CMBX balances, provide management with additional measures of our profitability that management relies upon in monitoring the performance of the business. Disclosure of these measures, which are presented below, provides investors with additional detail regarding how management evaluates our performance. Net Interest Spread (excluding PAA) Average Interest Earning Assets (1) Interest Income (excluding PAA) * Average Yield on Interest Earning Assets (excluding PAA) * Average Interest Bearing Liabilities Economic Interest Expense * (2) Average Economic Cost of Interest Bearing Liabilities * (2) Economic Net Interest Income (excluding PAA) * Net Interest Spread (excluding PAA) * For the years ended (dollars in thousands) December 31, 2023 $86,305,249 $3,733,235 4.33% $74,962,858 $2,257,912 3.01% $1,475,323 1.32 % December 31, 2022 $76,429,267 $2,418,300 3.16% $64,512,269 $943,574 1.46% $1,474,726 1.70 % December 31, 2021 $76,079,589 $2,040,194 2.68% $66,607,057 $525,385 0.79% $1,514,809 1.89 % * Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information. (1) Based on amortized cost. (2) Average interest bearing liabilities reflects the average balances during the period. Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Net Interest Margin (excluding PAA) Interest Income (excluding PAA) * TBA Dollar Roll and CMBX Coupon Income (1) Economic Interest Expense * Subtotal Average Interest Earnings Assets Average TBA Contract and CMBX Balances Subtotal Net Interest Margin (excluding PAA) * For the years ended (dollars in thousands) December 31, 2023 $3,733,235 20,621 (2,257,912) $1,495,944 $86,305,249 6,010,685 $92,315,934 1.62% December 31, 2022 $2,418,300 431,475 (943,574) $1,906,201 $76,429,267 17,533,362 $93,962,629 2.03% December 31, 2021 $2,040,194 445,768 (525,385) $1,960,577 $76,079,589 21,131,344 $97,210,933 2.02% * Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information. (1) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives. CMBX coupon income totaled $1.5 million, $4.4 million and $5.2 million for the years ended December 31, 2023, 2022 and 2021, respectively. Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities Typically, our largest expense is the cost of interest bearing liabilities and the net interest component of interest rate swaps. The following table shows our average interest bearing liabilities and average economic cost of interest bearing liabilities as compared to average one-month and average six-month SOFR for the periods presented. Average Economic Cost of Interest Bearing Liabilities Average Interest Bearing Liabilities Interest Bearing Liabilities at Period End Economic Interest Expense * (1) Average Economic Cost of Interest Bearing Liabilities * Average OneMonth Term SOFR Average SixMonth Term SOFR Average OneMonth Term SOFR Relative to Average SixMonth Term SOFR Average Economic Cost of Interest Bearing Liabilities Relative to Average OneMonth Term SOFR Average Economic Cost of Interest Bearing Liabilities Relative to Average Six-Month Term SOFR For the years ended (dollars in thousands) December 31, 2023 $ 74,962,858 $ 77,038,467 $ 2,257,912 3.01% 5.07% 5.22% (0.15%) (2.06%) (2.21%) December 31, 2022 $ 64,512,269 $ 68,307,606 $ 943,574 1.46% 1.85% 2.52% (0.67%) (0.39%) (1.06%) December 31, 2021 $ 66,607,057 $ 61,877,597 $ 525,385 0.79% 0.04% 0.06% (0.02%) 0.75% 0.73% * Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information. (1) Economic interest expense is comprised of GAAP interest expense and the net interest component of interest rate swaps. ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis 59
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