What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-23 compared with 2025-02-21 · 150 added, 124 removed, 598 unchanged (31% of the section changed)

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Government agency, such as 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.

We may also invest in 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 U.S.

Government agency.

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Trends and Recent Market Impacts

In 2024, an increasingly favorable market environment for Agency RMBS investors emerged as the Fed pivoted from its restrictive monetary policy and began lowering short-term rates toward a neutral level.

Declining inflationary pressures and the Fed’s more accommodative monetary policy helped reduce interest rate volatility and steepen the yield curve.

These dynamics provided an improved investment backdrop that enabled AGNC to generate a positive economic return of 13.2% in 2024, comprised of our monthly dividends totaling $1.44 per common share for the year and a modest decline of our tangible net book value of $0.29 per common share.

presidential election and its implications for deficit spending, fiscal policy and future Treasury issuance tempered the positive investment sentiment that existed during the first three quarters of the year.

In addition, strong economic data late in the fourth quarter extended the Fed’s anticipated easing timeline as evidenced by its December Summary of Economic Projections, which indicated fewer expected rate cuts in 2025 and 2026 than previously projected.

Looking forward, our outlook for Agency mortgage-backed securities in 2025 remains very favorable.

We anticipate that Agency RMBS spreads relative to benchmark rates will remain wide compared to historical averages and continue to trade within the well-defined range that has been established over the past several quarters.

Agency RMBS spreads to benchmark rates in the current range offer investors attractive return opportunities.

Further, longer-term interest rates have risen meaningfully, and as of year-end, the 30-year primary mortgage rate was once again near 7%.

At current rate levels, we expect the supply of Agency RMBS in 2025 to be similar to that of 2024 and reasonably well-aligned with investor demand.

Potential increases in bank demand as regulatory constraints ease could also provide incremental additional support for Agency RMBS valuations.

Together, these positive dynamics create a constructive investment backdrop for AGNC in 2025.

Notwithstanding our favorable outlook for Agency RMBS as we begin 2025, financial market and macroeconomic uncertainty remains elevated as the new administration implements sweeping changes to tariff, immigration, fiscal, and regulatory policy.

In addition, while GSE reform does not appear to be an immediate focus of the administration, it is possible that this topic could be revisited at some point during the next four years.

Favorably in our view, there also appears to be a growing consensus that any change to the structure of the GSE’s and the Agency RMBS market should be done in a way that preserves the current functionality of the conventional mortgage market, avoids disrupting the real estate market and ensures that housing affordability does not decline further.

Please refer to Item 1A.

Risk Factors for additional information regarding potential changes to the Federal conservatorships of Fannie Mae and Freddie Mac, laws or regulations affecting the relationship between the GSEs and the U.S.

Government or other housing finance reform initiatives.

Financial Highlights

AGNC earned total comprehensive income of $0.84 per diluted common share for fiscal year 2024, an increase from $0.30 per share in 2023.

Net spread and dollar roll income per diluted common share decreased to $1.88 in 2024 from $2.61 in 2023, primarily due to a narrowing of our net interest rate spread, which averaged 242 basis points in 2024, down from 306 basis points in 2023.

The reduction in our net interest spread was largely driven by higher swap costs following the expiration of lower-cost pay-fixed interest rate swaps during the year and a strategic shift toward a greater proportion of Treasury-based hedges, which are not included in our reported net interest spread or net spread income.

Additionally, we expanded our use of longer-term hedges in response to changes in monetary policy and expectations of further yield curve steepening.

As of December 31, 2024, our interest rate hedge position covered 91% of the outstanding balance of our repurchase agreements used to fund our investment portfolio ("Investment Securities Repo"), TBA position, and other debt, compared to 112% at the end of 2023.

Our duration gap, which measures the estimated difference between the interest rate sensitivity of our assets and our liabilities, inclusive of interest rate hedges, extended to 0.3 years as of December 31, 2024, from -0.5 years as of December 31, 2023, consistent with higher long-term rates and shifts in portfolio and hedge composition.

The weighted average coupon on our fixed-rate Agency RMBS and TBA securities increased to 5.02% at the end of 2024, up from 4.83% at the end of 2023.

The average projected life Constant Prepayment Rate (CPR) for the portfolio decreased to 7.7% at year-end, from 11.4% at the end of 2023.

Actual CPRs for 2024 averaged 7.5%, slightly up from 6.3% in 2023.

AGNC's average and ending "at risk" leverage for 2024 was 7.2x tangible stockholders’ equity, compared to 7.4x and 7.0x, respectively, for 2023.

We concluded 2024 with $6.1 billion in cash and unencumbered Agency RMBS, representing 66% of tangible stockholders’ equity, compared to $5.1 billion and 66% of tangible equity as of December 31, 2023.

During 2024, we raised $2.0 billion of common stock through our at-the-market offering program at a considerable premium to tangible net book value, generating meaningful book value accretion for our common stockholders.

Market Trends

Agency RMBS outperformed domestic fixed income alternatives in 2025, and this favorable asset class performance, coupled with AGNC's active portfolio management strategies, drove AGNC's best-in-class economic return for the year.

1 In 2025, the Bloomberg US Mortgage Backed Securities Index (the "Agency MBS Index"), which represents the entire Agency RMBS market, generated a total return of 8.6% for the year, its best annual performance since 2002.

Also notable, given the similar credit profile, the Agency MBS Index outperformed the Bloomberg US Treasury Index by 2.3 percentage points, or 36%.

A number of factors that materialized over the course of the year catalyzed the strong performance of Agency RMBS, including:

• The Federal Reserve (the "Fed") shifted monetary policy toward lower short-term interest rates and greater accommodation, which contributed to the positive performance of all domestic fixed income asset classes.

• Greater fiscal policy clarity and the stable supply outlook for U.S.

Treasury securities contributed to reduced interest rate volatility.

• Improved conditions in short-term funding markets, particularly late in the year, benefited Agency RMBS, as the Fed announced an expansion of its balance sheet through reserve management purchases of short-term Treasury bills, as well as other actions that improved the functionality and accessibility of its Standing Repo Program.

• The Administration articulated a framework for GSE reform that focused on reducing Agency mortgage spreads, maintaining mortgage market stability, and improving housing affordability.

Collectively, these factors—along with sizable Agency MBS purchases by the GSEs later in the year—led to lower Agency RMBS spread volatility, tighter mortgage spreads to benchmark rates, and the outperformance of Agency RMBS relative to other fixed income asset classes.

As we enter 2026, many of these favorable dynamics remain in place, and the Administration's focus on housing affordability and maintaining mortgage market stability provide a favorable backdrop for mortgage spreads.

Looking ahead, the supply and demand outlook for Agency RMBS appears well balanced.

At current interest rate levels, the net supply of new Agency RMBS in 2026 is expected to be approximately $200 billion, which, when coupled with $200 billion of anticipated runoff of the Fed's Agency RMBS holdings, yields approximately $400 billion of total net supply to be absorbed by the market in 2026, an amount comparable to the prior two years.

Offsetting this supply, demand for Agency RMBS should remain robust, assuming conditions remain generally consistent with current expectations.

GSE purchases have the potential to account for approximately half of the projected 2026 supply, and banks, money managers, foreign investors, and REITs are expected to continue to be active purchasers of Agency RMBS.

Taken together, this favorable fundamental and technical backdrop for Agency RMBS is supportive of our positive outlook.

Portfolio and Summary Financial Highlights

For 2025, AGNC generated total comprehensive income of $1.74 per diluted common share and an economic return of 22.7% on tangible common equity, comprised of $1.44 in dividends declared and a $0.47 increase in tangible net book value per common share.

This compares to total comprehensive income of $0.84 per diluted common share and an economic return of 13.2% for 2024, comprised of $1.44 in dividends and a $0.29 decline in tangible net book value per common share.

Net spread and dollar roll income (a non-GAAP measure) per diluted common share decreased to $1.50 in 2025 from $1.88 in 2024.

The decline was primarily driven by lower swap income resulting from the maturity of legacy interest rate swaps with low fixed pay rates, as well as a timing mismatch between the issuance and deployment of $345 million and $2.0 billion of new preferred and common equity capital, respectively, during the year.

Another driver of net spread and dollar roll income in 2025 was the level of unhedged short-term debt in our funding mix.

As of December 31, 2025, our hedge ratio was 77%, reflecting the level of interest rate swap and U.S.

Treasury hedges (excluding option based-hedges) relative to total funding liabilities, compared to 88% as of December 31, 2024.

Our average hedge ratio for 2025 (excluding option based-hedges) was approximately 82%, compared to 93% for 2024.

This decline reflects the shift toward a more accommodative monetary policy environment and moderately reduced our net spread and dollar roll income in the near term, while positioning AGNC's earnings profile to benefit from rate cuts as they occur.

Our investment portfolio totaled $94.8 billion as of December 31, 2025, an increase of $21.5 billion for the year, including a $6.1 billion increase in our TBA position to $13.0 billion.

As of December 31, 2025, 30-year fixed-rate Agency RMBS and TBAs represented 95% of our investment portfolio, largely unchanged from December 31, 2024.

The weighted average coupon of our portfolio, excluding TBAs, increased to 5.19% as of December 31, 2025, compared to 5.03% as of December 31, 2024.

Including TBAs, the weighted average coupon of our fixed-rate portfolio increased to 5.12%, compared to 5.02% as of December 31, 2024.

At the same time, the portion of our fixed-rate investment portfolio, including TBAs, with favorable prepayment attributes 2 increased to 76% as of December 31, 2025, compared to 74% as of December 31, 2024.

The average projected life Constant Prepayment Rate ("CPR") for our portfolio increased to 9.6% as of December 31, 2025, from 7.7% as of December 31, 2024, largely reflecting a 70 basis point decline in the average 30-year mortgage rate, which was 6.16% at year end.

Actual CPRs averaged 8.4% for the year, compared to 7.5% for the prior year.

As of December 31, 2025, our "at risk" leverage was 7.2x tangible equity, unchanged from December 31, 2024.

Average leverage for the year was 7.4x, compared to 7.2x for the prior year.

We ended the year with a large liquidity position of $7.6 billion in unencumbered cash and Agency RMBS, representing 64% of tangible equity, compared to $6.1 billion and 66%, respectively, as of December 31, 2024.

Lastly, given the convexity profile of our assets and the significant decline in interest rate volatility, we increased our receiver swaption position by $6.9 billion during the year to provide additional protection in a declining rate environment.

Our duration gap, which measures the estimated difference between the interest rate sensitivity of our assets and liabilities including hedges, extended slightly to 0.4 years as of year end, compared to 0.3 years as of December 31, 2024.

Looking ahead, in addition to the favorable fundamental and technical backdrop for Agency RMBS, we expect net spread and dollar roll income to benefit from several factors, including lower funding costs resulting from the September, October and December 2025 rate cuts totaling 75 basis points, potential future rate cuts, greater stability in funding markets, and a shift in our hedge mix toward a greater share of swap-based hedges in the fourth quarter of 2025.

Notwithstanding these favorable factors, higher hedging costs due to the maturity of legacy lower pay-rate swaps, as well as reduced mortgage spreads, if they materialize in 2026, could offset some or all of these benefits.

For information regarding non-GAAP financial measures, including reconciliations to the most comparable GAAP measure, please refer to Results of Operations included in this MD&A below.

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Quantitative and Qualitative Disclosures about Market Risk in this form 10-K .

________________________________

Economic return represents the sum of the change in tangible net book value per common share and dividends declared per share of common stock during the period over beginning tangible net book value per common share.

Peer group includes Annaly Capital Management, Inc.

("NLY"), ARMOUR Residential REIT, Inc.

("ARR"), Dynex Capital, Inc.

("DX"), Invesco Mortgage Capital Inc.

("IVR"), Orchid Island Capital, Inc.

("ORC"), and Two Harbors Investment Corp.

Agency RMBS with favorable prepayment attributes include:

(i) specified pools backed by lower balance loans with original loan balances of up to $200K, HARP pools (defined as pools that were issued between May 2009 and December 2018 and backed by 100% refinance loans with original LTVs ≥ 80%), and pools backed by loans 100% originated in New York and Puerto Rico and (ii) other pools backed by loans with credit, loan balances, geographies, occupancy types, and other characteristics that exhibit favorable prepayment behavior.

Market Information

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Treasury Spread 135 143 146 126 110 -25

30-Year Agency Current Coupon Yield to 5/10-Year Swap Spread 177 181 192 168 141 -36

30-Year Agency Current Coupon Yield to 3/5/10-Year U.S.

Treasury Spread 142 150 157 137 123 -19

30-Year Agency Current Coupon Yield to 3/5/10-Year Swap Spread 177 183 197 174 151 -26

30-Year Agency Current Coupon Yield 5.83% 5.51% 5.48% 5.20% 5.04% -79 bps

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CDX IG 50 61 51 52 50 —

CDX HY 310 373 316 318 314 +4

________________________________

30-Year Current Coupon Yield represents yield on new production Agency RMBS.

30-Year Current Coupon Yield represents the yield on new production Agency RMBS.

30-Year Current Coupon Yields are sourced from Bloomberg and 30-Year Mortgage Rates are sourced from Clear Blue.

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________________________________

See Note 1 of preceding table for specified pool composition.

See Note 1 of the preceding table for specified pool composition.

As of December 31, 2024, lower balance specified pools had a weighted average original loan balance of $188,000 and $148,000 for 15-year and 30-year securities, respectively, and HARP pools had a weighted average original LTV of 128% and 141% for 15-year and 30-year securities, respectively.

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We accrue interest income based on the outstanding principal amount and contractual terms of these securities, and we amortize or accrete premiums and discounts associated with our purchase of these securities into interest income over their projected lives, incorporating scheduled contractual payments and estimated prepayments, using the effective interest method.

The weighted average cost basis of our securities as of December 31, 2024 was 101.5% of par value;

The weighted average cost basis of our securities as of December 31, 2025 was 101.2% of par value and may vary materially across different securities;

therefore, changes in our actual or projected prepayments can significantly alter the effective yield on our assets.

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We review our actual and anticipated prepayment experience on at least a quarterly basis, and effective yields are recalculated when differences arise between (i) our previous prepayment estimates and (ii) actual prepayments to date and current estimates of future prepayments.

If the actual and estimated future prepayment experience differs from our prior estimate of prepayments, we are required to record an adjustment in the current period to the amortization or accretion of premiums and discounts for the cumulative difference in the effective yield from inception through the reporting date.

When the actual and estimated future prepayment experience differs from our prior estimates, we are required to record a current-period adjustment to the amortization or accretion of premiums and discounts for the cumulative difference in the effective yield from inception through the reporting date.

We commonly refer to this adjustment as "catch-up" premium amortization cost/benefit.

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We also believe it is important for users of our financial information to consider information related to our current financial performance without the effects of certain measures and one-time events that are not necessarily indicative of our current investment portfolio performance and operations.

Specifically, in the case "net spread and dollar roll income available to common stockholders" and components of such measure, "economic interest income" and "economic interest expense," we believe the inclusion of TBA dollar roll income is meaningful as TBAs, which are accounted for under GAAP as derivative instruments with gains and losses recognized in other

gain (loss) in our consolidated statement of comprehensive income, are economically equivalent to holding and financing generic Agency RMBS using short-term repurchase agreements.

Similarly, we believe that the inclusion of periodic interest rate swap settlements is meaningful as interest rate swaps are the primary instrument we use to economically hedge against fluctuations in our borrowing costs and it is more indicative of our total cost of funds than interest expense alone.

Additionally, we believe the exclusion of "catch-up" premium amortization adjustments is meaningful as it excludes the cumulative effect from prior reporting periods due to current changes in future prepayment expectations and, therefore, exclusion of such adjustments is more indicative of the current earnings potential of our investment portfolio.

Specifically, with respect to "net spread and dollar roll income available to common stockholders" and its components, "economic interest income" and "economic interest expense," we believe the inclusion of TBA dollar roll income is meaningful because TBAs, which are accounted for under GAAP as derivative instruments with gains and losses recognized in other gain

(loss) in our consolidated statement of comprehensive income, are economically equivalent to holding and financing generic Agency RMBS using short-term repurchase agreements.

Similarly, we believe that the inclusion of periodic interest rate swap settlements is meaningful because interest rate swaps are the primary instruments we use to economically hedge against fluctuations in our borrowing costs, and their inclusion is more indicative of our total cost of funds than interest expense alone.

Additionally, we believe the exclusion of "catch-up" premium amortization adjustments is meaningful because it excludes the cumulative effect from prior reporting periods due to current changes in future prepayment expectations and, therefore, is more indicative of the current earnings potential of our investment portfolio.

However, because such measures are incomplete measures of our financial performance and involve differences from results computed in accordance with GAAP, they should be considered as supplementary to, and not as a substitute for, results computed in accordance with GAAP.

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Net interest income (expense) 675 18 (246)

Other gain (loss), net 955 497 (2,081)

Other gain, net 1,122 955 497

Operating expenses 127 110 96

Net income (loss) 863 155 (1,190)

Net income 1,670 863 155

Dividends on preferred stock 161 132 123

Net income (loss) available (attributable) to common stockholders $ 731 $ 32 $ (1,295)

Net income (loss) $ 863 $ 155 $ (1,190)

Net income available to common stockholders $ 1,509 $ 731 $ 32

Net income $ 1,670 $ 863 $ 155

Other comprehensive income (loss), net 268 (74) 155

Comprehensive income (loss) 789 310 (2,163)

Comprehensive income 1,938 789 310

Dividends on preferred stock 161 132 123

Comprehensive income (loss) available (attributable) to common stockholders $ 657 $ 187 $ (2,268)

Comprehensive income available to common stockholders $ 1,777 $ 657 $ 187

Weighted average number of common shares outstanding - basic 1,020.0 783.4 618.4

Weighted average number of common shares outstanding - diluted 1,023.7 786.0 619.6

Net income (loss) per common share - basic $ 0.93 $ 0.05 $ (2.41)

Net income (loss) per common share - diluted $ 0.93 $ 0.05 $ (2.41)

Comprehensive income (loss) per common share - basic $ 0.84 $ 0.30 $ (4.22)

Comprehensive income (loss) per common share - diluted $ 0.84 $ 0.30 $ (4.22)

Net income per common share - basic $ 1.48 $ 0.93 $ 0.05

Net income per common share - diluted $ 1.47 $ 0.93 $ 0.05

Comprehensive income per common share - basic $ 1.74 $ 0.84 $ 0.30

Comprehensive income per common share - diluted $ 1.74 $ 0.84 $ 0.30

Dividends declared per common share $ 1.44 $ 1.44 $ 1.44

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Economic interest income, excluding "catch-up" amortization (non-GAAP measure) $ 638 $ 166 $ 472

Our average investment portfolio (at cost), inclusive of TBAs, increased 9% and decreased 11% for fiscal years 2024 and 2023, respectively, primarily due to changes in our capital base.

Our average investment portfolio (at cost), inclusive of TBAs, increased 23% and 9% for fiscal years 2025 and 2024, respectively, primarily due to an increase in our capital base.

The average yield on our investment portfolio, including TBA implied asset yields and excluding "catch-up" premium amortization, increased 20 and 59 basis points for fiscal years 2025 and 2024, respectively, largely as a result of shifting our asset portfolio from lower coupon holdings toward a greater share of higher coupon, specified pools.

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Total change in economic interest benefit/expense $ 817 $ 496 $ 321

Our average mortgage borrowings, inclusive of TBAs, increased 11% and decreased 13% for fiscal years 2024 and 2023, respectively, consistent with changes to our average investment portfolio.

The average interest rate on our mortgage borrowings, excluding the impact of interest rate swap periodic income, increased 18 and 372 basis points for fiscal years 2024 and 2023, respectively, due to higher short-term interest rates.

Interest rate swap periodic income declined for fiscal years 2024 and 2023 primarily due to higher pay rates on our pay-fixed swaps largely driven by the maturity of low cost interest rate swaps.

The following is a summary of our interest rate swaps outstanding during fiscal years 2024, 2023 and 2022 (dollars in millions).

Our average mortgage borrowings, inclusive of TBAs, increased 25% and 11% for fiscal years 2025 and 2024, respectively, consistent with the increase to our average investment portfolio.

The average interest rate on our mortgage borrowings, excluding the impact of interest rate swap periodic income, decreased 91 and increased 18 basis points for fiscal years 2025 and 2024, respectively, due to changes in short-term interest rates.

Interest rate swap periodic income declined for fiscal years 2025 and 2024, primarily due to higher pay rates on our pay-fixed swaps, largely reflecting the maturity of lower-cost legacy swaps, and lower receive rates.

The ratio of interest rate swaps outstanding to mortgage borrowings also declined, reflecting a reduction in the Company's total hedge ratio and shifts in hedge composition.

The following table summarizes our interest rate swaps outstanding during fiscal years 2025, 2024 and 2023 (dollars in millions).

Amounts exclude forward starting swaps not yet in effect.

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2025 2024 2023

Comprehensive income (loss) available (attributable) to common stockholders

Comprehensive income available to common stockholders

$ 1,777 $ 657 $ 187

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(2,733) 885 (1,678)

Gain on derivative instruments and other securities, net

(Gain) loss on derivative instruments and other securities, net

1,082 (2,028) (386)

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Unrealized (gain) loss on available-for-sale securities measure at fair value through other comprehensive income, net

Other adjustments:

Estimated "catch-up" premium amortization benefit due to change in CPR forecast 1

(268) 74 (155)

Other adjustments:

Estimated "catch-up" premium amortization cost (benefit) due to change in CPR forecast 1

TBA dollar roll income, net 2

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Other interest income (expense), net 2,3

(87) (146) (65)

Net spread and dollar roll income available to common stockholders (non-GAAP measure) 1,535 1,474 1,617

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Loss on sale of investment securities, net $ (529) $ (188) $ (1,567)

Unrealized (loss) gain on investment securities measured at fair value through net income, net 2

(885) 1,678 (3,795)

Unrealized (loss) gain on investment securities measured at fair value through other comprehensive income, net

Unrealized gain (loss) on investment securities measured at fair value through net income, net 2

2,733 (885) 1,678

Total (loss) gain on investment securities, net

Unrealized gain (loss) on investment securities measured at fair value through other comprehensive income, net

Total gain (loss) on investment securities, net

$ 2,472 $ (1,147) $ 266

________________________________

Amounts exclude gain (loss) on TBA securities, which are reported in gain (loss) on derivative instruments and other securities, net in our Consolidated Statements of Comprehensive Income.

Amounts exclude gain (loss) on TBA securities, which is reported in gain (loss) on derivative instruments and other securities, net in our Consolidated Statements of Comprehensive Income.

Investment securities acquired after fiscal year 2016 are measured at fair value through net income (see Note 2 of our Consolidated Financial Statements in this Form 10-K).

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Payer swaptions (29) 54 (21)

Recceiver swaptions (3) — —

Treasury securities - short position 844 (54) 1,482

Treasury securities - long position (85) (30) (32)

Treasury futures contracts - short position 409 (42) 811

Receiver swaptions (47) (3) —

Treasury securities (705) 759 (84)

Treasury futures contracts (120) 409 (42)

SOFR futures contracts - long position 20 13 (10)

Other interest income (expense)

(87) (146) (77)

Other gain (loss) (3) 2 (17)

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Leverage and Financing Sources

Our leverage will vary depending on market conditions and our assessment of relative risks and returns, but we generally expect our leverage to be between six and twelve times the amount of our tangible stockholders' equity, measured as the sum of our total mortgage borrowings and net payable / (receivable) for unsettled investment securities, divided by the sum of our total stockholders' equity adjusted to exclude goodwill.

Our tangible net book value "at risk" leverage ratio was 7.2x and 7.0x as of December 31, 2024 and 2023, respectively.

Our leverage will vary depending on market conditions and our assessment of relative risks and returns, but we generally expect our leverage to be between six and ten times the amount of our tangible stockholders' equity, measured as the sum of our total mortgage borrowings and net payable / (receivable) for unsettled investment securities, divided by the sum of our total stockholders' equity adjusted to exclude goodwill.

Our tangible net book value "at risk" leverage ratio was 7.2x as of December 31, 2025 and 2024.

The following table includes a summary of our mortgage borrowings outstanding as of December 31, 2025 and 2024 (dollars in millions).

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As of December 31, 2025 and 2024, 44% and 47%, respectively, of our total repurchase agreements, including 51% and 49% or our investment securities repurchase agreements, respectively, were funded through the Fixed Income Clearing Corporation's GCF Repo service.

Our primary financing sources are collateralized borrowings structured as repurchase agreements.

We enter into repurchase agreements, or "repo," through bi-lateral arrangements with financial institutions and independent dealers.

We also enter into third-party repurchase agreements through our wholly-owned registered broker-dealer subsidiary, Bethesda Securities, LLC, such as tri-party repo offered through the FICC's GCF Repo service.

We manage our repurchase agreement funding position through a variety of methods, including diversification of counterparties, maintaining a suitable maturity profile and utilization of interest rate hedging strategies.

We also use TBA dollar roll transactions as a means of synthetically financing Agency RMBS.

The terms and conditions of our repurchase agreements are determined on a transaction-by-transaction basis when each such borrowing is initiated or renewed and, in the case of GCF Repo, by the prevailing margin requirements calculated by the FICC, which acts as the central counterparty.

The amount borrowed is generally equal to the fair value of the securities pledged, as determined by the lending counterparty, less an assessed discount, referred to as a "haircut," that reflects the underlying risk of the specific collateral and protects the counterparty against a change in its value.

Interest rates are generally fixed based on prevailing rates corresponding to the term of the borrowing.

None of our repo counterparties are obligated to renew or otherwise enter into new borrowings at the conclusion of our existing borrowings.

The use of TBA dollar roll transactions increases our funding diversification, expands our available pool of assets, and increases our overall liquidity position, as TBA contracts typically have lower implied haircuts relative to Agency RMBS pools funded with repo financing.

TBA dollar roll transactions may also have a lower implied cost of funds than comparable repo funded transactions (referred to as "dollar roll specialness") offering incremental return potential.

However, if it were to become uneconomical to roll our TBA contracts into future months it may be necessary to take physical delivery of the underlying securities and fund those assets with cash or other financing sources, which could reduce our liquidity position.

We primarily finance our assets through collateralized borrowings structured as repurchase agreements ("repo").

We enter into these agreements on a bilateral basis with financial institutions and independent dealers, as well as through tri-party and centrally cleared repo platforms—such as the FICC's GCF Repo service—accessed through our wholly owned, registered broker-dealer subsidiary, Bethesda Securities, LLC.

We manage our repo funding through counterparty diversification, maintaining a suitable maturity profile, interest rate hedging, and other strategies.

In addition to repo, we also utilize TBA dollar roll transactions to synthetically finance Agency RMBS.

The terms of bilateral repurchase agreements are established on a transaction-by-transaction basis at the time each borrowing is initiated or renewed and are governed by the provisions of a Master Repurchase Agreement.

For GCF Repo transactions, the terms and conditions are set by the FICC's clearing rules and applicable operating procedures.

Each of our repurchase agreements requires that borrowed amounts be subject to collateralization requirements, and interest rates are generally fixed and reflect prevailing market rates for the specified borrowing term and collateral type.

Our repurchase agreement counterparties are not obligated to renew or enter into new borrowings upon the maturity of existing agreements.

TBA dollar roll transactions enhance our funding diversification, expand our available pool of assets, and improve our liquidity position by typically requiring less collateral than Agency RMBS financed with repo.

These transactions may also benefit from lower implied costs, or "specialness." However, if rolling TBA contracts into future months becomes uneconomical, we may need to take physical delivery of the underlying securities and fund those securities with other sources, potentially reducing our liquidity position.

Collateral Requirements and Unencumbered Assets

Amounts available to be borrowed under our repurchase agreements are dependent upon prevailing interest rates, the lender’s "haircut" requirements and collateral value.

Each of these elements may fluctuate with changes in interest rates, credit quality and liquidity conditions within the financial markets.

To help manage the adverse impact of interest rate changes on our borrowings, we utilize an interest rate risk management strategy involving the use of derivative financial instruments.

In particular, we attempt to mitigate the risk of the cost of our short-term funding liabilities increasing at a faster rate than the earnings of our long-term fixed rate assets during a period of rising interest rates.

The collateral requirements, or haircut levels, under our repo agreements are typically determined on an individual transaction basis or by the prevailing requirements established by the FICC for GCF tri-party repo.

Consequently, haircut levels and minimum margin requirements can change over time and may increase during periods of elevated market volatility.

If the fair value of our collateral declines, our counterparties will typically require that we post additional collateral to re-establish the agreed-upon collateral levels, referred to as "margin calls." Similarly, if the estimated fair value of our investment securities increases, we may request that counterparties release collateral back to us.

Our counterparties typically have the sole discretion to determine the value of pledged collateral but are required to act in good faith in making determinations of value.

Our agreements generally provide that in the event of a margin call, collateral must be posted on the same business day, subject to notice requirements.

As of December 31, 2024, we had met all our margin requirements.

The value of Agency RMBS collateral is impacted by market factors and is reduced by monthly principal pay-downs on the underlying mortgage pools.

Fannie Mae and Freddie Mac publish monthly security pay-down factors for their mortgage pools on the fifth day after month-end, but do not remit payment to security holders until generally the 25th day after month-end.

Bi-lateral repo counterparties assess margin to account for the reduction in value of Agency collateral when factors are released.

The FICC assesses margin on the last day of each month, prior to the factor release date, based on its internally projected pay-down rates (referred to as the "blackout period exposure adjustment" or "blackout margin").

On the factor release date, the blackout margin is released and collateralization requirements are adjusted to actual factor data.

Due to the timing difference between associated margin calls and our receipt of principal pay-downs, our liquidity is temporarily reduced each month for principal repayments.

We attempt to manage the liquidity risk associated with principal pay-downs by monitoring conditions impacting prepayment rates and through asset selection.

Borrowing capacity under our repurchase agreements is influenced by counterparty margin requirements, collateral values, interest rates, risk limits, and counterparties' willingness and ability to lend.

These factors may change over time in response to interest rate movements, overall market liquidity, shifts in credit quality and changes in bank regulatory requirements.

Centrally cleared repo capacity also depends on Bethesda Securities continued compliance with regulatory and FICC membership requirements and maintaining its risk exposure within limits established by the FICC.

Haircuts for bilateral repurchase agreements are determined on a transaction-specific basis.

A haircut is a discount applied to the market value of pledged collateral to protect the counterparty against potential declines in its value and potential costs of selling collateral after a default.

When collateral values decline, counterparties typically issue a margin call requiring us to post additional collateral to restore the required collateralization level.

Conversely, if the value of pledged securities rises, we may request the return of excess collateral.

Collateral values are determined by our counterparties, who are required to act in good faith.

For centrally cleared GCF repo transactions, margin requirements are set by the FICC.

These include an initial margin requirement, calculated daily using a Value-at-Risk ("VaR") model, which evaluates Bethesda Securities' net exposure to the FICC, taking into account the offsetting risk sensitivities of positions such as repos and reverse repos.

Initial margin is designed to protect the FICC against potential future exposure from a member default and may also be used to cover losses arising from the default of other clearing members, subject to assessments from the loss mutualization waterfall and applicable caps and withdrawal provisions set pursuant to FICC rules.

The FICC also imposes daily variation margin, based on amounts borrowed plus accrued interest, adjusted for fluctuations in collateral value, and is intended to cover the current exposure associated with the repo transaction.

Margin thresholds may increase during periods of elevated market volatility, which could adversely affect our liquidity position.

In addition, repo counterparties typically reduce the collateral values assigned to Agency RMBS each month to reflect principal repayments.

Bilateral repo counterparties make this adjustment upon the publication of the pay-down factor by Fannie Mae, Freddie Mac or Ginnie Mae on the fifth business day following month-end, even though principal payments are generally not received until the 25 th calendar day following month-end.

The FICC assesses margin on the last business day of each month—prior to the factor release—using internally projected pay-down rates and subsequently adjusts collateral requirements to reflect the actual factor data when released.

The timing difference between margin calls related to principal pay-downs and our receipt of the corresponding cash flows temporarily reduces our available liquidity each month.

We manage this liquidity risk by monitoring factors that influence prepayment activity and through disciplined asset selection.

As of December 31, 2025, approximately 14% of our investment portfolio consisted of TBA securities, which are not subject to monthly principal pay-downs.

The remainder of our portfolio primarily consisted of Agency RMBS, which had an average one-year CPR forecast of 7% as of December 31, 2024.

Collateral requirements under our derivative agreements are subject to our counterparties' assessment of their maximum risk of loss associated with the derivative instrument, referred to as the initial or minimum margin requirement, and may be adjusted based on changes in market volatility and other factors.

We are also subject to daily variation margin requirements based on changes in the value of the derivative instrument and/or collateral pledged.

Daily variation margin requirements also entitle us to receive collateral if the value of amounts owed to us under the derivative agreement exceeds the minimum margin requirement.

The collateral requirements under our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC.

Collateral levels for interest rate derivative agreements are typically governed by the central clearing exchange and the associated futures commission merchants ("FCMs"), which may establish margin levels in excess of the clearing exchange.

Collateral levels for interest rate derivative agreements not subject to central clearing are established by the counterparty financial institution.

Haircut levels and minimum margin requirements imposed by our counterparties reduce the amount of our unencumbered assets and limit the amount we can borrow against our investment securities.

During the fiscal year 2024, haircuts on our repo funding arrangements remained stable.

As of December 31, 2024, the weighted average haircut on our repurchase agreements was approximately 3.2% of the value of our collateral, compared to 3.1% as of December 31, 2023.

To mitigate the risk of margins calls, we seek to maintain excess liquidity by holding unencumbered liquid assets that can be used to satisfy collateral requirements, collateralize additional borrowings or sold for cash.

The remainder of our portfolio, primarily consisting of Agency RMBS, had an average one-year CPR forecast of 12%.

Collateral requirements under our derivative agreements are typically subject to initial and variation margin requirements, similar to those for centrally cleared repo transactions, and may be adjusted based on changes in the value of the derivative agreements, collateral values, market volatility, and other factors.

Collateral requirements for our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC.

Collateral levels for interest rate swap agreements are established by the central clearing exchange and the associated futures commission merchants ("FCMs"), which may impose margin requirements in excess of those required by the clearing exchange.

Collateral requirements for non-centrally cleared derivatives are set by the counterparty financial institution.

Haircut levels and initial or additional minimum margin requirements reduce the amount of our unencumbered assets and limit our borrowing capacity.

Margin calls for repo and TBA transactions are typically due on the same business day, while margin calls for interest rate swaps and other derivative transactions are typically due on the next business day, subject to notice provisions.

During fiscal year 2025, haircuts and initial margin requirements on our repo funding arrangements remained stable.

As of December 31, 2025, the weighted average haircut and initial margin on our repurchase agreements were approximately 3.1% of the value of our collateral, compared to 3.2% as of December 31, 2024.

We were in compliance with all margin requirements as of December 31, 2025.

To mitigate the risk of margin calls, we seek to maintain excess liquidity by holding unencumbered liquid assets that can be used to satisfy collateral requirements, collateralize additional borrowings or be sold for cash.

As of December 31, 2025, our unencumbered assets totaled approximately $7.7 billion, or 65% of tangible equity, consisting of $7.6 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.

This compares to $6.2 billion of unencumbered assets, or 67% of tangible equity, as of December 31, 2024, consisting of $6.1 billion of cash and unencumbered Agency RMBS and $0.1 billion of unencumbered credit assets.

For additional details regarding assets pledged under our repo and derivative agreements refer to Note 6 to our Consolidated Financial Statements in this Form 10-K.

Counterparty Risk

Collateral requirements imposed by counterparties subject us to the risk that the counterparty does not return pledged assets to us as and when required.

We attempt to manage this risk by monitoring our collateral positions and limiting our counterparties to registered clearinghouses and major financial institutions with acceptable credit ratings.

We also diversify our funding across multiple counterparties and by region.

Collateral requirements imposed by counterparties subject us to the risk that pledged assets may not be returned to us as and when required.

We attempt to manage this risk by actively monitoring our collateral positions and limiting our counterparties to registered clearinghouses and regulated financial institutions, including banks and broker-dealers (both bank affiliated and independent) with acceptable credit ratings.

We also diversify our funding sources across multiple counterparties and geographic region.

As of December 31, 2025, our maximum amount at risk (or the excess/shortfall of the value of collateral pledged/received over our repurchase agreement liabilities/reverse repurchase agreement receivables) with any of our repurchase agreement counterparties, excluding the FICC, was less than 2% of our tangible stockholders' equity, with our top five repo counterparties, excluding the FICC, representing less than 5% of our tangible stockholders' equity.

As of December 31, 2024, 9% of our tangible stockholder's equity was at risk with the FICC.

As of December 31, 2025, less than 10% of our tangible stockholders' equity was at risk with the FICC.

Excluding central clearing exchanges, as of December 31, 2025, our amount at risk with any counterparty to our derivative agreements was less than 1% of our stockholders' equity.

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Capital Markets

The equity capital markets serve as a source of capital to grow our business and to meet potential liquidity needs of our business.

Equity capital markets serve as a source of capital to grow our business and to meet potential liquidity needs.

The availability of equity capital is dependent on market conditions and investor demand for our common and preferred stock.

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Furthermore, when the trading price of our common stock is less than our then-current estimate of our tangible net book value per common share, among other conditions, we may repurchase shares of our common stock pursuant to the stock repurchase plan authorized by our Board.

As of December 31, 2025, $1.0 billion remained authorized to repurchase shares of our common stock through December 31, 2026.

Please refer to Note 9 of our Consolidated Financial Statements in this Form 10-K for further details regarding our recent equity capital transactions.

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Forward-looking statements are based on management's assumptions, projections and beliefs as of the date of this Annual Report, but they involve a number of risks and uncertainties.

Actual results may differ materially from those anticipated in forward-looking statements, as well as from historical performance.

Actual results may differ materially from those anticipated in

forward-looking statements, as well as from historical performance.

Factors that could cause actual results to vary from our forward-looking statements include, but are not limited to, the following:

• changes in U.S.

monetary policy or interest rates, including actions taken by the Federal Reserve to normalize monetary policy and to reduce the size of its U.S.

Treasury and Agency RMBS bond portfolio;

• fluctuations in the yield curve;

• the level, degree and extent of volatility in interest rates or the yield on our assets relative to interest rate benchmarks;

• fluctuations in mortgage prepayment rates on the loans underlying our Agency RMBS;

• the availability and terms of financing and our hedge positions;

• the availability and terms of our financing and hedge positions;

• changes in the market value of our assets, including from changes in net interest spreads, market liquidity or depth, and changes in our "at risk" leverage or hedge positions;

• fluctuations in the yield curve;

• the effectiveness of our risk mitigation strategies;

• conditions in the market for Agency RMBS and other mortgage securities, including changes in the available supply of such securities or investor appetite therefor;

• actions by the federal, state, or local governments that affect the economy, the housing sector or financial markets;

• changes in U.S.

monetary policy or interest rates, including actions taken by the Federal Reserve to adjust the size or composition of its U.S.

Treasury and Agency RMBS bond portfolio or to influence funding markets;

• changes in U.S.

government entity purchases or dispositions of Agency RMBS or other actions that directly or indirectly increase demand or supply of Agency RMBS or affect prepayment speeds;

• the direct or indirect effects of actions by the federal, state, or local governments that affect the economy, the housing sector or financial markets, including actions relating to fiscal policy;

• the direct or indirect effects of geopolitical events, including war, terrorism, civil discord, embargos, trade or other disputes, or natural disasters, on conditions in the markets for Agency RMBS or other mortgage securities, the terms or availability of funding for our business, or our ongoing business operations;

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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 7. Management’s Discussion and Analysis