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Item 7. Management’s Discussion and Analysis

2026-02-23 compared with 2025-02-20 · 241 added, 267 removed, 490 unchanged (51% of the section changed)

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The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements, which are included in Part IV, Item 15 of this Report.

We are a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities (“MBS”) and other mortgage-related assets.

We are a Maryland corporation primarily focused on investing in, financing and managing MBS and other mortgage-related assets.

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

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Interest rates and prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty.

The market value of our assets can be impacted by credit spread premiums (yield advantage over U.S.

Treasury notes) and the supply of, and demand for, assets in which we invest.

The market value of our assets can be impacted by spreads and the supply of, and demand for, assets in which we invest.

Market Conditions and Impacts

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

Of these macroeconomic factors, financial conditions, inflation, employment conditions, monetary policy, interest rates and interest rate volatility had the most direct impacts on our performance and financial condition during 2024.

Financial conditions were predominantly accommodative throughout 2024, buoyed by strong equity market performance, tightening spreads across investment grade, high yield and emerging market bonds, declining interest rate volatility and the start of the Federal Open Market Committee’s (“FOMC”) easing cycle.

The fourth quarter saw these trends continue following the resolution of the US elections, despite sharply higher interest rates in the intermediate and long end of the yield curve.

Inflation readings trended lower during 2024.

The headline consumer price index (“CPI”) ended the year at 2.9%, down from 3.4% in December of 2023, while CPI (ex.

food and energy) declined from 3.9% to 3.2%.

The disinflationary trend stalled during the fourth quarter, however, as headline CPI increased from 2.4% to 2.9% and CPI (ex.

food and energy) declined modestly from 3.3% to 3.2%.

Investors responded to the stalled progress, along with fresh uncertainty regarding the potential impacts of future fiscal and trade policies, by adjusting expectations for future inflation sharply higher.

This was reflected most directly in Treasury inflation-protected securities breakeven rates.

The two-year breakeven ended the year at 2.54% (up from 1.77% at the end of September, and up from 2.02% in December of 2023) and the five-year breakeven ended at 2.39% (up from 2.09% in September and 2.15% last December).

The employment picture was strong throughout 2024, with the economy adding a total of over 2.2 million jobs.

This trend continued during the fourth quarter, as the economy added an average of 170,000 jobs per month.

Strong labor markets, inflation persistently higher than the FOMC’s target of 2% and uncertainty about the impact of future policy action led to a re-pricing of the market’s expectations of future monetary policy.

Following the 100 basis point reduction in the Federal Funds target rate over the course of the third and fourth quarters, Federal Funds futures market expectations as of year-end 2024 reflected only one to two additional cuts in the target rate through the end of 2025.

This compares to an expectation of ten cuts through the end of 2025 priced in as recently as mid-September 2024.

Quantitative tightening continued in the fourth quarter of 2024, as the Federal Reserve passively reduced the size of its balance sheet through maturities of U.S.

Treasuries and paydowns of Agency RMBS.

Paydowns of Agency RMBS from the balance sheet added approximately $16 billion of net supply to the market each month, well below the Federal Reserve's monthly cap of $35 billion.

Although quantitative tightening is anticipated to conclude over the next several quarters, runoff of the Agency RMBS portion of the balance sheet is expected to continue, with proceeds redeployed into Treasuries.

Interest rates were quite volatile during 2024, with rates falling for the first three quarters of the year on expectations of future policy action by the FOMC before sharply reversing during the fourth quarter as the market priced the majority of those cuts out.

Over the year, the yield on the two-year Treasury was flat at 4.25%, the yield on the five-year Treasury increased 56 basis points to 4.39% and the yield on the ten-year Treasury finished at 4.58%, up 72 basis points on the year.

During the fourth quarter interest rates were higher across the board, with the two-year, five-year and ten-year Treasury yields up 60 basis points, 81 basis points and 78 basis points, respectively.

Short-dated interest rate volatility reflected the market’s shifting expectations of both monetary and potential fiscal policy, increasing ahead of the U.S.

elections and FOMC meeting in November before settling in December to end the year slightly lower.

Against this macroeconomic backdrop, Agency RMBS underperformed Treasuries during the fourth quarter while still ending the year with modest outperformance.

Underperformance during the quarter primarily took place in lower coupons, as the sharp move higher in interest rates limited demand for deep discount securities.

Although interest rate volatility moved higher during the quarter, supply and demand technicals for higher coupon Agency RMBS were supportive as supply was limited while bank and overseas demand improved.

Prepayment speeds largely remained at low levels given limited housing activity and elevated mortgage rates, but recently originated loans did display significant responsiveness to the short-lived notable decline in mortgage rates in the third quarter.

Premiums on higher coupon specified pool collateral declined modestly given the increase in interest rates but remain relatively well-supported as implied financing via the dollar roll market for TBA investments remained largely unattractive throughout the quarter.

Agency CMBS risk premiums contracted notably during the fourth quarter and throughout 2024 given increased optimism regarding eventual monetary policy normalization, money manager inflows, renewed bank demand for stable cash flow profiles amidst elevated interest rate volatility and relatively modest new issuance.

December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 One Quarter Change One Year

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

corporate earnings.

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

Financial conditions ended 2025 slightly improved, falling sharply after elevated uncertainty around U.S.

trade policy in April before rebounding over the remainder of the year.

Conditions remained accommodative in the fourth quarter as the Federal Open Market Committee (“FOMC”) reduced rates twice, volatility measures remained subdued and equity markets performed well.

During the fourth quarter, the S&P 500 Index and the NASDAQ continued their strong performance, posting gains of 2.3% and 2.6%, respectively.

For 2025, the S&P 500 gained 16.4% and the NASDAQ was up 20.4%.

Credit market valuations improved over the course of 2025 and ended the fourth quarter largely unchanged, despite experiencing a period of notable deterioration driven primarily by uncertainty regarding U.S.

trade policy.

Inflation readings trended modestly lower during 2025 but continued to exceed the Federal Reserve’s 2% target.

The headline consumer price index (“CPI”) ended the year at 2.7%, down from 2.9% in December 2024.

Core CPI (CPI excluding food and energy) declined from 3.2% to 2.6%.

The disinflationary trend was also evident in the fourth quarter, as headline CPI decreased from 3.0% to 2.7% and core CPI declined modestly from 3.0% to 2.6%.

Investors responded to the improved inflation readings by lowering expectations for future inflation, most directly reflected in Treasury inflation-protected securities breakeven rates.

The two-year breakeven ended the year at 2.30% (down from 2.63% at the end of September and 2.54% in December 2024) and the five-year breakeven ended at 2.27% (down from 2.45% in September and 2.39% last December).

The labor market weakened in 2025, as the economy added 181,000 jobs compared to 1.5 million jobs in 2024.

This weakening trend continued during the fourth quarter, as the economy lost 51,000 jobs.

Despite inflation remaining above the Federal Reserve’s 2% target, the FOMC responded to the weakening job market by lowering its benchmark Federal Funds target rate by 25 basis points on three occasions during 2025, including at both meetings in the fourth quarter.

By year-end, Federal Funds futures priced in expectations for an additional 50 basis points of rate cuts by the end of 2026, reflecting investor anticipation of a more accommodative Federal Reserve moving forward.

The FOMC ended its program of quantitative tightening during the fourth quarter after reducing its portfolio of U.S.

Treasury securities and Agency MBS by over $2.2 trillion since June 2022.

Interest rates declined across the U.S.

Treasury yield curve in 2025, reflecting market expectations for a more accommodative monetary policy stance and continued weakness in the labor market.

The two-year U.S.

Treasury security yield fell 78 basis points to 3.47%, the five-year yield declined 68 basis points to 3.71% and the ten-year yield decreased by 43 basis points to 4.15%.

Interest rates were little changed during the fourth quarter, as the yield on two-year U.S.

Treasury securities decreased by 13 basis points, while the yields on five- and ten-year U.S.

Treasury securities fell by two basis points and remained unchanged, respectively.

Despite increasing significantly in April after the U.S.

trade policy announcements, interest rate volatility declined notably throughout the remainder of the year.

This decline reflected market expectations for an accommodative Federal Reserve, which were confirmed when the FOMC lowered its benchmark rate by 25 basis points at each of the last three meetings of 2025.

Against this macroeconomic backdrop, Agency RMBS delivered robust performance during the fourth quarter, capping an exceptional year for the sector.

Relative to U.S.

Treasury securities, 2025 marked the strongest calendar-year performance for Agency RMBS since 2010, which is particularly notable given the ongoing runoff in Agency RMBS from the Federal Reserve’s balance sheet and the continued lack of meaningful demand from commercial banks.

Three key themes emerged in the second half of the year that supported valuations following the sector’s underperformance amid April’s trade policy-related instability:

a sharp decline in interest rate volatility, significant inflows into fixed income funds and mortgage REITs, and the unexpected emergence of Fannie Mae and Freddie Mac as additional sources of demand.

With organic net supply totaling just $164 billion for the year, money manager, mortgage REIT and GSE demand drove higher valuations.

As a result, the sector outperformed investment grade corporates relative to U.S.

Treasury securities for the first time since 2018.

Prepayment speeds increased modestly but remained low, constrained by subdued housing activity and mortgage rates that, despite falling nearly 100 basis points over the year, remain elevated.

Premiums on higher coupon specified pool collateral were well supported by the decline in mortgage rates, improving notably in the second half of the year.

Agency CMBS risk premiums finished 2025 largely unchanged, retracing the spread widening seen in April amid heightened U.S.

trade policy uncertainties.

The rebound in valuations began in mid-to-late April and continued through the fourth quarter, supported by improving clarity in trade relations and growing confidence in the path toward monetary policy easing.

Additionally, slightly higher issuance levels relative to the prior year were well absorbed due to money manager inflows and continued bank demand for stable cash flow profiles.

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

Interest Rates

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One-month SOFR 3.69 % 4.13 % 4.34 % 4.32 % 4.33 % (0.44) % (0.64) %

2 Year Treasury 4.25 % 3.65 % 4.72 % 4.62 % 4.25 % 0.60 % — %

5 Year Treasury 4.39 % 3.58 % 4.33 % 4.20 % 3.83 % 0.81 % 0.56 %

10 Year Treasury 4.58 % 3.80 % 4.34 % 4.19 % 3.86 % 0.78 % 0.72 %

30 Year Treasury 4.78 % 4.13 % 4.50 % 4.34 % 4.02 % 0.65 % 0.76 %

(in basis points) December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 One Quarter Change One Year

Treasury 3.47 % 3.60 % 3.72 % 3.91 % 4.25 % (0.13) % (0.78) %

Treasury 3.71 % 3.73 % 3.79 % 3.98 % 4.39 % (0.02) % (0.68) %

Treasury 4.15 % 4.15 % 4.23 % 4.24 % 4.58 % — % (0.43) %

Treasury 4.83 % 4.73 % 4.77 % 4.61 % 4.78 % 0.10 % 0.05 %

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

Swap Spreads (1)

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30 Year Mortgage Spreads vs.

5/10 Year Treasury Blend (2)

5/10 Year U.S.

Treasury Securities Blend (2)

FNMA 2.0% 83 82 90 75 65 1 18

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FNMA 6.0% 93 124 161 147 140 (31) (47)

FNMA 6.5% 47 100 127 116 135 (53) (88)

10 Year Agency CMBS Spreads vs.

Treasuries (3)

Treasury Securities (3)

FHLMC K 37 37 42 45 41 — (4)

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Treasury security with a similar maturity.

In the near-term, we remain cautious on Agency RMBS as shifting expectations for monetary and fiscal policy may result in elevated interest rate volatility, reducing investor demand.

Our long-term outlook for Agency RMBS is favorable, however, as we expect demand to improve in higher coupons given attractive valuations, an eventual decline in interest rate volatility, and a steeper yield curve.

Lastly, we expect a gradual increase in Agency CMBS new issuance to be met with robust investor

demand, as the sector continues to offer value relative to other fixed income investments due to its prepayment protection and attractive risk-adjusted return profiles.

Given the meaningful decline in interest rate volatility, we remain constructive on Agency RMBS, though we view near-term risks as balanced following the sector's strong performance, reinforced by the recent announcements that Fannie Mae and Freddie Mac will purchase $200 billion in Agency RMBS.

In addition, Agency CMBS continues to offer attractive risk-adjusted yields and diversification benefits given its stable cash flow profile and lower sensitivity to interest rate fluctuations.

Longer term, the environment for Agency MBS investments is likely to remain favorable given reduced interest rate volatility and expectations for broadening investor demand and a steeper yield curve.

Investment Activities

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

Treasury securities, at fair value — 11,214

Investment in unconsolidated venture — 500

Total investment portfolio 6,276,609 5,445,508

As of December 31, 2024 and 2023, our holdings of 30 year fixed-rate Agency RMBS represented 83% and 98% of our total investment portfolio, respectively.

As of December 31, 2025 and 2024, our holdings of 30 year fixed-rate Agency RMBS represented approximately 85% and 83% of our total investment portfolio, respectively.

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

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6.0% 1,283,242 24.2 % 5.93 % 1,481,454 32.7 % 5.97 %

6.5% 218,879 4.1 % 6.14 % — — % — %

Total 30 year fixed-rate Agency RMBS 5,309,160 100.0 % 5.46 % 4,541,525 100.0 % 5.50 %

Our purchases of Agency RMBS have been primarily focused on specified pools with attractive prepayment profiles.

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

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

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Loan balance 2,111,999 39.8 % 1,961,771 43.2 %

High loan-to-value (“LTV”) ratio 509,459 11.2 % 574,246 11.6 %

High loan-to-value ratio 870,125 16.4 % 509,459 11.2 %

Low credit score 1,384,689 26.1 % 1,328,867 29.3 %

Total 30 year fixed-rate Agency RMBS 5,309,160 100.0 % 4,541,525 100.0 %

We resumed investing in Agency CMBS in the first quarter of 2024 because these securities benefit from prepayment protection characteristics and have an attractive return profile.

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

As of December 31, 2024, our holdings of Agency CMBS represented approximately 15% of our total investment portfolio.

Approximately 79% of our Agency CMBS were Fannie Mae DUS and 21% were Freddie Mac Multifamily Participation Certificates.

As of December 31, 2024 and 2023, our holdings of non-Agency CMBS and non-Agency RMBS represented less than 1% of our total investment portfolio.

In the first quarter of 2024, we received a final distribution from our sole remaining unconsolidated venture.

Following this distribution, we no longer have any investments in unconsolidated ventures.

As of December 31, 2025 and 2024, our holdings of Agency CMBS represented approximately 14% and 15% of our total investment portfolio, respectively.

These securities offer attractive risk-adjusted yields and diversification benefits.

Further, the hedging costs associated with these holdings are economical as Agency CMBS is less sensitive to interest rate risk given prepayment protection and scheduled balloon maturity payments.

As of December 31, 2025, approximately 81% of our Agency CMBS holdings were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.

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

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

Financing and Other Liabilities

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

Repurchase agreements are generally settled on a short-term basis, usually from one to six months, and bear interest at rates that are expected to move in close relationship to SOFR.

Repurchase agreements are generally settled on a short-term basis, usually from one to six months, and bear interest at rates that are expected to move in close relationship to the secured overnight financing rate (“SOFR”).

The following table presents the amount of collateralized borrowings outstanding under repurchase agreements as of the end of each quarter, the average amount outstanding during the quarter and the maximum balance outstanding during the quarter.

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Hedging Instruments

We generally hedge as much of our interest rate and foreign exchange risk as we deem prudent because of market conditions.

No assurance can be given that our hedging activities will have the desired beneficial impact on our results of operations or financial condition.

Our investment policies do not contain specific requirements as to the percentages or amount of risk that we are required to hedge.

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

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

• the duration of the hedges may not match the duration of the related liabilities;

• our counterparty in the hedging transaction may default on its obligation to pay;

• the values of derivatives used for hedging are adjusted in accordance with accounting rules to reflect changes in fair value.

We enter into interest rate swap agreements that are designed to mitigate the effects of changes in interest rates for a portion of our borrowings.

Under these swap agreements, we generally pay fixed interest rates and receive floating interest rates indexed to SOFR.

To a lesser extent, we have also used interest rate swap agreements whereby we make floating interest rate payments indexed to SOFR and receive fixed interest rate payments as part of our overall risk management strategy.

To a lesser extent, we have in the past entered into and may in the future enter into interest rate swap agreements whereby we make floating interest rate payments indexed to SOFR and receive fixed interest rate payments as part of our overall risk management strategy.

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

During the year ended December 31, 2024, we entered into new interest rate swaps with a notional amount of $2.6 billion and terminated or settled existing interest rate swaps with a notional amount of $3.4 billion.

During the third quarter of 2024, we began entering into futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance.

During the year ended December 31, 2024, we entered into futures contracts with a notional amount of $2.8 billion and terminated or settled existing futures contracts with a notional amount of $1.4 billion.

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

During the year ended December 31, 2025, we entered into interest rate swaps with a notional amount of $1.3 billion and terminated or settled interest rate swaps with a notional amount of $790.0 million.

We also use U.S.

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

During the year ended December 31, 2025, we entered into U.S.

Treasury futures contracts with a notional amount of $5.6 billion and terminated or settled U.S.

Treasury futures contracts with a notional amount of $5.9 billion.

Daily variation margin for interest rate swaps and U.S.

Treasury futures contracts is characterized as settlement of the derivative itself rather than collateral and is recorded as a realized gain or loss in our consolidated statements of operations.

Additionally, we have used and may in the future use short positions in TBAs to manage risk and economically hedge a

portion of our exposure to changes in Agency RMBS valuations.

Capital Activities

As of December 31, 2024, we may sell up to 11,095,561 shares of our common stock from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents.

The table below shows sales of our common stock under equity distribution agreements during the years ended December 31, 2024 and 2023.

As of December 31, 2025, we had 19,538,020 shares of our common stock remaining available for sale from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents.

The table below shows issuances of our common stock under equity distribution agreements during the years ended December 31, 2025 and 2024.

Years ended December 31,

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Shares sold 9,983,179 13,204,968

Net proceeds 116,215 109,104

Commissions and other costs 1,720 1,478

Fees paid to placement agents 1,034 1,475

Cash proceeds, net of fees paid to placement agents 81,625 116,460

For information on dividends declared during the years ended December 31, 2025 and 2024, see Note 10 - “Stockholders' Equity" of our consolidated financial statements in Part IV, Item 15 of this annual report on Form 10-K.

During the years ended December 31, 2025 and 2024, we did not repurchase any shares of our common stock.

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

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

During the year ended December 31, 2023, we repurchased and retired 151,637 shares of Series B Preferred Stock and 271,031 shares of Series C Preferred Stock.

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

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

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

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

On December 27, 2024, we redeemed all issued and outstanding shares of our Series B Preferred Stock for $106.2 million.

The cash redemption price for each share of Series B Preferred Stock was $25.00.

The excess of the consideration transferred over carrying value was accounted for as a deemed dividend and resulted in a reduction of $3.5 million in net income attributable to common stockholders during the year ended December 31, 2024.

For information on dividends declared and paid during the years ended December 31, 2024 and 2023, see Note 11 - “Stockholders' Equity” of our consolidated financial statements in Part IV, Item 15 of this report on Form 10-K.

During the year ended December 31, 2024, we did not repurchase any shares of our common stock.

Book Value per Common Share

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Book value per common share 8.72 8.92 10.00

Our book value per common share decreased 10.8% as of December 31, 2024 compared to December 31, 2023 primarily due to losses recognized on investments and dividends declared, which were partially offset by net interest income and gains recognized on derivative instruments.

Our book value per common share decreased 2.2% as of December 31, 2025 compared to December 31, 2024.

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

Refer to Item 7A.

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All of these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effects based on information available as of the date of these financial statements.

If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in valuation of our investment portfolio, allowances for credit losses on our available-for-sale MBS, and a change in our interest income recognition among other effects.

If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in valuation of our investment portfolio or derivative instruments and a change in our interest income recognition among other effects.

Mortgage-Backed Securities.

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

Under the fair value option, changes in fair value are recognized in the consolidated statement of operations.

We have elected the fair value option for all of our MBS held as of December 31, 2025 (December 31, 2024:

$5.4 billion or 99.7%).

Under the fair value option, we recognize changes in fair value in our consolidated statement of operations.

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

As of December 31, 2024, $5.4 billion (December 31, 2023:

$5.0 billion) or 99.7% (December 31, 2023:

99.7%) of our MBS are accounted for under the fair value option.

We record our MBS purchased before September 1, 2016, as available-for-sale and report these MBS at fair value.

We determine the fair value of our MBS by obtaining valuations from an independent source.

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Additionally, refer to Item 7A.

“Quantitative and Qualitative Disclosures About Market Risk” for the estimated impact of an instantaneous shift in the yield curve on the market value of our interest rate-sensitive investments.

“Quantitative and Qualitative Disclosures About Market Risk” for the estimated impact of an instantaneous shift in the yield curve on the market value of our interest rate-sensitive instruments.

Interest Income Recognition.

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Premiums or discounts are amortized or accreted into interest income over the life of the investment using the effective interest method.

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

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

Interest income on our MBS where we may not recover substantially all of our initial investment is based on estimated future cash flows.

We estimate future expected cash flows at the time of purchase and determine the effective interest rate based on these estimated cash flows and our purchase price.

Over the life of the investments, we update these estimated future cash flows and compute a revised yield based on the current amortized cost of the investment, unless those changes will be reflected in an allowance for credit losses.

In situations where an allowance for credit losses is limited by the fair value of the investment, we compute the yield as the rate that equates expected future cash flows to the current fair value of the investment.

In estimating these future cash flows, there are a number of assumptions that are subject to uncertainties and contingencies, including but not limited to the rate and timing of principal payments (prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations.

Over the life of the investments, we update these estimated future cash flows and compute a revised yield based on the current amortized cost of the investment.

In estimating these future cash flows, there are a number of assumptions that are subject to uncertainties and contingencies, including but not limited to the rate and timing of principal payments, the pass through or coupon rate and interest rate fluctuations.

These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimate and our interest income.

Changes in our original or most recent cash flow projections may result in a prospective change in interest income recognized on these securities, or the amortized cost of these securities.

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

One of the most significant factors impacting our projected cash flows is changes in long-term interest rates.

One of the most significant factors impacting our interest income recognition is changes in long-term interest rates.

When interest rates fall, prepayments will generally increase and when interest rates rise, prepayments will generally decrease.

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Accordingly, under different conditions, we could report materially different amounts.

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

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

Prepayment rates on our mortgage-backed securities increased modestly in 2024 compared to 2023 but remained relatively low given elevated interest rates.

Prepayment rates on our mortgage-backed securities accelerated in 2025 compared to 2024 as interest rates declined.

Refer to Item 7A.

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Accounting for Derivative Financial Instruments.

We use or have used derivatives to manage interest rate and currency exchange risk and as an alternative means of investing in and financing Agency RMBS.

We use or have used derivatives to manage interest rate risk and as an alternative means of investing in and financing Agency RMBS.

We record all derivatives on our consolidated balance sheets at fair value.

Refer to Note 2 - “Summary of Significant Accounting Policies” of our consolidated financial statements included in Part IV, Item 15 of this Report for a description of how we determine the fair value of our futures contracts, interest rate swaps and TBAs.

As of December 31, 2024, all of our futures contracts were exchange-traded and all of our interest rate swaps were centrally cleared by a registered clearing organization.

Treasury futures contracts, interest rate swaps and TBAs.

As of December 31, 2025, all of our U.S.

Treasury futures contracts were exchange-traded, and all of our interest rate swaps were centrally cleared by a registered clearing organization.

Changes in the fair value of our derivatives are recorded in gain (loss) on derivative instruments, net in our consolidated statement of operations.

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The factors that impact valuations of our TBAs are similar to those that impact valuations of our Agency RMBS.

Valuations of interest rate swaps and futures contracts are most significantly impacted by changing interest rate expectations.

We recognized net gains on our interest rate swaps and futures contracts in 2024 primarily due to shifting expectations that interest rates would stay higher for longer.

Valuations of U.S.

Treasury futures contracts are impacted by changes in interest rates.

Valuations of interest rate swaps are impacted by changes in swap rates, which includes changes in interest rates as well as changes in swap spreads.

We recognized net losses on our interest rate swaps and U.S.

Treasury futures contracts in 2025 as rates declined.

Results of Operations

Our consolidated results of operations for the years ended December 31, 2024, 2023 and 2022 are summarized below.

The table below presents information from our consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023.

Years Ended December 31,

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Interest income 295,287 286,546 277,929

Mortgage-backed and other securities 286,546 277,929 192,566

Commercial loan — — 1,947

Total interest income 286,546 277,929 194,513

Interest expense 219,865 249,719 228,229

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Dividends to preferred stockholders (13,120) (22,011) (23,153)

Gain on repurchase and retirement of preferred stock 427 1,471 14,179

Gain (loss) on repurchase and retirement of preferred stock 14 427 1,471

Issuance and redemption costs of redeemed preferred stock — (3,535) —

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

Average earning asset yields increased 6 basis points for the year ended December 31, 2024 compared to 2023.

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

We earned total interest income of $286.5 million during 2024 (2023:

$277.9 million).

Our interest income consists of coupon interest and net (premium amortization) discount accretion on MBS and other securities as well as interest income on our commercial loan as shown in the table below.

Average earning asset yields decreased 7 basis points for the year ended December 31, 2025 compared to 2024.

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

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

Years Ended December 31,

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Interest income

Mortgage-backed and other securities - coupon interest 281,080 271,856 198,290

Mortgage-backed and other securities - net (premium amortization) discount accretion 5,466 6,073 (5,724)

Mortgage-backed and other securities - interest income 286,546 277,929 192,566

Commercial loan — — 1,947

Coupon interest 296,581 281,080 271,856

Net (premium amortization) discount accretion (1,294) 5,466 6,073

Total interest income 295,287 286,546 277,929

Our interest income increased $8.6 million for the year ended December 31, 2024 compared to 2023 due to higher average earning assets and average earning asset yields.

Our interest income increased $8.7 million for the year ended December 31, 2025 compared to 2024 due to higher average earning assets, which was partially offset by lower average earning asset yields.

Prepayment Speeds

Our RMBS portfolio is subject to inherent prepayment risk primarily driven by changes in interest rates, which impacts the amount of premium and discount on the purchase of these securities that is recognized into interest income.

Our Agency RMBS portfolio is subject to inherent prepayment risk primarily driven by changes in interest rates, which impacts the amount of premium and discount on the purchase of these securities that is recognized into interest income.

Generally, in an environment of falling interest rates, prepayment speeds will increase as homeowners are more likely to prepay their existing mortgage and refinance into a lower borrowing rate.

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

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

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

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

The following table presents net (premium amortization) discount accretion recognized on our mortgage-backed and other securities portfolio during 2024, 2023 and 2022.

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

Faster prepayment rates on securities purchased at a premium relative to par value result in higher premium amortization and a decrease in interest income.

Conversely, faster prepayment rates on securities purchased at a discount relative to par value result in higher discount accretion and an increase in interest income.

The following table presents net (premium amortization) discount accretion recognized during 2025, 2024 and 2023.

Years Ended December 31,

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Net (premium amortization) discount accretion (1,294) 5,466 6,073

Net discount accretion decreased slightly for the year ended December 31, 2024 compared to 2023 as the impact of repositioning into securities with higher book prices was largely offset by modestly faster prepayment rates.

The change in net (premium amortization) discount accretion for the year ended December 31, 2025 compared to 2024 was primarily a result of repositioning a portion of our investment portfolio into higher coupon securities that have higher amortized costs relative to par value.

Our interest income is subject to interest rate risk.

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Interest Expense and Cost of Funds

The table below presents our average borrowings and cost of funds for the years ended December 31, 2024, 2023 and 2022.

The table below presents information related to our borrowings and cost of funds for the years ended December 31, 2025, 2024 and 2023.

Years ended December 31,

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

Our average cost of funds increased 36 basis points for the year ended December 31, 2024 compared to 2023 as the FOMC raised the Federal Funds target rate from a range of 4.25% to 4.50% as of January 1, 2023 to a maximum of 5.25% to 5.50% before lowering the target rate in the second half of 2024.

Our cost of funds for the year ended December 31, 2024 was also significantly impacted by the completion of amortization of net deferred gains on de-designated interest rate swaps in December 2023.

The amortization of these net deferred gains previously offset a portion of our current period interest expense on repurchase agreement borrowings.

Our average cost of funds decreased 95 basis points for the year ended December 31, 2025 compared to 2024.

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

The table below presents the components of interest expense for the years ended December 31, 2025, 2024 and 2023.

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Total interest expense 219,865 249,719 228,229

Our interest expense increased $21.5 million for the year ended December 31, 2024 compared to 2023 due to a decrease in amortization of net deferred gains on de-designated interest rate swaps and increases in total average borrowings and borrowing rates.

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

Our interest expense decreased $29.9 million for the year ended December 31, 2025 compared to 2024 due to a lower cost of funds, which was partially offset by an increase in average borrowings.

Net Interest Income

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Interest income 295,287 286,546 277,929

Mortgage-backed and other securities 286,546 277,929 192,566

Commercial loan — — 1,947

Total interest income 286,546 277,929 194,513

Interest expense

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Net interest rate margin 0.99 % 0.11 % 0.41 %

Our net interest income, which equals total interest income less total interest expense, decreased $12.9 million for the year ended December 31, 2024 compared to 2023 due to a decrease in amortization of net deferred gains on de-designated interest rate swaps, a higher average Federal Funds target rate and higher average borrowings, which were partially offset by higher average earning assets and average earning asset yields.

Our net interest rate margin, which equals the yield on our average earning assets for the period less the average cost of funds, decreased 30 basis points for the year ended December 31, 2024 compared to 2023 due to a decrease in amortization of net deferred gains on de-designated interest rate swaps and a higher average Federal Funds target rate, which were partially offset by higher average earning asset yields.

Our net interest income, which equals total interest income less total interest expense, and our net interest rate margin, which equals the yield on our average earning assets for the period less the average cost of funds, increased for the year ended December 31, 2025 compared to 2024 due to a lower cost of funds, which was partially offset by a decrease in average earning asset yields.

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

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Net unrealized gains (losses) on MBS accounted for under the fair value option 151,761 (124,329) 50,364

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

Net unrealized gains (losses) on U.S.

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Total gain (loss) on investments, net 149,344 (133,911) (107,280)

(107,280) (1,079,339)

During the year ended December 31, 2025, we sold MBS and realized net losses of $2.4 million (2024:

net losses of $9.1 million).

Net realized losses during the year ended December 31, 2025 primarily reflect sales of Agency RMBS during the first quarter as we rotated the portfolio into higher coupons.

Net realized losses during the year ended December 31, 2024 primarily reflect sales of 4.0% to 5.0% coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS.

Net realized losses during the year ended December 31, 2023 primarily reflect the repositioning of Agency RMBS coupon allocations and sales of lower yielding Agency RMBS to purchase higher yielding Agency RMBS in an effort to improve the earnings power of the portfolio.

We have elected the fair value option for all of our MBS purchased on or after September 1, 2016.

Before September 1, 2016, we had also elected the fair value option for our non-Agency RMBS interest-only securities.

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

As of December 31, 2024, $5.4 billion or 99.7% (December 31, 2023:

$5.0 billion or 99.7%) of our MBS were accounted for under the fair value option.

We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $124.3 million in 2024 (2023:

net unrealized gains of $50.4 million).

Net unrealized losses in the year ended December 31, 2024 were due to lower valuations on Agency RMBS and Agency CMBS given an increase in interest rates.

Net unrealized gains in the year ended December 31, 2023 reflect favorable valuations on our assets held at year end.

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

Treasury security during the year ended December 31, 2024.

We sold the security during the first quarter of 2024.

We recorded net realized and unrealized gains of $384,000 on U.S.

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

$5.4 billion or 99.7%).

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

We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $151.8 million in 2025 (2024:

net unrealized losses of $124.3 million).

Net unrealized gains for the year ended December 31, 2025 were primarily due to the decline in interest rates and MBS spreads during the year, as valuations on fixed-rate securities increased as interest rates fell and spreads tightened.

Net unrealized losses for the year ended December 31, 2024 were due to lower valuations on Agency RMBS and Agency CMBS given an increase in interest rates.

We did not hold any U.S.

Treasury securities during the year ended December 31, 2025.

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

Treasury security during the year ended December 31, 2024.

(Increase) Decrease in Provision for Credit Losses

As of December 31, 2024, $15.0 million of our $5.4 billion of MBS are classified as available-for-sale and subject to evaluation for credit losses.

As of December 31, 2025, we no longer own any securities that are classified as available-for-sale and subject to evaluation for credit losses.

We recorded a provision for credit losses of $458,000 on a single non-Agency CMBS for the year ended December 31, 2024.

Refer to Note 2 – “Summary of Significant Accounting Policies” of our consolidated financial statements included in Part IV, Item 15 of this Report for additional information on how we calculate our provision for credit losses.

Equity in Earnings (Losses) of Unconsolidated Ventures

For the year ended December 31, 2024, we recorded equity in losses of unconsolidated ventures of $193,000.

equity in losses of $1,000).

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

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

The tables below summarize the components of our gain (loss) on derivative instruments, net for the years ended December 31, 2024, 2023 and 2022.

The tables below summarize the components of our gain (loss) on derivative instruments, net for the following periods.

$ in thousands Year ended December 31, 2025

not designated as

hedging instrument Realized gain (loss) on derivative instruments, net Contractual net

Derivative Instruments Realized Gain (Loss) on Derivative Instruments, Net Contractual Net

Interest Income (Expense) Unrealized

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Interest rate swaps (162,830) 112,244 686 (49,900)

Futures Contracts 58,000 — 3,463 61,463

Treasury futures contracts (56,313) — (1,286) (57,599)

TBAs 1,967 — 606 2,573

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$ in thousands Year ended December 31, 2024

not designated as

hedging instrument Realized gain (loss) on derivative instruments, net Contractual net

Derivative Instruments Realized Gain (Loss) on Derivative Instruments, Net Contractual Net

Interest Income (Expense) Unrealized

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Interest rate swaps (47,581) 161,762 610 114,791

Currency Forward Contracts (18) — — (18)

Treasury futures contracts 58,000 — 3,463 61,463

TBAs 986 — (606) 380

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$ in thousands Year ended December 31, 2023

not designated as

hedging instrument Realized gain (loss) on derivative instruments, net Contractual net

Derivative Instruments Realized Gain (Loss) on Derivative Instruments, Net Contractual Net

Interest Income (Expense) Unrealized

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Total (179,526) 239,008 2,356 61,838

As of December 31, 2024 and 2023, we held the following interest rate swaps whereby we pay fixed rate interest and receive floating rate interest based upon SOFR.

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

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

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Interest rate swaps 3,820,000 1.34 % 3.87 % 4.6 3,265,000 0.97 % 4.49 % 5.3

During the year ended December 31, 2024, we entered into interest rate swaps with a notional amount of $2.6 billion and terminated or settled existing interest rate swaps with a notional amount of $3.4 billion (December 31, 2023:

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

$2.6 billion of additions and $3.4 billion of terminations or settlements).

We recorded net gains of $114.8 million and $62.3 million on interest rate swaps during the years ended December 31, 2024 and 2023, respectively, primarily due to changes in interest rate expectations.

As of December 31, 2024, we had $4.9 billion of repurchase agreement borrowings with a weighted average remaining maturity of 29 days (December 31, 2023:

$4.5 billion and 20 days).

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

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

During the third quarter of 2024, we began using futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance.

The table below presents certain details of our futures contracts as of December 31, 2024.

We did not hold any futures contracts as of December 31, 2023.

As of December 31, 2024

$ in thousands Notional Amount - Short

We recorded net losses of $49.9 million on interest rate swaps for the year ended December 31, 2025 due to a decline in swap rates on maturities less than 15 years (2024:

net gains of $114.8 million).

As of December 31, 2025 and 2024, we held the following U.S.

Treasury futures contracts.

December 31, 2025 December 31, 2024

$ in thousands Notional Amount - Short Notional Amount - Short

Treasury futures 420,000 136,000

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Total 1,090,000 1,402,000

We recognized net gains of $61.5 million on futures contracts for the year ended December 31, 2024 due to changes in interest rate expectations.

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

We recorded net gains of $380,000 on TBAs during the year ended December 31, 2024 (December 31, 2023:

net losses of $442,000).

Other Investment Income (Loss), net

Our other investment income (loss), net for the year ended December 31, 2023 consisted of foreign currency transaction gains and losses and the reclassification of our foreign currency translation adjustment that was previously recorded in accumulated other comprehensive income related to an unconsolidated venture.

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

During the year ended December 31, 2025, we entered into U.S.

Treasury futures contracts with a notional amount of $5.6 billion and terminated or settled U.S.

Treasury futures contracts with a notional amount of $5.9 billion (2024:

$2.8 billion of additions and $1.4 billion of terminations or settlements).

We recognized net losses of $57.6 million on U.S.

Treasury futures contracts for the year ended December 31, 2025 due to a decline in interest rates (2024:

net gains of $61.5 million).

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

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

We recorded net gains of $2.6 million on TBAs during the year ended December 31, 2025 (2024:

For the year ended December 31, 2025, we incurred management fees of $11.3 million (2024:

$12.3 million) that are payable to our Manager under our management agreement.

Management fees decreased for the year ended December 31, 2024 compared to 2023 due to lower average stockholders' equity.

Our management fees are calculated quarterly in arrears.

$11.9 million).

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

Refer to Note 9 – “Related Party Transactions” of our consolidated financial statements in Part IV, Item 15 of this Report for a discussion of our relationship with our Manager and a description of how our fees are calculated.

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

Gain on Repurchase and Retirement of Preferred Stock

Gain (Loss) on Repurchase and Retirement of Preferred Stock

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

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

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

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

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

Issuance and Redemption Costs of Redeemed Preferred Stock

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For the year ended December 31, 2025, our net income attributable to common stockholders was $88.2 million (2024:

net loss of $37.5 million) or $0.65 basic and diluted net income per average share available to common stockholders (2023:

$0.85 net loss per share).

For the year ended December 31, 2024, the change in net income (loss) attributable to common stockholders compared to 2023 was primarily due to:

(i) net losses on investments of $133.9 million versus $107.3 million in the 2023 period;

(ii) net gains on derivative instruments of $176.6 million versus $61.8 million in the 2023 period and (iii) a $12.9 million decrease in net interest income.

$34.8 million) or $1.32 basic and diluted net income per average share available to common stockholders (2024:

The change in net income attributable to common stockholders compared to 2024 was primarily due to:

(i) net gains on investments of $149.3 million compared to net losses on investments of $133.9 million in 2024;

(ii) net losses on derivative instruments of $104.9 million compared to net gains of $176.6 million in 2024 and (iii) a $38.6 million increase in net interest income.

For further information on the changes in net gain (loss) on investments, net gain (loss) on derivative instruments, and changes in net interest income, see preceding discussion under “Gain (Loss) on Investments, net”, “Gain (Loss) on Derivative Instruments, net” and “Net Interest Income”.

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TBA dollar roll income;

gain on repurchase and retirement of preferred stock;

(gain) loss on repurchase and retirement of preferred stock;

foreign currency (gains) losses, net and amortization of net deferred (gain) loss on de-designated interest rate swaps.

We may add and have added additional reconciling items to our earnings available for distribution calculation as appropriate.

By excluding the gains and losses discussed above, we believe the presentation of earnings available for distribution provides a consistent measure of operating performance that investors can use to evaluate our results over multiple reporting periods and, to a certain extent, compare to our peer companies.

However, because not all of our peer companies use identical operating performance measures, our presentation of earnings available for distribution may not be comparable to other similarly titled measures used by our peer companies.

We exclude the impact of gains and losses when calculating earnings available for distribution because (i) when analyzed in conjunction with our U.S.

GAAP results, earnings available for distribution provides additional detail of our investment portfolio’s earnings capacity and (ii) gains and losses are not accounted for consistently under U.S.

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

For example, a portion of our mortgage-backed securities are classified as available-for-sale securities, and we record changes in the valuation of these securities in other comprehensive income on our consolidated balance sheets.

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

We exclude the impact of gains and losses when calculating earnings available for distribution because, when analyzed in conjunction with our U.S.

GAAP results, earnings available for distribution provides additional detail of our investment portfolio’s earnings capacity.

In addition, certain gains and losses represent one-time events.

We may add and have added additional reconciling items to our earnings available for distribution calculation as appropriate.

Furthermore, gains and losses have not been accounted for consistently under U.S.

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

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

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

federal income tax law generally requires that we distribute at least 90% of our REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains.

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

Because we view earnings available for

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

federal income tax law generally requires that we distribute at least 90% of our REIT taxable income annually.

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

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

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1,147 1,366 697

(Gain) on repurchase and retirement of preferred stock (427) (1,471) (14,179)

(Gain) loss on repurchase and retirement of preferred stock (14) (427) (1,471)

Foreign currency (gains) losses, net (3)

Amortization of net deferred (gain) loss on de-designated interest rate swaps (4)

— (10,405) (19,708)

Subtotal 68,959 119,976 273,337

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

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

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

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

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(5) Earnings available for distribution per common share is equal to earnings available for distribution divided by the basic weighted average number of common shares outstanding.

The components of earnings available for distribution for the years ended December 31, 2024, 2023 and 2022 were as follows.

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

Years Ended December 31,

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

Earnings available for distribution decreased for the year ended December 31, 2024 compared to 2023 primarily due to lower effective net interest income.

Earnings available for distribution increased for the year ended December 31, 2025 compared to 2024 due to the redemption of our Series B Preferred Stock in December 2024, which was partially offset by lower effective net interest income.

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

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107,621 2.17 % 87,957 1.90 % (374) — %

Our effective interest expense and effective cost of funds increased for the year ended December 31, 2024 compared to 2023 primarily due to a decrease in contractual net interest income on interest rate swaps.

Our effective interest expense increased for the year ended December 31, 2025 compared to 2024 due to a decrease in contractual net interest income on interest rate swaps and an increase in average borrowings, which were partially offset by a lower average cost of funds.

Our effective cost of funds increased for the year ended December 31, 2025 compared to 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower average cost of funds.

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

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

See preceding discussion under “Gain (Loss) on Derivative Instruments, net” for details of our interest rate swap portfolio as of December 31, 2024 and December 31, 2023.

We also use U.S.

Treasury futures contracts, which do not earn or incur contractual interest, in lieu of certain interest rate swaps as an alternative way to help mitigate the potential impact of changing interest rates on our performance.

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

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

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187,666 3.26 % 198,589 3.60 % 278,303 5.44 %

Our effective net interest income and effective interest rate margin decreased for the year ended December 31, 2024 compared to 2023 primarily due to a decrease in contractual net interest income on interest rate swaps.

Our effective net interest income and effective interest rate margin decreased for the year ended December 31, 2025 compared to 2024 due to a decrease in contractual net interest income on interest rate swaps and average earning asset yields, which were partially offset by a lower average cost of funds.

Economic Debt-to-Equity Ratio

The table below shows our debt-to-equity ratio and our economic debt-to-equity ratio as of December 31, 2024 and December 31, 2023.

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

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

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We present an economic debt-to-equity ratio, a non-GAAP financial measure of leverage that considers the impact of the off-balance sheet financing of our investments in TBAs that are accounted for as derivative instruments under U.S.

We include our TBAs at implied cost basis in our measure of leverage because a forward contract to acquire Agency RMBS in the

TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities.

We include these types of TBAs at implied cost basis in our measure of leverage because a forward contract to acquire Agency RMBS in the TBA market carries similar risks to Agency RMBS purchased in the cash market and funded with on-balance sheet liabilities.

Similarly, a contract for the forward sale of Agency RMBS has substantially the same effect as selling the underlying Agency RMBS and reducing our on-balance sheet funding commitments.

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

(2) Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis ($606,000 as of December 31, 2024;

none as of December 31, 2023) to total stockholders' equity.

(2) Economic debt-to-equity ratio is calculated as the ratio of total repurchase agreements and TBAs at implied cost basis (none as of December 31, 2025;

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

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, fund investments, repay borrowings and fund other general business needs.

Our primary sources of funds for liquidity consist of the net proceeds from our common and preferred equity offerings, net cash provided by operating activities, proceeds from repurchase agreements and other financing arrangements and future issuances of equity and/or debt securities.

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to pay dividends, purchase investments, repay borrowings and fund other general business needs.

Our primary sources of funds for liquidity consist of the net cash proceeds from our common equity offerings, net cash provided by operating activities, proceeds from repurchase agreements and other financing arrangements and future issuances of equity and/or debt securities.

We currently believe that we have sufficient liquidity and capital resources available for the acquisition of additional investments, repayments on borrowings, margin requirements and the payment of cash dividends as required for continued qualification as a REIT.

We generally maintain liquidity to pay down borrowings under repurchase agreements to reduce borrowing costs and otherwise efficiently manage our long-term investment capital.

We generally maintain liquidity to pay down borrowings under financing arrangements to reduce borrowing costs and otherwise efficiently manage our long-term investment capital.

Because the level of these borrowings can be adjusted on a daily basis, the level of cash and cash equivalents carried on our consolidated balance sheets is significantly less important than our potential liquidity available under borrowing arrangements or through the sale of liquid investments.

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

We held cash, cash equivalents and restricted cash of $210.9 million at December 31, 2024 (2023:

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

We held cash, cash equivalents and restricted cash of $166.4 million as of December 31, 2025 (2024:

$210.9 million).

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Our primary use of cash from investing activities during the year ended December 31, 2025 was $2.7 billion to purchase MBS (2024:

We received proceeds from the sale of MBS of $1.3 billion and proceeds from the sale of U.S.

Treasury securities of $10.8 million during the year ended December 31, 2024.

We generated $389.5 million from principal payments of MBS during the year ended December 31, 2024.

We also received $11.4 million to settle derivative contracts during the year ended December 31, 2024.

Our investing activities used net cash of $536.8 million for the year ended December 31, 2023.

Our primary use of cash from investing activities during the year ended December 31, 2023 was $5.9 billion to purchase MBS and $59.5 million to purchase U.S.

$2.2 billion).

We received proceeds from sales of MBS of $1.5 billion (2024:

$1.3 billion from sales of MBS and $10.8 million from sales of U.S.

Treasury securities).

We also paid $179.5 million to settle derivative contracts during the year ended December 31, 2023.

We received proceeds from the sale of MBS of $5.2 billion and proceeds from the sale of U.S.

Treasury securities of $49.0 million during the year ended December 31, 2023.

We also generated $531.9 million from principal payments of MBS during the year ended December 31, 2025 (2024:

$389.5 million) and used cash of $217.2 million to settle derivative contracts during the year ended December 31, 2025 (2024:

received cash of $11.4 million).

Our financing activities provided net cash of $691.3 million for the year ended December 31, 2025 (2024:

$326.5 million).

Our primary source of cash from financing activities during the year ended December 31, 2024 was net proceeds on our repurchase agreements of $435.7 million and proceeds from issuance of common stock of $116.5 million.

We redeemed all outstanding shares of our Series B Preferred Stock for $106.2 million during the year ended December 31, 2024.

We also paid dividends of $105.5 million and used $11.1 million to repurchase Series B (prior to redemption) and Series C Preferred Stock during the year ended December 31, 2024.

Our financing activities provided net cash of $218.9 million for the year ended December 31, 2023.

Our primary source of cash from financing activities during the year ended December 31, 2023 was net proceeds on our repurchase agreements of

Our primary source of cash from financing activities during the year ended December 31, 2025 was net proceeds on our repurchase agreements of $725.3 million (2024:

$435.7 million) and proceeds from issuance of common stock of $81.6 million (2024:

We paid dividends of $102.2 million and used $8.7 million to repurchase Series B and Series C Preferred Stock.

$116.5 million).

We also paid dividends of $106.9 million (2024:

$105.5 million) and used $8.5 million to repurchase Series C Preferred Stock during the year ended December 31, 2025 (2024:

$11.1 million to repurchase Series B Preferred Stock prior to redemption and Series C Preferred Stock).

We redeemed all outstanding shares of our Series B Preferred Stock for $106.2 million in December 2024.

As of December 31, 2025, the average margin requirement (weighted by borrowing amount), or the haircut, under our repurchase agreements was 4.4% for Agency RMBS and 4.9% for Agency CMBS.

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

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

Declines in the value of our securities portfolio can trigger margin calls by our lenders under our repurchase agreements.

An event of default or termination event may give our counterparties the option to terminate all repurchase transactions outstanding with us and require any amount due from us to the counterparties to be payable immediately.

Effects of Margin Requirements, Leverage and Credit Spreads

Our securities have values that fluctuate according to market conditions and the market value of our securities will decrease as prevailing interest rates or credit spreads increase.

Effects of Margin Requirements, Leverage and Spreads

Our securities have values that fluctuate according to market conditions and the market value of our securities will decrease as prevailing interest rates or spreads increase.

When the value of the securities pledged to secure a repurchase loan decreases to the point where the positive difference between the collateral value and the loan amount is less than the haircut, our lenders may issue a “margin call”, which means that the lender will require us to pay cash or pledge additional collateral.

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

If interest rates increase as a result of a yield curve shift or for another reason or if credit spreads widen, then the prices of our collateral (and our unpledged assets that constitute our liquidity) will decline, we will experience margin calls, and we will seek to use our liquidity to meet the margin calls.

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

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

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

If our haircuts increase, our liquidity will proportionately decrease.

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

Our interest rate swaps and U.S.

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

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

We intend to maintain a level of liquidity in relation to our assets that enables us to meet reasonably anticipated margin calls and increased collateral requirements but that also allows us to be substantially invested in securities.

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

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

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

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

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We also had approximately $397.3 million of unencumbered investments and unrestricted cash of $56.0 million as of December 31, 2025.

As of December 31, 2024, our known contractual obligations primarily consist of $4.9 billion of repurchase agreement borrowings with a weighted average remaining maturity of 29 days.

As of December 31, 2025, our known contractual obligations primarily consisted of $5.6 billion of repurchase agreement borrowings with a weighted average remaining maturity of 23 days.

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

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Based upon our current portfolio and existing borrowing arrangements, we believe that cash flow from operations and available borrowing capacity will be sufficient to enable us to meet anticipated short-term (one year or less) liquidity requirements to fund our investment activities, pay fees under our management agreement, fund our required distributions to stockholders and fund other general corporate expenses.

Our ability to meet our long-term (greater than one year) liquidity and capital resource requirements will be subject to obtaining additional debt financing.

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

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

Our ability to meet our long-term (greater than one year) liquidity and capital resource requirements will be subject to obtaining ongoing debt financing.

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

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

ability to invest such offering proceeds.

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

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Under these agreements, we pledge assets from our investment portfolio as collateral.

Additionally, certain counterparties may require us to provide cash collateral in the event the market value of the assets declines to maintain a contractual repurchase agreement collateral ratio.

Additionally, certain counterparties may require us to provide additional collateral in the event the market value of the assets declines to maintain a contractual repurchase agreement collateral ratio.

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

As of 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.

The following table summarizes our exposure under repurchase agreements to counterparties by geographic concentration as of December 31, 2024.

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.

The following table summarizes our exposure to counterparties by geographic concentration as of December 31, 2025.

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

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North America 14 3,510,419 160,681

Europe (excluding United Kingdom) 2 593,975 (25,686)

Asia 3 764,029 37,765

Europe (excluding United Kingdom) 2 723,946 32,814

United Kingdom 1 620,861 25,525

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If our cash available for distribution is less than our REIT taxable income, we could be required to sell assets or borrow funds to make cash distributions, or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

As discussed above, our distribution requirements are based on REIT taxable income rather than U.S.

GAAP net income.

The primary differences between our REIT taxable income and U.S.

GAAP net income are:

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

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

(ii) gains and losses on derivative instruments that are included in current U.S.

GAAP net income but are excluded from REIT taxable income until realized;

and (iii) temporary differences related to amortization of premiums and discounts on investments.

For additional information regarding the characteristics of our dividends, refer to Note 10 – “Stockholders' Equity” of our consolidated financial statements in Part IV, Item 15 of this Report.

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

Section 3(c)(1) or Section 3(c)(7) of the 1940 Act, together with any other investment securities the Operating Partnership may own, may not have a combined value in excess of 40% of the value of the Operating Partnership’s total assets (exclusive of U.S.

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis