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Item 1A. Risk Factors

2026-02-23 compared with 2025-02-20 · 169 added, 207 removed, 679 unchanged (36% of the section changed)

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Additional risks not presently known, or that we currently deem immaterial, also may have a material adverse effect on our business, financial condition, results of operations and trading price of our securities.

Risk Factor Summary

Risks Related to Our Investments

Federal Reserve’s participation in the Agency RMBS market could have an adverse effect on our Agency RMBS investments.

• We may lose profits if our assets experience periods of illiquidity.

• Our investments may be concentrated and subject to risk of default.

• There could be adverse impacts to our results and dividends resulting from fluctuations in interest rates and increases in interest rates.

• Spread risk is inherent to our business as a levered investor in our target assets.

• Premium securities may be subject to more risk than par value securities.

• Prepayment rates may adversely affect the value of our investment portfolio.

• Market conditions may upset the historical relationship between interest rate changes and prepayment trends, which would make it more difficult for us to analyze our investment portfolio.

• The Federal conservatorship of and changes in laws affecting Fannie Mae and Freddie Mac may adversely affect our business.

• Competition may limit our ability to acquire desirable investments.

• There is risk of losses associated with our investments.

• We are dependent on third-party service providers, whose actions we may not control.

• A decline in the market value of our MBS may adversely affect our results of operations and financial condition.

Risks Related to Financing and Hedging

• Our strategy involves the use of significant leverage, which increases the risk that we may incur substantial losses.

• We depend on repurchase agreement financing to acquire our target assets, and our inability to access this funding on acceptable terms could have a material adverse effect on our results of operations, financial condition and business.

• The inherent uncertainty of repurchase transactions, including counterparty credit risk, may cause us to incur a loss on our repurchase transactions.

• The repurchase agreements and other financing arrangements that we use to finance our investments may require us to provide additional collateral and may restrict us from leveraging our assets as fully as desired.

• A failure to comply with covenants in our repurchase agreements and other financing arrangements would have a material adverse effect on us.

• Our use or future use of repurchase agreements to finance our target assets may give our lenders greater rights if either we or a lender files for bankruptcy.

• We enter into hedging transactions that could expose us to contingent liabilities in the future.

• Hedging may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.

• Our hedging strategies may be ineffective.

• Clearing facilities or exchanges may increase the margin requirements we are required to post when entering into derivative instruments, which may negatively impact our ability to hedge and our liquidity.

• We may enter into derivative contracts that expose us to risks and contingent liabilities, and those contingent liabilities may not appear on our balance sheet.

• It may be uneconomical to “roll” Agency MBS TBA holdings, or we may be unable to meet margin calls on TBA contracts, which could negatively affect our financial condition and results of operations.

Risks Related to Our Business

• Our business may be adversely affected by unfavorable or changing economic, market, and political conditions.

• Maintaining 1940 Act exclusions for our subsidiaries imposes limits on our operations, and failure to maintain an exclusion could have a material negative impact on our operations.

• We are highly dependent on information systems and systems failures or cyber-attacks could significantly disrupt our business, which may, in turn, negatively affect the market price of our capital stock and our ability to pay dividends.

• The recent advancements in and increased use of artificial intelligence (“AI”) present risks and challenges that may adversely impact our business.

• Our Manager utilizes quantitative models to support investment decisions and investment processes, including those related to our portfolio management and risk analysis, which may contain errors.

• We may repurchase shares of our common stock and preferred stock from time to time, which may negatively impact our compliance with covenants in our financing agreements and regulatory requirements and our ability to invest in our target assets in the future.

• There are risks associated with accounting estimates, judgments and assumptions in the preparation of our financial statements, and changes in the fair value of our derivatives may result in volatility in our U.S.

GAAP earnings.

• Our reported U.S.

GAAP financial results differ from our REIT taxable income, which impacts our dividend distribution requirements.

Therefore, our U.S.

GAAP results may not be an accurate indicator of future taxable income and dividend distributions.

Risks Related to Our Relationship with Our Manager

• We are dependent on our Manager and its key personnel for our success.

• There are conflicts of interest in our relationship with our Manager and Invesco, which could result in decisions that are not in the best interests of our stockholders.

Risks Related to Our Capital Stock

• We have not established a minimum dividend payment level, and we cannot assure our stockholders of our ability to pay dividends in the future.

• Future offerings of debt or equity securities that would rank senior to our common stock may adversely affect the market price of our common stock.

Risks Related to Our Organization and Structure

• Certain provisions of Maryland law and in our organizational documents could inhibit changes in control.

• We are the sole general partner of our Operating Partnership and could become liable for the debts and other obligations of our Operating Partnership.

• Investment in our capital stock has various U.S.

federal income tax risks, and there are risks involved with the requirements associated with our REIT qualification.

General Risk Factors

• Our business is subject to extensive regulation.

• We may be adversely affected by the current and future economic, regulatory and other actions of government bodies and their agencies.

• We may change any of our strategies, policies or procedures without stockholder consent.

• We may enter into transactions and take certain actions in connection with such transactions, and there are certain other factors, that could affect the price of our common stock.

Risks Related to Our Investments

Fluctuations in interest rates could adversely affect the value of our investments and derivative financial instruments and cause our interest expense to increase, which could result in reduced earnings, decreased profitability and dividends, and diminished cash available for distribution to our stockholders.

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control.

Interest rate fluctuations present a variety of risks including the risk of a narrowing of the difference between asset yields and borrowing rates, a decline in the yield on adjustable-rate investments, and a detrimental impact on prepayment rates and may adversely affect our income and the value of our assets and capital stock.

We may invest in RMBS, CMBS, mortgage loans and other financing arrangements that are subject to risks related to interest rate fluctuations.

Fluctuations in short- or long-term interest rates could have adverse effects on our operations and financial condition, which may negatively affect cash available for distribution to our stockholders.

Fluctuations in interest rates could impact us as follows:

• If short-term interest rates increase significantly the amount of interest owed on the repurchase agreements we enter into to finance the purchase of our investments would increase, which may reduce our net income.

• If long-term rates increase significantly, the market value of our fixed-rate investments would decline, and the duration and weighted average life of the investments may increase.

We could realize a loss if the securities were sold.

Risks Related to Our Investment and Portfolio Management Activities

Fluctuations in interest rates could adversely affect the value of our investments and derivative financial instruments and cause our interest expense to increase.

This could result in reduced earnings, decreased profitability and dividends, and diminished cash available for distribution to our stockholders.

Interest rates are highly sensitive to many factors beyond our control, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors.

Interest rate fluctuations present various risks, such as a narrowing of the difference between asset yields and borrowing rates, a decline in the yield on adjustable-rate investments, and a detrimental impact on prepayment rates.

These risks may adversely affect our income and book value.

We may invest in RMBS, CMBS, mortgage loans and other financing arrangements that are subject to interest rate risks.

Fluctuations in short- or long-term interest rates could adversely affect our operations and financial condition, which may reduce cash available for distribution to our stockholders.

Specifically:

• If short-term interest rates increase significantly, interest owed on repurchase agreements used to finance our investments would increase, potentially reducing our net income.

• If long-term interest rates increase significantly, the market value of our fixed-rate investments would decline, and the duration and weighted average life of these investments may increase, potentially resulting in realized losses if these securities were sold.

• If short-term or long-term interest rates fall, we may recognize losses on our derivative financial instruments that are not offset by gains on our investments, which may adversely affect our liquidity and financial position.

• If short-term interest rates rise disproportionately relative to longer-term interest rates (a flattening of the yield curve), our borrowing costs may increase more rapidly than the interest income earned on our investments.

Because we expect our investments, on average, generally will bear interest based on longer-term rates than our borrowings, a flattening of the yield curve would tend to decrease our net income.

Additionally, to the extent cash flows from investments that return scheduled and unscheduled principal are reinvested, the spread between the yields on the new investments and available borrowing rates may decline, which would likely decrease our net income.

If short-term interest rates rise to the extent that they exceed longer-term interest rates (a yield curve inversion), our borrowing costs may exceed our interest income and we could incur operating losses.

Since our investments generally bear interest based on longer-term rates than our borrowings, a flattening of the yield curve would tend to decrease our net income.

Additionally, reinvestment of principal repayments at lower spreads relative to borrowing costs may further reduce our net income.

• If short-term interest rates rise above longer-term interest rates (a yield curve inversion), our borrowing costs could exceed our interest income and we could incur operating losses.

In a period of rising interest rates, our operating results will depend in large part on the difference between the income from our investments and borrowing costs.

We anticipate that, in most cases, the income from such assets may respond more slowly to interest rate fluctuations than the cost of our borrowings.

Consequently, changes in interest rates, particularly short-term interest rates, may significantly influence our net income.

Increases in these rates will tend to decrease our net income and the market value of our assets and may negatively affect cash available for distribution to our stockholders.

While we attempt to manage risk from changes in market interest rates, our hedging activities may not fully mitigate our interest rate risk, and a rapid increase or decrease in interest rates may have material and adverse effects on our business , results of operations and financial performance.

There can be no guarantee that our interest rate risk management will fully mitigate the yield curve flattening and inversion risks described above.

In addition, market values of our investments may decline without any general increase in interest rates for a number of reasons, such as widening of credit spreads, increases or expected increases in defaults, or changes or expected changes in voluntary prepayments for those investments that are subject to prepayment risk, which may negatively affect cash available for distribution to our stockholders.

Elevated interest rates may cause a decrease in the availability of certain of our target assets which could adversely affect our ability to acquire target assets that satisfy our investment objectives and to generate income and pay dividends.

Elevated interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing.

A reduction in the volume of mortgage loans originated may affect the volume of target assets available to us, which could adversely affect our ability to acquire assets that satisfy our investment objectives.

If rising interest rates cause us to be unable to acquire a sufficient volume of our target assets with a yield that is above our borrowing cost, our ability to satisfy our investment objectives and to generate income and pay dividends may be materially and adversely affected.

Typically, income from our investments responds more slowly to interest rate changes than our borrowings costs, so increases in interest rates, particularly short-term interest rates, may significantly reduce our net income and may negatively affect cash available for distribution to our stockholders.

While we attempt to manage interest rate risk through our hedging activities, these measures may not fully mitigate the risks described above.

Rapid increases or decreases in interest rates could have material adverse effects on our business , results of operations and financial performance.

There can be no guarantee that our interest rate risk management strategies will fully mitigate yield curve flattening or inversion risks.

In addition, market values of our investments may decline without any general increase in interest rates, due to factors such as widening spreads, increases or expected increases in defaults, or changes or expected changes in voluntary prepayments for investments subject to prepayment risk.

These factors may negatively affect cash available for distribution to our stockholders.

Interest rate volatility represents significant risks to our business, potentially affecting our liquidity, increasing our costs, and impacting our ability to manage risks effectively.

Interest rate volatility can materially and adversely impact our business, financial condition, and operating results.

Elevated volatility amplifies market risks that affect the value of our assets and liabilities and can reduce earnings stability.

Increased volatility also heightens our exposure to margin calls, including higher risk-based margin requirements, which may require us to post additional collateral, thereby reducing our unencumbered liquidity, limiting resources available for operational needs and further margin obligations.

In addition, heightened volatility may reduce liquidity in the mortgage market as investors scale back exposure to mitigate risk, making it more difficult to buy or sell assets without significantly impacting market prices.

Volatility may also diminish the effectiveness and accuracy of the predictive models we rely on for decision-

making and risk management.

Sustained interest rate volatility has the potential to materially impact our liquidity, increase our costs, and impair our ability to manage risk effectively.

While we actively monitor market conditions and adjust our strategies in response, there is no assurance that these measures will be sufficient to offset the negative effects of volatility on our business, operations, and financial results.

Spread risk is inherent to investing in MBS and other mortgage-related assets.

When the spread between the market yield on our mortgage assets and benchmark interest rates widens, our tangible net book value will typically decline.

When the spread between the market yield on our mortgage assets and benchmark interest rates widens, our book value will typically decline.

We refer to this as “spread risk”.

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and foreign central banks, market liquidity or changes in investor return requirements and sentiment.

Wider spreads can also occur

independent of moves in interest rates.

For example, actions by the Federal Reserve in 2022 and 2023 to taper its purchases of Agency RMBS and to reduce its balance sheet resulted in a widening of credit spreads and lower Agency RMBS valuations, impacting our tangible net book value.

Wider spreads can also occur independent of moves in interest rates.

Our active portfolio management strategy may expose us to greater losses and lower returns than compared to passive strategies.

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Furthermore, because of our active strategy, investors may be unable to assess changes in our financial position solely by observing changes in the mortgage market.

Federal Reserve’s or FDIC’s par ticipation in the Agency RMBS market could have an adverse effect on our Agency RMBS investments.

Federal Reserve’s participation in the Agency RMBS market can materially impact the available supply, price and returns on Agency RMBS.

Federal Reserve has continued its passive contraction of its balance sheet by ceasing reinvestments of proceeds from maturing Agency RMBS portfolio repayments.

Federal Reserve’s, GSEs’, or FDIC’s par ticipation in the Agency RMBS market could have an adverse effect on our Agency RMBS investments.

Federal Reserve’s participation in the Agency RMBS market can materially impact mortgage market conditions, affecting supply, pricing and returns on Agency RMBS.

Asset purchases by the Federal Reserve generally drive Agency RMBS values higher and tighten mortgage spreads, which increases our book value but reduces the return potential on new investments.

Conversely, actual or anticipated reductions in the amount of its Agency RMBS holdings typically lead to lower values and wider spreads, thereby lowering our book value while improving the return potential on new acquisitions.

Federal Reserve has continued its passive contraction of its Agency RMBS portfolio by reinvesting proceeds from maturing Agency RMBS into Treasury bills.

Given the U.S.

Federal Reserve’s historic participation and the current scale of its balance sheet holdings, the effects of a shift in monetary policy may be material and are difficult to predict, and we may be unable to mitigate potentially adverse effects on our portfolio and financial condition.

Furthermore, despite its stated preference for a passive balance sheet reduction, there is no guarantee the U.S.

Federal Reserve will not conduct outright sales of Agency RMBS in the secondary market, which could significantly increase the pace of their balance sheet reduction and result in lower Agency RMBS valuations due to a widening of credit spreads.

Furthermore, there is no guarantee the U.S.

Federal Reserve will not conduct outright sales of Agency RMBS in the secondary market, which could significantly increase the pace of their Agency RMBS portfolio reduction.

A change in the Federal Reserve's balance sheet policy could increase market volatility, reduce liquidity, and widen RMBS spreads, materially impacting our book value and financial condition.

The GSEs may also, from time to time, participate in the Agency RMBS market through purchases or sales for their retained portfolios.

Such activity can materially affect Agency RMBS supply, pricing, liquidity and spreads, which may impact the value of our existing investments and return potential of new investments.

Changes in the scale, pace or market expectations regarding GSE participation could increase volatility and make it more difficult to evaluate relative value and manage risk.

At times, upon a financial institution’s distress or impending failure, the FDIC may take control of a significant portion of the Agency RMBS held by that institution.

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We cannot predict or control the impact future actions by the U.S.

Federal Reserve or the FDIC will have on our business.

Federal Reserve, GSEs or the FDIC will have on our business.

Accordingly, future actions by the U.S.

Federal Reserve or FDIC could have a material and adverse effect on our business, financial condition and results of operations.

Federal Reserve, GSEs or FDIC could have a material and adverse effect on our business, financial condition and results of operations.

Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest.

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When these conditions exist, institutions from which we seek financing for our investments may tighten their lending standards, increase margin calls or become insolvent, which could make it more difficult for us to obtain financing on favorable terms or at all.

In addition, volatility further increases the complexity and cost of hedging against interest rate fluctuations, which can adversely affect our profitability.

Our profitability and financial condition including our liquidity may be adversely affected if we are unable to obtain cost-effective financing for our investments.

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Premium securities have market values that exceed their unpaid principal balance.

We may purchase RMBS at a premium, which represent prices that we believe appropriately reflect the risks involved.

We may purchase RMBS at a premium, which represents prices that we believe appropriately reflect the risks involved.

Declining interest rates increase the premium level of our RMBS and generate unrealized holding gains.

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GAAP, we may amortize this premium over the estimated term of the RMBS.

If the RMBS is prepaid in whole or in part before its maturity date, however, we may be required to expense the premium that was prepaid at the time of the prepayment.

• Our adjustable-rate RMBS may bear interest rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin.

If the RMBS is prepaid in whole or in part before its maturity date, however, we may be required to expense the premium that was paid at the time of the prepayment.

• Adjustable-rate RMBS may bear interest at rates that are lower than their fully indexed rates, which are equivalent to the applicable index rate plus a margin.

If an adjustable-rate RMBS is prepaid before or soon after the time of adjustment to a fully indexed rate, we will have held that RMBS while it was least profitable and lost the opportunity to receive interest at the fully indexed rate over the remainder of its expected life.

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While we seek to diversify our portfolio of investments, we are not required to observe any specific diversification criteria, except as may be set forth in the investment guidelines and Investment Company Act of 1940 Compliance Policy adopted by our board of directors.

Therefore, our investments in our target assets may at times be concentrated in certain types of securities, property types that are subject to higher risk of foreclosure or secured by properties concentrated in a limited number of geographic locations.

To the extent that our portfolio is concentrated in any one region or type of security, downturns relating generally to such region or type of security may result in defaults on a number of our investments within a short time period, which may reduce our net income and the value of our capital stock and accordingly reduce our ability to pay dividends to our stockholders, which could have an adverse impact on our results of operations, financial condition and business.

Therefore, our investments in our target assets may at times be concentrated in certain types

of securities.

To the extent that our portfolio is concentrated in any one region or type of security, downturns relating generally to such region or type of security may result in defaults on a number of our investments within a short time period, which may reduce our net income and book value and accordingly reduce our ability to pay dividends to our stockholders, which could have an adverse impact on our results of operations, financial condition and business.

The Federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between these agencies and the U.S.

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Fannie Mae and Freddie Mac are U.S.

Government-sponsored entities, or GSEs, but their guarantees are not backed by the full faith and credit of the United States (although the FHFA largely controls their actions through its conservatorship of the two GSEs).

Government-sponsored entities, or GSEs, but their guarantees are not backed by the full faith and credit of the United States (although the Federal Housing Finance Administration (“FHFA”) largely controls their actions through its conservatorship of the two GSEs).

Ginnie Mae is part of a U.S.

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Government, GSEs could default on their guarantee obligations which would materially and adversely affect the value of our Agency MBS.

Accordingly, if these government actions are inadequate in the future and the GSEs were

to suffer losses, be significantly reformed, or cease to exist, our business, operations and financial condition could be materially and adversely affected.

Accordingly, if these government actions are inadequate in the future and the GSEs were to suffer losses, be significantly reformed, or cease to exist, our business, operations and financial condition could be materially and adversely affected.

The future roles of the GSEs may be reduced (perhaps significantly) and the nature of their guarantee obligations could be limited relative to historical measurements.

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Our profitability depends, in large part, on our ability to acquire our target assets at attractive prices.

The supply of our target assets may be impacted by policies and procedures adopted by the GSEs, the FHFA or other governmental agencies, such as policies impacting origination and pooling practices, as well as by legislative, regulatory or other administrative actions related to the GSEs’ government-like status or changes to their federal conservatorships.

We compete with a variety of institutional investors, including other REITs, and some of our competitors are larger and may have greater financial, technical, marketing and other resources than we do.

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Also, as a result of this competition, desirable investments in our target assets may be limited in the future, and we may not be able to take advantage of attractive investment opportunities from time to time.

Elevated interest rates generally reduce the demand for mortgage loans due to the higher cost of borrowing.

We may acquire certain target assets that are subject to defaults, foreclosure timeline extension, fraud, residential and commercial price depreciation, and unfavorable modification of loan principal amount, interest rate and amortization of principal, which could result in losses to us.

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In the event of defaults on the mortgage loans that underlie our investments and the exhaustion of any underlying or any additional credit support, we may not realize our anticipated return on our investments, and we may incur a loss on these investments causing an adverse impact on our results of operations, financial condition and business.

Our subordinated MBS assets may be in the “first loss” position, subjecting us to greater risks of loss.

Subordinated MBS assets may be in the “first loss” position, subjecting us to greater risks of loss.

We may invest in certain tranches of MBS that are only entitled to a portion of the principal and interest payments made on mortgage loans underlying the securities issued by the trust.

In general, losses on a mortgage loan included in a RMBS trust will be borne first by the equity holder of the issuing trust if any, and then by the “first loss” subordinated security holder and then by the “second loss” subordinate holder and so on.

For non-Agency CMBS assets, losses on a mortgaged property securing

a mortgage loan included in a securitization will typically be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, then by the holder of a mezzanine loan or B-Note, if any, then by the “first loss” subordinated security holder (generally, the “B-Piece” buyer) and then by the holder of a more senior security.

For non-Agency CMBS assets, losses on a mortgaged property securing a mortgage loan included in a securitization will typically be borne first by the equity holder of the property, then by a cash reserve fund or letter of credit, if any, then by the holder of a mezzanine loan or B-Note, if any, then by the “first loss” subordinated security holder (generally, the “B-Piece” buyer) and then by the holder of a more senior security.

We may acquire securities at every level of such a trust, from the equity position to the most senior tranche.

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There can be no assurance that our due diligence process will uncover all relevant facts or that any asset acquisition will be successful, which could lead to losses in the value of our portfolio.

We depend on third-party service providers, including mortgage servicers, for a variety of services related to our RMBS.

We depend on third-party service providers, including mortgage servicers, for a variety of services related to our investments.

We are, therefore, subject to the risks associated with third-party service providers.

We depend on a variety of services provided by third-party service providers related to our RMBS.

We rely on the mortgage servicers who service the mortgage loans backing our RMBS to, among other things, collect principal and interest payments and administer escrow accounts on the underlying mortgages and perform loss mitigation services.

We depend on a variety of services provided by third-party service providers related to our assets.

We rely on the mortgage servicers who service the mortgage loans backing our investments to, among other things, collect principal and interest payments and administer escrow accounts on the underlying mortgages and perform loss mitigation services.

If a servicer is not vigilant in seeing that borrowers make their required monthly payments, borrowers may be less likely to make these payments, resulting in a higher frequency of default.

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Any failure by servicers to service these mortgages and/or to competently manage and dispose of properties could negatively impact the value of these investments and our financial performance.

Further, the foreclosure process, especially in judicial foreclosure states such as New York, Florida and New Jersey, can be lengthy and expensive, and the delays and costs involved in completing a foreclosure and liquidating such property through sale may materially increase any related loss.

Further, the foreclosure process, especially in judicial foreclosure states, can be lengthy and expensive, and the delays and costs involved in completing a foreclosure and liquidating such property through sale may materially increase any related loss.

A decline in the market value of our mortgage-backed securities may adversely affect our results of operations and financial condition.

All of our mortgage-backed securities are reported at fair value.

Their value may fluctuate due to a number of factors including, among others, market volatility, geopolitical events and changes in credit spreads, spot and forward interest rates, and actual and anticipated prepayments.

Their value may fluctuate due to a number of factors including, among others, market volatility, geopolitical events and changes in spreads, spot and forward interest rates, and actual and anticipated prepayments.

They may also fluctuate in value due to increased or reduced demand.

The level of demand may be impacted by, among other things, interest rates, capital flows, economic conditions, and government policies and actions, such as purchases and sales by the Federal Reserve.

Changes in the market values of these assets impact our stockholders’ equity and declines in market value adversely affect our book value per common share.

For a discussion of how we determine our provision for credit losses, see Note 2 - “Summary of Significant Accounting Policies” of our consolidated financial statements in Part IV of this Report.

The fair value of certain of our investments may fluctuate over short periods of time, and our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed.

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We have at times experienced significant declines in the fair value of our investments as a result of market volatility.

If we experience a decline in the fair value of our investments as a result of future uncertain market conditions, it could materially and adversely affect our business, results of operations, financial condition, stock price, liquidity and ability to make distributions to our stockholders.

If we experience a decline in the fair value of our investments as a result of future uncertain market conditions, or if we were to sell an asset through a forced liquidation, it could materially and adversely affect our business, results of operations, financial condition, stock price, liquidity and ability to make distributions to our stockholders.

Risks Related to Financing and Hedging

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When we engage in repurchase transactions, we generally sell securities to lenders (repurchase agreement counterparties) and receive cash from these lenders.

The lenders are obligated to resell the same securities back to us at the end of the term of the transaction.

The lenders are obligated to resell the same securities back to us at the end of the transaction term.

Because the cash we receive from the lender when we initially sell the securities to the lender is less than the value of those securities (this difference is the haircut), if the lender defaults on its obligation to resell the same securities back to us we may incur a loss on the transaction equal to the amount of the haircut (assuming there was no change in the value of the securities).

As of December 31, 2024, one counterparty held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than $36.5 million, or 5% of our stockholders’ equity.

As of December 31, 2025, one counterparty held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than 5% of our stockholders’ equity.

We may incur a loss on a repurchase transaction if the value of the underlying securities has declined as of the end of the transaction term, as we would have to repurchase the securities for their initial value but would receive securities worth less than that amount.

Further, if we default on one of our obligations under a repurchase transaction, the lender can terminate the transaction and refrain from entering into any other repurchase transactions with us.

Some of our repurchase agreements contain cross-default provisions, so

that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default.

Repurchase agreements may contain cross-default provisions, so that if a default occurs under any one agreement, the lenders under our other agreements could also declare a default.

Any losses we incur on our repurchase transactions could adversely affect our earnings and thus our cash available for distribution to our stockholders.

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Either decision would require us to transfer additional assets to such lender without any advance of funds from the lender or to repay a portion of the outstanding borrowings.

Any such margin call or increased collateral requirements could have a material adverse effect on our results of operations, financial condition, business, liquidity and ability to pay dividends to our stockholders, and could cause the value of our capital stock to decline.

We may be forced to sell assets at significantly depressed prices to meet such margin calls and to maintain adequate liquidity, which could cause us to incur losses.

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Further, financial institutions providing the repurchase facilities may require us to maintain a certain amount of cash uninvested or to set aside non-levered assets sufficient to maintain a specified liquidity position which would allow us to satisfy our collateral obligations.

As a result, we may not be able to leverage our assets as fully as desired, which could reduce our return on stockholders' equity.

As a result, we may not be able to leverage our assets as fully as desired, which could reduce our

return on stockholders' equity.

If we are unable to meet these collateral obligations, our financial condition could deteriorate rapidly.

A failure to comply with covenants in our repurchase agreements and other financing arrangements would have a material adverse effect on us, and any future financings may require us to provide additional collateral or pay down debt.

We are subject to various covenants contained in our existing financing arrangements and may become subject to additional covenants in connection with future financings.

Many of our master repurchase agreements require us to maintain compliance with various financial covenants, including a minimum tangible net worth, specified financial ratios (such as total debt to total assets) and financial information delivery obligations.

A failure to comply with covenants in our repurchase agreements and other financing and hedging arrangements would have a material adverse effect on us, and any future financing may require us to provide additional collateral or pay down debt.

Many of our master repurchase agreements and other financing and hedging arrangements contain customary terms and conditions, including financial covenants such as a minimum stockholders' equity, a maximum leverage ratio and financial information delivery obligations.

These covenants may limit our flexibility to pursue certain investments or incur additional debt.

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Bankruptcy Code and to take possession of and liquidate the assets that we have pledged under their repurchase agreements, without delay, if we file for bankruptcy.

Furthermore, the special treatment of repurchase agreements under the U.S.

Bankruptcy Code may make it difficult for us to recover our pledged assets if a lender party to such agreement files for bankruptcy.

Furthermore, were a lender party to a repurchase agreement to file for bankruptcy or a similar insolvency proceeding, such insolvency event may result in a disruption to our financing capitalization structure, including due to premature termination of such repurchase agreement and/or potential delays in regaining control over collateral in the possession or control of such lender party.

We enter into hedging transactions that could expose us to contingent liabilities in the future.

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Hedging may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders.

We pursue various hedging strategies to seek to reduce our exposure to adverse changes in interest rates on our liabilities and currency exchange rates.

Our hedging activity varies in scope based on the level and volatility of interest rates, currency exchange rates, the type of assets held and other changing market conditions.

We pursue various hedging strategies to seek to reduce our exposure to adverse changes in interest rates on our liabilities.

Our hedging activity varies in scope based on the level and volatility of interest rates, the type of assets held and other changing market conditions.

Hedging may fail to protect or could adversely affect our earnings because, among other things:

• interest rate and/or currency hedging can be expensive, particularly during periods of volatile markets;

• interest rate hedging can be expensive, particularly during periods of volatile markets;

• available interest rate hedges may not correspond directly with the interest rate risk for which protection is sought;

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We attempt to limit, or hedge against, the adverse effect of changes in interest rates on the value of our assets and financing costs, subject to complying with REIT tax requirements.

Hedging strategies are complex and do not fully protect against adverse changes under all circumstances.

Hedging strategies are complex and do not fully protect

against adverse changes under all circumstances.

Our business model also calls for accepting certain amounts of risk.

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• the degree to which the value of our interest rate hedges changes relative to our assets as a result of fluctuations in interest rates, passage of time, or other factors.

Additionally, regulations adopted by the CFTC could adversely affect our ability to engage in derivative transactions or impose increased margin requirements and require additional operational and compliance costs.

Additionally, regulations adopted by the Commodity Futures Trading Commission could adversely affect our ability to engage in derivative transactions or impose increased margin requirements and require additional operational and compliance costs.

Consequently, our hedging strategies may fail to protect us from loss and could even result in greater losses than if we had not entered in the hedge transaction.

Clearing facilities or exchanges may increase the margin requirements we are required to post when entering into derivative instruments, which may negatively impact our ability to hedge and our liquidity.

Clearing facilities or exchanges may expose us to credit risk and may increase the margin requirements we are required to post when entering into derivative instruments, which may negatively impact our ability to hedge and our liquidity.

We are required to post margin when entering into a hedging instrument that is traded on an exchange or administered through a clearing house.

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In prior periods, exchanges have required additional margin in response to events having, or expected to have, adverse economic consequences.

Future adverse economic developments or market uncertainty and any proposed new reporting requirements by self-regulatory

authorities and Congress, may result in increased margin requirements for our hedging instruments, which may have a material adverse effect on our liquidity, financial condition and results of operations.

Future adverse economic developments or market uncertainty and any proposed new reporting requirements by self-regulatory authorities and Congress may result in increased margin requirements for our hedging instruments, which may have a material adverse effect on our liquidity, financial condition and results of operations.

We may enter into derivative contracts that expose us to contingent liabilities, and those contingent liabilities may not appear on our balance sheet.

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A TBA contract is an agreement to purchase or sell, for future delivery, an Agency MBS with a specified issuer, term and coupon.

A TBA dollar roll is a transaction where two TBA contracts with the same terms but different settlement dates are simultaneously bought and sold.

The price difference between those two contracts is commonly referred to as the “drop” and is a reflection of the expected net interest income from an investment in similar Agency mortgage-backed securities, net of an implied financing cost, which would be foregone as a result of settling the contract in the later month rather than in the earlier month.

Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency mortgage-backed security less an implied financing cost.

A TBA dollar roll consists of selling a TBA contract settling in one month and simultaneously buying an equivalent TBA contract settling in a later month.

The price difference, known as the drop, represents the expected principal and interest that would be earned on the underlying Agency MBS during the roll period, net of the implied financing cost associated with holding (but in this case, not actually taking delivery of) those securities.

Accordingly, TBA dollar roll income generally represents the economic equivalent of the interest income earned on the underlying Agency mortgage-backed security less an implied financing cost.

Consequently, dollar roll transactions and such forward purchases of Agency securities represent a form of off-balance sheet financing and increase our “at risk” leverage.

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Our business may be adversely affected by unfavorable or changing economic, market, and political conditions.

Elevated inflation, interest rate volatility, a recessionary period, adverse trends in employment levels, pandemics or endemics, geopolitical instability or conflicts, trade or supply chain disruptions, economic or other sanctions, uncertainty regarding the breach of the U.S.

Elevated inflation, interest rate volatility, a recessionary period, adverse trends in employment levels, pandemics or endemics, geopolitical instability or armed conflicts, trade policy, tariffs, or supply chain disruptions, economic or other sanctions, uncertainty regarding the breach of the U.S.

debt ceiling or a sustained capital market correction could have an adverse effect on our business, including on the value of our investments and collateral securing our financing, which can impact our liquidity.

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Excluded from the term “investment securities,” among other things, are U.S.

government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.

government securities and securities issued by majority-owned subsidiaries that are not themselves

investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.

We are a holding company that conducts business through the Operating Partnership and the Operating Partnership’s wholly owned or majority-owned subsidiaries.

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There can be no assurance that the laws and regulations governing the 1940 Act status of REITs will not change in a manner that adversely affects our operations or inhibits our ability to pursue our strategies.

Any issuance of more specific or different guidance relating to the relevant exemptions and exceptions from the definition of an investment company under the

1940 Act could similarly affect or inhibit our operations.

Any issuance of more specific or different guidance relating to the relevant exemptions and exceptions from the definition of an investment company under the 1940 Act could similarly affect or inhibit our operations.

If we, the Operating Partnership or its subsidiaries fail to maintain an exemption from the 1940 Act, we could, among other things, be required to (a) change the investments that we hold or the manner in which we conduct our operations to avoid being required to register as an investment company, (b) effect sales of our assets in a manner that, or at a time when, we would not otherwise choose to do so, or (c) register as an investment company.

Any of these events could cause us to incur losses and negatively affect the value of our capital stock, the sustainability of our business model, and our ability to pay dividends, which could have an adverse effect on our business and the market price for our shares of capital stock.

Any of these events could cause us to incur losses and negatively affect our book value, the sustainability of our business model, and our ability to pay dividends, which could have an adverse effect on our business and the market price for our shares of capital stock.

In addition, if it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties or injunctive relief imposed by the SEC.

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Our Manager’s status as a global financial institution and the nature of its client base may enhance the risk that it is targeted by such cyber threats, which could impact us.

Although our Manager takes protective measures, including measures to effectively secure information through system security technology, has many controls, processes, digital backup and recovery processes in place, and seeks to continually monitor and develop its systems to protect its and our technology infrastructure and data from misappropriation or corruption, our Manager’s technology systems may still be vulnerable to unauthorized access as a result of an external attack, actions by its employees or vendors with access to its systems, computer malware or other events that have a security impact and that result in the disclosure or release of confidential information inadvertently or through malfeasance, or result in the loss (temporarily or permanently) of data, applications or systems.

vulnerable to unauthorized access as a result of an external attack, actions by its employees or vendors with access to its systems, computer malware or other events that have a security impact and that result in the disclosure or release of confidential information inadvertently or through malfeasance, or result in the loss (temporarily or permanently) of data, applications or systems.

The third parties with which we or our Manager do business or which facilitate our business activities, including financial intermediaries and technology infrastructure, data storage and service providers, are also susceptible to the foregoing risks (including those related to the third parties with which they are similarly interconnected or on which they otherwise rely), and our or their business operations and activities may therefore be adversely affected, perhaps materially, by failures, terminations, errors or malfeasance by, or attacks or constraints on, one or more financial, technology or infrastructure institutions or intermediaries with whom we or they are interconnected or conduct business.

We do not control the cyber security plans and systems put in place by our Manager and third-party service providers, and such service providers may have limited indemnification obligations to us or our Manager.

A breach of our Manager's technology systems could damage our reputation and could result in unauthorized disclosure or modification or loss of sensitive or confidential information (including client data);

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In addition, any insurance we maintain against the risk of this type of loss may not be sufficient to cover all actual losses or may not apply to circumstances relating to any particular breach or other cyber incident.

The recent advancements in and increased use of AI present risks and challenges that may adversely impact our business.

The recent advancements in and increased use of artificial intelligence (“AI”) present risks and challenges that may adversely impact our business.

Our Manager or its or our third-party vendors, clients or counterparties have developed and may continue to develop or incorporate AI technology in certain business processes, services or products.

The development and use of AI presents a number of risks and challenges.

The legal and regulatory environment relating to AI is uncertain and rapidly evolving, in the U.S.

and internationally, and includes regulation targeted specifically at AI technology, as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI.

The development and use of AI presents a number of risks and challenges to our business.

The legal and regulatory environment relating to AI is rapidly evolving, in the U.S., E.U.

and internationally, and includes regulation targeted specifically at AI technology, including the EU AI Act, portions of which have already come into force with more to follow this year and future years, as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI.

Global divergence in AI regulations and evolving standards could create conflicting requirements across jurisdictions, increase compliance costs, and heighten enforcement risk.

These evolving laws and regulations could require changes in our Manager’s implementation of AI technology, increase its or our compliance costs and the risk of non-compliance, and restrict or impede its ability to develop, adopt and deploy AI technologies efficiently and effectively.

AI models, particularly generative AI models, may produce output or take action that is incorrect or outdated, that

result in the release of personal, confidential or proprietary information, that reflect biases included in the data on which they are trained or introduced during the training or fine tuning process, that infringe on the intellectual property rights of others, or that is otherwise harmful.

In addition, the complexity of many AI models makes it challenging to understand why they are generating particular outputs.

This limited transparency increases the challenges associated with assessing the proper operation of AI technology, understanding and monitoring the capabilities of the AI technology developed by third parties, and, to that extent, are dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models, and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we or our Manager may have limited visibility.

Any of these risks could expose our Manager or us to liability or adverse legal or regulatory consequences and harm its or our reputation and the public perception of its or our business or the effectiveness of our security measures.

In addition to our Manager’s use of AI technologies, it and we are exposed to risks arising from the use of AI technologies by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks.

Generative AI, if used to perpetrate fraud or launch cyberattacks, could result in losses, liquidity outflows, or other adverse effects at a particular financial institution or exchange.

If our Manager’s use of AI becomes controversial, it or we may experience brand or reputational harm, competitive harm, or legal liability.

If not appropriately governed, managed and controlled, AI models, particularly generative AI models, may produce output or take action that is incorrect or outdated, that result in the release of personal, confidential or proprietary information, that reflect biases included in the data on which they are trained or introduced during the training or fine tuning process, that infringe on the intellectual property rights of others, or that is otherwise harmful.

The complexity and limited transparency of many AI models makes it challenging to understand why they generate particular outputs, increasing governance and monitoring risks.

Use of third-party AI models may introduce additional risk, as we may have limited visibility into their training data, validation processes, and controls to prevent unauthorized or harmful content.

This results in potential risks arising from the inclusion of any unauthorized material in the training data for their models, and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility.

Further, AI tools, whether embedded in third party systems or in tools that we develop, that are used to support our business, such as investment decision making, present unique risks, including errors in algorithms or assumptions, data quality issues, and potential bias, that could adversely affect investment performance and increase business and compliance risks.

Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.

In addition to our use of AI technologies, we are exposed to risks arising from the use of AI technologies by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks.

Generative AI may be exploited to create sophisticated phishing schemes, ransomware attacks, or other cyber threats, which could result in financial losses, liquidity outflows, or systemic market disruptions.

If our or our Manager's use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability.

In addition, technology is subject to rapid advancements and changes and our competitors may, from time to time, implement newer technologies or more advanced platforms for their services and products, including digital advisers, low cost, high speed financial applications and services and investment platforms based on AI and other advanced electronic systems, which could adversely affect our business if we are unable to remain competitive.

Our Manager utilizes quantitative models to support investment decisions and investment processes, including those related to our portfolio management and risk analysis, which may contain errors.

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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 year ended December 31, 2024, we repurchased and retired 138,008 shares of our Series B Preferred Stock (prior to redemption) and 338,780 shares of our Series C Preferred Stock.

As of December 31, 2024, we had authority to purchased 706,659 additional shares of our Series C Preferred Stock under the current share repurchase program.

During the year ended December 31, 2025, we repurchased and retired 352,528 shares of our Series C Preferred Stock.

As of December 31, 2025, we had authority to purchase 354,131 additional shares of our Series C Preferred Stock under the current share repurchase program.

We may engage in share repurchases from time-to-time through open market purchases, including block purchases or privately negotiated transactions, or under any trading plan that may be adopted in accordance with Rules 10b5-1 and 10b-18 of the Exchange Act.

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Refer to Item 7.

assumptions that we believe are the most critical to an understanding of our business, financial condition and results of operations.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates” in Part II of this Report for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our business, financial condition and results of operations.

Changes in the fair value of our derivatives may result in volatility in our U.S.

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The total changes in fair value may exceed our consolidated net income in any period or for a full year.

Volatility in our net income may adversely affect the price of our capital stock.

Volatility in our net income may adversely affect the market price of our capital stock.

Our reported U.S.

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There is no assurance that our Manager’s allocation policies that address some of the conflicts relating to our access to investment and financing sources will be adequate to address all of the conflicts that may arise.

Therefore, we may compete for investment or financing opportunities sourced by our Manager and, as a result, we may either not be presented with

the opportunity or have to compete with other clients and fund products of our Manager or clients and fund products of Invesco and its subsidiaries to acquire these investments or have access to these sources of financing.

Therefore, we may compete for investment or financing opportunities sourced by our Manager and, as a result, we may either not be presented with the opportunity or have to compete with other clients and fund products of our Manager or clients and fund products of Invesco and its subsidiaries to acquire these investments or have access to these sources of financing.

Our Manager would have a conflict in recommending our participation in any equity investment it manages.

Our Manager has a conflict of interest in recommending our participation in any equity investment it manages because the fees payable to it may be greater than the fees payable by us under the management agreement.

With respect to equity investments, we have made in partnerships managed by an affiliate of our Manager, our Manager has agreed to waive base management fees at the equity investment level to avoid duplication of fees.

To address any potential conflict of interest, we require the terms of any equity investment managed by our Manager to be approved by our audit committee consisting of our independent directors.

With respect to equity investments, we have made in partnerships managed by an affiliate of our Manager, our Manager agreed to waive base management fees at the equity investment level to avoid duplication of fees.

To address any potential conflict of interest, we

require the terms of any equity investment managed by our Manager to be approved by our audit committee consisting of our independent directors.

However, there can be no assurance that all conflicts of interest will be eliminated.

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We have not established a minimum dividend payment level, and we cannot assure our stockholders of our ability to pay dividends in the future.

We pay quarterly dividends to our stockholders in an amount such that we distribute all or substantially all of our REIT taxable income in each year, subject to certain adjustments.

We pay monthly dividends to our stockholders in an amount such that we distribute all or substantially all of our REIT taxable income in each year, subject to certain adjustments.

We have not established a minimum dividend payment level, and our ability to pay dividends may be adversely affected by a number of factors, including the risk factors described in this Report.

All dividends will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, debt covenants, maintenance of our REIT qualification, applicable provisions of Maryland law and other factors as our board of directors may deem relevant from time to time.

We believe that a change in any one of the following factors and other factors described in the risk factors in this Report could adversely affect our results of operations and impair our ability to pay dividends to our stockholders:

We believe that a change in any one of the following factors and

other factors described in the risk factors in this Report could adversely affect our results of operations and impair our ability to pay dividends to our stockholders:

• our ability to make profitable investments;

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Any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock.

For example, our preferred shares have a preference on liquidating distributions and a preference on dividend payments that could limit our ability to make a distribution to the holders of our common stock.

For example, our Series C Preferred Stock has a preference on liquidating distributions and a preference on dividend payments that could limit our ability to make a distribution to the holders of our common stock.

We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities.

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Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us.

In addition, future issuances and sales of preferred stock on parity to our Series C Preferred Stock, or the perception that such issuances and sales could occur, may also cause prevailing market prices for the Series C Preferred Stock and our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.

In addition, future issuances and sales of preferred stock on parity with our Series C Preferred Stock, or the perception that such issuances and sales could occur, may also cause prevailing market prices for the Series C Preferred Stock and our common stock to decline and may adversely affect our ability to raise additional capital in the financial markets at times and prices favorable to us.

Risks Related to Our Organization and Structure

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Under the statute, our board of directors has, by resolution, exempted business combinations between us and any other person, provided that such business combination is first approved by our board of directors (including a majority of our directors who are not affiliates or associates of such person).

acquisition” (defined as the direct or indirect acquisition of issued and outstanding control shares) have no voting rights except to the extent approved by stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquiror of control shares, officers of the corporation and employees of the corporation who are also directors.

The “control share” provisions of the MGCL provide that “control shares” of a Maryland corporation (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer, would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of issued and outstanding control shares) have no voting rights except to the extent approved by stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquiror of control shares, officers of the corporation and employees of the corporation who are also directors.

Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock.

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Additionally, Title 3, Subtitle 8 of the MGCL (“Subtitle 8”) permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement certain corporate governance provisions, some of which (for example, a classified board) we do not yet have.

Our charter contains a provision whereby we have elected to be subject to the provision of Subtitle 8 relating to the filling of vacancies on our board of directors.

Our charter contains a provision whereby we have elected to be subject to the provision of Subtitle 8 relating to the filling of vacancies on our board of directors by only a majority of the

remaining directors, even if the remaining directors constitute less than a quorum, and for the remainder of the full term of the directorship in which the vacancy occurred.

Through provisions in our charter and bylaws unrelated to Subtitle 8, we vest in our board of directors the exclusive power to fix the number of directorships, require the affirmative vote of stockholders entitled to cast not less than two-thirds of the votes entitled to be cast generally in the election of directors to remove any director from our board of directors, which removal will be allowed only for cause, and require the written request of stockholders entitled to cast at least a majority of all the votes entitled to be cast on any matter in order to call a special meeting to act on such matter.

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• a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.

reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer and at our request, serves or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan, limited liability company or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.

In addition, our bylaws require us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to (a) any individual who is a present or former director or officer and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or (b) any individual who, while a director or officer and at our request, serves or has served as a director, officer, partner or trustee of another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan, limited liability company or other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity.

As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law.

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If we do not qualify to be taxed as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability .

We have operated and expect to continue to operate so as to qualify to be taxed as a REIT under the Code.

We have operated and expect to continue to operate so as to qualify to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “ Code ” ).

However, qualification as a REIT involves the application of highly technical and complex Code provisions for which only a limited number of judicial or administrative interpretations exist.

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federal income tax laws applicable to investments similar to an investment in shares of our stock.

The 2017 tax reform legislation commonly referred to as the Tax Cuts and Jobs Act has resulted in fundamental changes to the Code, with many of the changes applicable to individuals applying only through December 31, 2025.

Federal legislation intended to ameliorate the economic impact of the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act made technical corrections to, or modified on a temporary basis, certain of the provisions of the Tax Cuts and Jobs Act.

The One Big Beautiful Bill Act, which was signed into law on July 4, 2025, made significant changes to the U.S.

federal income tax laws in various areas.

Among the notable changes, the One Big Beautiful Bill Act permanently extended certain provisions that were enacted in the Tax Cuts and Jobs Act of 2017, most of which were set to expire after December 31, 2025.

Although REITs generally receive certain tax advantages compared to entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate assets and/or mortgage loans to elect to be treated for U.S.

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There can be no assurance that future tax law changes will not increase income tax rates, impose new limitations on deductions, credits or other tax benefits, or make other changes that may adversely affect our business, cash flows or financial performance or a stockholder’s investment in us.

You are urged to consult with your tax advisor with respect to the impact of

these legislative changes on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.

You are urged to consult with your tax advisor with respect to the impact of these legislative changes on your investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.

To maintain our REIT status, we may have to borrow funds on a short-term basis during unfavorable market conditions.

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We will be subject to regular corporate income taxes on any undistributed REIT taxable income, including undistributed net capital gain, each year.

Additionally, we will be subject to a 4% nondeductible excise tax on any amount by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from previous years.

Additionally, we will be subject to a 4% nondeductible excise tax on any amount by which dividends paid by us in

any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from previous years.

Payments we make to our stockholders under our share repurchase plan generally will not be taken into account for purposes of these distribution requirements.

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Debt will generally meet the “straight debt” safe harbor if the debt is a written unconditional promise to pay on demand or on a specified date a certain sum of money, the debt is not convertible, directly or indirectly, into stock, and the interest rate and the interest payment dates of the debt are not contingent on the profits, the borrower’s discretion, or similar factors.

Additionally, no more than 5% of the value of our assets (other than government securities, qualified real estate assets and securities of our taxable REIT subsidiaries) can consist of the securities of any one issuer, no more than 20% of the value of our assets may be represented by securities of one or more taxable REIT subsidiaries, and no more than 25% of the value of our assets may consist of “nonqualified publicly offered REIT debt instruments.” If we fail to comply with these requirements at the end of any calendar quarter, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions in order to avoid losing our REIT qualification and suffering adverse tax consequences.

If we fail to comply with these requirements at the end of any calendar quarter, we must dispose of a portion of our assets within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions in order to avoid losing our REIT qualification and suffering adverse tax consequences.

In order to satisfy these requirements and maintain our qualification as a REIT, we may be forced to liquidate assets from our portfolio or not make otherwise attractive investments.

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As a result, the acquisition of less than 9.8% of our outstanding common stock or our capital stock by a person could cause another person to be treated as owning in excess of 9.8% of our outstanding common stock or our capital stock, respectively, and thus violate the Ownership Limits.

There can be no assurance that our board of directors, as permitted in the

charter, will not decrease these Ownership Limits in the future.

There can be no assurance that our board of directors, as permitted in the charter, will not decrease these Ownership Limits in the future.

Any attempt to own or transfer shares of our common stock or capital stock in excess of the Ownership Limits without the consent of our board of directors will result either in the shares in excess of the limit being transferred by operation of our charter to a charitable trust, and the person who attempted to acquire such excess shares not having any rights in such excess shares, or in the transfer being void.

The Ownership Limits may have the effect of precluding a change in control of us by a third party, even if such change in control would be in the best interests of our stockholders or would result in receipt of a premium to the price of our common stock (and even if such change in control would not reasonably jeopardize our REIT status).

Any exemptions to the Ownership Limits granted in the future may limit our board of directors’ power to increase the Ownership Limits or grant further exemptions.

Any exemptions to the Ownership

Limits granted in the future may limit our board of directors’ power to increase the Ownership Limits or grant further exemptions.

stockholders may be required to file U.S.

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We expect our shares to be regularly traded on an established securities market.

Final Treasury Regulations that were effective as of April 25, 2024 (the “Final Regulations”) modified prior tax guidance relating to the manner in which we determine whether we are a domestically controlled REIT.

The Final Regulations provide a look-through rule for our stockholders that are non-publicly traded partnerships, non-public REITs, non-public regulated investment companies, or non-public domestic C corporations owned more than 50% directly or indirectly by foreign persons (“foreign-controlled domestic corporations”) and treat “qualified foreign pension funds” as foreign persons.

The look-through rule in the Final Regulations applicable to foreign-controlled domestic corporations will not apply to a REIT for a period of up to ten years if it is able to satisfy certain requirements, including not undergoing a significant change in its ownership and not acquiring a significant amount of new USRPIs, in each case since April 24, 2024, the date the Final Regulations were issued.

If a REIT fails to satisfy such requirements during the ten-year period, then the look-through rule in the Final Regulations applicable to foreign controlled domestic corporations will apply to such REIT beginning on the day immediately following the date of such failure.

While we cannot predict when we will commence being subject to such look-through rule in the Final Regulations, we may not be able to satisfy the applicable requirements for the duration of the ten-year period.

Prospective investors are urged to consult with their tax advisors regarding the application and impact of these rules.

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Restrictions on the deduction of all of our interest expense could prevent us from satisfying the REIT distribution requirements and avoiding the incurrence of income or excise taxes.

Under Section 163(j) of the Code, the deduction for business interest expense may be limited to the amount of the taxpayer’s business interest income plus 30% of the taxpayer’s “adjusted taxable income” unless the taxpayer’s gross receipts do not exceed $25 million per year during the applicable testing period or the taxpayer qualifies to elect and elects to be treated as an “electing real property trade or business.” A taxpayer’s adjusted taxable income will start with its taxable income and add back items of non-business income and expense, business interest income and business interest expense, net operating losses, and any deductions for “qualified business income.” A taxpayer that is exempt from the interest expense limitations as an electing real property trade or business is ineligible for certain expensing benefits and is subject to less favorable depreciation rules for real property.

Under Section 163(j) of the Code, the deduction for business interest expense may be limited to the amount of the taxpayer’s business interest income plus 30% of the taxpayer’s “adjusted taxable income” unless the taxpayer’s gross receipts do not exceed $25 million per year during the applicable testing period or the taxpayer qualifies to elect and elects to be treated as an “electing real property trade or business.” A taxpayer’s adjusted taxable income will start with its taxable income and add back certain items including items of non-business income and expense, business interest income and business interest expense, net operating losses, any deductions for “qualified business income”, and any deductions for depreciation, amortization, or depletion.

A taxpayer that is exempt from the interest expense limitations as an electing real property trade or business is ineligible for certain expensing benefits and is subject to less favorable depreciation rules for real property.

The rules for business interest expense will apply to us and at the level of each entity in which or through which we invest that is not a disregarded entity for U.S.

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Our charter authorizes our board of directors to revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interests to qualify as a REIT.

Our board of directors has duties to us and could only cause such changes in our tax treatment if it determines in good faith that such changes are in our best interests.

Our board of directors has duties to us under Maryland law and could only cause such changes in our tax treatment if it determines in good faith that such changes are in our best interests.

In this event, we would become subject to U.S.

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Although this does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our stock.

However, for taxable years through the taxable year ending December 31, 2025, non-corporate U.S.

However, non-corporate U.S.

taxpayers may be entitled to claim a deduction in determining their taxable income of up to 20% of “qualified REIT dividends” (dividends not designated as capital gain dividends or qualified dividend income), subject to certain limitations.

You are urged to consult with your tax advisor regarding the effect of this change on your effective tax rate with respect to REIT dividends.

You are urged to consult with your tax advisor regarding your effective tax rate with respect to REIT dividends.

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

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federal income tax as a regular C corporation, including any applicable corporate alternative minimum tax.

No more than 20% of the value of our total assets may consist of stock or securities of one or more taxable REIT subsidiaries.

No more than 25% (or 20% for taxable years ending on or before December 31, 2025) of the value of our total assets may consist of stock or securities of one or more taxable REIT subsidiaries.

This requirement limits the extent to which we can conduct our activities through taxable REIT subsidiaries.

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These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.

Similarly, if we acquire REMIC residual interests (or equity interests in taxable mortgage pools in a manner consistent with our REIT qualification) and generate “excess inclusion income,” a portion of our dividends received by a tax-exempt stockholder will be treated as unrelated business taxable income.

treated as unrelated business taxable income.

The excess inclusion income would also be subject to adverse U.S.

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If the amendments to the outstanding instrument are “significant modifications” under the applicable Treasury Regulations, the modified instrument will be considered to have been reissued to us in a debt-for-debt exchange with the borrower.

In that event,

we may be required to recognize taxable gain to the extent the principal amount of the modified instrument exceeds our adjusted tax basis in the unmodified instrument, even if the value of the instrument or the payment expectations have not changed.

In that event, we may be required to recognize taxable gain to the extent the principal amount of the modified instrument exceeds our adjusted tax basis in the unmodified instrument, even if the value of the instrument or the payment expectations have not changed.

Following such a taxable modification, we would hold the modified loan with a cost basis equal to its principal amount for federal tax purposes.

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government securities for purposes of the 75% asset test or the qualification of income or gains from dispositions of TBAs as gains from the sale of real property (including interests in real property and interests in mortgages on real property) or other qualifying income for purposes of the 75% gross income test, we treat our TBAs under which we contract to purchase to-be-announced Agency MBS (“long TBAs”) as qualifying assets for purposes of the REIT 75% asset test, and we treat income and gains from our long TBAs as qualifying income for purposes of the 75% gross income test, based on an opinion of counsel substantially to the effect that (i) for purposes of the REIT asset tests, our long TBAs should be treated as “real estate assets,” and (ii) for purposes of the 75% gross income test, any gain recognized by us in connection with the disposition of our long TBAs by offset, including in dollar roll transactions, should be qualifying income.

Opinions of counsel are not binding on the IRS, and no assurance can be

given that the IRS will not successfully challenge the conclusions set forth in such opinions.

Opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not successfully challenge the conclusions set forth in such opinions.

In addition, it must be emphasized that the opinion of counsel is based on various assumptions relating to our TBAs and is conditioned upon fact-based representations and covenants made by our management regarding our TBAs.

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We are required to comply with numerous federal and state laws.

The laws, rules and regulations comprising this regulatory framework change frequently, as can the interpretation and enforcement of existing laws, rules, and regulations.

The laws, rules and

regulations comprising this regulatory framework change frequently, as can the interpretation and enforcement of existing laws, rules, and regulations.

From time to time, we may receive requests from federal and state agencies for records, documents, and information regarding our policies, procedures, and practices regarding our business activities.

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government, Federal Reserve, U.S.

Treasury, SEC and other U.S.

and foreign governmental and regulatory bodies have taken a number of economic actions and regulatory initiatives from time-to-time designed to stabilize and stimulate the economy and the financial markets, and additional actions and initiatives may occur in the future.

While our current exposure to transactions in foreign currencies is limited, uncertainties regarding geopolitical developments can produce volatility in global financial markets, which could have a negative impact on our business in the future.

Treasury, FHFA, SEC and other U.S.

Additional actions and initiatives may occur in the future.

While we are not currently directly exposed to transactions in foreign currencies, uncertainties regarding geopolitical developments can produce volatility in global financial markets, which could have a negative impact on our business in the future.

There can be no assurance that, in the long term, actions that governments and regulatory bodies or central banks have taken in the past or may take in the future will improve the efficiency and stability of mortgage or financial markets.

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Furthermore, a change in our asset allocation could result in us making investments in asset categories different from those described in this Report.

The failure of our management to make investments that meet our investment criteria could cause a material adverse effect on our business, financial condition, liquidity, results of operations and ability to pay dividends to our stockholders and could cause the value of our capital stock to decline.

We may enter into transactions and take certain actions in connection with such transactions that could affect the price of our common stock.

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In addition, the trading volume in our capital stock may fluctuate and cause significant price variations to occur.

If the market price of our capital stock declines significantly, our stockholders may be unable to resell their shares at or above the price our stockholders paid for their shares.

If the market price of our capital stock declines significantly, our stockholders may be unable to sell their shares at or above the price our stockholders paid for their shares.

Furthermore, fluctuations in the trading price of our common stock may adversely affect the liquidity of our common stock and our ability to raise additional equity capital.

Price fluctuations may result in our stock trading below our reported book value per share for extended periods of time.

We cannot assure you that the market price of our capital stock will not fluctuate or decline significantly in the future.

Some of the factors that could negatively affect our share price or result in fluctuations in the price or trading volume of our capital stock are included in the risk factors described in this Report.

Common stock eligible for future sale may have adverse effects on our share price.

We cannot predict the effect, if any, of future sales of our common stock, or the availability of shares for future sales, on the market price of our common stock.

Further, certain stock change of ownership tests may limit our ability to raise significant amounts of equity capital or could limit our future use of tax losses to offset income tax obligations, which may adversely affect us or our stockholders.

Sales of substantial amounts of common stock or the perception that such sales could occur may adversely affect the prevailing market price for our common stock.

Also, we may issue additional shares in public offerings or private placements to make new investments or for other purposes.

We are not required to offer any such shares to existing stockholders on a preemptive basis.

Therefore, it may not be possible for existing stockholders to participate in such future share issuances, which may dilute existing stockholders’ interests in us.

Future issuances of equity securities may dilute your ownership in us and may also negatively affect the market price of our common stock.

The issuance or sale of substantial amounts of our common stock (directly, in underwritten offerings or through our at-the-market (“ATM”) program, or indirectly through convertible or exchangeable securities, warrants, or options) to raise additional capital, or pursuant to our stock incentive plans, or the perception that such securities are available or that such issuances or sales are likely to occur, could materially and adversely affect the market price of our common stock and our ability to raise capital through future offerings of equity or equity-related securities.

However, our future growth will depend, in part, upon our ability to raise additional capital, including through the issuance of equity securities.

We are not required to offer any additional equity securities to existing common stockholders on a preemptive basis, and our charter empowers our Board of Directors to make significant changes to our capital stock without stockholder approval.

Our preferred stock, as well as any additional preferred stock we may issue, will have a preference on distribution payments, periodically or upon liquidation, which could impact our ability to make distributions to common stockholders.

Because our decision to issue additional equity securities in the future will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature, or success of our future capital-raising efforts.

Thus, common stockholders bear the risk that our future issuances of equity securities may negatively affect the market price of our common stock and will likely dilute their percentage ownership.

We consider the potential dilution of existing stockholders as part of our decision to issue new shares.

We also consider the favorable impact to existing stockholders of spreading administrative and operating expenses over an increased number of common shares.

Certain stock change of ownership tests may limit our ability to raise significant amounts of equity capital or could limit our future use of tax losses to offset income tax obligations, which may adversely affect us or our stockholders.

Investing in our capital stock may involve a high degree of risk.

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

What changed 10-K

Item 1A. Risk Factors