December 31, 2022 Agency Residential Credit MSR Corporate & Other Consolidated (dollars in thousands) Interest income $ 2,146,583 $ 550,449 $ — $ 81,855 $ 2,778,887 Interest expense 936,063 344,669 6,202 22,801 1,309,735 Net interest income 1,210,520 205,780 (6,202) 59,054 1,469,152 Servicing and related income — — 246,926 — 246,926 Servicing and related expense — — 25,145 — 25,145 Net servicing income — — 221,781 — 221,781 Other income (loss) 480,383 (147,908) (47,510) (41,178) 243,787 Less: Total general and administrative expenses 50,817 47,005 29,784 35,123 162,729 Income (loss) before income taxes 1,640,086 10,867 138,285 (17,247) 1,771,991 Income taxes (792) (10,485) 57,055 (207) 45,571 Net income (loss) 1,640,878 21,352 81,230 (17,040) 1,726,420 Less: Net income (loss) attributable to noncontrolling interest — 1,088 — 7 1,095 Net income (loss) attributable to Annaly 1,640,878 20,264 81,230 (17,047) 1,725,325 Dividends on preferred stock — — — 110,623 110,623 Net income (loss) available (related) to common stockholders 1,640,878 20,264 81,230 (127,670) 1,614,702 Unrealized gains (losses) on available-for-sale securities (8,204,542) — — — (8,204,542) Reclassification adjustment for net (gains) losses included in net income (loss) 3,537,236 — — — 3,537,236 Other comprehensive income (loss) (4,667,306) — — — (4,667,306) Comprehensive income (loss) (3,026,428) 21,352 81,230 (17,040) (2,940,886) Comprehensive income (loss) attributable to noncontrolling interests — 1,088 — 7 1,095 Comprehensive income (loss) attributable to Annaly $ (3,026,428) $ 20,264 $ 81,230 $ (17,047) $ (2,941,981) Noncash investing and financing activities: Receivable for unsettled trades 572,089 — 3,002 — 575,091 Payable for unsettled trades 1,108,386 38 49,422 — 1,157,846 Net change in unrealized gains (losses) on available-for-sale securities, net of reclassification adjustment (4,667,306) — — — (4,667,306) Dividends declared, not yet paid — — — 412,113 412,113 Total assets Total assets $ 65,080,130 $ 14,152,927 $ 1,931,176 $ 686,479 $ 81,850,712 21. RISK MANAGEMENT The primary risks to the Company are liquidity and funding risk, investment/market risk, credit risk and operational risk. Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond the Company’s control. Changes in the general level of interest rates can affect net interest income, which is the difference between the interest income earned on interest earning assets and the interest expense incurred in connection with the interest bearing liabilities, by affecting the spread between the interest earning assets and interest bearing liabilities. Changes in the level of interest rates can also affect the value of the interest earning assets and the Company’s ability to realize gains from the sale of these assets. A decline in the value of the interest earning assets pledged as collateral for borrowings under repurchase agreements and derivative contracts could result in the counterparties demanding additional collateral or liquidating some of the existing collateral to reduce borrowing levels. The Company may seek to mitigate the potential financial impact by entering into interest rate agreements such as interest rate swaps, interest rate swaptions and other hedges. Weakness in the mortgage market, the shape of the yield curve, changes in the expectations for the volatility of future interest rates and deterioration of financial conditions in general may adversely affect the performance and market value of the Company’s investments. This could negatively impact the Company’s book value. Furthermore, if many of the Company’s lenders are unwilling or unable to provide additional financing, the Company could be forced to sell its investments at an inopportune time when prices are depressed. The Company has established policies and procedures for mitigating risks, including conducting scenario and sensitivity analyses and utilizing a range of hedging strategies. ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Financial Statements F-35
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