Annaly Capital Management, Inc. Reports 3rd Quarter 2006 Core EPS of $0.16; Mid-Quarter Capital Raise Fully Invested by Quarter-End.

NEW YORK -- Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings for the quarter ended September 30, 2006 of $34.9 million or $0.16 per average share available to common shareholders, as compared to Core Earnings of $21.2 million or $0.14 per average share available to common shareholders for the quarter ended September 30, 2005 and Core Earnings of $31.3 million or $0.16 per average share available to common shareholders for the quarter ended June 30, 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 September 30, 2006 was $42.9 million or $0.21 basic net income per average share available to common shareholders, as compared to net income of $21.2 million or $0.14 basic net income per average share available to common shareholders for the quarter ended September 30, 2005 and 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.

During the third quarter $484 million of Mortgage-Backed Securities were sold, resulting in a realized loss of $446,000. In addition, the Company had an $8.4 million gain on the termination of interest rate swaps with a notional value of $895 million.

Common dividends declared for the quarter ended September 30, 2006 were $0.14 per share, as compared to $0.13 per share for the quarter ended September 30, 2005 and $0.13 per share for the quarter ended June 30, 2006. The annualized dividend yield on common stock for the quarter ended September 30, 2006, based on the September 30, 2006 closing price of $13.14, was 4.26%. On a Core Earnings basis, the Company provided an annualized return on average equity of 6.29% for the quarter ended September 30, 2006, as compared to 5.20% for the quarter ended September 30, 2005 and 7.63% for the quarter ended June 30, 2006. On a GAAP basis, the Company provided an annualized return on average equity of 7.72% for the quarter ended September 30, 2006, as compared to 5.20% for the quarter ended September 30, 2005, and 2.09% for the quarter ended June 30, 2006.

During the third quarter, the Company completed a secondary offering of common stock. The net proceeds from the offering, including the exercise of the underwriters' over-allotment option, were approximately $476.7 million, before offering expenses.

Michael A.J. Farrell, Chairman, Chief Executive Officer and President of Annaly, commented on the quarter's results. "The Federal Reserve has been on hold since the June 28/29 FOMC meeting. As a result, the front of the yield curve has been relatively range-bound. For our portfolio, this has meant that our cost of funds has leveled out, and pressure on book value has eased. We expect that the market will remain in a relatively tight trading range until incoming economic data offer clear direction as to the Federal Reserve's next policy bias."

For the quarter ended September 30, 2006, the annualized yield on average earning assets was 5.44% and the annualized cost of funds on the average repurchase balance was 5.12%, which equates to an interest rate spread of 0.32%. This is an 8 basis point increase over the 0.24% annualized interest rate spread for the quarter ended September 30, 2005 and a 2 basis point decrease over the 0.34% annualized interest rate spread for the quarter ended June 30, 2006. For the quarter ended September 30, 2005, the annualized yield on average earning assets was 3.75% and the annualized cost of funds on the average repurchase balance was 3.51%. 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%. At September 30, 2006, the weighted average yield on assets was 5.58% and the cost of funds was 5.12%, which equates to an interest rate spread of 46 basis points. Leverage at September 30, 2006 was 9.6:1, in comparison to 10.9:1 at September 30, 2005 and 11.5:1 at June 30, 2006.

Fixed rate securities comprised 71% of the Company's portfolio at September 30, 2006. The balance of the portfolio was comprised of 20% adjustable rate mortgages and 9% LIBOR floating rate collateralized mortgage obligations. The Company has continued to avoid the introduction of credit risk into its portfolio. As of September 30, 2006, substantially all of the assets in the Company's portfolio were FNMA, GNMA and FHLMC mortgage-backed securities, which carry an actual or implied "AAA" rating. During the third quarter of 2006, the Company entered into additional interest rate swap transactions, pursuant to which the Company agrees to pay a fixed interest rate and to receive a variable interest rate. The Company's swaps are designated as cash flow hedges against the benchmark interest rate risk associated with the Company's borrowings. The purpose

of the swaps is to mitigate the risk of rising interest rates that affect the Company's cost of funds. Since the Company will be receiving a floating rate on the notional amount of the swaps, the effect of the swaps will be to enhance the earnings potential of a portion of the fixed rate assets in the portfolio in a rising rate environment.

"We were able to fully leverage and invest the proceeds of our capital raise by the end of the quarter," said Wellington Denahan-Norris, Annaly's Vice Chairman, Chief Investment Officer and Chief Operating Officer. "Giving effect to the swaps, at September 30, 2006 our portfolio of short duration assets was effectively comprised of 39% fixed-rate, 20% adjustable-rate and 41% floating-rate exposure, which is consistent with the portfolio composition in our barbell strategy."

The following table summarizes portfolio information for the Company:

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The Constant Prepayment Rate was 16% during the third quarter of 2006, as compared to 28% during the third quarter of 2005, and 19% during the second quarter of 2006. The weighted average cost basis was 100.5 at September 30, 2006. The net amortization of premiums and accretion of discounts on investment securities for the quarters ended September 30, 2006, September 30, 2005 and June 30, 2006 was $14.9 million, $43.7 million, and $17.9 million, respectively. The total net premium remaining unamortized at September 30, 2006, September 30, 2005 and June 30, 2006 was $139.7 million, $376.0 million, and $161.7 million, respectively.

General and administrative expenses as a percentage of average assets were 0.18%, 0.13%, and 0.18% for the quarters ended September 30, 2006, September 30, 2005, and June 30, 2006, respectively. At September 30, 2006, September 30, 2005, and June 30, 2006 the Company had a common stock book value per share of $11.26, $11.18 and $9.48, respectively.

At September 30, 2006, FIDAC, Annaly's wholly-owned registered investment advisor, had under management approximately $2.6 billion in net assets and $14.6 billion in gross assets, as compared to $2.9 billion in net assets and $26.8 billion in gross assets at September 30, 2005 and $2.6 billion in net assets and $14.1 billion in gross assets at June 30, 2006. For the quarter ended September 30, 2006, FIDAC earned investment advisory and service fees, net of fees paid to distributors, of $4.3 million, as compared to $8.5 million for the quarter ended September 30, 2005 and $4.5 million for the quarter ended June 30, 2006. FIDAC, organized as a taxable REIT subsidiary of Annaly, generally receives net investment advisory fees of approximately 10 to 20 basis points of the gross assets it manages, assists in managing or supervises.

"The change in bond market sentiment has been positive for FIDAC," said Mr. Farrell. "Our team is committed to growing our asset management business from here, as we endeavor to grow our fee income stream to complement the spread income earned at the Annaly level."

Annaly manages assets on behalf of institutional and individual investors worldwide through Annaly and through the funds managed by its wholly-owned registered investment advisor, FIDAC. The Company's principal business objective is to generate net income for distribution to investors from the spread between the interest income on its mortgage-backed securities and the cost of borrowing to finance their acquisition and from dividends Annaly receives from FIDAC, which earns investment advisory fee income. The Company, a Maryland corporation that has elected to be taxed as a real estate investment trust ("REIT"), currently has 204,845,591 shares of common stock outstanding.

The Company will hold the third quarter 2006 earnings conference call on November 2, 2006 at 10:00 a.m. EST. The number to call is 1-866-770-7129 for domestic calls and 617-213-8067 for international calls and the pass code is 32765281. The re-play number is 1-888-286-8010 for domestic calls and 617-801-6888 for international calls and the pass code is 31915202. The replay is available for 48 hours after the earnings call. There will be a web cast of the call on www.annaly.com. If you would like to be added to the e-mail distribution list, please visit www.annaly.com, click on E-Mail alerts, enter your e-mail address where indicated and click the Subscribe button.

This news release and our public documents to which we refer contain or incorporate by reference certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements which are based on various assumptions (some of which are beyond our control) may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as "may," "will," "believe," "expect," "anticipate," "continue," or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, changes in interest rates, changes in yield curve, changes in prepayment rates, the availability of mortgage-backed securities for purchase, the availability of financing and, if available, the terms of any financing, changes in the market value of our assets, changes in business conditions and the general economy, and risks associated with the investment advisory business of FIDAC, including the removal by FIDAC's clients of assets FIDAC manages, FIDAC's regulatory requirements, and competition in the investment advisory business, changes in government regulations affecting our business, and our ability to maintain our qualification as a REIT for federal income tax purposes. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005 and all subsequent Quarterly Reports on Form 10-Q. We do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

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