What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-05 compared with 2025-08-08 · 192 added, 223 removed, 499 unchanged (45% of the section changed)

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together with its consolidated subsidiaries (which does not include us), as "Invesco."

The following discussion should be read in conjunction with our condensed consolidated financial statements and the accompanying notes to our condensed consolidated financial statements, which are included in Item 1 of this Quarterly Report, as well as the information contained in our most recent Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

The following discussion should be read in conjunction with our condensed consolidated financial statements and the accompanying notes to our condensed consolidated financial statements, which are included in Item 1 of this Quarterly Report, as well as the information contained in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

Forward-Looking Statements

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Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Executive Summary

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Our objective is to provide attractive risk-adjusted returns to our stockholders, primarily through dividends and secondarily through capital appreciation.

As of June 30, 2025, we were invested in:

As of September 30, 2025, we were invested in:

• residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S.

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We operate our business in a manner that permits our exclusion from the definition of “Investment Company” under the 1940 Act.

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Market Conditions and Impacts

Macroeconomic factors that affect our business include inflation, economic growth, employment conditions, interest rates, interest rate volatility, fiscal and monetary policy, public policy, financial conditions, spread premiums, residential and commercial real estate prices, credit availability, the health of the banking system, consumer personal income and spending and corporate earnings.

Of these macroeconomic factors, financial conditions, inflation, employment conditions, monetary policy, public policy, interest rates and interest rate volatility had the most direct impacts on our performance and financial condition during the second quarter of 2025.

Financial conditions were quite volatile during the second quarter.

They tightened sharply in the first week of April following the initial tariff announcements on April 2 nd , which triggered a broad repricing across risk markets.

Despite the early turbulence, financial conditions ended the quarter modestly accommodative, supported by the subsequent delay in tariff implementation.

Equity markets, which experienced declines of over 10% in the immediate aftermath of April 2 nd , rebounded strongly.

The S&P 500 finished the quarter up 10.6%, while the NASDAQ posted a gain of 17.7%.

Credit markets followed a similar trajectory, with spreads in investment grade, high yield and emerging market debt all widening materially in early April before tightening by quarter end.

Inflation remained relatively stable during the quarter, though it continued to exceed the Federal Reserve’s 2% target.

The headline consumer price index (“CPI”) rose to 2.7%, up from 2.4% at the end of March.

Core CPI, which excludes food and energy, increased modestly to 2.9% year-over-year, compared to 2.8% previously.

Despite these increases, investor expectations for future inflation declined, reflecting concerns about the potential impact of fiscal and trade policies on long-term economic growth.

Breakeven rates on Treasury inflation-protected securities moved lower during the quarter.

The two-year breakeven fell to 2.5% from 3.3%, while the five-year breakeven declined to 2.3% from 2.6%.

Meanwhile, labor market data pointed to continued stability.

After revisions, the economy added an average of 64,000 jobs per month during the second quarter, down from an average of 111,000 jobs in the first quarter.

The headline unemployment rate decreased slightly during the second quarter, dropping to 4.1% from 4.2%.

Prior to the revisions to the employment data, stable employment data and declining recession risks led to a moderation in market expectations for near-term monetary policy action.

Federal Funds futures market expectations at the end of June 2025 reflected expectations for an additional 50 to 75 basis points of rate cuts by year end, down from 100 basis points at the end of April.

Quantitative tightening continued at a slower pace in the second quarter, as the Federal Reserve reduced the monthly runoff of U.S.

Treasuries on its balance sheet to $5 billion, down from $25 billion, while maintaining the $35 billion cap on Agency MBS runoff.

Interest rates declined across the front end of the Treasury yield curve during the second quarter, while long-end rates moved higher.

This reflected market expectations for more accommodative policy from the FOMC, alongside concerns about a potential increase in Treasury issuance over the coming years.

The yield on the two-year Treasury fell 19 basis points to 3.72%, the five-year Treasury yield declined 19 basis points to 3.79% and the yield on the ten-year Treasury decreased 1 basis point to 4.23%.

In contrast, the yield on the 30-year Treasury increased 16 basis points to 4.77%.

Interest rate volatility spiked in early April as the market digested the potential impact of the April 2 nd tariff announcements but quickly subsided.

By quarter end, both long and short-dated volatility had declined.

As a result of the spike in interest rate volatility and broad selloff in risk assets, Agency RMBS sharply underperformed Treasuries in early April.

However, the 90-day pause in tariff implementation announced on April 9 th provided support for financial markets, benefiting the Agency MBS sector.

Performance was relatively consistent across the 30-year conventional coupon stack, with coupons ranging from 2.5% to 6.5%, outperforming their Treasury hedges by 20 to 30 basis points.

Supply and demand technicals for higher coupon Agency RMBS were supportive despite muted demand from banks and overseas investors.

A modest seasonal uptick in origination activity was more than offset by strong inflows into fixed income funds, with money managers allocating a significant portion of these flows to the sector given its attractive relative value.

Prepayment speeds increased during the quarter due to the combination of higher refinancing activity related to the decline in mortgage rates earlier in the year and the seasonal increase in housing turnover.

However, premiums on specified pool collateral were largely unchanged during the quarter with mortgage rates relatively stable since March.

Agency CMBS risk premiums increased with broader financial markets during April before improving in May and June.

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June 30, 2025 March 31, 2025 December 31, 2024 September 30,

2024 June 30, 2024 One Quarter Change One Year

Of these macroeconomic factors, financial conditions, inflation, employment conditions, monetary policy, interest rates and interest rate volatility had the most direct impact on our performance and financial condition during the third quarter of 2025.

Financial conditions remained accommodative during the third quarter as volatility measures declined sharply and equity markets performed well, with the S&P 500 Index and the NASDAQ posting gains of 8.1% and 11.4%, respectively.

Credit markets ended the quarter largely unchanged, with investment-grade and high-yield corporate bond spreads widening slightly, while emerging market debt spreads tightened modestly.

Inflation continued to exceed the Federal Reserve’s 2% target over the quarter, with the headline consumer price index (“CPI”) rising 2.9% year-over-year in August, up from 2.7% at the end of June, and core CPI, which excludes food and energy, increased by 3.1% year-over-year, compared to 2.9% previously.

Investor expectations for future inflation increased modestly, reflecting concerns about the potential impact of fiscal and trade policies on consumer prices.

Breakeven rates on Treasury inflation-protected securities moved higher during the quarter, with the two-year breakeven rising to 2.6% from 2.5%, and the five-year breakeven increasing to 2.5% from 2.3%.

Meanwhile, labor market data pointed to continued sluggish growth.

The economy added an average of 51,000 jobs in July and August (with September data delayed due to the government shutdown), down slightly from the second quarter average of 55,000.

The headline unemployment rate increased slightly, moving from 4.1% in June to 4.3% in August.

Despite inflation levels consistently above the Federal Reserve’s 2% target, the Federal Open Market Committee (“FOMC”) lowered its benchmark Federal Funds target rate by 25 basis points in mid-September, citing signs of a weaker labor market.

As of the end of September, Federal Funds futures reflected expectations for an additional 50 basis points of rate cuts by year end.

Quantitative tightening continued through the third quarter, with the Federal Reserve maintaining its monthly runoff of U.S.

Treasuries at $5 billion, while maintaining the $35 billion cap on Agency MBS runoff.

Interest rates declined across the Treasury yield curve during the third quarter, reflecting market expectations for a more accommodative policy stance from the Federal Reserve and continued weakness in the labor market.

The yield on the two-year Treasury fell 12 basis points to 3.60%, the five-year yield declined 6 basis points to 3.73% and the ten-year yield decreased by 8 basis points to 4.15%.

Interest rate volatility declined notably throughout the quarter, as the market coalesced around expectations for two additional rate cuts by the Federal Reserve before year end.

Agency RMBS performed well during the third quarter, benefiting from the persistent decline in interest rate volatility as well as the overall supportive environment for risk assets.

While demand from commercial banks and overseas investors remained relatively subdued during the quarter, the steepening of the yield curve in the front end, aided by expectations for additional monetary policy easing in the coming months, improved investor sentiment for Agency RMBS as money managers and mortgage REITs deployed inflows into the sector.

The outperformance was broadly distributed across the 30-year conventional mortgage coupon stack, with discount coupons recording the largest gains.

Coupons ranging from 2.0% to 5.0% outperformed their Treasury hedges by 90 to 130 basis points, while 5.5% to 6.5% coupons posted more modest excess returns relative to Treasuries of 30 to 80 basis points.

Performance in higher coupons was dampened by elevated prepayment risk, as 30-year mortgage rates declined approximately 0.5% during the quarter.

Prepayment speeds increased marginally during the quarter as the seasonal decline in housing turnover was offset by a notable increase in refinancing activity, which is expected to persist in higher coupons over the next few months.

Positively, premiums on specified pool collateral improved in higher coupons during the quarter as investors sought prepayment protection.

Agency CMBS risk premiums continued to decline with broader financial markets.

September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024 One Quarter Change One Year Change

Interest Rates

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30 Year Treasury 4.73 % 4.77 % 4.61 % 4.78 % 4.13 % (0.04) % 0.60 %

(in basis points) June 30, 2025 March 31, 2025 December 31, 2024 September 30,

2024 June 30, 2024 One Quarter Change One Year

(in basis points) September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 September 30, 2024 One Quarter Change One Year Change

Swap Spreads (1)

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Treasury security with a similar maturity.

We remain cautious on the near-term outlook for Agency RMBS, reflecting our belief that elevated near-term uncertainty regarding trade, fiscal and monetary policy warrants a modestly more defensive posture.

However, our long-term outlook for Agency RMBS is favorable, as we expect demand to improve in higher coupons given attractive valuations, continued stabilization in interest rate volatility and a steeper yield curve.

Lastly, we remain positive on Agency CMBS as limited issuance, strong fundamental performance and stable cash flow profiles should provide favorable support for this sector.

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Given the notable decline in interest rate volatility, we remain constructive on Agency RMBS, though we view near term risks as balanced following its recent strong performance.

Our longer-term outlook for the sector remains favorable, as we expect investor demand to broaden given lower interest rate volatility, a steeper yield curve and attractive valuations.

In addition, Agency CMBS continues to offer attractive risk-adjusted yields and diversification benefits relative to our Agency RMBS holdings, supported by its stable cash flow profile and lower sensitivity to interest rate fluctuations.

Lastly, we believe anticipated changes to bank regulatory capital rules would increase demand for Agency RMBS and Agency CMBS, providing further support for both sectors.

Investment Activities

The table below shows the composition of our investment portfolio as of June 30, 2025, December 31, 2024 and June 30, 2024.

$ in thousands June 30, 2025 December 31, 2024 June 30, 2024

The table below shows the composition of our investment portfolio as of September 30, 2025, December 31, 2024 and September 30, 2024.

$ in thousands September 30, 2025 December 31, 2024 September 30, 2024

30 year fixed-rate pass-through, at fair value 4,778,759 4,541,525 5,107,814

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Non-Agency RMBS, at fair value — 7,224 7,673

Subtotal 5,185,559 5,445,508 4,836,827

TBAs, at implied market value (1)

Total investment portfolio 5,749,238 5,445,508 5,873,696

(1) Our presentation of TBAs in the table above represents management's view of our investment portfolio and does not reflect how we record TBAs on our condensed consolidated balance sheets under U.S.

GAAP, we record TBAs that we do not intend to physically settle on the contractual settlement date as derivative financial instruments.

We value TBAs on our condensed consolidated balance sheets at net carrying value, which represents the difference between the fair market value and the implied cost basis of the TBAs.

We view our TBA dollar roll transactions as a form of off-balance sheet financing.

For further information on how management evaluates our at-risk leverage, see Non-GAAP Financial Measures below.

As o f June 30, 2025, our holdings of 30 year fixed-rate Agency RMBS represented approximately 81% of our total investment portfolio versus 83% as of December 31, 2024 and 87% as of June 30, 2024.

Our 30 year fixed-rate Agency RMBS holdings as of June 30, 2025, December 31, 2024 and June 30, 2024 consisted of specified pools with coupon distributions as shown in the table below.

June 30, 2025 December 31, 2024 June 30, 2024

As o f September 30, 2025, our holdings of 30 year fixed-rate Agency RMBS represented approximately 83% of our total investment portfolio compared to 83% as of December 31, 2024 and 87% as of September 30, 2024.

Our 30 year fixed-rate Agency RMBS holdings as of September 30, 2025, December 31, 2024 and September 30, 2024 consisted of specified pools with coupon distributions as shown in the table below.

September 30, 2025 December 31, 2024 September 30, 2024

$ in thousands Fair Value Percentage Period-end Weighted Average Yield Fair Value Percentage Period-end Weighted Average Yield Fair Value Percentage Period-end Weighted Average Yield

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Total 30 year fixed-rate Agency RMBS 4,778,759 100.0 % 5.51 % 4,541,525 100.0 % 5.50 % 5,107,814 100.0 % 5.43 %

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Our holdings of Agency RMBS are primarily focused on specified pools with attractive prepayment profiles.

We seek to capitalize on the impact of prepayments on our investment portfolio by purchasing specified pools with characteristics that optimize borrower incentive to prepay for both our premium and discount priced investments.

The table below shows the specified pool characteristics of our 30 year fixed-rate Agency RMBS holdings as of June 30, 2025, December 31, 2024 and June 30, 2024.

June 30, 2025 December 31, 2024 June 30, 2024

The table below shows the specified pool characteristics of our 30 year fixed-rate Agency RMBS holdings as of September 30, 2025, December 31, 2024 and September 30, 2024.

September 30, 2025 December 31, 2024 September 30, 2024

$ in thousands Fair Value Percentage Fair Value Percentage Fair Value Percentage

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Low credit score 1,259,039 26.3 % 1,328,867 29.3 % 1,332,544 26.1 %

Investment property 57,800 1.4 % — — % — — %

Total 30 year fixed-rate Agency RMBS 4,778,759 100.0 % 4,541,525 100.0 % 5,107,814 100.0 %

As of June 30, 2025, our holdings of Agency CMBS represented approximately 17% of our total investment portfolio versus 15% as of December 31, 2024 and 8% as of June 30, 2024.

Our Agency CMBS benefit from prepayment protection characteristics and have an attractive return profile.

As of September 30, 2025, our holdings of Agency CMBS represented approximately 16% of our total investment portfolio compared to 15% as of December 31, 2024 and 11% as of September 30, 2024.

Our holdings of Agency CMBS benefit from prepayment protection characteristics and have an attractive return profile.

Further, the hedging costs related to these holdings are economical as they are less sensitive to interest rate risk given prepayment protection and scheduled balloon maturity payments.

As of June 30, 2025, approximately 81% of our Agency CMBS were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.

As of September 30, 2025, approximately 81% of our Agency CMBS holdings were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.

We sold our remaining investments in non-Agency securities during 2025.

As of December 31, 2024 and June 30, 2024, our holdings of non-Agency securities represented less than 1% of our total investment portfolio.

As of December 31, 2024 and September 30, 2024, our holdings of non-Agency securities represented less than 1% of our total investment portfolio.

Financing and Other Liabilities

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Maximum balance (2)

June 30, 2024 4,260,475 4,251,953 4,269,254

September 30, 2024 5,184,885 5,004,504 5,184,885

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June 30, 2025 4,635,881 4,577,566 4,635,881

September 30, 2025 5,150,081 4,889,782 5,150,081

(1) Average quarterly balance for each period is based on month-end balances.

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We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes.

During the six months ended June 30, 2025, we entered into interest rate swaps with a notional amount of $725.0 million and terminated existing interest rate swaps with a notional amount of $485.0 million.

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During the nine months ended September 30, 2025, we entered into interest rate swaps with a notional amount of $745.0 million and terminated existing interest rate swaps with a notional amount of $630.0 million.

We also use futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance.

During the six months ended June 30, 2025, we entered into futures contracts with a notional amount of $2.9 billion and terminated existing futures contracts with a notional amount of $3.5 billion.

Daily variation margin for interest rate swaps and futures contracts is characterized as settlement of the derivative itself rather than collateral and is recorded as a realized gain or loss in our condensed consolidated statement of operations.

During the nine months ended September 30, 2025, we entered into futures contracts with a notional amount of $4.2 billion and terminated existing futures contracts with a notional amount of $4.6 billion.

Additionally, we have used and may in the future use short positions in TBAs to manage risk and economically hedge a portion of our exposure to changes in Agency RMBS valuations.

Capital Activities

As of June 30, 2025, we had 6,600,754 shares of our common stock remaining available for sale from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents.

The table below shows sales of our common stock under equity distribution agreements during the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

As of September 30, 2025, we had 20,388,007 shares of our common stock remaining available for sale from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents.

The table below shows sales of our common stock under equity distribution agreements during the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

Shares in ones, $ in thousands 2025 2024 2025 2024

Shares sold 4,638,385 10,084,138 9,133,192 12,211,131

Cash proceeds, net of fees paid to placement agents 2,163 16,059 38,231 19,378

Fees paid to placement agents 458 1,123 942 1,369

For information on dividends declared during the six months ended June 30, 2025 and 2024, see Note 10 - "Stockholders' Equity" of our condensed consolidated financial statements in Part I.

Item 1 of this report on Form 10-Q.

During the six months ended June 30, 2025, we did not repurchase any shares of our common stock.

Cash proceeds, net of fees paid to placement agents 36,145 88,684 74,376 108,062

For information on dividends declared during the nine months ended September 30, 2025 and 2024, see Note 10 - “Stockholders' Equity” of our condensed consolidated financial statements in Part I.

Item 1 of this quarterly report on Form 10-Q.

During the nine months ended September 30, 2025, we did not repurchase any shares of our common stock.

In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock.

During the three and six months ended June 30, 2025, we repurchased and retired 96,803 and 186,949 and shares of Series C Preferred Stock, respectively.

During the three and six months ended June 30, 2024, we repurchased and retired 44,661 and 138,008 shares of Series B Preferred Stock, respectively, and 105,492 and 201,409 shares of Series C Preferred Stock, respectively.

During the three and nine months ended September 30, 2025, we repurchased and retired 89,223 and 276,172 shares of Series C Preferred Stock, respectively.

During the three and nine months ended September 30, 2024, we repurchased and retired no shares and 138,008 shares of Series B Preferred Stock, respectively, and 66,507 and 267,916 shares of Series C Preferred Stock, respectively.

We redeemed all outstanding shares of our Series B Preferred Stock in December 2024.

As of June 30, 2025, we had authority to repurchase 519,710 additional shares of our Series C Preferred Stock under the current preferred stock share repurchase program.

As of September 30, 2025, we had authority to repurchase 430,487 additional shares of our Series C Preferred Stock under the current preferred stock share repurchase program.

Book Value per Common Share

We calculate book value per common share as follows.

In thousands except per share amounts June 30, 2025 December 31, 2024

In thousands except per share amounts September 30, 2025 December 31, 2024

Numerator (adjusted equity):

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Book value per common share 8.41 8.92

Our book value per common share decreased 9.8% as of June 30, 2025 compared to December 31, 2024.

Our book value per common share decreased 5.7% as of September 30, 2025 compared to December 31, 2024.

The decrease in our book value per common share was primarily due to losses on derivative instruments, dividends declared and expenses, which were partially offset by net interest income and gains on investments.

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“Quantitative and Qualitative Disclosures About Market Risk” for interest rate risk and its impact on fair value.

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Critical Accounting Policies and Estimates

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Results of Operations

The table below presents information from our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

The table below presents information from our condensed consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands, except share data 2025 2024 2025 2024

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Diluted 67,582,683 56,233,031 65,495,971 51,395,488

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Interest Income and Average Earning Asset Yields

The table below presents information related to our average earning assets and earning asset yields for the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

The table below presents information related to our average earning assets and earning asset yields for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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All yields are annualized.

Total average earning assets increased $231.8 million and $340.1 million for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Total average earning assets decreased $184.1 million for the three months ended September 30, 2025 and increased $164.3 million for the nine months ended September 30, 2025 compared to the same periods in 2024.

Changes in our average earning assets are a factor of our total stockholders' equity and our desired leverage levels.

Average earning asset yields decreased 5 basis points and 6 basis points for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Average earning asset yields increased 11 basis points for the three months ended September 30, 2025 and were unchanged for the nine months ended September 30, 2025 compared to the same periods in 2024.

Changes in our average earning asset yields are driven by the composition of our investments, amortized cost of our securities and prepayment rates.

Our interest income includes coupon interest and net (premium amortization) discount accretion as shown in the table below.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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Total interest income 72,916 73,825 217,386 210,436

Our interest income increased for the three and six months ended June 30, 2025 compared to the same periods in 2024 due to higher average earning assets.

Our interest income decreased slightly for the three months ended September 30, 2025 compared to the same period in 2024 as a decrease in average earning assets was largely offset by an increase in average earning asset yields.

Interest income increased $7.0 million for the nine months ended September 30, 2025 compared to the same period in 2024 due to higher average earning assets.

Prepayment Speeds

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For Agency RMBS where we do not estimate prepayments, premium amortization and discount accretion are not impacted by prepayments until actual prepayments occur.

For those securities on which we do estimate prepayments, expected future prepayment speeds are estimated on at least a quarterly basis.

For Agency RMBS purchased at a substantial premium relative to principal value, expected future prepayment speeds are estimated on at least a quarterly basis.

If the actual prepayment speed during the period is faster than estimated, the amortization on securities purchased at a premium to par value will be accelerated, resulting in lower interest income recognized.

Conversely, for securities purchased at a discount to par value, interest income will be reduced in periods where prepayment speeds were slower than expected.

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The following table presents net (premium amortization) discount accretion recognized for the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

The following table presents net (premium amortization) discount accretion recognized for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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Net (premium amortization) discount accretion (269) 1,477 (413) 4,399

Net premium amortization was $356,000 for the three months ended June 30, 2025 compared to net discount accretion of $1.8 million for the same period in 2024.

Net premium amortization was $144,000 for the six months ended June 30, 2025 compared to net discount accretion of $2.9 million for the same period in 2024.

The change in net (premium amortization) discount accretion for the three and six months ended June 30, 2025 compared to the same periods in 2024 was primarily a result of repositioning a portion of our investment portfolio into higher coupon securities that have higher amortized costs relative to principal value.

The change in net (premium amortization) discount accretion for the three and nine months ended September 30, 2025 compared to the same periods in 2024 was primarily a result of repositioning a portion of our investment portfolio into higher coupon securities that have higher amortized costs relative to principal value.

Our interest income is subject to interest rate risk.

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Interest Expense and Cost of Funds

The table below presents information related to our borrowings and cost of funds for the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

The table below presents information related to our borrowings and cost of funds for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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(3) Average cost of funds is calculated by dividing annualized interest expense by our average borrowings.

Total average borrowings increased $325.6 million and $417.1 million for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Total average borrowings decreased $114.7 million for the three months ended September 30, 2025 and increased $238.7 million for the nine months ended September 30, 2025 compared to the same periods in 2024.

Changes in our average borrowings are a factor of our total stockholders' equity and our desired leverage levels.

Our average cost of funds decreased 97 basis points and 104 basis points for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively.

Changes in our costs of funds are substantially driven by the Federal Funds target rate, which the FOMC lowered from a range of 5.25% to 5.50% as of January 1, 2024 to 4.25% to 4.50% as of June 30, 2025.

The table below presents the components of interest expense for the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

Our average cost of funds decreased 78 basis points and 95 basis points for the three and nine months ended September 30, 2025 compared to the same periods in 2024, respectively.

Changes in our costs of funds are substantially driven by the Federal Funds target rate, which was set at a range of 4.25% to 4.50% for the majority of the three and nine months ended September 30, 2025 and a range of 5.25% to 5.50% for the majority of the three and nine months ended September 30, 2024 .

The table below presents the components of interest expense for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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Total interest expense 55,302 66,315 163,222 187,288

Our interest expense decreased $6.5 million and $13.1 million for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024 due to a lower cost of funds, which was partially offset by an increase in average borrowings.

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Our interest expense decreased $11.0 million for three months ended September 30, 2025 compared to the same period in 2024 due to a lower cost of funds and a decrease in average borrowings.

Our interest expense decreased $24.1 million for the nine months ended September 30, 2025 compared to the same period in 2024 due to a lower cost of funds, which was partially offset by an increase in average borrowings.

Net Interest Income

The table below presents the components of net interest income for the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

The table below presents the components of net interest income for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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Net interest rate margin 0.90 % 0.01 % 0.94 % (0.01) %

Our net interest income, which equals total interest income less total interest expense, and our net interest rate margin, which equals the yield on our average earning assets for the period less the average cost of funds, increased for the three and six months ended June 30, 2025 compared to the same periods in 2024 due to a lower cost of funds.

Our net interest income, which equals total interest income less total interest expense, and our net interest rate margin, which equals the yield on our average earning assets for the period less the average cost of funds, increased for the three months ended September 30, 2025 compared to the same period in 2024 due to a lower cost of funds and an increase in average earning asset yields.

Our net interest income and net interest rate margin increased for the nine months ended September 30, 2025 compared to the same period in 2024 due to a lower cost of funds.

Our cost of funds is generally more sensitive to changes in interest rates than the yield on our investment portfolio, which is largely comprised of 30 year fixed-rate Agency RMBS.

Gain (Loss) on Investments, net

The table below summarizes the components of gain (loss) on investments, net for the three and six months ended June 30, 2025 and 2024.

Three Months Ended June 30, Six Months Ended June 30,

The table below summarizes the components of gain (loss) on investments, net for the three and nine months ended September 30, 2025 and 2024.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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Total gain (loss) on investments, net 49,540 165,168 126,430 53,803

During the three and six months ended June 30, 2025, we sold MBS and realized net gains of $1.8 million and net losses of $3.6 million, respectively (June 30, 2024:

net losses of $6.5 million and $9.8 million).

Net realized gains during the three months ended June 30, 2025 primarily reflect sales of Agency RMBS during the period of heightened market volatility experienced early in the second quarter.

Net realized losses during the six months ended June 30, 2025 primarily reflect sales of lower coupon Agency RMBS during the first quarter.

Net realized losses during the three and six months ended June 30, 2024 reflect sales of 4.0% to 5.0% coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS.

During the three and nine months ended September 30, 2025, we sold MBS and realized net gains of $1.2 million and net losses of $2.4 million, respectively (three and nine months ended September 30, 2024:

net gains of $5.0 million and net losses of $4.8 million, respectively).

Net realized gains during the three months ended September 30, 2025 reflect a decrease in our allocation to higher coupon Agency RMBS.

Net realized losses during the nine months ended September 30, 2025 primarily reflect sales of lower coupon Agency RMBS during the first quarter.

Net realized gains and losses during the three and nine months ended September 30, 2024 primarily reflect sales of 4.0% to 5.0% coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS.

Under the fair value option, changes in fair value are recognized in income on the condensed consolidated statements of operations.

As of June 30, 2025, all of our MBS were accounted for under the fair value option (December 31, 2024:

As of September 30, 2025, all of our MBS were accounted for under the fair value option (December 31, 2024:

$5.4 billion or 99.7%).

We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $7.1 million in the three months ended June 30, 2025 as the heightened market volatility that negatively impacted valuations in April largely subsided prior to quarter end.

We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $80.5 million in the six months ended June 30, 2025 primarily due to a sharp decline in interest rates during the first quarter of the year, as valuations on fixed-rate securities increased as interest rates fell.

We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $38.7 million and $101.2 million in the three and six months ended June 30, 2024, respectively, due to higher interest rates and wider spreads on fixed-rate Agency RMBS as valuations declined given an increase in interest rates and elevated interest rate volatility.

We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $48.3 million and $128.8 million in the three and nine months ended September 30, 2025, respectively, primarily due to a sharp decline in interest rates during the year, as valuations on fixed-rate securities increased as interest rates fell.

We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $160.2 million and $59.0 million in the three and nine months ended September 30, 2024, respectively, due to lower interest rates during the third quarter resulting in improved valuations on Agency RMBS and Agency CMBS.

We did not hold any U.S.

Treasury securities during the three and six months ended June 30, 2025 or the three months ended June 30, 2024.

Treasury securities during the three and nine months ended September 30, 2025 or the three months ended September 30, 2024.

We recorded net realized and unrealized losses of $458,000 on U.S.

Treasury securities in the six months ended June 30, 2024.

Treasury securities in the nine months ended September 30, 2024.

(Increase) Decrease in Provision for Credit Losses

We recorded a $263,000 and $302,000 increase in the provision for credit losses during the three and six months ended June 30, 2024, respectively, on a single security based on a comparison of the security's amortized cost basis to discounted

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expected cash flows.

We recorded an $80,000 decrease and $222,000 increase in the provision for credit losses during the three and nine months ended September 30, 2024, respectively, on a single security based on a comparison of the security's amortized cost

basis to discounted expected cash flows.

We sold the security in 2025 and no longer own any securities that are classified as available-for-sale and, therefore, subject to evaluation for credit losses.

Equity in Earnings (Losses) of Unconsolidated Ventures

For the six months ended June 30, 2024, we recorded equity in losses of $193,000.

For the nine months ended September 30, 2024, we recorded equity in losses of $193,000.

We received a final distribution from our sole remaining unconsolidated venture during the first quarter of 2024, and the venture was dissolved in April 2024.

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$ in thousands

Three months ended June 30, 2025

Three months ended September 30, 2025

not designated as

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Futures Contracts (13,742) — 5,119 (8,623)

TBAs (1,458) — 218 (1,240)

Total (49,189) 29,138 10,833 (9,218)

$ in thousands

Three months ended June 30, 2024

Three months ended September 30, 2024

not designated as

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Interest Rate Swaps (160,472) 40,883 517 (119,072)

Futures Contracts (12,419) — 2,527 (9,892)

TBAs 94 — 1,525 1,619

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$ in thousands

Six months ended June 30, 2025

Nine months ended September 30, 2025

not designated as

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$ in thousands

Six months ended June 30, 2024

Nine months ended September 30, 2024

not designated as

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Interest Rate Swaps (134,661) 129,441 8,569 3,349

Futures Contracts (12,419) — 2,527 (9,892)

TBAs 621 — — 621

Total (146,459) 129,441 11,096 (5,922)

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As of June 30, 2025 and December 31, 2024, we held the following interest rate swaps whereby we pay fixed rate interest and receive floating rate interest based upon SOFR.

$ in thousands As of June 30, 2025 As of December 31, 2024

As of September 30, 2025 and December 31, 2024, we held the following interest rate swaps whereby we pay fixed interest rates and receive floating interest rates based upon SOFR.

$ in thousands As of September 30, 2025 As of December 31, 2024

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

Interest Rate Swaps 3,380,000 1.08 % 4.24 % 5.9 3,265,000 0.97 % 4.49 % 5.3

We recorded net losses of $16.2 million and $63.8 million on interest rate swaps for the three and six months ended June 30, 2025, respectively, due to notably tighter swap spreads during the second quarter and a sharp decline in interest rates during the first six months of the year.

We recorded net gains of $29.3 million and $122.4 million for the three and six months ended June 30, 2024 primarily due to changes in interest rate expectations.

As of June 30, 2025, we had $4.6 billion of repurchase agreement borrowings with a weighted average remaining maturity of 24 days.

We typically refinance each repurchase agreement at market interest rates upon maturity.

We use interest rate swaps to manage our exposure to changing interest rates and add stability to interest rate expense.

As of June 30, 2025 and December 31, 2024, we held the following futures contracts.

June 30, 2025 December 31, 2024

We recorded net losses of $595,000 and $64.4 million on interest rate swaps for the three and nine months ended September 30, 2025, respectively (three and nine months ended September 30, 2024:

net losses of $119.1 million and net gains of $3.3 million, respectively).

Net losses during the nine months ended September 30, 2025 were due to a sharp decline in swap rates during the year.

As of September 30, 2025 and December 31, 2024, we held the following futures contracts.

September 30, 2025 December 31, 2024

$ in thousands Notional Amount - Short Notional Amount - Short

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We use futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance.

During the six months ended June 30, 2025, we entered into futures contracts with a notional amount of $2.9 billion and terminated existing futures contracts with a notional amount of $3.5 billion.

We recognized net losses of $13.5 million and $46.4 million on futures contracts during the three and six months ended June 30, 2025, respectively, due to changes in interest rate expectations.

We did not hold any futures contracts during the three and six months ended June 30, 2024.

We recognized net losses of $8.6 million and $55.0 million on futures contracts during the three and nine months ended September 30, 2025, respectively (three and nine months ended September 30, 2024:

net losses of $9.9 million).

Net losses during the three and nine months ended September 30, 2025 were due to a decline in interest rates.

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

During the second quarter of 2025, we used short positions in TBAs in response to heightened market volatility to manage risk and economically hedge a portion of our exposure to changes in Agency RMBS valuations.

We recorded net losses of $1.2 million and net gains of $2.6 million on TBAs during the three and six months ended June 30, 2025, respectively (three and six months ended June 30, 2024:

net losses of $998,000).

We incurred management fees of $2.8 million and $5.8 million for the three and six months ended June 30, 2025, respectively (June 30, 2024:

$2.9 million and $5.8 million).

We did not hold any TBAs during the three months ended September 30, 2025.

We recorded net gains of $2.6 million on TBAs during the nine months ended September 30, 2025 (three and nine months ended September 30, 2024:

net gains of $1.6 million and $621,000, respectively).

We incurred management fees of $2.7 million and $8.5 million for the three and nine months ended September 30, 2025, respectively (three and nine months ended September 30, 2024:

$2.9 million and $8.7 million, respectively).

Our management fees are determined by our average stockholders' equity.

Refer to Note 9 – "Related Party Transactions" of our condensed consolidated financial statements for a discussion of our relationship with our Manager and a description of how our fees are calculated.

Our general and administrative expenses not covered under our management agreement amounted to $2.0 million and $3.7 million for the three and six months ended June 30, 2025, respectively (June 30, 2024:

$1.9 million and $3.7 million).

Our general and administrative expenses not covered under our management agreement amounted to $1.8 million and $5.5 million for the three and nine months ended September 30, 2025, respectively (three and nine months ended September 30, 2024:

$1.8 million and $5.5 million, respectively).

General and administrative expenses not covered under our management agreement primarily consist of directors and officers insurance, legal costs, accounting, auditing and tax services, filing fees and miscellaneous general and administrative costs.

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In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock.

During the three and six months ended June 30, 2025, we repurchased and retired 96,803 and 186,949 shares of Series C Preferred Stock, respectively.

During the three and six months ended June 30, 2024, we repurchased and retired 44,661 and

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138,008 shares of Series B Preferred Stock, respectively, and 105,492 and 201,409 shares of Series C Preferred Stock, respectively.

During the three and nine months ended September 30, 2025, we repurchased and retired 89,223 and 276,172 shares of Series C Preferred Stock, respectively.

respectively.

Gains and losses on repurchases and retirements of preferred stock represent the difference between the consideration transferred and the carrying value of the preferred stock.

Net Income (Loss) Attributable to Common Stockholders

For the three months ended June 30, 2025, our net loss attributable to common stockholders was $26.6 million (June 30, 2024:

$18.8 million) or $0.40 basic and diluted net loss per average share available to common stockholders (June 30, 2024:

The change in net loss attributable to common stockholders was primarily due to (i) net losses on investments of $5.3 million in the 2025 period compared to net losses on investments of $45.2 million in the 2024 period;

(ii) net losses on derivative instruments of $30.9 million in the 2025 period compared to net gains on derivatives of $28.3 million in the 2024 period;

For the three months ended September 30, 2025, our net income attributable to common stockholders was $50.2 million (September 30, 2024:

$35.3 million) or $0.74 basic and diluted net income per average share available to common stockholders (September 30, 2024:

$0.63 per share).

The change in net income attributable to common stockholders was primarily due to (i) net gains on investments of $49.5 million in the 2025 period compared to net gains on investments of $165.2 million in the 2024 period;

(ii) net losses on derivative instruments of $9.2 million in the 2025 period compared to net losses on derivatives of $127.3 million in the 2024 period;

and (iii) a $10.1 million increase in net interest income.

For the six months ended June 30, 2025, our net loss attributable to common stockholders was $10.3 million (June 30, 2024:

net income of $5.0 million) or $0.16 basic and diluted net loss per average share available to common stockholders (June 30, 2024:

net income per share of $0.10).

The change in net income (loss) attributable to common stockholders was primarily due to (i) net gains on investments of $76.9 million in the 2025 period compared to net losses on investments of $111.4 million in the 2024 period;

(ii) net losses on derivative instruments of $107.6 million in the 2025 period compared to net gains on derivatives of $121.4 million in the 2024 period;

For the nine months ended September 30, 2025, our net income attributable to common stockholders was $39.9 million (September 30, 2024:

$40.2 million) or $0.61 basic and diluted net income per average share available to common stockholders (September 30, 2024:

$0.78 per share).

The change in net income attributable to common stockholders was primarily due to (i) net gains on investments of $126.4 million in the 2025 period compared to net gains on investments of $53.8 million in the 2024 period;

(ii) net losses on derivative instruments of $116.8 million in the 2025 period compared to net losses on derivatives of $5.9 million in the 2024 period;

and (iii) a $31.0 million increase in net interest income.

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GAAP, certain gains and losses may be reflected in net income whereas other gains and losses may be reflected in other comprehensive income.

For example, a portion of our mortgage-

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backed securities were historically classified as available-for-sale securities, and changes in the valuation of these securities were recorded in other comprehensive income on our condensed consolidated balance sheets.

For example, a portion of our mortgage-backed securities were historically classified as available-for-sale securities, and changes in the valuation of these securities

were recorded in other comprehensive income on our condensed consolidated balance sheets.

We elected the fair value option for our mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in our condensed consolidated statements of operations.

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We have historically distributed at least 100% of our REIT taxable income.

Because we view earnings available for distribution as a consistent measure of our investment portfolio's ability to generate income for distribution to common stockholders, earnings available for distribution is one metric, but not the exclusive metric, that our board of directors uses to determine the amount, if any, and the payment date of dividends on our common stock.

However, earnings available for distribution should not be considered as an indication of our taxable income, a guaranty of our ability to pay dividends or as a proxy for the amount of dividends we may pay, as earnings available for distribution excludes certain items that impact our cash needs.

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GAAP), a measure of our liquidity or as an indication of amounts available to fund our cash needs.

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The table below provides a reconciliation of U.S.

GAAP net income (loss) attributable to common stockholders to earnings available for distribution for the following periods.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands, except per share data 2025 2024 2025 2024

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GAAP gain (loss) on derivative instruments, net on the condensed consolidated statements of operations includes the following components.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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The TBA settling in the later month typically prices at a discount to the TBA settling in the earlier month.

TBA dollar roll income represents the price differential between the TBA price for current month settlement versus the TBA price for forward month settlement.

TBA dollar roll income represents the price differential between the TBA price for current month settlement compared to the TBA price for forward month settlement.

We include TBA dollar roll income in earnings available for distribution because it is the economic equivalent of interest income on the underlying Agency RMBS, less an implied financing cost, over the forward settlement period.

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The table below shows the components of earnings available for distribution for the following periods.

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2025 2024 2025 2024

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(1) See below for a reconciliation of net interest income to effective net interest income, a non-GAAP measure.

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Earnings available for distribution decreased during the three and six months ended June 30, 2025 compared to the same periods in 2024 due to lower effective net interest income, which was partially offset by lower preferred dividends due to the redemption of our Series B Preferred Stock in December 2024.

Earnings available for distribution increased slightly during the three months ended September 30, 2025 compared to the same period in 2024 due to lower preferred dividends resulting from the redemption of our Series B Preferred Stock in December 2024, which was partially offset by a decrease in effective net interest income.

Earnings available for distribution decreased during the nine months ended September 30, 2025 compared to the same period in 2024 due to lower effective net interest income, which was partially offset by lower preferred dividends.

See below for details on the change in effective net interest income.

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We calculate effective interest expense (and by calculation, effective cost of funds) as U.S.

GAAP total interest expense adjusted for contractual net interest income (expense) on our interest rate swaps that is recorded as gain (loss) on derivative instruments.

GAAP total interest expense adjusted for contractual net interest income (expense) on our interest rate swaps that is recorded as gain (loss) on derivative instruments, net.

We view our interest rate swaps as an economic hedge against increases in future market interest rates on our borrowings.

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The following table reconciles total interest expense to effective interest expense and cost of funds to effective cost of funds for the following periods.

Three Months Ended June 30,

Three Months Ended September 30,

$ in thousands Reconciliation Cost of Funds / Effective Cost of Funds Reconciliation Cost of Funds / Effective Cost of Funds

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Effective interest expense 26,164 2.14 % 25,432 2.03 %

Six Months Ended June 30,

Nine Months Ended September 30,

$ in thousands Reconciliation Cost of Funds / Effective Cost of Funds Reconciliation Cost of Funds / Effective Cost of Funds

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Effective interest expense 77,374 2.14 % 57,847 1.70 %

Our effective interest expense increased in the three and six months ended June 30, 2025 compared to the same periods in 2024 due to a decrease in contractual net interest income on interest rate swaps and higher average borrowings, which were partially offset by a lower Federal Funds target rate.

Our effective cost of funds increased in the three and six months ended June 30, 2025 compared to the same periods in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower Federal Funds target rate.

Our effective interest expense increased slightly in the three months ended September 30, 2025 compared to the same period in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was largely offset by a lower average cost of funds and a decrease in average borrowings.

Our effective interest expense increased in the nine months ended September 30, 2025 compared to the same period in 2024 due to a decrease in contractual net interest income on interest rate swaps and an increase in average borrowings, which was partially offset by a lower average cost of funds.

Our effective cost of funds increased in the three and nine months ended September 30, 2025 compared to the same periods in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower average cost of funds.

In addition to changes caused by the underlying floating rate index, the amount of contractual net interest income or expense on interest rate swaps that we recognize has changed based on changes in the size and composition of our interest rate swap portfolio.

During the third quarter of 2024, we also began using futures contracts, which do not earn or incur contractual interest, in lieu of certain interest rate swaps as an alternative way to help mitigate the potential impact of changing interest rates on our performance.

See preceding discussion under “Gain (Loss) on Derivative Instruments, net” for details of our interest rate swap portfolio as of June 30, 2025 and December 31, 2024.

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See preceding discussion under “Gain (Loss) on Derivative Instruments, net” for details of our interest rate swap portfolio as of September 30, 2025 and December 31, 2024.

The following table reconciles net interest income to effective net interest income and net interest rate margin to effective interest rate margin for the following periods.

Three Months Ended June 30,

Three Months Ended September 30,

$ in thousands Reconciliation Net Interest Rate Margin / Effective Interest Rate Margin Reconciliation Net Interest Rate Margin / Effective Interest Rate Margin

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Effective net interest income 46,752 3.28 % 48,393 3.28 %

Six Months Ended June 30,

Nine Months Ended September 30,

$ in thousands Reconciliation Net Interest Rate Margin / Effective Interest Rate Margin Reconciliation Net Interest Rate Margin / Effective Interest Rate Margin

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Effective net interest income 140,012 3.33 % 152,589 3.77 %

Our effective net interest income and effective net interest rate margin decreased in the three and six months ended June 30, 2025 compared to the same periods in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower Federal Funds target rate.

Our effective net interest income decreased in the three months ended September 30, 2025 compared to the same period in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower average cost of funds and an increase in average earning asset yields.

Our effective net interest income decreased in the nine months ended September 30, 2025 compared to the same period in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower average cost of funds.

Our effective net interest rate margin was unchanged in the three months ended September 30, 2025 compared to the same period in 2024 as a decrease in contractual net interest income on interest rate swaps was offset by a lower average cost of funds and an increase in average earning asset yields.

Our effective net interest rate margin decreased in the nine months ended September 30, 2025 compared to the same period in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower average cost of funds.

Economic Debt-to-Equity Ratio

The table below shows our debt-to-equity ratio and our economic debt-to-equity ratio as of June 30, 2025 and December 31, 2024.

The table below shows our debt-to-equity ratio and our economic debt-to-equity ratio as of September 30, 2025 and December 31, 2024.

Our debt-to-equity ratio is calculated in accordance with U.S.

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GAAP financial measure of debt-to-equity ratio, provides information that is useful to investors in understanding how management evaluates our at-risk leverage and gives investors a comparable statistic to those of other mortgage REITs who also invest in TBAs and present a similar non-GAAP measure of leverage.

$ in thousands June 30,

$ in thousands September 30,

2025 December 31,

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(1) Debt-to-equity ratio is calculated as the ratio of total repurchase agreements to total stockholders' equity.

(2) Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis (none as of June 30, 2025;

(2) Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis (none as of September 30, 2025;

$606,000 as of December 31, 2024) to stockholders' equity.

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Liquidity and Capital Resources

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However, there can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls.

We held cash, cash equivalents and restricted cash of $190.5 million as of June 30, 2025 (June 30, 2024:

We held cash, cash equivalents and restricted cash of $180.7 million as of September 30, 2025 (September 30, 2024:

$168.5 million).

Our cash, cash equivalents and restricted cash change due to normal fluctuations in cash balances related to the timing of principal and interest payments, repayments of debt, and asset purchases and sales.

Our operating activities provided net cash of approximately $60.0 million for the six months ended June 30, 2025 (June 30, 2024:

$90.5 million).

Our investing activities provided net cash of $191.5 million in the six months ended June 30, 2025 (June 30, 2024:

Our operating activities provided net cash of approximately $97.3 million for the nine months ended September 30, 2025 (September 30, 2024:

$121.3 million).

We used cash of $1.1 billion to purchase MBS during the six months ended June 30, 2025 (June 30, 2024:

Our investing activities used net cash of $372.5 million in the nine months ended September 30, 2025 (September 30, 2024:

$898.8 million).

Our primary source of cash from investing activities for the six months ended June 30, 2025 was proceeds from sales of MBS of $1.2 billion (June 30, 2024:

We used cash of $2.0 billion to purchase MBS during the nine months ended September 30, 2025 (September 30, 2024:

$1.9 billion).

Our primary source of cash from investing activities for the nine months ended September 30, 2025 was proceeds from sales of MBS of $1.5 billion (September 30, 2024:

$887.2 million from the sales of MBS and $10.8 million from the sale of U.S.

Treasury securities).

We also generated $234.0 million from principal payments of MBS during the six months ended June 30, 2025 (June 30, 2024:

$153.0 million) and used cash of $149.1 million to settle derivative contracts in the six months ended June 30, 2025 (June 30, 2024:

net cash received of $26.3 million).

Our financing activities used net cash of $271.8 million for the six months ended June 30, 2025 (June 30, 2024:

We also generated $364.8 million from principal payments of MBS during the nine months ended September 30, 2025 (September 30, 2024:

$261.9 million) and used cash of $198.3 million to settle derivative contracts in the nine months ended September 30, 2025 (September 30, 2024:

$146.5 million).

During the six months ended June 30, 2025, we used cash for net repayments on our repurchase agreements of $258.1 million (June 30, 2024:

Our financing activities provided net cash of $245.1 million for the nine months ended September 30, 2025 (September 30, 2024:

$747.3 million).

We used cash of $53.8 million for the six months ended June 30, 2025 to pay dividends (June 30, 2024:

During the nine months ended September 30, 2025, we received net cash from proceeds on our repurchase agreements of $256.1 million (September 30, 2024:

$726.6 million).

Proceeds from issuance of common stock provided $38.2 million for the six months ended June 30, 2025 (June 30, 2024:

We used cash of $79.6 million for the nine months ended September 30, 2025 to pay dividends (September 30, 2024:

$75.7 million).

As of June 30, 2025, the average margin requirement (weighted by borrowing amount), or the haircut, under our repurchase agreements was 4.5% for Agency RMBS and 4.9% for Agency CMBS.

Proceeds from issuance of common stock provided $74.4 million for the nine months ended September 30, 2025 (September 30, 2024:

$108.1 million).

As of September 30, 2025, the average margin requirement (weighted by borrowing amount), or the haircut, under our repurchase agreements was 4.5% for Agency RMBS and 4.9% for Agency CMBS.

The haircuts ranged from a low of 3% to a high of 5% for Agency RMBS and a low of 4% to a high of 5% for Agency CMBS.

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The level of liquidity we have available to meet margin calls is directly affected by our leverage levels, our haircuts and the price changes on our securities.

If interest rates increase or if spreads widen, then the prices of our collateral (and our unpledged assets that constitute our liquidity) will decline, we will experience margin calls, and we will seek to use our liquidity to meet the margin calls.

If interest rates increase or if spreads widen, then the value of our collateral (and our unpledged assets that constitute our liquidity) will decline, we will experience margin calls, and we will seek to use our liquidity to meet the margin calls.

There can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls or increased collateral requirements.

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In addition, if we increase our borrowings, our liquidity will decrease by the amount of additional haircut on the increased level of indebtedness.

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Our interest rate swaps and futures contracts require us to post initial margin and daily variation margin based on subsequent changes in their fair value.

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We are subject to financial covenants in connection with our lending, derivatives and other agreements we enter into in the normal course of our business.

We intend to operate in a manner which complies with all of our financial covenants.

We intend to operate in a manner that complies with all of our financial covenants.

Our lending and derivative agreements provide that we may be declared in default of our obligations if our leverage ratio exceeds certain thresholds and we fail to maintain stockholders’ equity or market value above certain thresholds over specified time periods.

Forward-Looking Statements Regarding Liquidity

As of June 30, 2025, we held $4.9 billion of Agency securities that are financed by repurchase agreements.

We also had approximately $302.9 million of unencumbered investments and unrestricted cash of $59.4 million as of June 30, 2025.

As of June 30, 2025, our known contractual obligations primarily consisted of $4.6 billion of repurchase agreement borrowings with a weighted average remaining maturity of 24 days.

As of September 30, 2025, we held $5.4 billion of Agency securities that are financed by repurchase agreements.

We also had approximately $364.9 million of unencumbered investments and unrestricted cash of $58.5 million as of September 30, 2025.

As of September 30, 2025, our known contractual obligations primarily consisted of $5.2 billion of repurchase agreement borrowings with a weighted average remaining maturity of 21 days.

We generally intend to refinance the majority of our repurchase agreement borrowings at market rates upon maturity.

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In addition, we may increase our capital resources by obtaining long-term credit facilities or through public or private offerings of equity or debt securities, possibly including classes of preferred stock, common stock, senior or subordinated notes and convertible notes.

Such financing will depend on market conditions for capital raises and our ability to invest such offering proceeds.

Such financing will depend on market conditions for capital raises and our

ability to invest such offering proceeds.

If we are unable to renew, replace or expand our sources of financing on substantially similar terms, it may have an adverse effect on our business and results of operations.

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If a counterparty were to default on its obligations, we would be exposed to potential losses to the extent the fair value of collateral pledged by us to the counterparty, including any accrued interest receivable on such collateral, exceeded the amount loaned to us by the counterparty plus interest due to the counterparty.

As of June 30, 2025, one counterparty held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than 5% of our stockholders' equity.

The following table summarizes our exposure to counterparties by geographic concentration as of June 30, 2025.

As of September 30, 2025, one counterparty held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than 5% of our stockholders' equity.

The following table summarizes our exposure to counterparties by geographic concentration as of September 30, 2025.

The information is based on the geographic headquarters of the counterparty or counterparty's parent company.

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Total 20 5,150,081 245,488

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To maintain our qualification as a REIT, U.S.

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GAAP net income are:

(i) unrealized gains and losses on investments that we have elected the fair value option for that are included in current U.S.

(i) unrealized gains and losses on investments for which we have elected the fair value option that are included in current U.S.

GAAP income but are excluded from REIT taxable income until realized or settled;

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Other Matters

We believe that we satisfied each of the asset tests in Section 856(c)(4) of the Internal Revenue Code of 1986, as amended (the "Code") for the period ended June 30, 2025, and that our proposed method of operation will permit us to satisfy the asset tests, gross income tests, and distribution and stock ownership requirements for our taxable year that will end on December 31, 2025.

We believe that we satisfied each of the asset tests in Section 856(c)(4) of the Internal Revenue Code of 1986, as amended (the "Code") for the period ended September 30, 2025, and that our proposed method of operation will permit us to satisfy the asset tests, gross income tests, and distribution and stock ownership requirements for our taxable year that will end on December 31, 2025.

At all times, we intend to conduct our business so that neither we nor our Operating Partnership nor the subsidiaries of our Operating Partnership are required to register as an investment company under the 1940 Act.

If we were required to register as an investment company, then our use of leverage would be substantially reduced.

Because we are a holding company that conducts our business through our Operating Partnership and the Operating Partnership’s wholly-owned or majority-owned subsidiaries, the securities issued by these subsidiaries that are excepted from the definition of "investment company" under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, together with any other investment securities the Operating Partnership may own, may not have a combined value in excess of 40% of the value of the Operating Partnership’s total assets (exclusive of U.S.

Because we are a holding company that conducts our business through our Operating Partnership and the Operating Partnership’s wholly-owned or majority-owned

subsidiaries, the securities issued by these subsidiaries that are excepted from the definition of "investment company" under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, together with any other investment securities the Operating Partnership may own, may not have a combined value in excess of 40% of the value of the Operating Partnership’s total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test.

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IAS Asset I LLC and certain of the Operating Partnership’s other subsidiaries that we may form in the future rely upon the exclusion from the definition of "investment company" under the 1940 Act provided by Section 3(c)(5)(C) of the 1940 Act, which is available for entities "primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate." This exclusion generally requires that at least 55% of each subsidiary’s portfolio be comprised of qualifying assets and at least 80% be comprised of qualifying assets and real estate-related assets (and no more than 20% comprised of miscellaneous assets).

We calculate that as of June 30, 2025, we conducted our business so as not to be regulated as an investment company under the 1940 Act.

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We calculate that as of September 30, 2025, we conducted our business so as not to be regulated as an investment company under the 1940 Act.

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-Q

Item 2. Management’s Discussion and Analysis