What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-02-22 compared with 2023-02-21 · 192 added, 317 removed, 1085 unchanged (32% of the section changed)

11 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Under the supervision and with the participation of the principal executive officer and principal financial officer, management assessed the effectiveness of our internal control over financial reporting as of December 31, 2023.

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Not applicable.

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Directors, Executive Officers and Corporate Governance.

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Not applicable.

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Exhibit Index

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3.6 Articles Supplementary reclassifying 2,110,000 shares of authorized but unissued shares of Series A Preferred Stock as shares of Preferred Stock without designation, incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on June 17, 2021.

3.7 Articles of Amendment of Invesco Mortgage Capital Inc.

(incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on June 3, 2022).

3.8 Articles of Amendment of Invesco Mortgage Capital Inc.

(incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, filed with the SEC on June 3, 2022).

3.9 Articles of Amendment (Authorized shares) (incorporated by reference to Exhibit 3.9 to the Quarterly Report on Form 10-Q, filed with the SEC on August 4, 2022).

3.7 Articles of Amendment of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on June 3, 2022.

3.8 Articles of Amendment of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 3.2 to our Current Report on Form 8-K, filed with the SEC on June 3, 2022.

3.9 Articles of Amendment (Authorized shares), incorporated by reference to Exhibit 3.9 to our Quarterly Report on Form 10-Q, filed with the SEC on August 4, 2022.

3.10 Amended and Restated Bylaws of Invesco Mortgage Capital Inc., incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on February 17, 2017.

4.1 Specimen Common Stock Certificate of Invesco Mortgage Capital Inc.

4.1 Specimen Common Stock Certificate of Invesco Mortgage Capital Inc, incorporated by reference to Exhibit 4.1 to our Annual Report on Form 10-K filed with the SEC on February 21, 2023.

4.2 Specimen 7.75% Series B Fixed-to-Floating Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.1 to our Registration Statement on Form 8-A, filed with the SEC on September 8, 2014.

9 unchanged sentences

§ 10.5 Invesco Mortgage Capital Inc.

Amended and Restated 2009 Equity Incentive Plan, incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8, filed with the SEC on May 4, 2022.

Amended and Restated 2009 Equity Incentive Plan, incorporated by reference to Exhibit 4.3 to our Registration Statement on Form S-8, filed with the SEC on May 4, 2022.

10.6 Form of Restricted Stock Award Agreement for Non-Executive Directors under the Invesco Mortgage Capital Inc.

2009 Equity Incentive Plan (May 2021), incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on August 4, 2021.

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10.7 Equity Distribution Agreement with respect to the Series B Shares and Series C Shares, dated March 19, 2019, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc.

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1 to the Equity Distribution Agreement, among Invesco Mortgage Capital Inc., the Operating Partnership, the Manager and JonesTrading Institutional Services LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on June 17, 2021.

10.9 Equity Distribution Agreement, dated November 3, 2021, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc., JMP Securities LLC and JonesTrading Institutional Services LLC, incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on November 3, 2021.

10.9 Equity distribution agreement, dated February 23, 2023, among Invesco Mortgage Capital Inc., IAS Operating Partnership LP, Invesco Advisers, Inc., Citizens JMP Securities, LLC (formerly JMP Securities LLC) and JonesTrading Institutional Services LLC incorporated by reference to Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on February 23, 2023.

19 Insider Trading Policy

21.1 Subsidiaries of the Registrant.

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97 Policy for Recoupment of Incentive Compensation.

101 The following series of audited XBRL-formatted documents are collectively included herewith as Exhibit 101.

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Refer to (a)(2) above.

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INDEX TO FINANCIAL STATEMENTS

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Schedule IV - Mortgage Loans on Real Estate as of December 31, 20 2 3

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Report of Independent Registered Public Accounting Firm

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and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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We have served as the Company’s auditor since 2016.

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INVESCO MORTGAGE CAPITAL INC.

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$ in thousands except share amounts

Mortgage-backed securities, at fair value (including pledged securities of $ 4,439,583 and $ 7,326,175 , respectively)

Mortgage-backed securities, at fair value (including pledged securities of $ 4,712,185 and $ 4,439,583 , respectively, net of allowance for credit losses of $ 320 and $ 0 , respectively)

5,045,306 4,791,893

Treasury securities, at fair value 11,214 —

Cash and cash equivalents 76,967 175,535

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Common Stock, par value $ 0.01 per share;

67,000,000 and 450,000,000 shares authorized, respectively;

38,710,916 and 32,987,478 shares issued and outstanding, respectively

67,000,000 shares authorized, 48,460,626 and 38,710,916 shares issued and outstanding, respectively

Additional paid in capital 4,011,138 3,901,562

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The accompanying notes are an integral part of these consolidated financial statements.

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INVESCO MORTGAGE CAPITAL INC.

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Mortgage-backed and other securities 277,929 192,566 167,056

Commercial and other loans 1,947 2,146 2,766

Commercial loan — 1,947 2,146

Total interest income 277,929 194,513 169,202

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228,229 51,560 ( 11,290 )

Secured loans — — 8,655

Total interest expense 228,229 51,560 ( 11,290 )

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Gain (loss) on derivative instruments, net 61,838 559,007 122,611

Realized and unrealized credit derivative income (loss), net — — ( 35,312 )

Net gain (loss) on extinguishment of debt — — 14,742

Other investment income (loss), net ( 66 ) 186 1

15 unchanged sentences

Diluted 44,073,815 34,160,080 27,513,223

(1) Negative interest expense on repurchase agreements in 2021 is due to amortization of net deferred gains on de-designated interest rate swaps that exceeds current period interest expense on repurchase agreements.

(1) Negative interest expense on repurchase agreements in 2021 is due to amortization of net deferred gains on de-designated interest rate swaps that exceeded current period interest expense on repurchase agreements.

For further information on amortization of amounts classified in accumulated other comprehensive income before we discontinued hedge accounting, see Note 8 - “Derivatives and Hedging Activities” and Note 12 - “Stockholders' Equity” .

The accompanying notes are an integral part of these consolidated financial statements.

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INVESCO MORTGAGE CAPITAL INC.

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Other comprehensive income (loss):

Unrealized gain (loss) on mortgage-backed and credit risk transfer securities, net ( 6,280 ) 756 ( 223,416 )

Reclassification of unrealized (gain) loss on sale of mortgage-backed and credit risk transfer securities to gain (loss) on investments, net — — 13,940

Unrealized gain (loss) on mortgage-backed securities, net ( 91 ) ( 6,280 ) 756

Reclassification of unrealized loss on available-for-sale securities to (increase) decrease in provision for credit losses 320 — —

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Currency translation adjustments on investment in unconsolidated venture ( 10 ) ( 537 ) ( 75 )

Reclassification of currency translation loss on investment in unconsolidated venture to other investment income (loss), net 123 — —

Total other comprehensive income (loss) ( 10,063 ) ( 26,525 ) ( 21,319 )

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The accompanying notes are an integral part of these consolidated financial statements.

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INVESCO MORTGAGE CAPITAL INC.

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Balance at December 31, 2020 5,600,000 135,356 6,200,000 149,860 11,500,000 278,108 20,322,211 203 3,389,381 58,605 ( 2,644,355 ) 1,367,158

Cumulative effect of adoption of new accounting principle — — — — — — — — — — 342 342

Net income (loss) — — — — — — — — — — ( 90,000 ) ( 90,000 )

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Stock awards — — — — — — 18,365 1 — — — 1

Redemption of preferred stock ( 5,600,000 ) ( 135,356 ) — — — — — — — — ( 4,682 ) ( 140,038 )

Common stock dividends — — — — — — — — — — ( 105,992 ) ( 105,992 )

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Stock awards — — — — — — 36,886 — — — — —

Redemption of preferred stock ( 5,600,000 ) ( 135,356 ) — — — — — — — — ( 4,682 ) ( 140,038 )

Payments in lieu of fractional shares in connection with one-for-ten reverse stock split — — — — — — ( 46 ) — ( 1 ) — — ( 1 )

Repurchase and retirement of preferred stock — — ( 1,662,366 ) ( 40,181 ) ( 3,683,530 ) ( 89,080 ) — — — — 14,179 ( 115,082 )

Common stock dividends — — — — — — — — — — ( 107,555 ) ( 107,555 )

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Stock awards — — — — — — 50,239 — — — — —

Payments in lieu of fractional shares in connection with one-for-ten reverse stock split — — — — — — ( 46 ) — ( 1 ) — — ( 1 )

Repurchase and retirement of preferred stock — — ( 151,637 ) ( 3,665 ) ( 271,031 ) ( 6,554 ) — — — — 1,471 ( 8,748 )

4 unchanged sentences

The accompanying notes are an integral part of these consolidated financial statements.

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INVESCO MORTGAGE CAPITAL INC.

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Realized and unrealized (gain) loss on derivative instruments, net 177,170 ( 472,135 ) ( 138,414 )

Realized and unrealized (gain) loss on credit derivatives, net — — 41,635

(Gain) loss on investments, net 107,280 1,079,339 366,509

2 unchanged sentences

Other amortization ( 9,836 ) ( 19,095 ) ( 21,383 )

Net (gain) loss on extinguishment of debt — — ( 14,742 )

Loss on foreign currency translation 123 — —

Changes in operating assets and liabilities:

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Cash Flows from Investing Activities

Purchase of mortgage-backed and credit risk transfer securities ( 25,723,584 ) ( 17,132,975 ) ( 13,613,447 )

Purchase of mortgage-backed securities ( 5,933,598 ) ( 25,723,584 ) ( 17,132,975 )

Purchase of U.S.

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Distributions from (contributions to) investments in unconsolidated ventures, net 41 11,342 3,848

Change in other assets — — 40,846

Principal payments from mortgage-backed and credit risk transfer securities 403,327 825,189 892,592

Proceeds from sale of mortgage-backed and credit risk transfer securities 27,281,250 16,273,956 25,028,464

Principal payments from mortgage-backed securities 348,547 403,327 825,189

Proceeds from sale of mortgage-backed securities 5,236,686 27,281,250 16,273,956

Proceeds from sale of U.S.

Treasury securities 48,977 468,051 —

Payment on the sale of credit derivatives — — ( 31,353 )

Settlement (termination) of forwards, swaps, swaptions and TBAs, net ( 179,526 ) 459,466 156,160

Redemption of Federal Home Loan Bank of Indianapolis stock — — 74,250

Net change in due from counterparties and collateral held payable on derivative instruments 1,584 2,594 ( 5,430 )

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Cash paid in lieu of fractional shares in connection with one-for-ten reverse stock split — ( 1 ) —

Principal repayments of secured loans — — ( 1,650,000 )

Proceeds from repurchase agreements 41,084,893 66,872,266 82,347,113

Principal repayments of repurchase agreements and related fees ( 69,625,277 ) ( 82,587,978 ) ( 85,987,597 )

Principal repayments of repurchase agreements ( 40,861,440 ) ( 69,625,277 ) ( 82,587,978 )

Net change in due from counterparties and collateral held payable on repurchase agreements ( 2,417 ) 8,419 ( 4,743 )

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Non-cash Investing and Financing Activities Information

Net change in unrealized gain (loss) on mortgage-backed and credit risk transfer securities classified as available-for-sale ( 6,280 ) 756 ( 207,708 )

Net change in unrealized gain (loss) on mortgage-backed securities classified as available-for-sale ( 229 ) ( 6,280 ) 756

Dividends declared not paid 19,384 25,162 29,689

Increase (decrease) in Agency CMBS purchase commitments — — ( 99,557 )

Net change in investment related receivable (payable) excluding Agency CMBS purchase commitments ( 707 ) 46 266

Change in foreign currency translation adjustment on other investments 537 75 ( 1,144 )

Dividend paid in common stock — — 74,234

Net change in investment related receivable (payable) 1,706 ( 707 ) 46

Net change in foreign currency translation adjustment recorded in accumulated other comprehensive income ( 113 ) 537 75

Offering costs not paid 10 144 527

The accompanying notes are an integral part of these consolidated financial statements.

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INVESCO MORTGAGE CAPITAL INC.

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government agency or a federally chartered corporation (“non-Agency RMBS”);

• other real estate-related financing arrangements.

During the periods presented in these consolidated financial statements, we also invested in:

• CMBS that are guaranteed by a U.S.

government agency such as Ginnie Mae or a federally chartered corporation such as Fannie Mae or Freddie Mac (collectively “Agency CMBS”);

• credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises (“GSE CRT”);

• a commercial mortgage loan;

Treasury securities;

• a real estate-related financing arrangement.

During the periods presented in these consolidated financial statements, we also invested in a commercial mortgage loan.

We conduct our business through IAS Operating Partnership L.P.

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Actual results may differ from those estimates.

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Translation of Foreign Currencies

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Fair Value Measurements

We report our MBS and GSE CRTs and derivative assets and liabilities at fair value as determined by an independent pricing service.

We report our MBS and derivative assets and liabilities at fair value as determined by an independent pricing service.

We generally obtain one price per instrument from our primary pricing service.

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We and the pricing service continuously monitor market indicators and economic events to determine whether they may have an impact on our valuations.

The pricing service values interest rate swaps, currency forward contracts and to-be-announced securities (“TBAs”) under the market approach through the use of quoted prices available in an active market.

The pricing service values interest rate swaps, currency forward contracts, U.S.

Treasury securities and to-be-announced securities (“TBAs”) under the market approach through the use of quoted prices available in an active market.

Overrides of prices from pricing services are rare in the current market environment for the assets we hold.

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A questionnaire is sent to pricing services which requests information such as changes in methodologies, business recovery preparedness, internal controls and confirmation that evaluations are generated based on market data.

Physical visits are also made to each pricing service's office.

Virtual visits may take place in lieu of physical visits given concerns surrounding the COVID-19 pandemic.

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An independent pricing service valued our commercial loan investment using a discounted cash flow analysis.

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As described in Note 10 - “Fair Value of Financial Instruments,” we evaluate the source used to fair value our assets and liabilities and make a determination on its categorization within the fair value hierarchy.

If the price of a security is obtained from quoted prices for identical instruments in active markets, the security is classified as a level 1 security.

If the price of a security is obtained from quoted prices for similar instruments or model-derived valuations whose inputs are observable, the security is classified as a level 2 security.

If the inputs appear to be unobservable, the security would be classified as a level 3 security.

If the price of a security is readily available, meaning that it is a quoted price in an active market for identical assets, the security is classified as a level 1 security.

If the price of a security is obtained from quoted prices in inactive markets for similar instruments, or whose values are model-derived but the inputs are observable either directly or indirectly, the security is classified as a level 2 security.

If the inputs appear to be not observable, and reflect judgment about assumptions used to value the asset, the security would be classified as a level 3 security.

Transfers between levels, if any, are determined at the end of the reporting period.

Mortgage-Backed and Credit Risk Transfer Securities

We record our purchases of MBS and GSE CRTs on the trade date and report these securities at fair value as described above in the Fair Value Measurements section of this Note 2 to our consolidated financial statements.

We record our purchases of MBS on the trade date and report these securities at fair value as described above in the Fair Value Measurements section of this Note 2 to our consolidated financial statements.

Approximately $ 5.0 billion or 99.7 % of our MBS are accounted for under the fair value option as of December 31, 2023 (December 31, 2022:

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In our view, this election more appropriately reflects the results of our operations because fair value changes are accounted for in the same manner as fair value changes in our economic hedging instruments.

We elected the fair value option for all MBS purchased on or after September 1, 2016, GSE CRTs purchased on or after August 24, 2015 and all RMBS interest-only securities.

We elected the fair value option for all MBS purchased on or after September 1, 2016 and all RMBS interest-only securities.

We classify the remaining balance of our MBS as available-for-sale ($ 15.7 million or 0.3 % as of December 31, 2023;

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Realized gains and losses from sales of MBS are determined based upon the specific identification method.

GSE CRTs purchased before August 24, 2015 were reported at fair value and accounted for as hybrid financial instruments consisting of a debt host contract and an embedded derivative.

Unrealized gains or losses arising from changes in fair value of the debt host contract, excluding other-than-temporary impairment, were recognized in accumulated other comprehensive income until sale or disposition of the investment.

Upon sale or disposition of the debt host contract, the cumulative gain or loss previously reported in stockholders’ equity was recognized in income.

Realized and unrealized gains or losses arising from changes in fair value of the embedded derivative were recognized in realized and unrealized credit derivative income (loss), net in our consolidated statements of operations.

We elected the fair value option for GSE CRTs purchased on or after August 24, 2015 due to the complexities associated with bifurcation of GSE CRTs into a debt host contract and an embedded derivative.

Realized gains and losses from sales of GSE CRTs were determined based upon the specific identification method.

Our interest income recognition policies for MBS and GSE CRTs are described below in the Interest Income Recognition section of this Note 2 to our consolidated financial statements.

Our interest income recognition policies for MBS is described below in the Interest Income Recognition section of this Note 2 to our consolidated financial statements.

Allowances for Credit Losses on Available-for-Sale Securities

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If the allowance for credit losses has been reduced to zero, we reflect the remaining favorable changes as a prospective adjustment to the effective interest rate of the investment.

The allowance for credit losses is

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limited to the amount by which the investment’s amortized cost exceeds fair value.

The allowance for credit losses is limited to the amount by which the investment’s amortized cost exceeds fair value.

When the allowance for credit losses is limited, the effective interest rate used to recognize interest income and accrete credit losses is prospectively adjusted.

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Treasury securities are recognized within gain (loss) on investments, net in our consolidated statements of operations.

Coupon interest income is accrued based on the outstanding principal balance of the securities and their contractual terms.

Interest income on U.S.

Treasury securities is recognized within mortgage-backed and other securities interest income on our consolidated statements of operations.

Commercial Loan Held-For-Investment

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For non-Agency RMBS not of high credit quality, when actual cash flows vary from expected cash flows, the difference is recorded as an adjustment to the amortized cost of the security, unless those changes are reflected in an allowance for credit losses, and the security's yield is revised prospectively.

For Agency RMBS and Agency CMBS that cannot be prepaid in such a way that we would not recover substantially all of our initial investment, interest income recognition is based on contractual cash flows.

For Agency RMBS that cannot be prepaid in such a way that we would not recover substantially all of our initial investment, interest income recognition is based on contractual cash flows.

We do not estimate prepayments in applying the effective interest method.

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Credit Risk Transfer Securities

Interest income on GSE CRTs purchased before August 24, 2015 was accrued based on the coupon rate of the debt host contract which reflected the credit risk of GSE unsecured senior debt with a similar maturity.

Premiums or discounts associated with the purchase of GSE CRTs were amortized or accreted into interest income over the life of the debt host contract using the effective interest method.

The difference between the coupon rate on the hybrid instrument and the coupon rate on the debt host contract was considered premium income associated with the embedded derivative and was recorded in realized and unrealized credit derivative income (loss), net in our consolidated statements of operations.

Interest income on GSE CRTs purchased on or after August 24, 2015 was based on estimated future cash flows.

Commercial and Other Loans

We recognize interest income from commercial and other loans when earned and deemed collectible, or until a loan becomes past due based on the terms of the loan agreement.

Any related origination fees or costs on commercial and other loans for which we have elected the fair value option are recognized immediately in earnings.

Interest received after a loan becomes past due or impaired is used to reduce the outstanding loan principal balance.

When a delinquent loan previously placed on nonaccrual status has cured, meaning all delinquent principal and interest have been remitted by the borrower, the loan is placed back on accrual status.

Alternately, loans that have been individually impaired may be placed back on accrual status if restructured and after the loan is considered re-performing.

A restructured loan is considered re-performing when the loan has been current for at least 12 months.

We recognized interest income from commercial and other loans when earned and deemed collectible, or until a loan became past due based on the terms of the loan agreement.

Treasury Securities

Coupon interest income on U.S.

Treasury securities is accrued based on the outstanding principal balance of the securities and their contractual terms.

Interest income on U.S.

Treasury securities is recognized within mortgage-backed and other securities interest income on our consolidated statements of operations.

Cash and Cash Equivalents

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We record the mortgage-backed securities and the related repurchase agreement financing on a gross basis in our consolidated balance sheets, and the corresponding interest income and interest expense on a gross basis in our consolidated statements of operations.

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Secured Loans

Our wholly-owned subsidiary, IAS Services LLC, was a member of the Federal Home Loan Bank of Indianapolis (“FHLBI”).

As a member of the FHLBI, IAS Services LLC borrowed funds from the FHLBI in the form of secured advances.

FHLBI advances were treated as secured financing transactions and carried at their contractual amounts.

During the year ended December 31, 2020, we fully repaid our outstanding secured loans from the FHLBI and terminated our membership.

IAS Services LLC was dissolved in December 2020.

Dividends Payable

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Comprehensive Income

Our comprehensive income consists of net income, as presented in the consolidated statements of operations, adjusted for unrealized gains and losses on MBS purchased before September 1, 2016 and the debt host contract associated with GSE CRTs purchased before August 24, 2015;

reclassification of unrealized losses on available-for-sale securities to (increase) decrease in provision for credit losses;

Our comprehensive income consists of net income, as presented in the consolidated statements of operations, adjusted for unrealized gains and losses on MBS purchased before September 1, 2016, reclassification of unrealized losses on available-for-sale securities to (increase) decrease in provision for credit losses;

reclassification of amortization of net deferred gains and losses on de-designated interest rate swaps to repurchase agreements interest expense and currency translation adjustments on an investment in an unconsolidated venture.

Unrealized gains and losses on our MBS purchased before September 1, 2016 and the debt host contract associated with GSE CRTs purchased before August 24, 2015 are reclassified into net income upon their sale.

Unrealized gains and losses on our MBS purchased before September 1, 2016 are reclassified into net income upon their sale.

Accounting for Derivative Financial Instruments

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Net interest paid or received under our interest rate swaps is also recognized in gain (loss) on derivative instruments, net in our consolidated statements of operations.

Cash receipts or payments that are attributed to contractual interest earned or incurred on interest rate swaps are classified as cash flows from operating activities in our consolidated statements of cash flows.

All other cash flows from derivatives are generally recorded as investing cash flows in our consolidated statements of cash flows.

Before 2014, we applied hedge accounting to our interest rate swap agreements.

Effective December 31, 2013, we voluntarily discontinued hedge accounting for our interest rate swap agreements by de-designating the interest rate swaps as cash flow hedges.

As long as we expect the forecasted transactions that were being hedged (i.e., rollovers of our repurchase agreement borrowings) to still occur, the balance recorded in accumulated other comprehensive income (loss) (“AOCI”) from the interest rate swap activity through December 31, 2013 will remain in AOCI and be recognized in our consolidated statements of operations as interest expense over the remaining term of the interest rate swaps.

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Prior to December 31, 2020, we were a party to hybrid financial instruments that contained embedded derivative instruments and for which we did not elect the fair value option.

We assessed at inception whether the economic characteristics of the embedded derivative instruments were clearly and closely related to the economic characteristics of the remaining component of the financial instrument (i.e., the debt host contract), whether the financial instrument was remeasured to fair value through earnings and whether a separate instrument with the same terms as the embedded instrument would meet the definition of a derivative instrument.

When it was determined that (1) the embedded instrument possessed economic characteristics that were not clearly and closely related to the economic characteristics of the debt host contract, (2) the financial instrument was not remeasured to fair value through earnings and (3) a separate instrument with the same terms would qualify as a derivative instrument, the embedded instrument qualified as an embedded derivative that was separated from the debt host contract.

The embedded derivative was recorded at fair value, and changes in fair value were recorded in realized and unrealized credit derivative income (loss), net in our consolidated statements of operations.

Amounts recorded in accumulated other comprehensive income (loss) (“AOCI”) before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on repurchase agreements on the consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

We evaluate the terms and conditions of our holdings of swaptions, currency forward contracts and TBAs to determine if an instrument has the characteristics of an investment or should be considered a derivative under U.S.

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We would recognize interest and penalties related to uncertain tax positions, if any, as income tax expense, which would be included in general and administrative expenses.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Standards Accounting Board issued an accounting standards update intended to improve reportable segment disclosure requirements on an annual and interim basis.

The amendments require, among other items, enhanced disclosures around significant segment expenses regularly provided to the chief operating decision maker (“CODM”), as well as the CODM's title and position.

Additionally, the amendments expand the scope of all segment reporting disclosure requirements to include those entities with only a single operating segment, such as us.

We are required to implement the amendments in our consolidated financial statements for the year ended December 31, 2024 and for interim periods thereafter.

The amendments must be applied on a retrospective basis and early adoption is permitted.

We are currently evaluating the impact of these amendments on our disclosures.

Note 3 – Variable Interest Entities (“VIEs”)

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Non-Agency RMBS 8,139 8,139

Investments in unconsolidated ventures 552 552

Investment in unconsolidated venture 500 500

Total 18,574 18,574

Refer to Note 4 - “Mortgage-Backed and Credit Risk Transfer Securities” and Note 5 - “Other Assets” for additional details regarding these investments.

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Note 4 – Mortgage-Backed and Credit Risk Transfer Securities

During the first half of 2020, we experienced unprecedented market conditions as a result of the COVID-19 pandemic and sold a substantial portion of our MBS and GSE CRT portfolio to generate liquidity and reduce leverage.

We resumed investing in Agency RMBS in July 2020.

Refer to Note 4 - “Mortgage-Backed Securities” for additional details regarding our non-Agency CMBS and non-Agency RMBS.

Note 4 – Mortgage-Backed Securities

The following tables summarize our MBS portfolio by asset type at December 31, 2023 and 2022.

December 31, 2022

As of December 31, 2023

$ in thousands Principal/ Notional

1 unchanged sentence

(Discount) Amortized

Cost Unrealized

Cost Allowance for Credit Losses Unrealized

(Loss), net Fair

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Total 5,864,813 ( 926,395 ) 4,938,418 ( 320 ) 107,208 5,045,306 5.42 %

(1) Period-end weighted average yield is based on amortized cost as of December 31, 2022 and incorporates future prepayment and loss assumptions.

(1) Period-end weighted average yield is based on amortized cost as of December 31, 2023 and incorporates future prepayment and loss assumptions when appropriate.

(2) All Agency collateralized mortgage obligations (“Agency-CMO”) are interest-only securities (“Agency IO”).

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(5) Non-Agency RMBS includes interest-only securities (“non-Agency IO”) which represent 96.9 % of principal/notional balance, 37.6 % of amortized cost and 31.7 % of fair value.

December 31, 2021

As of December 31, 2022

$ in thousands Principal/ Notional

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Total 5,687,505 ( 952,225 ) 4,735,280 56,613 4,791,893 5.35 %

(1) Period-end weighted average yield is based on amortized cost as of December 31, 2021 and incorporates future prepayment and loss assumptions.

(1) Period-end weighted average yield is based on amortized cost as of December 31, 2022 and incorporates future prepayment and loss assumptions when appropriate.

(2) All Agency-CMO are Agency IO.

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We have elected the fair value option for all of our RMBS interest-only securities and our MBS purchased on or after September 1, 2016.

As of December 31, 2022 and December 31, 2021, approximately 99 % of our MBS are accounted for under the fair value option.

As of December 31, 2023 and December 31, 2022, approximately 99.7 % and 99.1 % of our MBS are accounted for under the fair value option, respectively.

December 31, 2023 December 31, 2022

6 unchanged sentences

Total 15,678 5,029,628 5,045,306 42,454 4,749,439 4,791,893

Table of Conten t s

The components of the carrying value of our MBS portfolio at December 31, 2023 and 2022 are presented below.

6 unchanged sentences

Unamortized discount ( 169,342 ) ( 762,114 ) ( 931,456 ) ( 126,112 ) ( 831,308 ) ( 957,420 )

Allowance for credit losses ( 320 ) — ( 320 ) — — —

Gross unrealized gains (1)

13 unchanged sentences

The following tables present the estimated fair value and gross unrealized losses of our MBS by length of time that such securities have been in a continuous unrealized loss position at December 31, 2023 and 2022.

December 31, 2022 Less than 12 Months 12 Months or More Total

As of December 31, 2023 Less than 12 Months 12 Months or More Total

$ in thousands Fair

5 unchanged sentences

Losses Number of Securities

30 year fixed-rate Agency RMBS (1)

929,292 ( 7,060 ) 7 — — — 929,292 ( 7,060 ) 7

Agency-CMO (1)

8 unchanged sentences

These losses are not reflected in an allowance for credit losses based on a comparison of discounted expected cash flows to current amortized cost basis.

(3) Includes non-Agency IO with fair value of $ 1.4 million for which the fair value option has been elected.

(3) Includes non-Agency IO with a fair value of $ 1.2 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 399,000 .

Table of Conten t s

December 31, 2021 Less than 12 Months 12 Months or More Total

As of December 31, 2022 Less than 12 Months 12 Months or More Total

$ in thousands Fair

9 unchanged sentences

25,417 ( 1,645 ) 6 2,934 ( 496 ) 1 28,351 ( 2,141 ) 7

Non-Agency CMBS (2)

26,592 ( 439 ) 2 — — — 26,592 ( 439 ) 2

Non-Agency RMBS (3)

2 unchanged sentences

(1) Fair value option has been elected for all Agency securities in an unrealized loss position.

(2) Includes non-Agency IO with a fair value of $ 1.7 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 2.1 million.

The remaining $ 136,000 of unrealized losses on non-Agency RMBS are included in accumulated other comprehensive income.

(2) Unrealized losses on non-Agency CMBS are included in accumulated other comprehensive income.

These losses are not reflected in an allowance for credit losses based on a comparison of discounted expected cash flows to current amortized cost basis.

As of December 31, 2022 and 2021, we did no t have an allowance for credit losses recorded on our consolidated balance sheet.

(3) Includes non-Agency IO with a fair value of $ 1.4 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 561,000 .

We recorded a $ 320,000 provision for credit losses on a single non-Agency CMBS during the year ended December 31, 2023.

The following table presents a roll-forward of our allowance for credit losses.

$ in thousands Years Ended December 31,

2023 2022 2021

Beginning allowance for credit losses — — ( 1,768 )

5 unchanged sentences

$ in thousands 2023 2022 2021

Gross realized gains on sale of MBS and GSE CRT 5,348 3,297 656,915

Gross realized losses on sale of MBS and GSE CRT ( 1,169,258 ) ( 284,521 ) ( 1,020,696 )

Impairment of investments the Company intends to sell or more likely than not will be required to sell before recovery of amortized cost basis and other impairments — — ( 101,138 )

Net unrealized gains (losses) on MBS and GSE CRT accounted for under the fair value option 118,365 ( 85,702 ) ( 492,047 )

Gross realized gains on sale of MBS 5,363 5,348 3,297

Gross realized losses on sale of MBS ( 163,391 ) ( 1,169,258 ) ( 284,521 )

Net unrealized gains (losses) on MBS accounted for under the fair value option 50,364 118,365 ( 85,702 )

Net unrealized gains (losses) on commercial loan — 404 417

Net unrealized gains (losses) on U.S.

Treasury securities 372 — —

Net realized gains (losses) on U.S.

Treasury securities 12 ( 34,198 ) —

Realized loss on loan participation interest — — ( 3,808 )

Total gain (loss) on investments, net ( 107,280 ) ( 1,079,339 ) ( 366,509 )

Table of Conten t s

The following tables present components of interest income recognized on our mortgage-backed and other securities portfolio for the years ended December 31, 2023, 2022 and 2021.

GSE CRT interest income excludes coupon interest associated with embedded derivatives not accounted for under the fair value option of $ 6.3 million for the years ended December 31, 2020 that was recorded as realized and unrealized credit derivative income (loss), net.

For the Year ended December 31, 2023

6 unchanged sentences

Treasury securities 31 291 322

Other 1,030 — 1,030

Other (inclusive of interest earned on cash balances) 2,903 — 2,903

Total 271,856 6,073 277,929

5 unchanged sentences

Non-Agency RMBS 1,223 ( 552 ) 671

Other 21 — 21

Treasury securities 1,773 ( 41 ) 1,732

Other (inclusive of interest earned on cash balances) 1,030 — 1,030

Total 198,290 ( 5,724 ) 192,566

3 unchanged sentences

Agency RMBS 201,694 ( 41,881 ) 159,813

Agency CMBS 35,822 ( 1,744 ) 34,078

Non-Agency CMBS 3,841 2,695 6,536

Non-Agency RMBS 1,950 ( 1,264 ) 686

GSE CRT 10,232 ( 2,560 ) 7,672

Other 751 — 751

Total 298,613 ( 21,213 ) 277,400

Note 5 – Other Assets

The following table summarizes our other assets as of December 31, 2022 and 2021:

$ in thousands December 31, 2022 December 31, 2021

Commercial loan, held-for-investment — 23,515

Investments in unconsolidated ventures 552 12,476

Prepaid expenses and other assets 1,179 1,518

Other (inclusive of interest earned on cash balances) 21 — 21

Total 207,506 ( 40,450 ) 167,056

Table of Conten t s

Our commercial loan was fully repaid in October 2022.

The loan had a principal balance of $ 23.9 million and a weighted average coupon rate of 8.60 % as of December 31, 2021.

During the year ended December 31, 2022 we recorded unrealized gains of $ 404,000 on our commercial loan (2021:

unrealized gains of $ 417,000 , 2020:

unrealized losses of $ 1.2 million).

We have invested in unconsolidated ventures that are managed by an affiliate of our Manager.

The unconsolidated ventures invest in our target assets.

Refer to Note 14 - “Commitments and Contingencies” for additional details regarding our commitments to these unconsolidated ventures.

Note 5 – U.S.

Treasury Securities

The following table presents the components of the carrying value of our U.S.

Treasury security as of December 31, 2023.

The security is classified as a trading security and matures in 2053.

We did not hold any U.S.

Treasury securities as of December 31, 2022.

$ in thousands December 31, 2023

Principal balance 10,000

Unamortized premium 842

Amortized cost 10,842

Unrealized gain (loss) 372

Fair value 11,214

Note 6 – Borrowings

We finance the majority of our investment portfolio through repurchase agreements.

Our repurchase agreements bear interest at a contractually agreed upon rate and generally have maturities ranging from one to six months .

We account for our repurchase agreements as secured borrowings since we maintain effective control of the financed assets.

Our repurchase agreements are subject to certain financial covenants.

We were in compliance with all of these covenants as of December 31, 2023.

The following tables summarize certain characteristics of our repurchase agreements at December 31, 2023 and 2022.

Refer to Note 7 - “Collateral Positions” for collateral pledged and held under our repurchase agreements.

December 31, 2022

December 31, 2023 December 31, 2022

$ in thousands Amount

1 unchanged sentence

Rate Weighted

Repurchase Agreements - Agency RMBS 4,234,823 4.24 % 28

Total Borrowings 4,234,823 4.24 % 28

December 31, 2021

$ in thousands Amount

(days) Amount

Outstanding Weighted

2 unchanged sentences

Total Borrowings 4,458,695 5.53 % 20 4,234,823 4.24 % 28

Our repurchase agreements bear interest at a contractually agreed upon rate.

Agency RMBS repurchase agreements generally have maturities ranging from one to six months .

Repurchase agreements are accounted for as secured borrowings since we maintain effective control of the financed assets.

The repurchase agreements are subject to certain financial covenants.

We were in compliance with all of these covenants as of December 31, 2022.

In the first half of 2020, we experienced unprecedented market conditions as a result of the COVID-19 pandemic.

We received an unusually high number of margin calls from our repurchase agreement counterparties during March 2020 following significant spread widening in both Agency and non-Agency securities.

As a result, we were unable to meet margin calls and were not in compliance with all of the financial covenants of our repurchase agreements as of March 31, 2020.

While certain of our repurchase agreement counterparties permitted our repurchase agreements to remain outstanding while we were not in compliance, other counterparties seized and sold securities that we had posted as collateral for our repurchase agreements.

As of May 7, 2020, we repaid all of our repurchase agreements that may have been in default.

Gains and losses associated with the termination of these repurchase agreements during the year ended December 31, 2020 are reported as net gain (loss) on extinguishment of debt in our consolidated statement of operations.

Table of Conten t s

Note 7 – Collateral Positions

The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements, interest rate swaps, currency forward contracts, and TBAs as of December 31, 2022 and 2021.

The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements, interest rate swaps and TBAs as of December 31, 2023 and 2022.

Refer to Note 2 - “Summary of Significant Accounting Policies - Fair Value Measurements” for a description of how we determine fair value.

Agency RMBS collateral pledged is included in mortgage-backed securities on our consolidated balance sheets.

Cash collateral pledged on centrally cleared interest rate swaps and currency forward contracts is classified as restricted cash on our consolidated balance sheets.

Cash collateral pledged on centrally cleared interest rate swaps is classified as restricted cash on our consolidated balance sheets.

Cash collateral pledged on repurchase agreements and TBAs accounted for as derivatives is classified as due from counterparties on our consolidated balance sheets.

8 unchanged sentences

Derivative instruments:

Cash 1,584 4,458

Restricted cash 121,670 103,246

2 unchanged sentences

Agency RMBS 4,712,185 4,439,583

Cash 1,584 7,985

Restricted cash 121,670 103,246

2 unchanged sentences

Repurchase agreements:

Non-cash collateral 7,216 248

Total repurchase agreements collateral held 12,108 248

Derivative instruments:

Total derivative instruments collateral held — 280

Total collateral held:

Cash 2,475 4,892

Non-cash collateral 39,130 7,216

Total collateral held 12,108 528

Table of Conten t s

Total repurchase agreements collateral held 41,605 12,108

Repurchase Agreements

4 unchanged sentences

We intend to maintain a level of liquidity that will enable us to meet margin calls.

As of December 31, 2022 and 2021, our repurchase agreement collateral ratio (MBS pledged as collateral/ repurchase agreement amount outstanding) was 105 %.

The ratio of our total repurchase agreements collateral pledged to our total repurchase agreements outstanding was 106 % as of December 31, 2023 (December 31, 2022:

105 %) based on the fair value of the securities as reported in our consolidated balance sheets.

Interest Rate Swaps

4 unchanged sentences

Certain of our FCM agreements include cross default provisions.

TBAs and Currency Forward Contracts

Our TBAs and currency forward contracts provide for bilateral collateral pledging based on market value as determined by our counterparties.

Collateral pledged with our TBA and currency forward counterparties is segregated in our books and records and can be in the form of cash or securities.

Our TBAs provide for bilateral collateral pledging based on market value as determined by our counterparties.

Collateral pledged with our TBA counterparties is segregated in our books and records and can be in the form of cash or securities.

Our counterparties have the right to repledge the collateral posted and have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the contracts changes.

8 unchanged sentences

$ in thousands Notional Amount as of December 31, 2022 Additions Settlement,

or Exercise Notional Amount as

of December 31, 2022

or Exercise Notional Amount as of December 31, 2023

Interest Rate Swaps (1)(2)

8,150,000 3,525,000 ( 7,610,000 ) 4,065,000

Currency Forward Contracts 13,596 23,485 ( 37,081 ) —

TBA Purchase Contracts 400,000 1,150,000 ( 1,550,000 ) —

1 unchanged sentence

Total 8,150,000 3,525,000 ( 7,610,000 ) 4,065,000

(1) Does not include interest rate swaps with forward start dates.

See below for additional details on our interest rate swaps with forward start dates.

(2) Notional amount as of December 31, 2022 includes $ 5.8 billion of interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate and $ 2.4 billion of interest rate swaps whereby we pay interest at a floating rate and receive interest at a fixed rate.

(1) Does not include interest rate swaps with forward start dates until the date they begin to bear interest.

See below for additional detail on our interest rate swaps with forward start dates.

(2) Notional amount as of December 31, 2023 includes $ 4.1 billion of interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate.

Notional amount as of December 31, 2022 includes $ 5.8 billion of interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate and $ 2.4 billion of interest rate swaps whereby we pay interest at a floating rate and receive interest at a fixed rate.

Refer to Note 7 - “Collateral Positions” for further information regarding our collateral pledged to and received from our derivative counterparties.

Table of Conten t s

Interest Rate Swaps

5 unchanged sentences

To a lesser extent, we also enter into interest rate swap contracts whereby we make floating-rate payments to a counterparty in exchange for the receipt of fixed-rate amounts as part of our overall risk management strategy.

Amounts recorded in accumulated other comprehensive income (“AOCI”) before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements.

Amounts recorded in accumulated other comprehensive income before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on repurchase agreements on the consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements.

We reclassified $ 10.4 million as a decrease to interest expense for the year ended December 31, 2023 (2022:

1 unchanged sentence

$ 22.0 million as a decrease).

As of December 31, 2022, $ 10.4 million (2021:

$ 30.1 million) of net unrealized gains on discontinued cash flow hedges are still included in accumulated other comprehensive income.

We expect to reclassify the remaining amount of net unrealized gains recorded in AOCI as a decrease to interest expense on repurchase agreements on the consolidated statements of operations in 2023.

As of December 31, 2023, there were no net unrealized gains on discontinued cash flow hedges (2022:

$ 10.4 million) included in accumulated other comprehensive income.

As of December 31, 2023 and 2022, we had interest rate swaps whereby we pay interest at a fixed rate and receive floating interest based on the secured overnight financing rate (“SOFR”) with the following maturities outstand ing, excluding interest rate swaps with forward start dates.

$ in thousands As of December 31, 2023

Maturities Notional Amount Weighted Average Fixed Pay Rate Weighted Average Floating Receive Rate Weighted Average Years to Maturity

Maturities Notional

Amount Weighted Average Fixed Pay Rate Weighted Average Floating Receive Rate Weighted Average Years to Maturity

Less than 3 years 950,000 2.55 % 5.38 % 1.6

1 unchanged sentence

5 to 7 years 1,150,000 0.55 % 5.38 % 6.6

7 to 10 years 1,425,000 0.55 % 4.30 % 7.8

Greater than 10 years 590,000 1.75 % 5.38 % 21.4

1 unchanged sentence

$ in thousands As of December 31, 2022

Maturities Notional Amount Weighted Average Fixed Pay Rate Weighted Average Floating Receive Rate Weighted Average Years to Maturity

Maturities Notional

Amount Weighted Average Fixed Pay Rate Weighted Average Floating Receive Rate Weighted Average Years to Maturity

Less than 3 years 1,550,000 0.09 % 4.30 % 2.2

2 unchanged sentences

7 to 10 years 1,425,000 0.55 % 4.30 % 7.8

Greater than 10 years 500,000 1.92 % 4.30 % 19.2

Total 5,800,000 0.45 % 4.30 % 6.3

As of December 31, 2022, we held $ 975.0 million notional amount of interest rate swaps with forward start dates that will receive floating interest based on SOFR (December 31, 2021:

$ 1.3 billion).

As of December 31, 2022, these interest rate swaps had a weighted average maturity of 16.5 years (December 31, 2021:

20.8 years) and a weighted average fixed pay rate of 0.89 % (December 31, 2021:

As of December 31, 2022 and December 31, 2021, we had interest rate swaps whereby we pay floating interest based on SOFR and receive interest at a fixed rate with the following maturities outstanding, excluding interest rate swaps with forward start dates.

Table of Conten t s

As of December 31, 2022, we held $ 975.0 million notional amount of SOFR-based pay fixed and receive floating interest rate swaps with forward start dates that had a weighted average maturity of 16.5 years and a weighted average fixed pay rate of 0.89 %.

We did not have any interest rate swaps with forward start dates as of December 31, 2023.

As of December 31, 2022, we had interest rate swaps whereby we pay floating interest based on SOFR and receive interest at a fixed rate with the following maturities outstanding, excluding interest rate swaps with forward start dates.

We did not have any pay floating and receive fixed interest rate swaps as of December 31, 2023.

$ in thousands As of December 31, 2022

Maturities Notional Amounts Weighted Average Floating Pay Rate Weighted Average Fixed Receive Rate Weighted Average Years to Maturity

Maturities Notional

Amount Weighted Average Floating Pay Rate Weighted Average Fixed Receive Rate Weighted Average Years to Maturity

Less than 3 years 100,000 4.30 % 4.90 % 0.9

4 unchanged sentences

Total 2,350,000 4.30 % 2.78 % 9.3

$ in thousands As of December 31, 2021

Maturities Notional Amounts Weighted Average Floating Pay Rate Weighted Average Fixed Receive Rate Weighted Average Years to Maturity

Less than 3 years 1,000,000 0.05 % 0.77 % 2.6

5 to 7 years 500,000 0.05 % 1.26 % 6.9

7 to 10 years 250,000 0.05 % 1.27 % 10.0

Total 1,750,000 0.05 % 0.98 % 4.9

As of December 31, 2022, we held $ 275.0 million notional amount of interest rate swaps with forward start dates that will pay floating interest based on SOFR.

As of December 31, 2022, these interest rate swaps had a weighted average maturity of 16.0 years and a weighted average fixed receive rate of 2.63 %.

We did not hold any such interest rate swaps as of December 31, 2021.

As of December 31, 2022, we held $ 275.0 million notional amount of SOFR-based pay floating and receive fixed interest rate swaps with forward start dates that had a weighted average maturity of 16.0 years and a weighted average fixed receive rate of 2.63 %.

We did not have any interest rate swaps with forward start dates as of December 31, 2023.

Swaptions and Currency Forward Contracts

6 unchanged sentences

If we sell or exercise an interest rate swaption, the realized gain or loss on the interest rate swaption would equal the difference between the cash or the fair value of the underlying interest rate swap received and the premium paid.

We use currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies.

We have historically used currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies.

We recognize realized and unrealized gains and losses associated with the purchases or sales of currency forward contracts in gain (loss) on derivative instruments, net in our consolidated statements of operations.

We did not have any currency forward contracts outstanding as of December 31, 2022.

As of December 31, 2021 we had $ 13.6 million of notional amount of currency forward contracts related to an investment in an unconsolidated venture denominated in euro.

Credit Derivatives

Our GSE CRTs purchased before August 24, 2015 were accounted for as hybrid financial instruments consisting of a debt host contract and an embedded credit derivative.

Embedded derivatives associated with GSE CRTs were recorded within mortgage-backed and credit risk transfer securities, at fair value, on our consolidated balance sheets.

We sold all of our GSE CRT investments that were accounted for as hybrid financial instruments in 2020.

Table of Conten t s

We did not have any currency forward contracts outstanding as of December 31, 2023 or December 31, 2022.

We primarily use TBAs that we do not intend to physically settle on the contractual settlement date as an alternative means of investing in and financing Agency RMBS.

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of December 31, 2022 and 2021.

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of December 31, 2022.

We did not have any TBAs outstanding as of December 31, 2023.

$ in thousands As of December 31, 2022

7 unchanged sentences

(2) Net carrying value of TBA sales contract includes $ 642,000 of derivative assets and $ 172,000 of derivative liabilities.

$ in thousands As of December 31, 2021

Notional Amount Implied Cost Basis Implied Market Value Net Carrying Value

TBA purchase contracts 1,600,000 1,636,906 1,633,955 ( 2,951 )

Tabular Disclosure of the Effect of Derivative Instruments on the Balance Sheet

6 unchanged sentences

Interest Rate Swaps Asset 939 20 Interest Rate Swaps Liability — —

Currency Forward Contracts — 270 Currency Forward Contracts — —

TBAs — 642 TBAs — 2,079

1 unchanged sentence

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The tables below present the effect of our credit derivatives on our consolidated statements of operations for the year ended December 31, 2020.

$ in thousands Year Ended December 31, 2020

not designated as

hedging instrument Realized gain (loss), net GSE CRT embedded derivative coupon interest Unrealized

gain (loss), net Realized and unrealized credit derivative income (loss), net

GSE CRT Embedded Derivatives ( 31,354 ) 6,323 ( 10,281 ) ( 35,312 )

Table of Conten t s

The following tables summarize the effect of interest rate swaps, interest rate swaptions, currency forward contracts and TBAs reported in gain (loss) on derivative instruments, net on the consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021.

14 unchanged sentences

Interest Rate Swaps 593,035 86,872 11,426 691,333

Interest Rate Swaptions ( 553 ) — — ( 553 )

Currency Forward Contracts 919 — ( 271 ) 648

7 unchanged sentences

Interest Rate Swaps 185,232 ( 15,803 ) ( 5,869 ) 163,560

Interest Rate Swaptions ( 553 ) — — ( 553 )

Currency Forward Contracts 209 — 970 1,179

7 unchanged sentences

Our derivative asset of $ 939,000 at December 31, 2023 (December 31, 2022:

liability of $ 11.4 million) related to centrally cleared interest rate swaps is not included in the table below as a result of this characterization of daily variation margin.

Table of Conten t s

asset of $ 20,000 ) related to centrally cleared interest rate swaps is not included in the table below as a result of this characterization of daily variation margin.

As of December 31, 2023

9 unchanged sentences

(Received) Pledged Net Amount

Derivatives (1) (2)

642 — 642 ( 642 ) — —

Total Assets 642 — 642 ( 642 ) — —

Derivatives (1) (2)

( 2,079 ) — ( 2,079 ) 642 1,297 ( 140 )

Repurchase Agreements (1)

20 unchanged sentences

Total Liabilities ( 4,236,902 ) — ( 4,236,902 ) 4,235,465 1,297 ( 140 )

(1) The fair value of securities pledged against our borrowings under repurchase agreements was $ 4.7 billion as of December 31, 2023 (December 31, 2022:

$ 4.4 billion).

We held $ 2.5 million of cash collateral under repurchase agreements as of December 31, 2023 (December 31, 2022:

$ 4.9 million).

(2) Amounts represent derivative assets and derivative liabilities which could potentially be offset against other derivative assets, derivative liabilities and cash collateral pledged or received.

(2) Cash collateral pledged by us on our currency forward contracts, TBAs and centrally cleared interest rate swaps was $ 104.8 million and $ 224.4 million at December 31, 2022 and December 31, 2021, respectively.

Cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and is therefore excluded from the tables above.

We held no cash collateral on our derivatives as of December 31, 2022 and $ 280,000 as of December 31, 2021.

(3) The fair value of securities pledged against our borrowings under repurchase agreements was $ 4.4 billion and $ 7.3 billion as of December 31, 2022 and December 31, 2021, respectively.

We pledged no cash collateral and $ 3.5 million of cash collateral under repurchase agreements as of December 31, 2022 and December 31, 2021, respectively.

We held cash collateral of $ 4.9 million and no cash collateral under repurchase agreements as of December 31, 2022 and December 31, 2021, respectively.

Table of Conten t s

(3) Cash collateral pledged by us on our derivatives was $ 121.7 million as of December 31, 2023 (December 31, 2022:

$ 104.8 million) of which $ 121.7 million relates to initial margin pledged on centrally cleared interest rate swaps (December 31, 2022:

$ 103.2 million).

Centrally cleared interest rate swaps are excluded from the tables above.

We held no cash collateral on our derivatives as of December 31, 2023 or December 31, 2022.

Note 10 – Fair Value of Financial Instruments

8 unchanged sentences

The following tables present our assets and liabilities measured at fair value on a recurring basis.

December 31, 2022

As of December 31, 2023

Fair Value Measurements Using:

2 unchanged sentences

— 5,045,306 — — 5,045,306

Treasury securities (2)

— 11,214 — — 11,214

Derivative assets — 939 — — 939

1 unchanged sentence

Total assets — 5,057,459 — 500 5,057,959

Derivative liabilities — 2,079 — — 2,079

Total liabilities — 2,079 — — 2,079

December 31, 2021

As of December 31, 2022

Fair Value Measurements Using:

$ in thousands Level 1 Level 2 Level 3 (3)

NAV as a practical expedient (2)

$ in thousands Level 1 Level 2 Level 3 NAV as a practical expedient (3)

Mortgage-backed securities (1)

6 unchanged sentences

(1) For more detail about the fair value of our MBS, refer to Note 4 - “Mortgage-Backed Securities”.

(2) For more information on U.S.

Treasury securities, refer to Note 5 - “U.S.

Treasury Securities”.

(3) Investments in unconsolidated ventures are valued using the net asset value (“NAV”) as a practical expedient and are not subject to redemption, although investors may sell or transfer their interest at the approval of the general partner of the underlying funds.

As of December 31, 2022, our unconsolidated ventures were in liquidation and plan to sell or settle their remaining investments as expeditiously as possible.

(3) We used an independent third party appraisal to value our commercial loan investment.

Table of Conten t s

As of December 31, 2022, we were invested in two unconsolidated ventures that were managed by an affiliate of our Manager.

One of the unconsolidated ventures was dissolved during the first quarter of 2023.

As of December 31, 2023, the remaining unconsolidated venture was in liquidation and plans to sell or settle its remaining investments as expeditiously as possible.

The following table shows a reconciliation of the beginning and ending fair value measurements of our commercial loan investment, which we valued utilizing Level 3 inputs.

$ in thousands December 31, 2022 December 31, 2021

$ in thousands December 31, 2022

Beginning balance 23,515

4 unchanged sentences

Unrealized gains and losses on our commercial loan investment are included in gain (loss) on investments, net in our consolidated statements of operations.

The following table summarizes the significant unobservable input used in the fair value measurement of our commercial loan investment:

Fair Value at Valuation Unobservable

$ in thousands December 31, 2021 Technique Input Rate

Commercial Loan 23,515 Discounted Cash Flow Discount rate 18.8 %

The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the consolidated balance sheets at December 31, 2023 and December 31, 2022:

15 unchanged sentences

Our Manager is not obligated to dedicate any of its employees exclusively to us, nor is our Manager obligated to dedicate any specific portion of time to our business.

During the year ended December 31, 2022, we reimbursed our Manager $ 1.5 million (2021:

The costs of support personnel provided by our Manager for the year ended December 31, 2023 were $ 1.6 million (2022:

$ 1.5 million;

$ 1.1 million) for costs of support personnel.

$ 1.1 million).

Management Fee

4 unchanged sentences

We do not pay any management fees on our investments in unconsolidated ventures that are managed by an affiliate of our Manager.

Table of Conten t s

Expense Reimbursement

5 unchanged sentences

Incurred costs, prepaid or expensed 6,963 8,085 7,108

Incurred costs, charged against equity as a cost of raising capital 223 692 239

Incurred costs, charged or expected to be charged against equity as a cost of raising capital 257 223 692

Total incurred costs, originally paid by our Manager 7,220 8,308 7,800

7 unchanged sentences

During the year ended December 31, 2023, we repurchased and retired 151,637 shares of Series B Preferred Stock and 271,031 shares of Series C Preferred Stock and recorded a gain on repurchase and retirement of preferred stock of $ 1.5 million.

As of December 31, 2022, we had authority to purchase 1,337,634 additional shares of our Series B Preferred Stock and 1,316,470 additional shares of our Series C Preferred Stock under the current share repurchase program.

During the year ended December 31, 2022, we repurchased and retired 1,662,366 shares of Series B Preferred Stock and 3,683,530 shares of Series C Preferred Stock and recorded a gain on repurchase and retirement of preferred stock of $ 14.2 million.

As of December 31, 2023, we had authority to repurchase 1,185,997 additional shares of our Series B Preferred Stock and 1,045,439 additional shares of our Series C Preferred Stock under the current share repurchase program.

Holders of our Series B Preferred Stock are entitled to receive dividends at an annual rate of 7.75 % of the liquidation preference of $ 25.00 per share or $ 1.9375 per share per annum until December 27, 2024.

After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month London Interbank Offered Rate ("LIBOR") plus a spread of 5.18 % of the $ 25.00 liquidation preference per annum.

After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month CME Term SOFR and the applicable credit spread adjustment ( 0.26161 %) plus a spread of 5.18 % of the $ 25.00 liquidation preference per annum.

Dividends are cumulative and payable quarterly in arrears.

Holders of our Series C Preferred Stock are entitled to receive dividends at an annual rate of 7.50 % of the liquidation preference of $ 25.00 per share or $ 1.875 per share per annum until September 27, 2027.

After September 27, 2027, holders are entitled to receive dividends at a floating rate equal to three-month LIBOR plus a spread of 5.289 % of the $ 25.00 liquidation preference per annum.

After September 27, 2027, holders are entitled to receive dividends at a floating rate equal to three-month CME Term SOFR and the applicable credit spread adjustment ( 0.26161 %) plus a spread of 5.289 % of the $ 25.00 liquidation preference per annum.

Dividends are cumulative and payable quarterly in arrears.

The United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it will cease to publish three-month USD LIBOR settings on July 1, 2023.

We do not currently intend to amend our Series B or Series C Preferred Stock to change the existing USD LIBOR cessation fallback language.

We have the option to redeem shares of our Series B Preferred Stock after December 27, 2024 and shares of our Series C Preferred Stock after September 27, 2027 for $ 25.00 per share, plus any accumulated and unpaid dividends through the date of the redemption.

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No fractional shares were issued in connection with the reverse stock split.

Instead, each stockholder holding fractional shares received cash, in lieu of such fractional shares, in an amount determined based on the closing price of our common stock at the

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Effective Time.

Instead, each stockholder holding fractional shares

received cash, in lieu of such fractional shares, in an amount determined based on the closing price of our common stock at the Effective Time.

The reverse stock split applied to all of our outstanding shares of common stock and did not affect any stockholder’s ownership percentage of our common stock, except for changes resulting from the payment of cash for fractional shares.

As of December 31, 2023, we may sell up to 6,300,529 shares of our common stock from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents.

These shares are registered with the SEC under our shelf registration statement (as amended and/or supplemented).

During the year ended December 31, 2023, we sold 9,699,471 shares (2022:

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$ 1.3 million) in commissions and fees.

We did not have any remaining shares authorized under our at-the-market program as of December 31, 2022.

During the years ended December 31, 2023 and December 31, 2022, we did not repurchase any shares of our common stock.

As of December 31, 2023, we had authority to purchase 1,816,398 shares of our common stock through our share repurchase program.

In May 2022, we granted 32,571 restricted shares of common stock to our independent directors.

The restricted shares will become unrestricted shares of common stock on the first anniversary of the grant date unless forfeited, subject to certain conditions that accelerate vesting.

For the year ended December 31, 2023, we granted 45,567 restricted shares of common stock to our independent directors (December 31, 2022:

Restricted shares become unrestricted shares of common stock on the first anniversary of the grant date unless forfeited, subject to certain conditions that accelerate vesting.

Accumulated Other Comprehensive Income

The following tables present the components of total other comprehensive income (loss), net and accumulated other comprehensive income (“AOCI”) at December 31, 2023 and December 31, 2022, respectively.

The tables exclude gains and losses on MBS and GSE CRTs that are accounted for under the fair value option.

The tables exclude gains and losses on MBS that are accounted for under the fair value option.

December 31, 2023

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Unrealized gain (loss) on mortgage-backed securities, net — ( 91 ) — ( 91 )

Reclassification of unrealized loss on available-for-sale securities to (increase) decrease in provision for credit losses — 320 — 320

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense — — ( 10,405 ) ( 10,405 )

Currency translation adjustments on investment in unconsolidated venture ( 10 ) — — ( 10 )

Reclassification of currency translation loss on investment in unconsolidated venture to other investment income (loss), net 123 — — 123

Total other comprehensive income (loss) 113 229 ( 10,405 ) ( 10,063 )

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AOCI balance at end of period ( 113 ) 469 10,405 10,761

Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified

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to interest expense on repurchase agreements on the consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on repurchase agreements on the consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

Dividends declared per share on our common stock have been retroactively adjusted to reflect our one-for-ten reverse stock split that was effected following the close of business on June 3, 2022.

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$ in thousands, except per share amounts Dividends Declared

Series A Preferred Stock Per Share In Aggregate Date of Payment

February 19, 2021 0.4844 2,713 April 26, 2021

(1) On June 16, 2021, we paid a final dividend of $ 0.2691 per share ($ 1.5 million in aggregate) in connection with the redemption of our Series A Preferred Stock.

The final dividend was treated as a component of the redemption price for tax purposes.

$ in thousands, except per share amounts Dividends Declared

Series B Preferred Stock Per Share In Aggregate Date of Payment

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February 16, 2022 0.46875 5,391 March 28, 2022

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$ in thousands, except per share amounts Dividends Declared

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Fiscal Tax Year Dividends Declared in Prior Year and Taxable in Current Year Dividends Declared and Taxable in Current Year Ordinary Dividends Return of Capital Capital Gain Distribution

Series A Preferred Stock Dividends

Fiscal tax year 2021 0.484400 0.484400 0.968800 — —

Series B Preferred Stock Dividends

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Fiscal tax year 2023 (CUSIP 46131B704) 0.650000 1.600000 2.250000 — —

— 1.550000 0.873081 0.676919 —

Fiscal tax year 2022 (CUSIP 46131B704) (1)

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This dividend is a 2023 dividend for federal income tax purposes.

(2) Excludes common stock dividend of $ 0.09 per share declared on December 27, 2021 that had a record date of January 11, 2022.

This dividend is a 2022 dividend for federal income tax purposes.

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Note 13 – Earnings (Loss) per Common Share

Common share amounts and earnings (loss) per share have been retroactively adjusted to reflect our one-for-ten reverse stock split that was effected following the close of business on June 3, 2022.

Earnings per share for the years ended December 31, 2022, 2021 and 2020 is computed as follows:

Earnings (loss) per share for the years ended December 31, 2023, 2022 and 2021 is computed as follows:

In thousands except per share amounts Years Ended December 31,

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Diluted ( 0.85 ) ( 12.21 ) ( 4.82 )

The following potential weighted average common shares were excluded from diluted earnings per share as the effect would be anti-dilutive.

For the year ended December 31, 2022, 1,216 shares for restricted stock awards.

The following potential weighted average common shares were excluded from diluted earnings per share as the effect would be antidilutive:

for the year ended December 31, 2023:

944 shares for restricted stock awards.

(December 31, 2022:

1,606 for restricted stock awards, December 31, 2020:

1,216 for restricted stock awards;

December 31, 2021:

1,606 for restricted stock awards).

Note 14 – Commitments and Contingencies

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Our material off balance sheet commitments and contingencies as of December 31, 2023 are discussed below.

As discussed in Note 5 - “Other Assets”, we have invested in unconsolidated ventures that are sponsored by an affiliate of our Manager.

The unconsolidated ventures are structured as partnerships, and we invested in the partnerships as a limited partner.

Both of the unconsolidated ventures are in liquidation and plan to sell or settle their remaining investments as expeditiously as possible.

Until the ventures complete their liquidation, we are committed to fund $ 6.3 million in additional capital to cover future expenses should they occur.

We have invested in an unconsolidated venture that is sponsored by an affiliate of our Manager.

The unconsolidated venture is structured as a partnership, and we invested in the partnership as a limited partner.

The unconsolidated venture is in liquidation and plans to sell or settle its remaining investments as expeditiously as possible.

Until the venture completes its liquidation, we are committed to fund $ 2.9 million in additional capital to cover future expenses should they occur.

Note 15 – Subsequent Events

We declared the following dividends on February 21, 2024:

a Series B Preferred Stock dividend of $ 0.4844 per share payable on March 27, 2023 to our stockholders of record as of March 5, 2023, and a Series C Preferred Stock dividend of $ 0.46875 per share payable on March 27, 2023 to our stockholders of record on March 5, 2023.

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a Series B Preferred Stock dividend of $ 0.4844 per share payable on March 27, 2024 to our stockholders of record as of March 5, 2024, and a Series C Preferred Stock dividend of $ 0.46875 per share payable on March 27, 2024 to our stockholders of record as of March 5, 2024.

INVESCO MORTGAGE CAPITAL INC.

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Ending balance — — 23,515

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

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Day Director February 22, 2024

/s/ Carolyn Gibbs Director February 22, 2024

Carolyn Gibbs

/s/ Carolyn B.

Handlon Director February 22, 2024

/s/ Edward J.

Hardin Director February 21, 2023

Director February 21, 2023

/s/ Katharine W.

Kelley Director February 22, 2024

Liu Director February 22, 2024

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Lockhart Director February 22, 2024

/s/ Gregory G.

McGreevey Director February 21, 2023

Zayicek Director February 22, 2024

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 9A. Controls and Procedures