Annaly Capital Management, Inc. Reports 2nd Quarter Core EPS of $0.28; Earnings Continue to Improve Through Volatile Environment

Business Wire, July 30, 2007

NEW YORK -- Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings for the quarter ended June 30, 2007 of $79.1 million or $0.28 per average share available to common shareholders as compared to Core Earnings of $31.3 million or $0.16 per average share available to common shareholders for the quarter ended June 30, 2006 and Core Earnings of $61.7 million or $0.26 per average share available to common shareholders for the quarter ended March 31, 2007. "Core Earnings" represents a non-GAAP measure and is defined as net income (loss) excluding impairment losses and gains or losses on sales of securities and termination of interest rate swaps. On a GAAP basis, the net income for the quarter ended June 30, 2007 was $85.7 million or $0.30 basic net income per average share available to common shareholders, as compared to a net income of $8.6 million or $0.02 basic net income per average share available to common shareholders for the quarter ended June 30, 2006 and net income of $67.4 million or $0.29 basic net income per average share available to common shareholders for the quarter ended March 31, 2007.

During the quarter ended June 30, 2007, the Company sold $1.4 billion of Mortgage-Backed Securities, resulting in a realized gain of $7.3 million. During the quarter ended June 30, 2006, the Company sold $852 million of Mortgage-Backed Securities, resulting in a realized loss of $1.2 million. During the quarter ended March 31, 2007, the Company sold $1.2 billion of Mortgage-Backed Securities, resulting in a realized gain of $6.1 million and terminated interest rate swaps with a notional value of $300 million, resulting in a realized gain of $67,000. In addition, during the quarter, the Company had a loss on other-than-temporarily impaired securities of $698,000 as compared to other-than-temporary impairments of $20.1 million and $491,000 for the quarters ended June 30, 2006 and March 31, 2007 respectively.

Common dividends declared for the quarter ended June 30, 2007 were $0.24 per share, as compared to $0.13 per share for the quarter ended June 30, 2006 and $0.20 per share for the quarter ended March 31, 2007. The annualized dividend yield on the Company's common stock for the quarter ended June 30, 2007, based on the June 29, 2007 closing price of $14.42, was 6.66%. On a Core Earnings basis, the Company provided an annualized return on average equity of 9.68% for the quarter ended June 30, 2007, as compared to 7.63% for the quarter ended June 30, 2006 and 8.13% for the quarter ended March 31, 2007. On a GAAP basis, the Company provided an annualized return on average equity of 10.49% for the quarter ended June 30, 2007, as compared to 2.09% for the quarter ended June 30, 2006, and 8.88% for the quarter ended March 31, 2007.

As previously announced, subsequent to quarter-end the Company completed a public offering of 54,050,000 shares of common stock. The estimated net proceeds of the offering, including the exercise of the underwriters' over-allotment option, were approximately $720.7 million, following offering expenses.

Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly, commented on the quarter's results. "The financial markets remain volatile, with the steadfastness of the Federal Reserve affecting expectations for future monetary policy and the level and shape of the yield curve. The bond market sell-off in the second quarter has begun to reverse itself. The economic backdrop is equally volatile, with the continued weakness in housing and the related deterioration in mortgage credit beginning to ripple through to broader economic performance. In this environment, Annaly is poised to benefit from our focus on high credit quality Agency mortgage-backed securities and our ability to access the capital markets. Our second quarter results--including the sixth consecutive increase in our quarterly dividend--demonstrate the continued improvement in portfolio performance through this challenging part of the business cycle, and we believe our recent capital raise will continue this trend."

For the quarter ended June 30, 2007, the annualized yield on average earning assets was 5.73% and the annualized cost of funds on the average repurchase balance was 5.13%, which equates to an interest rate spread of 0.60%. This is a 26 basis point increase over the 0.34% annualized interest rate spread for the quarter ended June 30, 2006 and a 2 basis point increase over the 0.58% annualized interest rate spread for the quarter ended March 31, 2007. 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%. For the quarter ended March 31, 2007, the annualized yield on average earning assets was 5.68% and the annualized cost of funds on the average repurchase balance was 5.10%. At June 30, 2007, the weighted average yield on assets was 5.71% and the cost of funds was 5.10%, which equates to an interest rate spread of 0.61%. Leverage at June 30, 2007 was 11.2:1, in comparison to 11.5:1 at June 30, 2006 and 9.8:1 at March 31, 2007.