What changed in this filing

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Item 1. Business

2026-02-23 compared with 2025-02-21 · 28 added, 20 removed, 170 unchanged (22% of the section changed)

8 unchanged sentences

Government agency, such as the Government National Mortgage Association ("Ginnie Mae").

We may also invest in other assets related to the housing, mortgage or real estate markets that are not guaranteed by a GSE or U.S.

Government agency.

We operate to qualify to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code").

11 unchanged sentences

• maintain an investment portfolio consisting predominantly of Agency RMBS;

• capitalize on discrepancies in the relative valuations in the Agency and non-Agency securities market;

• manage financing, interest rate, prepayment, extension and credit risks;

7 unchanged sentences

The $9 trillion Agency market plays a vital role in providing liquidity to homeowners and prospective homeowners to purchase or refinance homes.

Our team of investment professionals has decades of experience investing in Agency RMBS.

We may also invest in Agency multifamily mortgage-backed securities ("Agency multifamily MBS") that are similarly guaranteed by a GSE and in other assets related to the housing, mortgage, or real estate markets that are not guaranteed by a GSE or a U.S.

Government agency (collectively referred to as "non-Agency MBS").

Our team of investment professionals has decades of experience investing in Agency RMBS and our other targeted investments.

Our asset selection process involves assessing relative risk-return profiles against the backdrop of broader market conditions.

4 unchanged sentences

Monthly payments of principal and interest made by the individual borrowers on the mortgage loans underlying the pools are in effect "passed through" to the security holders, after deducting guarantee and servicer fees.

In general, mortgage pass-through certificates distribute cash flows from the underlying collateral on a pro rata basis among the security holders.

Security holders

also receive guarantor advances of principal and interest for delinquent loans in the mortgage pools.

We may also invest in Agency collateralized mortgage obligations ("CMOs"), which are structured instruments backed by a pool of Agency mortgage-backed securities.

In general, mortgage pass-through certificates

distribute cash flows from the underlying collateral on a pro rata basis among the security holders.

Security holders also receive guarantor advances of principal and interest for delinquent loans in the mortgage pools.

We may also invest in Agency collateralized mortgage obligations ("CMOs"), which are structured instruments backed by a pool of Agency RMBS.

• To-Be-Announced Forward Contracts ("TBAs").

1 unchanged sentence

TBA contracts specify the coupon rate, issuer, term and face value of the bonds to be delivered, with the actual bonds to be delivered only identified shortly before the TBA settlement date.

• Agency Multifamily Mortgage-Backed Securities.

Agency multifamily MBS consist of securities backed by one or more mortgage loans secured by one or more multifamily properties that benefit from a GSE guarantee of timely payment of principal and interest.

Our investments in Agency multifamily securities primarily consist of securities issued under Fannie Mae's Delegated Underwriting and Servicing ("DUS") program, which are generally backed by a single mortgage loan secured by a single property and include lender risk-sharing.

Non-Agency Securities

20 unchanged sentences

The amount of leverage that we utilize depends on market conditions, our assessment of risk and returns and our ability to borrow sufficient funds on favorable terms to acquire mortgage securities.

We generally expect our leverage to be within six to twelve times the amount of our tangible stockholders' equity, but under certain conditions we may operate at leverage levels outside of this range.

We generally expect our leverage to be within six to ten times the amount of our tangible stockholders' equity, but under certain conditions we may operate at leverage levels outside of this range.

We diversify our funding exposure by entering into repurchase agreements with multiple counterparties.

1 unchanged sentence

BES is a member of the Fixed Income Clearing Corporation ("FICC") and has direct access to bilateral and tri-party repo funding as a Financial Industry Regulatory Authority ("FINRA") member broker-dealer.

As an eligible institution, BES also raises repo funding through the General Collateral Finance ("GCF") Repo service offered by the FICC, with the FICC acting as the central counterparty.

As an eligible institution, BES also raises repo funding through the General Collateral Finance ("GCF") Repo service offered by the FICC, with the FICC acting as the central

counterparty.

Thus, through BES, we have greater depth and diversity of funding than solely through traditional bilateral repo, while also lowering our funding cost, reducing our collateral requirements and limiting our counterparty exposure.

10 unchanged sentences

Our investment strategies are based on our assessment of these risks, our ability to hedge a portion of these risks and our intention to qualify as a REIT.

We employ a variety of investment and risk management strategies to reduce our exposure to market risks, and we continuously monitor and adjust our hedge portfolio, the net duration (or interest rate sensitivity) of our investment portfolio, and leverage in order to optimize returns over the longer term as market conditions warrant.

We employ a variety of investment and risk management strategies to reduce our exposure to market risks, and we continuously monitor and adjust our hedge portfolio, the net duration (or interest rate sensitivity) of our investment portfolio, and leverage in order to optimize long-term risk-adjusted returns as market conditions warrant.

Our hedging strategies are generally not designed to protect our net book value from spread risk, which as a levered investor in mortgage-backed securities is the inherent risk we take that the spread between the market yield on our investments and the benchmark interest rates linked to our interest rate hedges fluctuates.

19 unchanged sentences

Qualification and taxation as a REIT depend on our ability to continually meet requirements imposed upon REITs by the Internal Revenue Code, including satisfying certain organizational requirements, an annual distribution requirement and quarterly asset and annual income tests.

The REIT asset and income tests are significant to our operations as they restrict the extent to which we can invest in certain types of securities and conduct certain hedging activities within the REIT.

The REIT asset and income tests are significant to our operations as they restrict the extent to which we can invest in certain types of securities

and conduct certain hedging activities within the REIT.

Consequently, we may be required to limit these activities or conduct them through a taxable REIT subsidiary ("TRS").

5 unchanged sentences

Interest income from obligations secured by mortgages on real property (such as Agency and non-Agency MBS) generally constitutes qualifying income for purposes of the 75% gross income test described above.

There is no direct authority with respect to the qualification of income or gains from TBAs for the 75% gross income test;

however, we treat these as qualifying income for this purpose based on an opinion of legal counsel.

There is no direct authority regarding the qualification of income or gains from TBAs for purposes of the 75% gross income test;

however, we treat such income and gains as qualifying income for this purpose based on an opinion of legal counsel.

The treatment of interest income from other real estate securities depends on their specific tax structure.

Income and gains from instruments that we use to hedge the interest rate risk associated with our borrowings incurred, or to be incurred, to acquire real estate assets will generally be excluded from both gross income tests, provided that specified requirements are met.

At the close of each calendar quarter, we must satisfy five tests relating to the nature of our assets.

Income and gains from instruments used to hedge the interest rate risk associated with our borrowings incurred, or to be incurred, to acquire real estate assets generally will be excluded from both gross income tests, provided that specified requirements are satisfied.

At the close of each calendar quarter, we must satisfy two sets of tests relating to the nature of our assets.

Asset qualification test:

At least 75% of the value of our total assets must be represented by some combination of "real estate assets," cash, cash items, U.S.

Government securities, and, under some circumstances, temporary investments in stock or debt instruments purchased with new capital.

For this purpose, mortgage-backed securities and mortgage loans are generally treated as "real estate assets." Assets that do not qualify for purposes of the 75% asset test are subject to the additional asset tests described below.

For this purpose, Agency mortgage-backed securities are treated as U.S.

Government securities and all other mortgage-backed securities and mortgage loans are generally treated as "real estate assets." Assets that do not qualify for purposes of the 75% asset test are subject to the additional asset diversification tests described below.

Assets diversification tests:

The value of any one issuer's securities that we own may not exceed 5% of the value of our total assets.

10 unchanged sentences

Additionally, as a self-clearing, registered broker-dealer, BES is subject to minimum net capital requirements.

Thus, our ability to access tri-party repo funding through the FICC's GCF Repo service, which represents a significant portion of our total borrowing capacity, is reliant on BES' ability to continually meet FINRA and FICC regulatory and membership requirements.

Thus, our ability to access tri-party repo funding through the

FICC's GCF Repo service, which represents a significant portion of our total borrowing capacity, is reliant on BES's ability to continually meet FINRA and FICC regulatory and membership requirements.

Human Capital Management

4 unchanged sentences

Our competitive and comprehensive benefits package is carefully designed to attract and retain talented personnel.

We believe our low voluntary employee turnover, which averaged less than 1 employee per year the past three years, and favorable employee survey results are a testament to the success of our human capital management initiatives.

We believe our zero employee turnover during the past three years and favorable employee survey results are a testament to the success of our human capital management initiatives.

Employee Communications and Engagement

17 unchanged sentences

These include our professional certification and continuing education policy, reimbursement for any supervisor-approved courses, one-on-one coaching to enhance skills in a number of areas of personal and professional development, and memberships to organizations that provide employees with access to educational webinars.

We also conduct periodic "Lunch and Learn" seminars and offer a formal mentoring program for employees to receive direct one-on-one career guidance and cross-functional experience across various operations.

We offer a formal mentoring program for employees to receive direct one-on-one career guidance and cross-functional experience across various operations.

Our employees also have the opportunity to lead and/or participate in employee-led initiatives, such as our employee-led Volunteerism & Community Outreach Committee, which is responsible for implementing and leading new volunteer opportunities, as well as identifying ways the Company can have a positive impact on the community.

24 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business