Encumbered Assets Unencumbered Assets Total Financial assets (dollars in thousands) Cash and cash equivalents $ 1,136,298 $ 275,850 $ 1,412,148 Investments, at carrying value (1) Agency mortgage-backed securities 62,707,010 3,553,285 66,260,295 Credit risk transfer securities 918,662 55,397 974,059 Non-agency mortgage-backed securities 1,554,090 554,184 2,108,274 Commercial mortgage-backed securities 220,486 1,958 222,444 Residential mortgage loans (2) 15,329,539 331,167 15,660,706 MSR 1,781,279 340,917 2,122,196 Other assets (3) — 56,165 56,165 Total financial assets $ 83,647,364 $ 5,168,923 $ 88,816,287 (1) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported on the Consolidated Statements of Financial Condition. (2) Includes assets transferred or pledged to securitization vehicles. (3) Includes commercial real estate investments and interests in certain joint ventures. We maintain liquid assets in order to satisfy our current and future obligations in normal and stressed operating environments. These are held as the primary means of liquidity risk mitigation. The composition of our liquid assets is also considered and is subject to certain parameters. The composition is monitored for concentration risk, including in respect of our deposits of our cash and cash equivalents, and asset type. We believe the assets we consider liquid can be readily converted into cash, through liquidation or by being used as collateral in financing arrangements (including as additional collateral to support existing financial arrangements). Our balance sheet also generates liquidity on an on-going basis through mortgage principal and interest repayments and net earnings held prior to payment of dividends. The following table presents our liquid assets as a percentage of total assets at December 31, 2023: Carrying Value (1) Liquid assets (dollars in thousands) Cash and cash equivalents $ 1,412,148 Residential Securities (2) 69,342,531 Commercial mortgage-backed securities 222,444 Residential mortgage loans (3) 2,353,084 Total liquid assets $ 73,330,207 Percentage of liquid assets to carrying amount of encumbered and unencumbered financial assets (4) 97.14 % (1) Carrying value approximates the market value of assets. The assets listed in this table include $67.5 billion of assets that have been pledged as collateral against existing liabilities at December 31, 2023. Please refer to the Encumbered and Unencumbered Assets table for related information. (2) The amounts reflected in the table above are on a settlement date basis and may differ from the total positions reported on the Consolidated Statements of Financial Condition. (3) Excludes securitized residential mortgage loans transferred or pledged to consolidated VIEs carried at fair value of $13.3 billion. (4) Denominator is computed based on the carrying amount of encumbered and unencumbered financial assets, excluding assets transferred or pledged to securitization vehicles, of $13.3 billion. Maturity Profile We consider the profile of our assets, liabilities and derivatives when managing both liquidity risk as well as investment/market risk employing a measurement of both the maturity gap and interest rate sensitivity gap. We determine the amount of liquid assets that are required to be held by monitoring several liquidity metrics. We utilize several modeling techniques to analyze our current and potential obligations including the expected cash flows from our assets, liabilities and derivatives. The following table illustrates the expected final maturities and cash flows of our assets, liabilities and derivatives. The table is based on a static portfolio and assumes no reinvestment of asset cash flows and no future liabilities are entered into. In assessing the maturity of our assets, liabilities and off-balance sheet obligations, we use the stated maturities, or our prepayment expectations for assets and liabilities that exhibit prepayment characteristics. Cash and cash equivalents are included in the ‘Less than 3 Months’ maturity bucket, as they are typically held for a short period of time. With respect to each maturity bucket, our maturity gap is considered negative when the amount of maturing liabilities exceeds the amount of maturing assets. A negative gap increases our liquidity risk as we must enter into future liabilities. Our interest rate sensitivity gap is the difference between interest earning assets and interest bearing liabilities maturing or repricing within a given time period. Unlike the calculation of maturity gap, interest rate sensitivity gap includes the effect of our ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES Item 7. Management’s Discussion and Analysis 72
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