Annaly Capital Management, Inc. Reports 2nd Quarter 2006 Core EPS of $0.16; Successful Deployment of New Capital Aids Performance

Business Wire, August 2, 2006

NEW YORK -- Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings for the quarter ended June 30, 2006 of $31.3 million or $0.16 per average share available to common shareholders, as compared to Core Earnings of $47.0 million or $0.36 per average share available to common shareholders for the quarter ended June 30, 2005 and Core Earnings of $23.9 million or $0.16 per average share available to common shareholders for the quarter ended March 31, 2006. "Core Earnings" is defined as net (loss) income excluding impairment losses and gains or losses on sales of securities. On a GAAP basis, the net income for the quarter ended June 30, 2006 was $8.6 million or $0.02 basic net income per average share available to common shareholders, as compared to net income of $47.0 million or $0.36 basic net income per average share available to common shareholders for the quarter ended June 30, 2005 and a net loss of $10.9 million or $0.12 basic net loss per average share related to common shareholders for the quarter ended March 31, 2006.

In a separate release issued today, the Board of Directors of Annaly announced that the Company's name has been changed to Annaly Capital Management, Inc.

During the second quarter $852 million face amount of securities were sold, resulting in a realized loss of $1.2 million, or $0.01 per share. In addition, the Company had a loss on other-than-temporarily impaired securities as of June 30, 2006 of $20.1 million, or $0.13 per share. Of the $20.1 million, $15.7 million resulted from further declines in the value of securities classified as other-than-temporarily impaired at March 31, 2006 and $4.4 million from losses on additional securities that the Company determined to be other-than-temporarily impaired at June 30, 2006. The non-cash loss on the securities deemed other-than-temporarily impaired that remain in the Company's portfolio was reflected in the income statement based on the fair value of the securities on June 30, 2006, and recognition of such impairment charges will not reduce the taxable income of the Company.

Common dividends declared for the quarter ended June 30, 2006 were $0.13 per share, as compared to $0.36 per share for the quarter ended June 30, 2005 and $0.11 per share for the quarter ended March 31, 2006. The annualized dividend yield on common stock for the quarter ended June 30, 2006, based on the June 30, 2006 closing price of $12.81, was 4.06%. On a Core Earnings basis, the Company provided an annualized return on average equity of 7.63% for the quarter ended June 30, 2006, as compared to 8.03% for the quarter ended June 30, 2005 and 6.52% for the quarter ended March 31, 2006. On a GAAP basis, the Company provided an annualized return on average equity of 2.09% for the quarter ended June 30, 2006, as compared to 11.36% for the quarter ended June 30, 2005, and (2.98%) for the quarter ended March 31, 2006.

During the second quarter, the Company completed public offerings of common stock and 6% Series B Cumulative Convertible Preferred Stock. The net proceeds of the offerings, including the exercise of the underwriters' over-allotment option, were approximately $549 million, before offering expenses.

Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly, commented on the quarter's results. "The two additional 25 basis point increases to the Fed Funds rate during the second quarter brought the total to 425 basis points over the 17 meetings since June 30, 2004. Market conditions, therefore, continued to be a challenge for strategies such as ours as the protracted sell-off in the front end of the yield curve pressured the value of our assets and raised our cost of funds relative to the yield on our assets. Nevertheless, our management team has acted aggressively to manage through this period, and our returns improved over the first quarter. The key to raising our dividend this quarter while the Fed tightens has been our ability to take advantage of the relatively superior values that have become available in our asset class of short duration Agency mortgage-backed securities. Through reinvesting amortized principal, repositioning of portfolio securities and deploying the new capital raised in April, we have improved our return profile by raising our weighted average coupon, lowering our weighted average dollar cost and introducing more floating rate exposure. Our team remains focused on executing our barbell strategy, avoiding credit risk and providing transparency as we manage for long-term performance through challenging markets."

For the quarter ended June 30, 2006, the annualized yield on average earning assets was 5.17% and the annualized cost of funds on the average repurchase balance was 4.83%, which equates to an interest rate spread of 0.34%. This is a 26 basis point decrease over the 0.60% annualized interest rate spread for the quarter ended June 30, 2005 and a 2 basis point increase over 0.32% annualized interest rate spread for the quarter ended March 31, 2006. For the quarter ended June 30, 2005, the annualized yield on average earning assets was 3.63% and the annualized cost of funds on the average repurchase balance was 3.03%. For the quarter ended March 31, 2006, the annualized yield on average earning assets was 4.70% and the annualized cost of funds on the average repurchase balance was 4.38%. At June 30, 2006, the weighted average yield on assets was 5.42% and the cost of funds was 5.01%, which equates to an interest rate spread of 41 basis points. Leverage at June 30, 2006 was 11.5:1, in comparison to 10.1:1 at June 30, 2005 and 10.2:1 at March 31, 2006.