 excludes, $8.3 million of dividends on the Company’s Series F Preferred stock, which were cumulative and undeclared as of September 30, 2017. 9

Quarter-Over-Quarter Changes in Key Metrics (cont’d) Unaudited For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Prior quarter net interest spread 1.55% 1.14% 0.97% 0.84% 1.15% Quarter-over-quarter changes in contribution: Net Interest Coupon on average interest earning assets 0.00% 0.03% 0.02% 0.00% 0.09% Spread Net amortization of premiums (0.41%) 0.45% 0.16% 0.21% (0.25%) Average cost of interest bearing liabilities(1) 0.01% (0.07%) (0.01%) (0.08%) (0.15%) Current quarter net interest spread 1.15% 1.55% 1.14% 0.97% 0.84% Prior quarter net interest spread (excluding PAA) * 1.09% 1.19% 1.15% 1.19% 1.24% Quarter-over-quarter changes in contribution: Net Interest Coupon on average interest earning assets 0.00% 0.03% 0.02% 0.00% 0.09% Spread (excluding PAA)* Net amortization of premiums, excluding PAA 0.08% (0.06%) 0.03% 0.04% 0.01% Average cost of interest bearing liabilities(1) 0.01% (0.07%) (0.01%) (0.08%) (0.15%) Current quarter net interest spread (excluding PAA) * 1.18% 1.09% 1.19% 1.15% 1.19% * Represents a non-GAAP financial measure. (1) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps. 10

Quarter-Over-Quarter Changes in Return on Average Equity Unaudited For the quarters ended 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Prior quarter GAAP return (loss) on average equity 36.86% 20.58% 10.98% 0.46% 13.97% Quarter-over-quarter changes in contribution: Coupon income 1.10% 0.83% 1.04% 0.24% (0.14%) Net amortization of premiums and accretion of discounts (3.10%) 3.05% 0.90% 1.35% (1.48%) GAAP Return Interest expense and net interest component of interest rate swaps (0.33%) (0.49%) (0.38%) (0.58%) (0.50%) (Loss) on Average Realized (gains) losses on termination or maturity of interest rate (0.02%) 4.43% (4.41%) 0.00% 0.00% Equity swaps Unrealized (gains) / losses on interest rate swaps (17.22%) 13.78% 11.65% 7.32% (10.36%) Realized and unrealized (gains) / losses on investments and other derivatives 0.05% (5.59%) 0.98% 2.36% (1.04%) Other(1) (0.14%) 0.27% (0.18%) (0.17%) 0.01% Current quarter GAAP return (loss) on average equity 17.20% 36.86% 20.58% 10.98% 0.46% Prior quarter core return on average equity (excluding PAA) * 10.70% 10.67% 10.57% 10.54% 10.66% Quarter-over-quarter changes in contribution: Coupon income 1.10% 0.83% 1.04% 0.24% (0.14%) Core Return on Net amortization of premiums (excluding PAA) 0.41% (0.56%) 0.02% 0.24% 0.26% Average Equity (excluding PAA)* Interest expense and net interest component of interest rate swaps (0.33%) (0.49%) (0.38%) (0.58%) (0.50%) TBA dollar roll income (0.65%) (0.01%) (0.35%) 0.25% 0.35% Other(2) (0.18%) 0.26% (0.23%) (0.12%) (0.09%) Current quarter core return on average equity (excluding PAA) * 11.05% 10.70% 10.67% 10.57% 10.54% * Represents a non-GAAP financial measure. (1) Includes other income (loss), general and administrative expenses and income taxes. (2) Includes other income (loss), MSR amortization (a component of Net unrealized gains (losses) on instruments measured at fair value through earnings), general and administrative expenses (excluding 11 transaction related expenses) and income taxes.

Residential Investments and TBA Derivative Overview as of June 30, 2018 Unaudited, dollars in thousands Agency Fixed-Rate Securities (Pools) Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Years to Maturity Face Value % (2) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value <=15 years (1) $4,316,730 5.5% 3.16% 102.8% 99.8% 9.3% $4,305,940 20 years 4,166,716 5.3% 3.48% 104.6% 101.1% 10.3% 4,211,585 >=30 years 69,980,293 89.2% 3.83% 105.9% 101.6% 8.9% 71,098,852 Total/Weighted Avg. $78,463,739 100.0% 3.77% 105.7% 101.5% 9.0% $79,616,377 TBA Purchase Contracts Weighted Avg. Implied Cost Implied Market Type Notional Value % (3) Coupon Basis Value 15-year $2,191,000 27.4% 3.00% $2,167,567 $2,177,991 30-year 5,809,000 72.6% 4.30% 5,976,796 6,002,703 Total/Weighted Avg. $8,000,000 100.0% 3.95% $8,144,363 $8,180,694 Agency Adjustable-Rate Securities Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Months to Reset Face Value % (2) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value 0 - 24 months $4,597,506 78.1% 3.04% 105.1% 102.9% 26.9% $4,729,693 25 - 40 months 413,613 7.0% 2.81% 104.0% 100.7% 19.0% 416,641 41 - 60 months 146,775 2.5% 2.88% 104.1% 100.4% 10.9% 147,332 61 - 90 months 673,718 11.5% 3.01% 103.5% 99.7% 14.1% 671,763 >90 months 51,117 0.9% 3.04% 103.1% 99.6% 13.2% 50,899 Total/Weighted Avg. $5,882,729 100.0% 3.02% 104.8% 102.3% 24.4% $6,016,328 (1) Includes Agency-backed multifamily securities with an estimated fair value of $794.4 million. (2) Weighted by current face value. (3) Weighted by notional value. 12

Residential Investments & TBA Derivative Overview as of June 30, 2018 (cont’d) Unaudited, dollars in thousands Agency Interest-Only Collateralized Mortgage-Backed Obligations Current Notional Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Estimated Type Value % (1) Coupon Amortized Cost Fair Value 3-Month CPR Fair Value Interest-only $2,604,168 39.8% 3.33% 14.0% 12.1% 8.2% $316,211 Inverse Interest-only 3,932,883 60.2% 4.03% 23.1% 16.4% 10.9% 644,142 Total/Weighted Avg. $6,537,051 100.0% 3.75% 19.5% 14.7% 9.8% $960,353 Mortgage Servicing Rights Unpaid Excess Weighted Avg. Principal Weighted Avg. Servicing Loan Age Estimated Type Balance Coupon Spread (months) Fair Value Total/Weighted Avg. $46,120,485 3.82% 0.24% 27.2 $599,014 Residential Credit Portfolio Current Face / Weighted Avg. Weighted Avg. Weighted Avg. Estimated Sector Notional Value % (2) Coupon Amortized Cost Fair Value Fair Value Credit Risk Transfer $528,869 17.4% 5.45% 103.2% 106.6% $563,796 Alt-A 191,939 5.3% 4.56% 83.1% 89.0% 170,922 Prime 270,226 8.2% 4.71% 92.2% 97.9% 264,491 Subprime 449,644 13.2% 2.91% 84.5% 94.8% 426,449 NPL/RPL 3,431 0.1% 5.00% 98.7% 100.4% 3,447 Prime Jumbo 130,544 3.8% 3.61% 97.3% 95.1% 124,141 Prime Jumbo Interest-only 910,065 0.5% 0.45% 1.5% 1.9% 17,335 Residential Mortgage Loans 1,658,358 51.5% 4.53% 101.4% 100.5% 1,666,157 Total/Weighted Avg. $4,143,076 100.0% 3.56% $3,236,738 (1) Weighted by current notional value. (2) Weighted by estimated fair value. 13

(1) Residential Credit Investments Detail as of June 30, 2018 Unaudited, dollars in thousands Payment Structure Investment Characteristics Estimated Credit 60+ Product Fair Value Senior Subordinate Coupon Enhancement Delinquencies 3M VPR Agency Credit Risk Transfer $536,768 $— $536,768 5.34% 1.15% 0.30% 6.57% Private Label Credit Risk Transfer 27,028 — 27,028 7.78% 3.51% 1.65% 6.32% Alt-A 170,922 105,461 65,461 4.56% 10.71% 10.99% 10.53% Prime 264,491 108,641 155,850 4.71% 11.05% 9.86% 14.24% Subprime 426,449 159,019 267,430 2.91% 9.67% 18.93% 5.79% Non-Performing Loan Securitizations 3,447 — 3,447 5.00% 48.95% 52.51% 2.35% Prime Jumbo (>=2010 Vintage) 124,141 98,880 25,261 3.61% 14.45% 0.13% 8.63% Prime Jumbo (>=2010 Vintage) Interest-only 17,335 17,335 — 0.45% 0.00% 0.18% 8.95% Total $1,570,581 $489,336 $1,081,245 4.60% 7.69% 8.79% 13.48% Bond Coupon Estimated Fair Product Value ARM Fixed Floater Interest Only Agency Credit Risk Transfer $536,768 $— $— $536,768 $— Private Label Credit Risk Transfer 27,028 — — 27,028 — Alt-A 170,922 48,614 96,578 25,730 — Prime 264,491 145,837 118,654 — — Subprime 426,449 — 47,190 379,259 — Non-Performing Loan Securitizations 3,447 — 3,447 — — Prime Jumbo (>=2010 Vintage) 124,141 — 124,141 — — Prime Jumbo (>=2010 Vintage) Interest-only 17,335 — — — 17,335 Total $1,570,581 $194,451 $390,010 $968,785 $17,335 (1) Excludes residential mortgage loans. 14

Commercial Real Estate Overview as of June 30, 2018 Unaudited, dollars in thousands GAAP Non-GAAP Number of Weighted Avg Weighted Avg Life Economic Book Values (1) % of Portfolio Levered Return Mortgage Debt & Preferred Equity Investments Investments LTV (2) (3) (years) (4) Interest(5) (6) Financeable First Mortgages 20 $882,570 19.0% 67.4% 3.7 $378,137 8.9% Mezzanine Loan Investments 18 359,574 7.8% 75.2% 3.1 375,428 9.4% Preferred Equity Investments 1 8,994 0.2% 94.3% 0.4 8,994 11.2% Commercial Real Estate Debt and Preferred Equity, Held for 39 $1,251,138 27.0% 69.8% 3.5 $762,559 9.1% Investment Loans Held for Sale, Net 1 $42,458 0.9% 23.8% 4.9 $42,458 7.5% Securitized Whole Loans 48 $2,542,413 54.9% 68.9% 4.4 $52,019 28.2% AAA CMBS 6 150,401 3.2% 29.6% 1.1 20,401 12.1% Credit CMBS 7 164,649 3.6% 58.8% 3.9 128,507 8.9% Total Commercial Real Estate Debt Investments, at fair value 61 $2,857,463 61.7% 66.2% 4.2 $200,927 14.2% Total Debt Portfolio 101 $4,151,059 89.6% 67.6% 4.0 $1,005,944 10.1% Equity Investments Number of Book Value % of Portfolio Economic Levered Return Properties Interest(5) (7) Real Estate Held for Investment 26 $386,576 8.4% $150,831 10.3% Investment in Unconsolidated Joint Ventures(8) 27 91,311 2.0% 125,351 10.0% Total Equity Investments 53 $477,887 10.4% $276,182 10.2% Total 154 $4,628,946 100.0% $1,282,126 10.1% Derivatives Net Notional Range of Ratings Implied Weighted Average Market Value Coupon CMBX (9) 297,555 AAA to BBB- 297,459 1.3% (1) Commercial real estate debt and preferred equity, held for investment book values are net of unamortized net origination fees. (2) Total weighted based on carry value. (3) Based on an internal valuation or the most recent third party appraisal, which may be prior to loan origination/purchase date or at the time of underwriting. (4) Maturity dates assume all of the borrowers' extension options are exercised for the commercial real estate debt and preferred equity, held for investment portfolio. (5) Economic Interest is a non-GAAP measure to include gross asset values less related financings. Equity investments is adjusted to exclude depreciation and amortization. (6) Levered Return represents the current coupon plus accretion and amortization of origination fees and premium/discount and funding costs over investment economic interest. (7) Equity levered returns are calculated based on trailing twelve months cash-on-cash returns, updated on a one month lag. (8) Includes investment in unconsolidated debt fund of $21.1 million and investment in Community Investment Impact Fund of $20.3 million. (9) The Company sells/buys protection on CMBX tranches referencing baskets of Conduit CMBS bonds with various ratings. Positive net notional indicates selling protection and being long the exposure to the underlying CMBS. CMBX positions are accounted for as derivatives with changes in fair value presented in Net gains (losses) on other derivatives. 15

Middle Market Lending Overview as of June 30, 2018 Unaudited, dollars in thousands Industry Dispersion Size Dispersion Industry Fixed Rate Floating Rate Total Position Size Amount Percentage Aircraft and Parts $— $38,022 $38,022 $0 - $20 million $306,958 24.4% Coating, Engraving and Allied Services — 60,049 60,049 $20 - $40 million 324,080 25.8% Computer Programming, Data Processing & Other $40 - $60 million 350,708 27.9% Computer Related Services — 212,750 212,750 Greater than $60 million 274,530 21.9% Drugs — 38,730 38,730 Total $1,256,276 100.0% Electric Work — 39,457 39,457 Electronic Components & Accessories — 23,995 23,995 Tenor Dispersion Engineering, Architectural, and Surveying — 10,635 10,635 Remaining Term Amount Percentage Groceries and Related Products — 14,745 14,745 One year or less $— —% Grocery Stores — 23,486 23,486 One to three years 61,366 4.9% Insurance Agents, Brokers and Services — 49,480 49,480 Three to five years 293,415 23.4% Mailing, Reproduction, Commercial Art and Greater than five years 901,495 71.7% Photography, and Stenographic — 14,863 14,863 Total $1,256,276 100.0% Management and Public Relations Services — 210,511 210,511 Medical and Dental Laboratories — 26,904 26,904 Lien Position Amount  Percentage Miscellaneous Business Services — 19,677 19,677 First lien loans 753,373 60.0% Miscellaneous Equipment Rental and Leasing — 49,375 49,375 Second lien loans 502,903 40.0% Miscellaneous Health and Allied Services, not Total 1,256,276 100.0% elsewhere classified — 54,196 54,196 Miscellaneous Plastic Products — 9,937 9,937 Motor Vehicles and Motor Vehicle Equipment — 17,138 17,138 Motor Vehicles and Motor Vehicle Parts and Supplies — 23,546 23,546 Offices and Clinics of Doctors of Medicine — 97,722 97,722 Offices and Clinics of Other Health Practitioners — 20,053 20,053 Public Warehousing and Storage — 55,057 55,057 Research, Development and Testing Services — 33,282 33,282 Schools and Educational Services, not elsewhere classified — 19,806 19,806 Services Allied with the Exchange of Securities — 14,909 14,909 Surgical, Medical, and Dental Instruments and Supplies — 16,658 16,658 Telephone Communications — 61,293 61,293 Total $— $1,256,276 $1,256,276 16

Hedging and Liabilities as of June 30, 2018 Unaudited, dollars in thousands Interest Rate Swaps (1) Interest Rate Swaptions Current Weighted Avg. Weighted Avg. Weighted Avg. Current Weighted Avg. Weighted Avg. Weighted Avg. Weighted Avg. Years to Underlying Underlying Underlying Underlying Months to Maturity Notional Pay Rate Receive Rate Maturity 0 to 3 years $32,086,800 1.76% 2.34% 1.62 Type Notional Pay Rate Receive Rate Years to Maturity Expiration >3 to 6 years 15,449,650 2.27% 2.31% 4.67 Long $3,250,000 2.75% 3M LIBOR 10.28 3.16 > 6 to 10 years 12,476,900 2.45% 2.24% 8.59 Greater than 10 years 4,076,400 3.58% 2.21% 17.48 Repurchase Agreements & Other Secured Financing Total / Weighted $64,089,750 2.08% 2.31% 4.43 Avg. Weighted Avg. Principal Rate Futures Positions Maturity Balance At Period End Notional Notional Weighted Avg. Within 30 days $30,922,430 2.15% Long Short Years to 30 to 59 days 6,328,941 2.11% Type Positions Positions Maturity(2) 60 to 89 days 14,275,263 2.15% U.S. Treasury Futures - 2 year — (480,000) 2.00 90 to 119 days 9,278,603 2.08% U.S. Treasury Futures - 5 year — (4,987,400) 4.42 Over 120 days(3) 18,715,905 2.35% U.S. Treasury Futures - 10 year & Greater — (10,274,500) 7.13 Total / Weighted Avg. $79,521,142 2.18% Total $— $(15,741,900) 6.12 Principal Weighted Average Rate Balance At Period End For the Quarter Days to Maturity (4) Repurchase agreements $75,760,655 2.17% 1.99% 71 Other secured financing 3,760,487 2.48% 2.57% 924 Securitized debt of consolidated VIEs 2,702,497 2.70% 2.62% 3,199 Mortgages payable 312,500 4.24% 4.36% 2,407 Total indebtedness $82,536,139 (1) There were no forward-starting interest rate swaps at June 30, 2018. (2) Weighted average years to maturity for futures positions are based on the U.S. Treasury contracts cheapest to deliver. (3) Approximately 5% of the total repurchase agreements and other secured financing have a remaining maturity over one year. 17 (4) Determined based on estimated weighted-average lives of the underlying debt instruments.

Quarter-Over-Quarter Interest Rate and MBS Spread Sensitivity Unaudited Assumptions: ▪ The interest rate sensitivity and MBS spread sensitivity are based on the portfolios as of June 30, 2018 and March 31, 2018 ▪ The interest rate sensitivity reflects instantaneous parallel shifts in rates ▪ The MBS spread sensitivity shifts MBS spreads instantaneously and reflects exposure to MBS basis risk ▪ All tables assume no active management of the portfolio in response to rate or spread changes Interest Rate Sensitivity (1) As of June 30, 2018 As of March 31, 2018 Interest Rate Estimated Percentage Estimated Change as a % Estimated Percentage Estimated Change as a % Change (bps) Change in Portfolio Value(2) of NAV(2)(3) Change in Portfolio Value(2) of NAV(2)(3) (75) 0.2% 1.8% 0.3% 2.5% (50) 0.3% 2.0% 0.3% 2.5% (25) 0.2% 1.3% 0.2% 1.5% 25 (0.3%) (1.9%) (0.3%) (2.0%) 50 (0.6%) (4.2%) (0.6%) (4.4%) 75 (0.9%) (7.0%) (0.9%) (7.2%) MBS Spread Sensitivity (1) As of June 30, 2018 As of March 31, 2018 MBS Spread Shock Estimated Change in Estimated Change as a % Estimated Change in Estimated Change as a % (bps) Portfolio Market Value (2) of NAV(2)(3) Portfolio Market Value (2) of NAV(2)(3) (25) 1.5% 11.5% 1.5% 11.5% (15) 0.9% 6.8% 0.9% 6.9% (5) 0.3% 2.3% 0.3% 2.3% 5 (0.3%) (2.3%) (0.3%) (2.3%) 15 (0.9%) (6.7%) (0.9%) (6.8%) 25 (1.5%) (11.2%) (1.5%) (11.3%) (1) Interest rate and MBS spread sensitivity are based on results from third party models in conjunction with internally derived inputs. Actual results could differ materially from these estimates. (2) Scenarios include Residential Investment Securities, residential mortgage loans, MSRs and derivative instruments. (3) Net asset value (“NAV”) represents book value of common equity. 18

Appendix

Endnotes for Page 2 * Represents a non-GAAP financial measure. Core earnings (excluding PAA) per average share, core earnings per average common share, annualized core return on average equity (excluding PAA), net interest margin (excluding PAA), average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and operating expenses to core earnings (excluding PAA) represent non-GAAP measures. This presentation also includes additional non-GAAP measures, including interest income (excluding PAA), economic interest expense, economic net interest income (excluding PAA), core earnings (excluding PAA), core earnings (excluding PAA) available to common shareholders, core earnings, core earnings available to common shareholders and core earnings per average common share. See the section titled “Non-GAAP Reconciliations” in the Appendix for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures. A reconciliation of GAAP net income (loss) to non-GAAP core earnings and non-GAAP core earnings (excluding PAA) is provided on page 8 of this financial summary. (1) Net of dividends on preferred stock. (2) Core earnings is defined as net income (loss) excluding gains or losses on disposals of investments and termination or maturity of interest rate swaps, unrealized gains or losses on interest rate swaps and instruments measured at fair value through earnings, net gains and losses on other derivatives, impairment losses, net income (loss) attributable to noncontrolling interest, transaction expenses and certain other non-recurring gains or losses, and inclusive of TBA dollar roll income (a component of Net gains (losses) on other derivatives) and realized amortization of MSRs (a component of net unrealized gains (losses) on instruments measured at fair value through earnings). Core earnings (excluding PAA) excludes 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 the Company’s Agency mortgage-backed securities. (3) Computed as the sum of repurchase agreements, other secured financing, securitized debt and mortgages payable divided by total equity. Securitized debt and mortgages payable are non-recourse to the Company. (4) Computed as the sum of recourse debt, TBA derivative notional outstanding and net forward purchases of investments divided by total equity. Recourse debt consists of repurchase agreements and other secured financing. Securitized debt and mortgages payable are non-recourse to the Company and are excluded from this measure. (5) Computed as the ratio of total equity to total assets (inclusive of total market value of TBA derivatives and exclusive of securitized debt of consolidated VIEs). (6) Comprised of non-Agency MBS, credit risk transfer securities and residential mortgage loans (includes securitized residential mortgage loans of consolidated VIEs). (7) Includes consolidated VIEs. (8) Net interest margin represents the sum of interest income plus TBA dollar roll 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 balances. Net interest margin (excluding PAA) is calculated using the sum of interest income (excluding PAA) plus TBA dollar roll 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 balances. (9) Represents annualized interest income divided by average interest earning assets. Interest earning assets reflects the average amortized cost of our investments during the period. Annualized yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (10) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps. (11) Excludes costs incurred in connection with a securitization of residential whole loans for the quarter ended March 31, 2018. 20

Non-GAAP Reconciliations Unaudited, dollars in thousands * To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company provides non-GAAP financial measures. 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 core earnings, 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 these non-GAAP financial measures and reconciliations to their most directly comparable GAAP results are provided below and on the next page. A reconciliation of GAAP net income (loss) to non-GAAP core earnings for the quarters ended June 30, 2018, March 31, 2018, December 31, 2017, September 30, 2017 and June 30, 2017, is provided on page 8 of this financial summary. For the quarters ended, 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Premium Amortization Reconciliation Premium amortization expense $202,426 $95,832 $203,951 $220,636 $251,084 Less: PAA cost (benefit) 7,516 (118,395) 11,367 39,899 72,700 Premium amortization expense (excluding PAA) $194,910 $214,227 $192,584 $180,737 $178,384 Interest Income (excluding PAA) Reconciliation GAAP interest income $776,806 $879,487 $745,423 $622,550 $537,426 PAA cost (benefit) 7,516 (118,395) 11,367 39,899 72,700 Interest Income (excluding PAA) * $784,322 $761,092 $756,790 $662,449 $610,126 Economic Interest Expense Reconciliation GAAP interest expense $442,692 $367,421 $318,711 $268,937 $222,281 Add: Net interest component of interest rate swaps (1) (31,475) 48,160 73,957 78,564 84,252 Economic interest expense *(1) $411,217 $415,581 $392,668 $347,501 $306,533 Economic Net Interest Income (excluding PAA) Reconciliation Interest income (excluding PAA) * $784,322 $761,092 $756,790 $662,449 $610,126 Less: Economic interest expense *(1) 411,217 415,581 392,668 347,501 306,533 Economic net interest Income (excluding PAA) *(1) $373,105 $345,511 $364,122 $314,948 $303,593 * Represents a non-GAAP financial measure. (1) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps. 21

Non-GAAP Reconciliations (cont'd) Unaudited, dollars in thousands For the quarters ended, 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017 Economic Metrics (excluding PAA) Average interest earning assets $102,193,435 $101,979,042 $100,247,589 $89,253,094 $83,427,268 Interest income (excluding PAA) * $784,322 $761,092 $756,790 $662,449 $610,126 Average yield on interest earning assets (excluding PAA) * 3.07% 2.99% 3.02% 2.97% 2.93% Average interest bearing liabilities $87,103,807 $87,376,452 $85,992,215 $76,382,315 $70,486,779 Economic interest expense * 411,217 415,581 392,668 347,501 306,533 Average cost of interest bearing liabilities(1) 1.89% 1.90% 1.83% 1.82% 1.74% Economic net interest income (excluding PAA)*(1) $373,105 $345,511 $364,122 $314,948 $303,593 Net interest spread (excluding PAA) * 1.18% 1.09% 1.19% 1.15% 1.19% Interest income (excluding PAA) * $784,322 $761,092 $756,790 $662,449 $610,126 TBA dollar roll income 62,491 88,353 89,479 94,326 81,051 Interest expense (442,692) (367,421) (318,711) (268,937) (222,281) Net interest component of interest rate swaps 31,475 (48,160) (82,271) (88,211) (96,470) Subtotal $435,596 $433,864 $445,287 $399,627 $372,426 Average interest earning assets $102,193,435 $101,979,042 $100,247,589 $89,253,094 $83,427,268 Average TBA contract balances 9,407,819 12,050,341 17,509,691 19,291,834 14,206,869 Subtotal $111,601,254 $114,029,383 $117,757,280 $108,544,928 $97,634,137 Net interest margin (excluding PAA) * 1.56% 1.52% 1.51% 1.47% 1.53% * Represents a non-GAAP financial measure. (1) Includes GAAP interest expense and the net interest component of interest rate swaps. Prior to the quarter ended March 31, 2018, this metric included the net interest component of interest rate swaps used to hedge cost of funds. Beginning with the quarter ended March 31, 2018, as a result of changes to the Company’s hedging portfolio, this metric reflects the net interest component of all interest rate swaps. 22