Armour Residential REIT, Inc.

Previous wording

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. All per share amounts, common shares outstanding and stock-based compensation amounts for all periods reflect the effect of our Reverse Stock Split. U.S. dollar amounts are presented in thousands, except per share amounts or as otherwise noted.

Current wording

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. All per share amounts, common shares outstanding and stock-based compensation amounts for all periods reflect the effect of our Reverse Stock Split. U.S. dollar and share amounts are presented in thousands, except per share amounts or as otherwise noted.

Previous wording

At December 31, 2024 and December 31, 2023, we invested in MBS, issued or guaranteed by a U.S. GSE, such as Fannie Mae, Freddie Mac, or a government agency such as Ginnie Mae (collectively, Agency Securities). Our Agency Securities consist primarily of fixed rate loans. From time to time we have also invested in U.S. Treasury Securities and money market instruments.

Current wording

At December 31, 2025, our investments in securities included MBS, issued or guaranteed by a U.S. GSE, such as Fannie Mae, Freddie Mac, or a government agency such as Ginnie Mae (collectively, Agency Securities) and U.S. Treasury Securities. At December 31, 2024, we invested solely in MBS. Our investment in securities consist primarily of fixed rate loans. Our charter permits us to invest in MBS backed by fixed rate, hybrid adjustable rate and adjustable rate home loans as well as unsecured notes and bonds issued by GSEs, U.S. Treasury Securities and money market instruments.

Previous wording

On September 18, 2024, the Fed lowered the target range for the Federal Funds Rate by 0.5% to 4.75% to 5.00%, which it had kept unchanged since July 26, 2023. On November 7, 2024, the Fed further lowered the target range for the Federal Funds Rate by 0.25% to 4.50% to 4.75% and on December 18, 2024, the Fed lowered the target range for the Federal Funds Rate by 0.25% to 4.25% to 4.50%. The Fed said that inflation has made progress toward its 2% objective but remains somewhat elevated, and the risks to achieving its employment and inflation goals are roughly in balance. The Fed further stated that in considering the extent and timing of additional adjustments to the target range for the Federal Funds Rate, it will carefully assess incoming data, the evolving outlook, and the balance of risks.

Current wording

At the Federal Reserve Open Market Committee meeting on October 29, 2025, the Fed lowered the target range for the Federal Funds Rate by 0.25% to 3.75% from 4.00%. At the December 10, 2025 meeting of the Federal Reserve Open Market Committee, the Fed further lowered the target range by 0.25% to 3.50% from 3.75%. The Fed noted that inflation has moved up since earlier in the year and remains somewhat elevated, while economic activity has been expanding at a moderate pace. The Fed also stated that uncertainty about the economic outlook remains elevated, and in considering the extent and timing of additional adjustments to the target range for the Federal Funds Rate, it will carefully assess incoming data, the evolving outlook, and the balance of risks.

Previous wording

Our borrowings in the repurchase market have closely tracked the Federal Funds Rate, and SOFR. Traditionally, a lower Federal Funds Rate has indicated a time of increased net interest spread and higher asset values. Volatility in these rates and divergence from the historical relationship among these rates could negatively impact our ability to manage our securities portfolio. If rates were to increase as a result, our net interest spread and the value of our securities portfolio might suffer as a result. Our derivatives are either Federal Funds Rate or SOFR-based interest rate swap contracts (see Note 8 to the consolidated financial statements).

Current wording

Our borrowings in the repurchase market have closely tracked the Federal Funds Rate and SOFR. Traditionally, a lower Federal Funds Rate has indicated a time of increased net interest spread and higher asset values. Volatility in these rates and divergence from the historical relationship among these rates could negatively impact our ability to manage our securities portfolio. If rates were to increase, our net interest spread and the value of our securities portfolio might suffer as a result. Our derivatives are either Federal Funds Rate or SOFR-based interest rate swap contracts (see Note 7 to the consolidated financial statements).

Previous wording

We may reduce our mortgage spread exposure by entering in to certain TBA Agency Securities short positions. The TBA short positions may represent different securities and maturities than our MBS and TBA Agency Security long positions, and accordingly, may perform somewhat differently. While we expect our TBA Agency Securities short positions to perform well compared to our related mortgage securities, there can be no assurance as to their relative performance.

Current wording

We may reduce our mortgage spread exposure by entering into certain TBA Agency Securities short positions. The TBA short positions may represent different securities and maturities than our MBS and TBA Agency Security long positions, and accordingly, may perform somewhat differently. While we expect our TBA Agency Securities short positions to perform well compared to our related mortgage securities, there can be no assurance as to their relative performance.

Previous wording

Net losses for the years ended December 31, 2024, December 31, 2023 and December 31, 2022 reflect losses on our trading securities offset by gains on derivatives. Although we had larger average securities portfolios in 2024 and 2023, interest income on these portfolios was offset by higher costs for repurchase financing.

Current wording

Net income for the year ended December 31, 2025, reflects gains on our trading securities and interest income from a larger average securities portfolio, offset by losses on our derivatives and interest expense on a larger average balance of repurchase agreements compared to 2024 and 2023. Net losses for the years ended December 31, 2024 and December 31, 2023 reflect losses on our trading securities offset by gains on derivatives.

Previous wording

•Loss on Agency Securities, trading, net includes mark to market changes in the fair value of our securities as well as the gain (loss) on sales.

Current wording

•Gain (Loss) on Agency Securities, trading, net includes mark to market changes in the fair value of our securities as well as the gain (loss) on sales.

Previous wording

◦Sales of our Agency Securities, trading resulted in realized losses of $(471,878) and $(457,350) for the years ended December 31, 2023 and December 31, 2022, respectively.

Current wording

◦Sales of our Agency Securities, trading resulted in realized losses of $(12,807) and $(105,182) for the years ended December 31, 2025 and December 31, 2024, respectively.

Previous wording

◦Sales of U.S. Treasury Securities resulted in realized losses of $(26,597) and $(144,563) for the years ended December 31, 2023 and December 31, 2022, respectively.

Current wording

◦Sales of U.S. Treasury Securities resulted in realized gains of $1,446 and $2,462 for the years ended December 31, 2025 and December 31, 2024, respectively.

Previous wording

•Gain on derivatives, net resulted from a combination of the following:

Current wording

•Gain (Loss) on derivatives, net resulted from a combination of the following:

Previous wording

◦Interest rate swap contracts' aggregate notional balance was $6,786,000 at December 31, 2023 and $6,350,000 at December 31, 2022.

Current wording

▪Interest rate swap contracts' aggregate notional balance was $12,327,000 at December 31, 2025 and $7,232,000 at December 31, 2024.

Previous wording

•Loss on Agency Securities, trading, net includes mark to market changes in the fair value of our securities as well as the loss on sales.

Current wording

•Gain (Loss) on Agency Securities, trading, net includes mark to market changes in the fair value of our securities as well as the gain (loss) on sales.

Previous wording

•Loss on U.S. Treasury Securities, net resulted from the change in fair value of the securities as well as the loss on sales

Current wording

•Gain (Loss) on U.S. Treasury Securities, net resulted from the change in fair value of the securities as well as the gain (loss) on sales

Previous wording

◦For the years ended December 31, 2024 and December 31, 2023, we sold short $1,050,019 and $651,621, respectively, of U.S. Treasury Securities.

Current wording

◦For the years ended December 31, 2024 and December 31, 2023 we sold short $1,050,019 and $651,621 of U.S. Treasury Securities, respectively.

Previous wording

The Company is managed by ACM, pursuant to a management agreement. The management fees are determined based on gross equity raised. Therefore, management fees increase when we raise capital and decline when we repurchase previously issued stock and distribute liquidation distributions as approved and so designated by a majority of the Board. However, because the management fee rate decreases to 0.75% per annum for gross equity raised in excess of $1.0 billion pursuant to the management agreement, the effective management fee rate declines as equity is raised. The cost of repurchased stock and any dividends specifically designated by the Board as liquidation distributions will reduce the amount of gross equity raised used to calculate the monthly management fee. Realized and unrealized gains and losses do not affect the amount of gross equity raised. At December 31, 2024, December 31, 2023 and December 31, 2022, the effective management fee was 0.92%, 0.93% and 0.95% prior to management fees waived, and 0.77%, 0.77% and 0.74%, after management fees waived, based on gross equity raised of $4,498,880, $4,231,965 and $3,787,042, respectively. During the years ended December 31, 2024, December 31, 2023 and December 31, 2022 ACM voluntarily waived management fees of $6,600, $6,600 and $7,800 respectively (see Note 9 to the consolidated financial statements).

Current wording

The Company is managed by ACM, pursuant to a management agreement. The management fees are determined based on gross equity raised. Therefore, management fees increase when we raise capital and decline when we repurchase previously issued stock and make liquidation distributions as approved and so designated by a majority of the Board. However, because the management fee rate decreases to 0.75% per annum for gross equity raised in excess of $1.0 billion pursuant to the management agreement, the effective management fee rate declines as equity is raised. The cost of repurchased stock and any dividends specifically designated by the Board as liquidation distributions will reduce the amount of gross equity raised used to calculate the monthly management fee. Realized and unrealized gains and losses do not affect the amount of gross equity raised. At December 31, 2025, December 31, 2024 and December 31, 2023, the effective management fee was 0.89%, 0.92% and 0.93% prior to management fees waived, and 0.77%, 0.77% and 0.77%, after management fees waived, based on gross equity raised of $5,366,343, $4,498,880 and $4,231,965, respectively. During each of the years ended December 31, 2025, December 31, 2024 and December 31, 2023 ACM voluntarily waived management fees of $6,600 (see Note 8 to the consolidated financial statements).

Previous wording

Realized gains and losses on interest rate contracts and treasury futures terminated before their maturity are deferred and amortized over the remainder of the original term of the contract for REIT taxable income. At December 31, 2024 and at December 31, 2023, we had approximately $(189,450) and $(247,349) respectively, of net deductible expense relating to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the years 2034 and 2033, respectively. At December 31, 2024, we had $257,341 of net operating loss carryforwards available for use indefinitely. Series C Preferred Stock dividends for 2024 will be treated 100.00% as fully taxable ordinary income. Common stock dividends for 2024 will be treated 85.18% as taxable ordinary income and 14.82% as non-taxable return of capital.

Current wording

Realized gains and losses on interest rate contracts and treasury futures terminated before their maturity are deferred and amortized over the remainder of the original term of the contract for REIT taxable income. At December 31, 2025 and at December 31, 2024, we had approximately $(313,284) and $(189,450) respectively, of net deductible expense relating to previously terminated interest rate swap and treasury futures/shorts contracts amortizing through the years 2040 and 2034, respectively. At December 31, 2025, we had $257,341 of net operating loss carryforwards available for use indefinitely. Series C Preferred Stock dividends for 2025 will be treated 100.00% as fully taxable ordinary income. Common stock dividends for 2025 will be treated 80.40% as taxable ordinary income and 19.60% as non-taxable return of capital.

Previous wording

Agency Security purchase and sale transactions, including purchases and sales for forward settlement, are recorded on the trade date, based on the specific identification method, to the extent it is probable that we will take or make timely physical delivery of the related securities. Premiums and discounts associated with the purchase of Multi-Family MBS, which are generally not subject to prepayment, are amortized or accreted into interest income over the contractual lives of the securities using a level yield method. Premiums and discounts associated with the purchase of other Agency Securities are amortized or accreted into interest income over the actual lives of the securities, reflecting actual prepayments as they occur. Gains or losses realized from the sale of securities are included in income and are determined using the specific identification method. We typically purchase Agency Securities at premium prices. The lower the prepayment rate, the lower the amount of amortization expense for a particular period. Accordingly, the yield on an asset and earnings are higher. If prepayment rates increase, the amount of amortization expense for a particular period will go up. These increased prepayment rates would act to decrease the yield on an asset and would decrease earnings.

Current wording

Agency Security purchase and sale transactions, including purchases and sales for forward settlement, are recorded on the trade date, based on the specific identification method, to the extent it is probable that we will take or make timely physical delivery of the related securities. Premiums and discounts associated with the purchase of Multi-Family MBS, which are generally not subject to prepayment, are amortized or accreted into interest income over the contractual lives of the securities using a level yield method. Premiums and discounts associated with the purchase of other Agency Securities are amortized or accreted into interest income over the actual lives of the securities, reflecting actual prepayments as they occur. Gains or losses realized from the sale of securities are included in income and are determined using the specific identification method. We purchase some of our Agency Securities at premium prices. The lower the prepayment rate, the lower the amount of amortization expense for a particular period. Accordingly, the yield on an asset and earnings are higher. If prepayment rates increase, the amount of amortization expense for a particular period will go up. These increased prepayment rates would act to decrease the yield on an asset and would decrease earnings.

Previous wording

We account for TBA Agency Securities as derivative instruments if it is reasonably possible that we will not take or make physical delivery of the Agency Security upon settlement of the contract. TBA Agency Securities are forward contracts for the purchase (“long position”) or sale (“short position”) of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency Securities delivered pursuant to the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. We estimate the fair value of TBA Agency Securities based on similar methods used to value our Agency Securities. TBA Agency Securities are included in the table below on a gross basis, as applicable, since they can be used to establish and finance portfolio positions in Agency Securities.

Current wording

We account for TBA Agency Securities as derivative instruments if it is reasonably possible that we will not take or make physical delivery of the Agency Security upon settlement of the contract. TBA Agency Securities are forward contracts for the purchase (“long position”) or sale (“short position”) of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency Securities delivered pursuant to the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. We estimate the fair value of TBA Agency Securities based on similar methods used to value our Agency Securities. TBA Agency

Previous wording

We have entered into repurchase agreements to finance the majority of our MBS. Our repurchase agreements are secured by our MBS and bear interest at rates that have moved in close relationship to the Federal Funds Rate and SOFR. We have established borrowing relationships with numerous investment banking firms and other lenders, 17 and 14 of which had open repurchase agreements with us at December 31, 2024 and December 31, 2023, respectively. We had outstanding balances under our repurchase agreements, net at December 31, 2024 of $10,713,830 (net of reverse repurchase agreements of $498,250). We had outstanding balances under our repurchase agreements, net at December 31, 2023 of $9,647,982 (net of reverse repurchase agreements of $353,937). We had obligations to return securities received as collateral associated with our reverse repurchase agreements as of December 31, 2024 and December 31, 2023 of $493,433 and $350,273, respectively. At December 31, 2024 and December 31, 2023, BUCKLER accounted for 45.7% and 48.4%, respectively, of our aggregate borrowings and had an amount at risk of 8.0% and 8.1%, respectively, of our total stockholders' equity (see Note 7 to the consolidated financial statements).

Current wording

We have entered into repurchase agreements to finance the majority of our MBS. Our repurchase agreements are secured by our MBS and bear interest at rates that have moved in close relationship to the Federal Funds Rate and SOFR. We have established borrowing relationships with numerous investment banking firms and other lenders, 22 and 17 of which had open repurchase agreements with us at December 31, 2025 and December 31, 2024, respectively. We had outstanding balances under our repurchase agreements, net at December 31, 2025 of $17,941,796 and at December 31, 2024 of $10,713,830 (net of reverse repurchase agreements of $498,250, $447,063 of which were with BUCKLER), respectively. We had obligations to return securities received as collateral associated with our reverse repurchase agreements as of December 31, 2025 and December 31, 2024 of $0 and $493,433, respectively. At December 31, 2025 and December 31, 2024, BUCKLER accounted for 47.0% and 45.7%, respectively, of our aggregate borrowings and had an amount at risk of 7.1% and 8.0%, respectively, of our total stockholders' equity (see Note 6 to the consolidated financial statements).

Previous wording

Our repurchase agreements require excess collateral, known as a “haircut.” At December 31, 2024, the average gross haircut percentage was 2.77% compared to 2.74% at December 31, 2023.

Current wording

Our repurchase agreements require excess collateral, known as a “haircut.” At December 31, 2025, the average gross haircut percentage was 2.73% compared to 2.77% at December 31, 2024.

Previous wording

We use various contracts to manage our interest rate risk as we deem prudent in light of market conditions and the associated costs with counterparties that have a high-quality credit rating and with futures exchanges. We generally pay a fixed rate and receive a floating rate with the objective of fixing a portion of our borrowing costs and hedging the change in our book value to some degree. The floating rate we receive is generally the Federal Funds Rate or SOFR. We had contractual commitments under derivatives at December 31, 2024 and December 31, 2023. At December 31, 2024 and December 31, 2023, we had derivatives with a net fair value of $906,778 and $872,376, respectively (see Note 8 to the consolidated financial statements).

Current wording

We use various contracts to manage our interest rate risk as we deem prudent in light of market conditions and the associated costs with counterparties that have a high-quality credit rating and with futures exchanges. We generally pay a fixed rate and receive a floating rate with the objective of fixing a portion of our borrowing costs and hedging the change in our book value to some degree. The floating rate we receive is generally the Federal Funds Rate or SOFR. We had contractual commitments under derivatives at December 31, 2025 and December 31, 2024. At December 31, 2025 and December 31, 2024, we had derivatives with a net fair value of $592,241 and $906,778, respectively (see Note 7 to the consolidated financial statements).

Previous wording

At December 31, 2024 and December 31, 2023, we had interest rate swap contracts with an aggregate notional balance of $7,232,000 and $6,786,000, a weighted average swap rate of 1.66% and 1.37% and a weighted average term of 76 and 68 months, respectively. We also had TBA Agency Securities with an aggregate notional balance of $0 and $300,000 at December 31, 2024 and December 31, 2023, respectively (see Note 8 to the consolidated financial statements).

Current wording

At December 31, 2025 and December 31, 2024, we had interest rate swap contracts with an aggregate notional balance of $12,327,000 and $7,232,000, a weighted average swap rate of 2.44% and 1.66% and a weighted average term of 51 and 76 months, respectively.

Previous wording

Although we attempt to structure our derivatives to offset the changes in asset prices, the complexity of the actual and expected prepayment characteristics of the underlying mortgages as well as the volatility in mortgage interest rates relative to U.S. Treasury and interest rate swap contract rates makes achieving high levels of offset difficult. We recognized net gains related to our derivatives of $323,500, $51,748 and $810,808, respectively for the years ended December 31, 2024, December 31, 2023 and December 31, 2022.

Current wording

Although we attempt to structure our derivatives to offset the changes in asset prices, the complexity of the actual and expected prepayment characteristics of the underlying mortgages as well as the volatility in mortgage interest rates relative to U.S. Treasury and interest rate swap contract rates makes achieving high levels of offset difficult. We recognized net (losses) gains related to our derivatives of $(285,749), $323,500 and $51,748, respectively for the years ended December 31, 2025, December 31, 2024 and December 31, 2023.

Previous wording

As required by the Dodd-Frank Act, the Commodity Futures Trading Commission has adopted rules requiring certain interest rate swap contracts to be cleared through a derivatives clearing organization. We are required to clear certain new interest rate swap contracts. Centrally-cleared interest rate swaps may have higher margin requirements than bilateral interest rate swaps. We have established an account with a futures commission merchant for this purpose. At December 31, 2024 and December 31, 2023, we had $2,025,000 and $1,275,000, respectively, of notional amount of centrally-cleared interest rate swap contracts.

Current wording

As required by the Dodd-Frank Act, the Commodity Futures Trading Commission has adopted rules requiring certain interest rate swap contracts to be cleared through a derivatives clearing organization. We are required to clear certain new interest rate swap contracts. Centrally-cleared interest rate swaps may have higher margin requirements than bilateral interest rate swaps. We have established an account with a futures commission merchant for this purpose. At December 31, 2025, December 31, 2024 and December 31, 2023, we had $7,193,000, $2,025,000. and $1,275,000, respectively, of notional amount of centrally-cleared interest rate swap contracts.

Previous wording

At December 31, 2024, our liquidity totaled $608,026, consisting of $67,970 of cash and cash equivalents plus $540,056 of unencumbered Agency Securities and U.S. government securities (including securities received as reverse margin collateral). Our primary sources of funds are borrowings under repurchase arrangements, monthly principal and interest payments on our MBS and cash generated from our operating results.

Current wording

At December 31, 2025, our liquidity totaled $1,173,820, consisting of $63,270 of cash and cash equivalents plus $1,110,550 of unencumbered Agency Securities and U.S. Treasury Securities (including securities received as reverse margin collateral). Our primary sources of funds are borrowings under repurchase arrangements, monthly principal and interest payments on our MBS and cash generated from our operating results.

Previous wording

Our primary uses of cash are to purchase MBS, pay interest and principal on our borrowings, fund our operations and pay dividends. From time to time, we purchase or sell assets for forward settlement up to 90 days in the future to lock in purchase prices or sales proceeds. At December 31, 2024 and December 31, 2023, we financed our securities portfolio with $10,713,830 (net of reverse repurchase agreements of $498,250, $447,063 of which were with BUCKLER) and $9,647,982 (net of reverse repurchase agreements of $353,937, all of which were with BUCKLER) of borrowings under repurchase agreements, respectively. At December 31, 2024 and December 31, 2023, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $493,433 and $350,273, respectively.

Current wording

Our primary uses of cash are to purchase MBS, pay interest and principal on our borrowings, fund our operations and pay dividends. From time to time, we purchase or sell assets for forward settlement up to 90 days in the future to lock in purchase prices or sales proceeds. At December 31, 2025 and December 31, 2024, we financed our securities portfolio with $17,941,796 and $10,713,830 (net of reverse repurchase agreements of $498,250, $447,063 of which were with BUCKLER) of borrowings under repurchase agreements, respectively. At December 31, 2025 and December 31, 2024, we had obligations to return securities received as collateral associated with our reverse repurchase agreements of $0 and $493,433, respectively.

Previous wording

We generally seek to borrow (on a recourse basis) between six and ten times the amount of our total stockholders’ equity. Our debt to equity ratios at December 31, 2024 and December 31, 2023, were 7.87:1 and 7.59:1, respectively, as we substituted Agency MBS for TBA Agency Securities. Our leverage ratios, including our TBA Agency Securities, were 7.87:1 and 7.83:1 at December 31, 2024 and December 31, 2023, respectively. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 7.95:1 and 7.96:1 at December 31, 2024 and December 31, 2023, respectively.

Current wording

We generally seek to borrow (on a recourse basis) between six and ten times the amount of our total stockholders’ equity. Our debt to equity ratios at December 31, 2025 and December 31, 2024, were 7.94:1 and 7.87:1, respectively, as we substituted Agency MBS for TBA Agency Securities. Our leverage ratios, including our TBA Agency Securities, were 7.94:1 and 7.87:1 at December 31, 2025 and December 31, 2024, respectively. Implied leverage, including TBA Securities and forward settling sales and unsettled purchases was 8.07:1 and 7.95:1 at December 31, 2025 and December 31, 2024, respectively.

Previous wording

(1)The increase in cash and cash collateral posted to counterparties related to operating activities from 2023 to 2024 is related to exiting certain MBS positions.

Current wording

(1)The decrease in cash and cash collateral posted to counterparties provided by operating activities from 2024 to 2025 is related to the change in our derivatives.

Previous wording

We adopted the 2009 Stock Incentive Plan (as amended, the “Plan”) to attract, retain and reward directors and other persons who provide services to us in the course of operations. The Plan authorizes the Board to grant awards including common stock, restricted shares of common stock (“RSUs”), stock options, performance shares, performance units, stock appreciation rights and other equity and cash-based awards (collectively, “Awards”), subject to terms as provided in the Plan. At December 31, 2024, there were 228 shares available for future issuance under the Plan.

Current wording

We adopted the Third Amended and Restated 2009 Stock Incentive Plan (the “Plan”) to attract, retain and reward directors and other persons who provide services to us in the course of operations. The Plan authorizes the Board to grant awards including common stock, restricted shares of common stock (“RSUs”), stock options, performance shares, performance units, stock appreciation rights and other equity and cash-based awards (collectively, “Awards”), subject to terms as provided in the Plan. At December 31, 2025, there were 3 shares available for future issuance under the Plan.

Previous wording

At December 31, 2024, there was approximately $6,185 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $36.38 per share), which we expect to recognize as an expense as follows: in 2025 an expense of $1,987, in 2026 an expense of $1,793, and thereafter an expense of $2,405. Our policy is to account for forfeitures as they occur. We also pay each of our non-executive Board members quarterly fees, which are payable in cash, common stock, RSUs or a combination of common stock, RSUs and cash at the option of the director. Compensation to be paid to our non-executive Board in the form of cash and common equity is $1,219 annually (see Note 10 to the consolidated financial statements).

Current wording

At December 31, 2025, there was approximately $7,602 of unvested stock based compensation related to the Awards (based on a weighted grant date price of $23.37 per share), which we expect to recognize as an expense as follows: in 2026 an expense of $2,540, in 2027 an expense of $2,062, and thereafter an expense of $3,000. Our policy is to account for forfeitures as they occur. We also pay each of our non-executive Board members quarterly fees, which are payable in cash, common stock, RSUs or a combination of common stock, RSUs and cash at the option of the director. Compensation to be paid to our non-executive Board in the form of cash and common equity is $1,219 annually (see Note 9 to the consolidated financial statements).

Previous wording

We may increase our capital resources by obtaining long-term credit facilities or making public or private offerings of equity or debt securities, including classes of preferred stock, common stock and senior or subordinated notes to meet our liquidity requirements. As of the date hereof, we have "at-the-market" offering programs with 3,136 shares of 7.00% Series C Cumulative Redeemable Preferred Stock available under the Preferred C ATM Sales Agreement and 9,049 shares of common stock remain available under the 2023 Common stock ATM Sales Agreement. In accordance with the terms of these agreements, we may offer and sell shares of stock over a period of time and from time to time, with BUCKLER and other agents as sales agents (see Note 11 to the consolidated financial statements). These liquidity requirements include maturing repurchase agreements, settling TBA Agency Security positions and potentially making net payments on our interest rate swap contracts, and in each case, continuing to meet ongoing margin requirements. Such financing will depend on market conditions for capital raises and for the investment of any proceeds and there can be no assurances that we will successfully obtain any such financing.

Current wording

We may increase our capital resources by obtaining long-term credit facilities or making public or private offerings of equity or debt securities, including classes of preferred stock, common stock and senior or subordinated notes to meet our liquidity requirements. As of the date hereof, we have "at-the-market" offering programs with 2,722 shares of 7.00% Series C Cumulative Redeemable Preferred Stock available under the Preferred C ATM Sales Agreement and 22,792 shares of common stock available under the 2023 Common stock ATM Sales Agreement. In accordance with the terms of these agreements, we may offer and sell shares of stock over a period of time and from time to time, with BUCKLER and other agents as sales agents (see Note 10 to the consolidated financial statements). These liquidity requirements include maturing repurchase agreements, settling TBA Agency Security positions and potentially making net payments on our interest rate swap contracts, and in each case, continuing to meet ongoing margin requirements. Such financing will depend on market conditions for capital raises and for the investment of any proceeds and there can be no assurances that we will successfully obtain any such financing.

Previous wording

•the geopolitical situation as a result of the war between Russia and Ukraine, as well as the outbreak of hostilities in the Middle East, may continue to adversely affect the U.S. economy, which may lead the Fed to take actions that may impact our business;

Current wording

•political, regulatory or market uncertainty, including economic downturns and heightened geopolitical tensions and conflicts, may continue to adversely affect the U.S. economy, which may lead the Fed to take actions that may impact our business;

Previous wording

•the impact of COVID-19 or a new pandemic on our operations;

Current wording

•the impact of a new pandemic on our operations;

Previous wording

•changes in applicable laws and regulations; and

Current wording

•changes in applicable laws and regulations, including to federal tax law and other regulatory provisions as a result of the One Big Beautiful Bill Act being signed into law; and