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Inflation, financial conditions, monetary policy initiatives, interest rates and interest rate volatility may have an impact on spreads.
+Added: Table of Content s
Prepayment Risk
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In general, an increase in prepayment rates will accelerate the accretion of purchase discounts, thereby increasing the interest income earned on the investments.
−Removed: Uncertainty regarding the rate of inflation, fiscal and monetary policy initiatives, elevated interest rate volatility and other factors have made it more difficult to predict prepayment levels for the securities in our portfolio.
+Added: Uncertainty regarding the rate of inflation, fiscal and monetary policy initiatives, elevated interest rate volatility and other factors make it more difficult to predict prepayment levels for the securities in our portfolio.
As a result, it is possible that realized prepayment behavior will be materially different from our expectations.
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However, if prepayment rates decrease in a rising interest rate environment, then the life of the fixed-rate portion of the related assets could extend beyond the term of the swap agreement or other hedging instrument.
−Removed: This could have a negative impact on our results from operations, as borrowing costs would no longer be fixed after the end of the hedging instrument, while the income earned on the hybrid adjustable-rate assets would remain fixed.
−Removed: This situation may also cause the market value of our hybrid adjustable-rate assets to decline, with little or no offsetting gain from the related hedging transactions.
+Added: This could have a negative impact on our results from operations, as borrowing costs would no longer be fixed after the end of the hedging instrument, while the income earned on the assets would remain fixed.
+Added: This situation may also cause the market value of our assets to decline, with little or no offsetting gain from the related hedging transactions.
In extreme situations, we may be forced to sell assets to maintain adequate liquidity, which could cause us to incur losses.
Market Value Risk
−Removed: Our available-for-sale securities are reflected at their estimated fair value with unrealized gains and losses excluded from earnings and reported in other comprehensive income under ASC Topic 320.
−Removed: The estimated fair value of these securities fluctuates primarily due to changes in interest rates and other factors.
+Added: The estimated fair value of our securities fluctuates primarily due to changes in interest rates and other factors.
Generally, in a rising interest rate environment, the estimated fair value of these securities would be expected to decrease;
3 unchanged sentences
When these or similar market conditions are present, margin call risk is elevated and our operating results and financial condition may be materially impacted.
−Removed: The sensitivity analysis table presented below shows the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments and net interest income, including net interest paid or received under interest rate swaps, as of March 31, 2025 and December 31, 2024, assuming a static portfolio and constant financing and asset spreads.
+Added: The sensitivity analysis table presented below shows the estimated impact of an instantaneous parallel shift in the yield curve, up and down 50 and 100 basis points, on the market value of our interest rate-sensitive investments and net interest income, including net interest paid or received under interest rate swaps, as of June 30, 2025 and December 31, 2024, assuming a static portfolio and constant financing and asset spreads.
When evaluating the impact of changes in interest rates, prepayment assumptions and principal reinvestment rates are adjusted based on our Manager’s expectations.
The analysis presented utilized assumptions, models and estimates of our Manager based on our Manager’s judgment and experience.
−Removed: As of March 31, 2025 As of December 31, 2024
+Added: As of June 30, 2025 As of December 31, 2024
Change in Interest Rates Percentage Change in Projected Net Interest Income Percentage Change in Projected Portfolio Value Percentage Change in Projected Net Interest Income Percentage Change in Projected Portfolio Value
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Certain assumptions have been made in connection with the calculation of the information set forth in the foregoing interest rate sensitivity table and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes.
−Removed: The interest rate scenarios assume interest rates as of March 31, 2025 and December 31,
−Removed: Furthermore, while the analysis reflects the estimated impact of interest rate increases and decreases on a static portfolio, we actively manage the size and composition of our investment and swap portfolios, which can result in material changes to our interest rate risk profile.
+Added: The interest rate scenarios assume interest rates as of June 30, 2025 and December 31, 2024.
+Added: Furthermore, while the analysis reflects the estimated impact of interest rate increases and decreases on a static portfolio, we actively manage the size and composition of our investment and swap portfolios, which can result in material changes to our
+Added: Table of Content s
+Added: interest rate risk profile.
When applicable, our scenario analysis assumes a floor of 0% for U.S.
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Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table.
+Added: We have previously invested in non-Agency CMBS and non-Agency RMBS and may invest in these types of assets again in the future.
+Added: The following sections discuss additional risks associated with credit investments in commercial and residential real estate markets.
Real Estate Risk
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In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay their loans, which could also cause us to suffer losses.
−Removed: We retain the risk of potential credit losses on all of our residential mortgage investments.
+Added: We retain the risk of potential credit losses on all of our commercial and residential mortgage investments.
We seek to manage this risk through our pre-acquisition due diligence process.
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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.