DYNEX CAPITAL INC
For the period ended Dec 31, 2025. Filed Feb 25, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 25, 2026
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-28.
0000826675-25-000021
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-25.
0000826675-26-000017
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 148 previous paragraphs and 102 current paragraphs.
37 unchanged; 39 reworded; 24 added; 71 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
During 2025, shifting U.S. policy and persistent global uncertainty created a favorable backdrop for high-quality, liquid assets like Agency MBS. The second Trump Administration implemented significant tariff increases that generated significantly higher customs revenues and passed the One Big Beautiful Bill Act extending tax provisions from 2017 with additional benefits. Despite these policy shifts and stricter immigration enforcement that contributed to unemployment rising to over 4.0% by year-end, the U.S. economy demonstrated resilience with 2.5% GDP growth through the first three quarters. The combination of moderating inflation, a softening labor market, and policy-driven uncertainty enabled the Federal Reserve to reduce the Federal Funds Rate by 75 basis points in the second half of 2025, bringing the target range to 3.50-3.75%. Additionally, the Fed ended its balance sheet runoff in December, announcing Treasury bill purchases to maintain stable reserve levels and reduce funding market volatility.
Current report
With this backdrop, Agency MBS emerged as one of the better performing sectors within the fixed-income market due to favorable technical and fundamental drivers. The U.S. Treasury yield curve steepened as short-term rates fell more rapidly than long-term yields while Agency MBS spreads substantially tightened relative to Treasuries. Interest rate volatility declined, which aided a reduction in hedging costs. Supply/demand dynamics were favorable overall as new mortgage originations remained muted while demand increased.
Current report
Summary of 2025 Financial Performance
Current report
Our 2025 results directly reflected our ability to capitalize on this favorable environment while maintaining disciplined risk management. For the year ended December 31, 2025, our total economic return ("TER") of $2.75 per common share, or 21.6% of beginning book value, was comprised of an increase in book value of $0.75 per common share and dividends declared of $2.00 per common share. The increase in our book value was predominantly driven by asset appreciation due to tighter spreads between our asset yields and the yields on our interest rate swaps and Treasury futures.The Company's results for 2025 also benefited from higher net interest income due to its purchases of Agency RMBS and CMBS throughout the year at higher yield levels than 2024 while related repurchase agreement financing costs fell following three U.S. Federal Funds rate cuts in 2025. Our increase in the use of SOFR-based interest rate swaps in 2025 added to economic net interest income.
Current report
Our total equity and market capitalization as of December 31, 2025 more than doubled since December 31, 2024 primarily because we raised over $1.2 billion through the issuance of over 90 million shares of common stock pursuant to our ATM program. We deployed the majority of this capital into opportunities in the Agency MBS market, while also strengthening our organization with refreshed leadership, a new independent auditor, and an expanded office footprint.
Current report
For our shareholders, 2025 delivered a 29.4% total return including dividends and share price appreciation. Over this decade through December 31, 2025, Dynex shareholders have experienced a 67% cumulative total return, or approximately 9% annualized with dividends reinvested.
Current report
Outlook for 2026
Current report
We believe the favorable macro environment for high-quality, liquid assets will persist into 2026, continuing to support Agency MBS performance. Recent policy actions now point toward a more stable and supportive framework for the mortgage market, creating a strong foundation for forward returns. Most notably, the Administration's January 2026 directive to the GSEs to purchase $200 billion in Agency MBS to support housing affordability creates a powerful technical tailwind. Combined with the potential for modest additional rate cuts, the policy environment has shifted decisively in favor of mortgage market stability. This clarity enhances our confidence in the path ahead for MBS spreads.
Current report
We anticipate sustained global demand for high-quality, liquid, dollar-denominated assets as geopolitical uncertainties persist and credit concerns mount in riskier sectors. Agency MBS remain uniquely positioned at the intersection of government-backed credit quality, superior yields to U.S. Treasuries, deep liquidity, and defensive characteristics appropriate for an uncertain late-cycle environment.
Current report
While spreads have tightened from the historically wide levels where we deployed capital in 2025, current valuations remain compelling on a forward-looking basis given the policy support, technical factors, and risk-adjusted return characteristics relative to alternatives.
Current report
(1)Includes a par value of $9 million of 4.5% 15-year Agency RMBS.
Current report
(2)Includes a notional amount of $690 million of 4.5% 15-year TBA securities.
Current report
Our Agency CMBS consist of loans collateralized by multifamily properties. Though we expect our exposure to Agency CMBS to remain modest as a percentage of the total portfolio, we added Agency CMBS selectively during 2025 where the risk-adjusted return profile aligned with our broader strategy. In addition to offering strong relative value, Agency CMBS help diversify and stabilize the portfolio's cash flow and total return profile, given their unique prepayment characteristics and underlying asset base.
Current report
Net Interest Income and Economic Net Interest Income
Current report
Net interest income and net interest spread increased for the year ended December 31, 2025, compared to the year ended December 31, 2024 due to the purchases of higher yielding Agency MBS over the past year. Though interest expense increased due to an increase in repurchase agreement borrowings used to finance these purchases, the average financing rate we paid declined 95 basis points year over year.
Current report
Net periodic interest earned on interest rate swaps increased for the year ended December 31, 2025, compared to the year ended December 31, 2024 due to a higher notional amount of interest rate swaps. The combination of higher interest earned on Agency MBS, lower financing rates, and higher periodic interest on interest rate swaps resulted in higher economic net interest income and higher economic net interest spread.
Current report
The following table presents information regarding the performance of our TBA dollar roll transactions for the periods indicated:
Current report
(1)Implied net interest income (expense) is also referred to as “drop income (loss)” and represents a portion of the total realized gain (loss) from our TBA dollar roll transactions recorded within “gain (loss) on derivative instruments, net.”
Current report
For the year ended December 31, 2025, gains on our investment portfolio exceeded losses on our hedges by approximately $303 million, which includes $45 million in net periodic interest we earned from interest rate swaps. The fair value of our investment portfolio increased during the year ended December 31, 2025 primarily due to the tightening of mortgage spreads to U.S. Treasuries relative to wider spreads at the time of purchase. U.S. Treasury rates and SOFR-based swap rates declined overall during the year ended December 31, 2025, which resulted in losses on our hedging portfolio.
Current report
For the year ended December 31, 2024, net gains from our interest rate hedging portfolio exceeded the net loss in fair value of our investments by $131 million. Through repositioning of our interest rate hedging portfolio, we managed through the volatile interest rate environment of 2024 to offset the negative impact of the increasing 10-year U.S. Treasury rate on our investment portfolio, which was also negatively impacted by widening credit spreads for the majority of 2024.
Current report
Operating expenses for the year ended December 31, 2025 increased $17 million compared to the year ended December 31, 2024 due to higher salary, bonus, and share-based compensation expenses, primarily resulting from an increase in performance-based compensation accruals and from the hiring of new employees. Audit and legal expenses also increased in 2025 compared to 2024 primarily due to the growth of the Company.
Current report
In addition to reporting the Company’s financial results determined in accordance with GAAP, management of the Company believes that investors’ understanding of our operating results may be enhanced by the use of non-GAAP financial measures, which are used by management internally, along with GAAP measures, to evaluate our performance. Our non-GAAP financial measures include earnings available for distribution (“EAD”) to common shareholders (including per common share) and economic net interest income and the related metric
Current report
Non-GAAP financial measures are not a substitute for GAAP measures and may be different from non-GAAP measures used by other companies. In addition, other companies, including in our industry, may calculate comparable measures differently, which reduces their usefulness as comparative measures. Investors should not rely on any single financial measure when evaluating our business. These non-GAAP measures should be considered as supplemental in nature and not as a substitute for our operating results in accordance with GAAP.
Current report
In addition to the GSE guarantee of principal payments on our Agency investments, we expect the capital and repurchase agreement markets will remain accessible at capacities sufficient to cover our short-term and long-term liquidity needs.
Removed paragraphs (71)
Previous report
In late 2023, the 10-year U.S. Treasury approached 5% based on inflation fears, but into the end of 2023 and early 2024, there was optimism that many rate cuts were on the near term horizon which spurred longer term rates to fall in the early part of 2024. As the year progressed and more economic data was available, it became clear that growth was still moderate and the early outlook for rate cuts was too aggressive. Beginning in September, the Federal Reserve began to cut interest rates, reversing the direction of short-term rates for the first time since March of 2022. The Federal Funds rate cut in September was followed by two more rate cuts before year end. This shift in policy and the outlook for 2025 changed the shape of the yield curve, and by the end of 2024, the yield curve was no longer inverted with short-term rates below longer-term rates. This change in the shape of the yield curve allows levered mortgage investors, like Dynex, to earn a positive carry by investing in longer term bonds with a higher yield than its repurchase based financing cost which is generally tied to shorter-term rates. Mortgage spreads to Treasuries remained elevated for most of 2024 which provided for solid opportunities to buy assets that will generate good returns over the long term.
Previous report
Market Data
Previous report
Summary of Results
Previous report
As a result of capital raising and a more favorable investing environment, we significantly grew our balance sheet during the year ended December 31, 2024. Our total assets increased over 28%, and our total shareholders’ equity increased over 36%. During the year, we added approximately $2.2 billion in higher coupon Agency RMBS at a lower cost of financing, which improved our net interest income to $5.9 million versus a loss of $(7.9) million in the prior year. As the yield curve un-inverted, we repositioned our hedges, changing the majority of our interest rate derivatives from U.S. Treasury futures to interest rate swaps, which contributed net periodic interest of $16.1 million to our earnings for the year ended December 31, 2024. Our investment portfolio declined in fair value because the increase in the 10-year U.S. Treasury rate as well as widening of credit spreads. However, gains from our hedging portfolio exceeded the losses in fair value of our investments by $130.5 million. Despite the growth in our balance sheet, we managed our operating expenses and lowered our expense ratio by approximately 70 basis points compared to the prior year.
Previous report
Current Outlook
Previous report
Inflation fears that drove U.S. Federal Reserve policy over the last three years are starting to subside, which allowed the Federal Open Market Committee to start cutting the U.S. Federal Funds rate in the second half of 2024. The shape of the yield curve and less restrictive monetary policy in 2025 provide an investment backdrop that is very different than the last two years, which were marked by rising short-term rates and a prolonged period of an inverted yield curve. Historically wide spreads provide us a good environment to invest into, and the swaps market further supports portfolio returns for levered mortgage investors like Dynex. With rapidly evolving geopolitical and macroeconomic factors, we are focused on regulatory changes and the potential range of impacts on monetary policy, yield curve, and generally supply and demand dynamics. We are also prepared for bouts of volatility and spread widening, which may cause temporary declines in the market value of our assets but should provide for compelling returns for our investors longer term. Inflation is still a focus and tax policy may cause changes to the inflation outlook. The financing environment is still liquid and supportive of ownership of high-quality liquid assets such as Agency MBS. We may continue to expand our capital base through the ATM program to deploy into an attractive market, achieve scale, and continue to attract higher price-to-book multiple on our common stock price.
Previous report
During the year ended December 31, 2024, we shifted the majority of our interest rate hedges from U.S. Treasury futures to interest rate swaps. The table below discloses details on the Company's interest rate hedges held as of December 31, 2024, compared to hedging portfolio held as of December 31, 2023:
Previous report
Net Interest Expense
Previous report
Net interest expense and net interest spread improved for the year ended December 31, 2024, compared to the year ended December 31, 2023. Though our average cost of financing remained higher than our effective yield for 2024, our net interest income turned positive as our purchases of higher-yielding assets increased our interest income relative to 2023, while the rate cuts implemented by the FOMC during the year helped to lower our interest expense. As market expectations of a rate reduction increased, we shortened our borrowing terms with our counterparties so we would be in a better position to rollover our borrowings as quickly as possible to take advantage of lower financing rates.
Previous report
The 10-year U.S. Treasury rate rose as high as 4.71%, ending 2024 at 4.57%, an increase of approximately 69 basis points since the year began. Throughout the year, we frequently adjusted the volume and type of derivative instruments used to hedge the volatile interest rate environment. As a result, net gains from our interest rate hedging portfolio exceeded the net loss in fair value of our investments by $130.5 million, which also declined in fair value due to wider credit spreads as of December 31, 2024 versus December 31, 2023.
Previous report
During the year ended December 31, 2023, the 10-year U.S. Treasury rate ranged from a low of 3.31% in April 2023 to a high of 4.99% in October 2023, yet ended the year where it started at 3.88%. Credit spreads, which were wider for most of 2023, also tightened during the fourth quarter of 2023. We purchased $3.6 billion of Agency RMBS throughout the year when credit spreads were wider relative to December 31, 2023. As a result, the fair value of our investment portfolio, including TBAs, increased a net $68.4 million for the year ended December 31, 2023. These gains were partially offset by net losses on our interest rate hedges of $(10.8) million for the year ended December 31, 2023.
Previous report
Operating expenses for the year ended December 31, 2024, increased $3.6 million compared to the year ended December 31, 2023, primarily due to accelerated recognition of share-based compensation expense for certain stock incentive awards granted in March 2024 to a retirement eligible employee. In addition, our salary and bonus expenses increased by $1.0 million due to an increase in average headcount as well as salary increases and other performance-based incentives.
Previous report
Non-GAAP financial measures are not a substitute for GAAP earnings and may not be comparable to similarly titled measures of other REITs because they may not be calculated in the same manner. Furthermore, though EAD is one of several factors our management considers in determining the appropriate level of distributions to common shareholders, it should not be utilized in isolation, and it is not an accurate indication of the Company’s REIT taxable income, its distribution requirements in accordance with the Tax Code or total economic return.
Previous report
(2)The Company did not use put options on U.S. Treasury futures during the year ended December 31, 2024.
Previous report
FORWARD-LOOKING STATEMENTS
Previous report
Certain written statements in this Annual Report on Form 10-K that are not historical facts constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements in this report addressing expectations, assumptions, beliefs, projections, future plans and strategies, future events, developments that we expect or anticipate will occur in the future, and future operating results, capital management, and dividend policy are forward-looking statements. Forward-looking statements are based upon management’s beliefs, assumptions, and expectations as of the date of this report regarding future events and operating performance, considering all information currently available to us, and are applicable only as of the date of this report. Forward-looking statements generally can be identified by the use of words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “may,” “will,” “intend,” “should,” “could,” or similar expressions. We caution readers not to place undue reliance on our forward-looking statements, which are not historical facts and may be based on projections, assumptions, expectations, and anticipated events that do not materialize. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Previous report
Forward-looking statements in this Annual Report on Form 10-K may include, but are not limited to, statements about:
Previous report
•Our business and investment strategy, including our ability to generate acceptable risk-adjusted returns, our target investment allocations, and our views on the future performance of MBS and other investments;
Previous report
•Our views on the macroeconomic environment, monetary and fiscal policy, and conditions in the investment, credit, interest rate, and derivatives markets;
Previous report
•Our views on inflation, market interest rates, and market spreads;
Previous report
•Our views on the effect of actual or proposed actions of the Federal Reserve or other central banks with respect to monetary policy (including the targeted Fed Funds rate), and the potential impact of these actions on interest rates, borrowing costs, inflation, or unemployment;
Previous report
•The effect of regulatory initiatives of the Federal Reserve, the Federal Housing Finance Agency, other financial regulators, and other central banks;
Previous report
•Our financing strategy, including our target leverage ratios, our use of TBA dollar roll transactions, and anticipated trends in financing costs, including TBA dollar roll transaction costs, and our hedging strategy, including changes to the derivative instruments to which we are a party, and changes to government regulation of hedging instruments and our use of these instruments;
Previous report
•Our investment portfolio composition and target investments;
Previous report
•Our investment portfolio performance, including the fair value, yields, and forecasted prepayment speeds of our investments;
Previous report
•Our liquidity and ability to access financing and the anticipated availability and cost of financing;
Previous report
•Our capital stock activity, including the impact of stock issuances and repurchases;
Previous report
•The amount, timing, and funding of future dividends;
Previous report
•Our use of our tax NOL carryforward and other tax loss carryforwards;
Previous report
•Future competition for and availability of investments, financing, and capital;
Previous report
•Estimates of future interest expenses, including related to the Company’s repurchase agreements and derivative instruments;
Previous report
•The status and effect of legislative reforms and regulatory rule-making or review processes, and the status of reform efforts and other business developments in the repurchase agreement financing market;
Previous report
•Market, industry, and economic trends, and how these trends and related economic data may impact the behavior of market participants and financial regulators;
Previous report
•The impact of recent bank failures, potential new regulations, and the potential for other bank failures this year;
Previous report
•The impact of debt ceiling negotiations on interest rates, spreads, the U.S. Treasury market and the impact more broadly on fixed income and equity markets:
Previous report
•Uncertainties regarding the war between Russia and Ukraine or Israel and Hamas and the related impacts on macroeconomic conditions, including, among other things, interest rates;
Previous report
•The financial position and creditworthiness of the depository institutions in which the Company’s MBS and cash deposits are held;
Previous report
•The impact of applicable tax and accounting requirements on us, including our tax treatment of derivative instruments such as TBAs, interest rate swaps, options, and futures;
Previous report
•Our future compliance with covenants in our master repurchase agreements, ISDA agreements, and debt covenants in our other contractual agreements;
Previous report
•Our reliance on a single service provider for our trading, portfolio management, and risk reporting systems;
Showing the first 40 of 71 passages. Open the source sections for the rest.
Reworded paragraphs (39)
Previous wording
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Part I, Item 1A, “Risk Factors” elsewhere in this Annual Report on Form 10-K and in other documents filed with the SEC and otherwise publicly disclosed. Please refer to “Forward-Looking Statements” contained within this Item 7 for additional information. This discussion also contains non-GAAP financial measures, which are discussed in the section “Non-GAAP Financial Measures.”
Current wording
This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those disclosed in Part I, Item 1A, “Risk Factors” elsewhere in this Annual Report on Form 10-K and in other documents we file with the SEC or otherwise publicly disclose. Please refer to “Forward-Looking Statements” contained within Part I, Item 1, “Business” of the Annual Report on Form 10-K for additional information. This discussion also contains non-GAAP financial measures, which are discussed in the section “Non-GAAP Financial Measures.”
Previous wording
For a complete description of our business, including our operating policies, investment philosophy and strategy, financing and hedging strategies, and other important information, please refer to Part I, Item 1 of this Annual Report on Form 10-K.
Current wording
For a complete description of our business, including our operating policies, investment philosophy and strategy, financing, risk management and hedging strategies, and other important information, please refer to Part I, Item 1, “Business” of this Annual Report on Form 10-K.
Previous wording
The charts below show the range of U.S. Treasury rates for the past year and information regarding market spreads as of and for the periods indicated:
Current wording
The charts below show the range of U.S. Treasury and Secured Overnight Funding Rate (“SOFR”)-based swap rates for the year ended December 31, 2025 and information regarding market spreads as of and for the periods indicated:
Previous wording
(2)Data represents the spread to swap rate on newly issued securities and is sourced from J.P. Morgan.
Current wording
(2)Data is sourced from J.P. Morgan and represents the spread to swap rate on newly issued Agency securities collateralized by multifamily properties.
Previous wording
The following table summarizes the changes in the Company's financial position during 2024:
Current wording
The following table summarizes the changes in the Company's financial position during the year ended December 31, 2025:
Previous wording
(2)Net proceeds from stock issuance include $6.3 million from amortization of share-based compensation, net of grants, and adjustments for payroll tax withholding on share-based compensation vesting during the year ended December 31, 2024.
Current wording
(2)Net proceeds from common stock issuance include approximately $1.2 billion from ATM issuances and approximately $11 million from amortization of share-based compensation, net of grants, during theyear ended December 31, 2025.
Previous wording
Our investment portfolio (including TBAs) as of December 31, 2024, increased approximately 32% compared to December 31, 2023. The following charts compare the composition of our MBS portfolio (including TBAs) as of the dates indicated:
Current wording
Our investment portfolio (including TBAs) as of December 31, 2025, has increased 98% since December 31, 2024. We added $8.2 billion of Agency RMBS and $1.2 billion of Agency CMBS during the year ended December 31, 2025, of which $809 million were pending settlement as of December 31, 2025. The following charts compare the composition of our MBS portfolio (including TBAs) as of the dates indicated:
Previous wording
We purchased approximately $2.2 billion of higher coupon Agency RMBS during the year ended December 31, 2024, of which $335.1 million were pending settlement as of December 31, 2024. We also increased our TBA positions by a notional of $1.0 billion during the year ended December 31, 2024. The following tables compare our fixed-rate Agency RMBS investments, including TBA dollar roll positions, as of the dates indicated:
Current wording
The following tables compare our 30-year fixed-rate Agency RMBS investments, including TBA dollar roll positions, as of the dates indicated:
Previous wording
(1)Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.
Current wording
(3)Implied cost basis of TBAs represents the forward price to be paid for the underlying Agency MBS.
Previous wording
(2)Fair value of TBAs is the implied market value of the underlying Agency security as of the end of the period.
Current wording
(4)Fair value of TBAs is the implied market value of the underlying Agency security as of the end of the period.
Previous wording
(3)TBAs are included on the consolidated balance sheet within “derivative assets/liabilities” at their net carrying value which is the difference between their implied market value and implied cost basis. Please refer to Note 5 of the Notes to the Consolidated Financial Statements for additional information.
Current wording
(5)TBAs are included on the consolidated balance sheet within “derivative assets/liabilities” at their net carrying value which is the difference between their implied market value and implied cost basis. Please refer to Note 5 of the Notes to the Consolidated Financial Statements for additional information.
Previous wording
(4)TBAs are excluded from this calculation as they do not have a defined weighted-average loan balance or age until mortgages have been assigned to the pool.
Current wording
(6)TBAs are excluded from this calculation as they do not have a defined weighted-average loan balance or age until mortgages have been assigned to the pool.
Previous wording
(5)Constant prepayment rate (“CPR”) represents the 3-month CPR of Agency RMBS held as of date indicated.
Current wording
(7)Constant prepayment rate (“CPR”) represents the 3-month CPR of Agency RMBS held as of date indicated.
Previous wording
(6)Duration measures the sensitivity of a security's price to the change in interest rates and represents the percent change in price of a security for a 100-basis point increase in interest rates. We calculate duration using third-party financial models and empirical data. Different models and methodologies can produce different estimates of duration for the same securities.
Current wording
(8)Duration measures the sensitivity of a security's price to the change in interest rates and represents the percent change in price of a security for a 100-basis point increase in interest rates. We calculate duration using third-party financial models and empirical data. Different models and methodologies can produce different estimates of duration for the same securities.
Previous wording
(7)Represents the weighted average market yield projected using cash flows generated from the forward curve based on market prices as of the date indicated and assuming zero volatility.
Current wording
(9)Represents the weighted average market yield projected using cash flows generated from the forward curve based on market prices as of the date indicated and assuming zero volatility.
Previous wording
Agency CMBS, Agency CMBS IO, and non-Agency CMBS IO comprise 2.1% of our MBS portfolio as of December 31, 2024 is comprised of Agency CMBS, Agency CMBS IO, and non-Agency CMBS IO. Our Agency CMBS and Agency CMBS IO are backed by loans collateralized by multifamily properties, which have performed well for the last decade versus other sectors of the commercial real estate market. Our Agency CMBS IO are Class X1 from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation. According to Freddie Mac, 99.8% of the loans in K-deals are current as of September 2024. Our non-Agency CMBS IO were all originated prior to 2018 with a weighted average remaining life of less than 2 years. The underlying loans for the non-Agency CMBS IO securities are collateralized by a number of different property types including: 27% retail, 40% office, 4% multifamily, 10% hotel and 19% all other real estate categories. In the current macroeconomic environment, we are not actively purchasing CMBS or CMBS IO as current risk versus reward remains unattractive relative to Agency RMBS. Our non-Agency CMBS IO investments are nearing maturity and have very little amortized cost remaining; any changes in actual payments may result in large swings in yield as shown below. Non-Agency CMBS IO do not comprise a material percentage of our portfolio and future income is not expected to have a material impact on our financial results.
Current wording
Agency CMBS IO are backed by loans collateralized by multifamily properties. Our Agency CMBS IO are from Freddie Mac Series K deals from which interest continues to be advanced even in the event of an underlying default up until liquidation. According to Freddie Mac, 99.7% of the loans in K-deals are current as of December 2025. Our non-Agency CMBS IO were all originated prior to 2018 and are backed by loans collateralized by a number of different property types, such as multifamily, office, retail, hotels, industrial, storage, and others. Our non-Agency CMBS IO investments are nearing maturity and have very little amortized cost remaining; any changes in actual payments may result in large swings in yield as shown below.
Previous wording
Our repurchase agreement borrowings increased to $6.6 billion as of December 31, 2024 from $5.4 billion as of December 31, 2023 as we used these funds to partially finance our purchases of Agency RMBS during the year. We have not experienced any difficulty in securing financing with any of our counterparties, and our repurchase agreement counterparties have not indicated any concerns regarding leverage or credit. Please refer to Note 4 of the Notes to the Consolidated Financial Statements contained within this Annual Report on Form 10-K as well as “Results of Operations” and “Liquidity and Capital Resources” contained within this Item 7 for additional information relating to our repurchase agreement borrowings.
Current wording
Our repurchase agreement borrowings increased to $14 billion as of December 31, 2025 from $7 billion as of December 31, 2024. These borrowings were used to partially finance our purchases of Agency MBS during the year ended December 31, 2025. We have not experienced any difficulty in securing financing with any of our counterparties, and our repurchase agreement counterparties have not indicated any concerns regarding leverage or credit. Please refer to Note 4 of the Notes to the Consolidated Financial Statements contained within this Annual Report on Form 10-K as well as “Results of Operations” and “Liquidity and Capital Resources” contained within this Item 7 for additional information relating to our repurchase agreement borrowings.
Previous wording
Please refer to Note 5 of the Notes to the Consolidated Financial Statements for details on our interest rate hedging instruments as well as “Quantitative and Qualitative Disclosures about Market Risk” in Item 7A of this Annual Report on Form 10-K.
Current wording
Please refer to Note 5 of the Notes to the Consolidated Financial Statements for details on our interest rate hedging instruments as well as “Liquidity and Capital Resources” within Item 7 and “Quantitative and Qualitative Disclosures about Market Risk” within Item 7A of this Annual Report on Form 10-K.
Previous wording
(6)Represents a non-GAAP measure. Please refer to the section below “Non-GAAP Financial Measures” for a reconciliation of economic net interest income/spread to GAAP measures.
Current wording
(6)Net periodic interest is the difference between the fixed interest rate we pay and the variable interest rate we receive on our interest rate swaps. It is a component of economic net interest income (expense), a non-GAAP measure. Please refer to the section below “Non-GAAP Financial Measures” for more information.
Previous wording
2)Realized gain (loss) for interest rate swaps consists of net periodic interest benefit of $16.1 million for the year ended December 31, 2024. We did not have any interest rate swap agreements mature or terminate during the year ended December 31, 2024.
Current wording
(2)Realized gain (loss) for interest rate swaps consists of net periodic interest benefit of $45.1 million for the year ended December 31, 2025 and $16.1 million for the year ended December 31, 2024.
Previous wording
In evaluating the Company’s financial and operating performance, management considers book value per common share, total economic return (loss) to common shareholders, and other operating results presented in accordance with GAAP as well as certain non-GAAP financial measures, which include earnings available for distribution (“EAD”) to common shareholders (including per common share) and economic net interest income and the related metric economic net interest spread. Management believes these non-GAAP financial measures may be useful to investors because they are viewed by management as a measure of the investment portfolio’s return based on the effective yield of its investments, net of financing costs and, with respect to EAD, net of other normal recurring operating income/expenses.
Current wording
economic net interest spread. Management believes these non-GAAP financial measures may be useful to investors because they are viewed by management as additional measures of the investment portfolio’s return.
Previous wording
Drop income generated by TBA dollar roll positions, which is included in "gain (loss) on derivatives instruments, net" on the Company's consolidated statements of comprehensive income, is included in EAD because management views drop income as the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. However, drop income/loss doesnot represent the total realized gain/loss from the Company’s investments in TBA securities.
Current wording
Drop income generated by TBA dollar roll positions, which is included in "gain (loss) on derivatives instruments, net" on the Company's consolidated statements of comprehensive income, is included in EAD because management views drop income as the economic equivalent of net interest income (interest income less implied financing cost) on the underlying Agency security from trade date to settlement date. However, drop income/loss does not represent the total realized gain/loss from the Company’s investments in TBA securities.
Previous wording
(3)TBA drop income (loss) is calculated by multiplying the notional amount of the TBA dollar roll positions by the difference in price between two TBA securities with the same terms but different settlement dates.
Current wording
(3)TBA drop income is calculated by multiplying the notional amount of the TBA dollar roll positions by the difference in price between two TBA securities with the same terms but different settlement dates.
Previous wording
During the year ended December 31, 2024, we issued 10,500,000 shares of common stock through a public offering, resulting in proceeds of $124.5 million, net of issuance costs. We also issued 16,756,835 shares of common stock through our ATM program, resulting in proceeds of $207.6 million, net of broker commissions and fees. We deployed these proceeds into purchases of higher coupon Agency RMBS and to cover increased initial margin requirements related to our interest rate swaps.
Current wording
During the year ended December 31, 2025, we issued 90,126,672 shares of common stock through our ATM program, resulting in proceeds of $1.2 billion, net of broker commissions and fees. We partially deployed these proceeds into Agency RMBS and to post initial margin requirements related to a larger hedging portfolio.
Previous wording
Our liquidity fluctuates based on our investment activities, leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments. Our measurement of liquidity includes unrestricted cash and cash equivalents and unencumbered Agency MBS, which are recognized as assets on our consolidated balance sheet. In our measure of liquidity, we also include the fair value of noncash collateral pledged to us by our counterparties, which we typically receive when the fair value of our pledged collateral exceeds our current margin requirement. Our liquidity as of December 31, 2024, was $658.3 million, which consisted of unrestricted cash of $377.1 million and unencumbered Agency MBS with a fair value of $281.2 million. Our liquidity as of December 31, 2023, was $453.6 million.
Current wording
Our liquidity fluctuates based on our investment activities, leverage, capital raising activities, and changes in the fair value of our investments and derivative instruments. Our measurement of liquidity includes unrestricted cash and cash equivalents and unpledged Agency MBS, which are recognized as assets on our consolidated balance sheet. In our measure of liquidity, we also include the fair value of noncash collateral pledged to us by our counterparties, which we typically receive when the fair value of our pledged collateral exceeds our current margin requirement. Our liquidity as of December 31, 2025, was approximately $1.4 billion, which consisted of unrestricted cash of $531 million, unpledged Agency MBS with a fair value of $901 million, and noncash collateral pledged by our counterparties of $1 million. Our liquidity as of December 31, 2024, was $658 million.
Previous wording
We continuously monitor our liquidity, especially with potential risk events on the horizon, such as uncertainty regarding Federal Reserve policy decisions, the size of the Federal Reserve’s balance sheet, quantitative tightening or easing measures, the frequent potential for a government shutdown, and the impact on global markets stemming from global central bank policies. We are also monitoring the wars and conflicts around the globe. We continuously assess the adequacy of our liquidity under various scenarios based on changes in the fair value of our investments and derivative instruments due to market factors such as changes in the absolute level of interest rates and the shape of the yield curve, credit spreads, lender haircuts, and prepayment speeds, which in turn have an impact on derivative margin requirements. In performing these analyses, we will also consider the current state of the fixed-income markets and the repurchase agreement markets to determine if market forces such as supply-demand imbalances or structural changes to these markets could change the liquidity of MBS or the availability of financing. We have not experienced any material changes in the terms of our repurchase agreements with our counterparties, and they have not indicated to us any concerns regarding access to liquidity.
Current wording
We continuously monitor our liquidity, especially with potential risk events on the horizon, such as tariff changes, potential GSE transition, uncertainty regarding Federal Reserve policy decisions, the size of the Federal Reserve’s balance sheet, quantitative tightening or easing measures, federal government shutdowns, and the impact on global markets stemming from global central bank policies. We are also monitoring the wars and conflicts around the globe. We continuously assess the adequacy of our liquidity under various scenarios based on changes in the fair value of our investments and derivative instruments due to market factors such as changes in the absolute level of interest rates and the shape of the yield curve, credit spreads, lender haircuts, and prepayment speeds, which in turn have an impact on margin requirements. In performing these analyses, we also consider the current state of the fixed-income markets and the repurchase agreement markets to determine if market forces such as supply-demand imbalances or structural changes to these markets could change the liquidity of MBS or the availability of financing. We have not experienced any material changes in the terms of our repurchase agreements with our counterparties, and they have not indicated to us any concerns regarding access to liquidity.
Previous wording
Our perception of the liquidity of our investments and market conditions significantly influences our targeted leverage. In general, our leverage will increase if we view the risk-reward opportunity of higher leverage on our capital outweighs the risk to our liquidity and book value. Our leverage, which we calculate using total liabilities plus the cost basis of TBA long positions, was 7.9 times shareholders’ equity as of December 31, 2024. We include 100% of the cost basis of our TBA securities in evaluating our leverage because it is possible under certain market conditions that it may be uneconomical for us to roll a TBA long position into future months, which may result in us having to take physical delivery of the underlying securities and use cash or other financing sources to fund our total purchase commitment.
Current wording
Our perception of the liquidity of our investments and market conditions significantly influences our targeted leverage. In general, our leverage will increase if we view the risk-reward opportunity of higher leverage on our capital outweighs the risk to our liquidity and book value. Our leverage, which we calculate using total liabilities plus the cost basis of TBA long positions, was 7.3 times shareholders’ equity as of December 31, 2025. We include 100% of the cost basis of our TBA securities in evaluating our leverage because it is possible under certain market conditions that it may be uneconomical for us to roll a TBA long position into future months, which may result in us having to take physical delivery of the underlying securities and use cash or other financing sources to fund our total purchase commitment.
Previous wording
Leverage based solely on repurchase agreement amounts outstanding was 5.5 times shareholders’ equity as of December 31, 2024. Our repurchase agreement borrowings are uncommitted with terms renewable at the discretion of our lenders and generally have original terms to maturity of overnight to six months, though in some instances, we may enter into longer-dated maturities depending on market conditions. We seek to maintain unused capacity under our existing repurchase agreement credit lines with multiple counterparties, which helps protect us in the event of a counterparty's failure to renew existing repurchase agreements. As part of our continuous evaluation of counterparty risk, we maintain our highest counterparty exposures with broker-dealer subsidiaries of regulated financial institutions or primary dealers.
Current wording
Leverage based solely on repurchase agreement amounts outstanding was 5.6 times shareholders’ equity as of December 31, 2025. Our repurchase agreement borrowings are uncommitted with terms renewable at the discretion of our lenders and generally have original terms to maturity of overnight to six months, though in some instances, we may enter into longer-dated maturities depending on market conditions. We seek to maintain unused capacity under our existing repurchase agreement credit lines with multiple counterparties, which helps protect us in the event of a counterparty's failure to renew existing repurchase agreements. As part of our continuous evaluation of counterparty risk, we maintain our highest counterparty exposures with broker-dealer subsidiaries of regulated financial institutions or primary dealers.
Previous wording
For our repurchase agreement borrowings, we are required to post and maintain margin to the lender (i.e., collateral in excess of the repurchase agreement borrowing) in order to support the amount of the financing. This excess collateral is often referred to as a “haircut” and is intended to provide the lender protection against fluctuations in the fair value of the collateral and/or the failure by us to repay the borrowing at maturity. Lenders have the right to change haircut requirements at maturity of the repurchase agreement and may change their haircuts based on market conditions and the perceived riskiness of the collateral pledged. If the fair value of the collateral falls below the amount required by the lender, the lender has the right to demand additional margin or collateral. These demands are referred to as “margin calls,” and if we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any collateral pledged. The weighted average haircut for our borrowings as of December 31, 2024, was consistent with prior periods, typically averaging less than 5% for borrowings collateralized with Agency RMBS and CMBS and between 10-14% for borrowings collateralized with CMBS IO.
Current wording
For our repurchase agreement borrowings, we are required to post and maintain margin to the lender (i.e., collateral in excess of the repurchase agreement borrowing) in order to support the amount of the financing. This excess collateral is often referred to as a “haircut” and is intended to provide the lender protection against fluctuations in the fair value of the collateral and/or the failure by us to repay the borrowing at maturity. Lenders have the right to change haircut requirements at maturity of the repurchase agreement and may change their haircuts based on market conditions and the perceived riskiness of the collateral pledged. If the fair value of the collateral falls below the amount required by the lender, the lender has the right to demand additional margin or collateral. If we fail to meet any margin call, our lenders have the right to terminate the repurchase agreement and sell any collateral pledged. The weighted average haircut for our borrowings as of December 31, 2025, was consistent with
Previous wording
The collateral we post in excess of our repurchase agreement borrowing with any counterparty is also typically referred to by us as “equity at risk,” which represents the potential loss to the Company if the counterparty is unable or unwilling to return collateral securing the repurchase agreement borrowing at its maturity. The counterparties with whom we have the greatest amounts of equity at risk may vary significantly during any given period due to the short-term and uncommitted nature of the repurchase agreement borrowings. As of December 31, 2024, we had amounts outstanding under 27 different repurchase agreements and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.
Current wording
The collateral we post in excess of our repurchase agreement borrowing with any counterparty is also typically referred to by us as “equity at risk,” which represents the potential loss to the Company if the counterparty is unable or unwilling to return collateral securing the repurchase agreement borrowing at its maturity. The counterparties with whom we have the greatest amounts of equity at risk may vary significantly during any given period due to the short-term and uncommitted nature of the repurchase agreement borrowings. As of December 31, 2025, we had amounts outstanding under 28 different repurchase agreements and did not have more than 10% of equity at risk with any counterparty or group of related counterparties.
Previous wording
receive collateral from our counterparties if the value of amounts owed to us under the derivative agreement exceeds the minimum margin requirement. The collateral posted as margin by us is typically in cash. As of December 31, 2024, we had cash collateral posted to our counterparties of $244.4 million under these agreements.
Current wording
Derivative instruments we enter into may require us to post initial margin at inception 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. The collateral posted as margin by us is typically in cash. As of December 31, 2025, we had cash collateral posted to our counterparties of $399 million under these agreements.
Previous wording
Collateral requirements for interest rate derivative instruments are typically governed by the central clearing exchange and the associated futures commission merchant, which may establish margin requirements in excess of the clearing exchange. Collateral requirements for our TBA contracts are governed by the Mortgage-Backed Securities Division ("MBSD") of the Fixed Income Clearing Corporation and, if applicable, by our third-party brokerage agreements, which may establish margin levels in excess of the MBSD. Our TBA contracts, which are subject to master securities forward transaction agreements published by the Securities Industry and Financial Markets Association as well as supplemental terms and conditions with each counterparty, generally provide that valuations for our TBA contracts and any pledged collateral are to be obtained from a generally recognized source agreed to by both parties. However, in certain circumstances, our counterparties have the sole discretion to determine the value of the TBA contract and any pledged collateral. In such instances, our counterparties are required to act in good faith in making determinations of value. In the event of a margin call, we must generally provide additional collateral on the same business day.
Current wording
Collateral requirements for interest rate derivative instruments are typically governed by the central clearing exchange and the associated futures commission merchant, which may establish margin requirements in excess of the clearing exchange. Collateral requirements for our TBA contracts are governed by the MBSD of the Fixed Income Clearing Corporation and, if applicable, by our third-party brokerage agreements, which may establish margin levels in excess of the MBSD. Our TBA contracts, which are subject to master securities forward transaction agreements published by the Securities Industry and Financial Markets Association as well as supplemental terms and conditions with each counterparty, generally provide that valuations for our TBA contracts and any pledged collateral are to be obtained from a generally recognized source agreed to by both parties. However, in certain circumstances, our counterparties have the sole discretion to determine the value of the TBA contract and any pledged collateral. In such instances, our counterparties are required to act in good faith in making determinations of value. In the event of a margin call, we must generally provide additional collateral on the same business day.
Previous wording
The following table provides details on the “net receipts (payments) on derivative instruments” shown on our consolidated statements of cash flows for the periods indicated:
Current wording
The following table provides details on the “net (payments) receipts on derivative instruments” shown on our consolidated statements of cash flows for the periods indicated:
Previous wording
(1)Net periodic interest from our effective interest rate swaps are recognized as income or expense during the period earned (incurred), but the cash is not received or paid until the anniversary of each agreement’s effective date or upon maturity.
Current wording
(1)Net periodic interest from our effective interest rate swaps is recognized as income or expense during the period earned or incurred, but the cash is not received or paid until the anniversary of each agreement’s effective date or upon maturity.
Previous wording
We set our dividend based on many factors, including our view on long-term returns, yield on comparable investments, liquidity and market risk, and levels of taxable income. Among these factors, we focus on economic returns and taxable income within the context of the distribution requirements. As a REIT, we are required to distribute to our shareholders amounts equal to at least 90% of our REIT taxable income for each taxable year after certain deductions, including the separate dividend requirements of the Series C Preferred Stock.
Current wording
We set our dividend based on many factors, including our view on long-term returns, yield on comparable investments, liquidity and market risk, and taxable income. Among these factors, we focus on economic returns and taxable income within the context of the distribution requirements. As a REIT, we are required to distribute to our shareholders amounts equal to at least 90% of our REIT taxable income for each taxable year after certain deductions, including the separate dividend requirements of the Series C Preferred Stock.
Previous wording
We designate certain derivative instruments as interest rate hedges for tax purposes. Realized gains (losses) resulting from the difference in fair value and the amount of cash received or paid upon termination or maturity of derivative instruments are included in GAAP earnings in the same reporting period in which the derivative instrument matures or is terminated by the Company but are generally not recognized in REIT taxable income until future periods. Our remaining net deferred tax hedge gain was estimated to be $719.0 million as of December 31, 2024, which will be amortized into REIT taxable income over several years. As of December 31, 2024, we also had $557.9 million in capital loss carryforwards, all of which will expire by either December 31, 2027 or by December 31, 2028. Due to these amounts and other temporary and permanent differences between GAAP net income and REIT taxable income, coupled with the degree of uncertainty about the trajectory of interest rates, we cannot reasonably estimate how much the deferred tax hedge gains to be recognized will impact our dividend declarations during 2025 or in any given year.
Current wording
We designate certain derivative instruments as interest rate hedges for tax purposes. Realized gains (losses) resulting from the difference in fair value and the amount of cash received or paid upon termination or maturity of designated derivative instruments are included in GAAP earnings in the same reporting period in which the derivative instrument matures or is terminated by the Company but are generally not recognized in REIT taxable income until future periods. Non-designated derivative instruments are included in GAAP earnings and REIT taxable income in the same period the derivative instrument matures or is terminated by the Company. Our remaining net deferred tax hedge gain was estimated to be $558 million as of December 31, 2025, which will be amortized into REIT taxable income over several years. As of December 31, 2025, we also had $505 million in capital loss carryforwards, all of which will expire by either December 31, 2027 or by December 31, 2028. Due to these amounts and other temporary and permanent differences between GAAP net income and REIT taxable income, coupled with the uncertainty inherent in the forward interest rate curve, we cannot reasonably estimate how much the deferred tax hedge gains to be recognized will impact our dividend declarations during 2026 or in any given period.
Previous wording
We generally fund dividend distributions through portfolio cash flows. If we make dividend distributions in excess of our portfolio cash flows during the period, whether for purposes of meeting our REIT distribution requirements or other reasons, those distributions are generally funded either through our existing cash balances or through the return of principal from our investments (either through repayment or sale). Please refer to "Operating and Regulatory Structure" within Part I, Item 1, "Business," as well as Part I, Item 1A, “Risk Factors” of this Form 10-K for additional important information regarding dividends declared on our taxable income.
Current wording
We fund dividend distributions through portfolio cash flows, existing cash balances, or through the return of principal from our investments (either through repayment or sale). Please refer to "Operating and Regulatory Structure" within Part I, Item 1, "Business," as well as Part I, Item 1A, “Risk Factors” of this Annual Report on
Previous wording
Fair Value Measurements. The fair value of our Agency MBS, as well as a majority of our non-Agency MBS, is based on estimated prices provided by third-party pricing services who have access to observable market information through trading desks and various information services. Most of our MBS are substantially similar to securities actively traded and observable in the market. To determine each security's valuation, the pricing service uses either a market approach or income approach, which rely on observable market data. The market approach uses prices and other relevant information that is generated by market transactions of identical or similar securities, while the income approach uses valuation techniques to convert estimated future cash flows to a discounted present value. Examples of these observable inputs and assumptions used in the valuation techniques include market interest rates, credit spreads, cash flows, and projected prepayment speeds, among other factors. Management reviews the prices it receives from the pricing service for reasonableness using broker quotes as well as other third-party pricing services.
Current wording
Fair Value Measurements. The fair value of our Agency MBS is based on prices received from an independent third-party pricing service. Most of our MBS are substantially similar to securities actively traded and observable in the market. In valuing a security, the pricing service primarily uses a market approach, which uses observable prices and other relevant information that is generated by market transactions of identical or similar securities, but may also use an income approach, which uses valuation techniques such as discounted cash flow modeling. Examples of the observable inputs and assumptions used in the valuation techniques include market interest rates, credit spreads, and projected prepayment speeds, among other factors. If the fair value of a security is not available from a third-party pricing service, we may estimate the fair value of the security through a variety of methods using observable market data.
Previous wording
In addition, management reviews the prices received for each security by comparing those prices to a second pricing source. If the price of a security is obtained from quoted prices for similar instruments or model-derived valuations whose inputs are observable, the security is classified as a level 2 security. The security is classified as a level 3 security if the inputs are unobservable, resulting in an estimate of fair value based primarily on management's judgment. Although it is rare, we may exclude a price received from a third party if we determine, based on our knowledge and expertise of the market, that the price received is significantly different from other observable market data. Please refer to Note 6 of the Notes to the Consolidated Financial Statements contained within Part II, Item 8 of this Annual Report on Form 10-K for additional information on fair value measurements.
Current wording
Management reviews the prices it receives from the pricing service for reasonableness using additional third-party pricing services. If the price of a security is obtained from quoted prices for similar instruments or model-derived valuations whose inputs are observable, the security is classified as a level 2 security. The security is classified as a level 3 security if the inputs are unobservable, resulting in an estimate of fair value based primarily on management's judgment. Although it is rare, we may exclude a price received from a third party if we determine, based on our knowledge and expertise of the market, that the price received is significantly different from other observable market data. Please refer to Note 6 of the Notes to the Consolidated Financial Statements contained within Part II, Item 8 of this Annual Report on Form 10-K for additional information on fair value measurements.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
prior periods, typically averaging less than 5% for borrowings collateralized with Agency RMBS and CMBS and between 10-14% for borrowings collateralized with CMBS IO.
Current report — wording carried from elsewhere
Form 10-K for additional important information regarding our deferred tax hedge gains and dividends declared on our taxable income.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Derivative instruments we enter into may require us to post initial margin at inception and daily variation margin based on subsequent changes in their fair value. Daily variation margin requirements also entitle us to