Invesco Mortgage Capital Inc.
For the period ended Jun 30, 2025. Filed Aug 8, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Aug 8, 2025
IVR$5.41-0.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0001437071-25-000017
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-08.
0001437071-25-000031
Item 2. 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 172 previous paragraphs and 176 current paragraphs.
105 unchanged; 63 reworded; 6 added; 4 removed; 0 previous and 2 current paragraphs rearranged.
Tables are not compared: 28 previous and 32 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 (6)
Current report
Financial conditions were quite volatile during the second quarter. They tightened sharply in the first week of April following the initial tariff announcements on April 2 nd, which triggered a broad repricing across risk markets. Despite the early turbulence, financial conditions ended the quarter modestly accommodative, supported by the subsequent delay in tariff implementation. Equity markets, which experienced declines of over 10% in the immediate aftermath of April 2 nd, rebounded strongly. The S&P 500 finished the quarter up 10.6%, while the NASDAQ posted a gain of 17.7%. Credit markets followed a similar trajectory, with spreads in investment grade, high yield and emerging market debt all widening materially in early April before tightening by quarter end.
Current report
Prior to the revisions to the employment data, stable employment data and declining recession risks led to a moderation in market expectations for near-term monetary policy action. Federal Funds futures market expectations at the end of June 2025 reflected expectations for an additional 50 to 75 basis points of rate cuts by year end, down from 100 basis points at the end of April. Quantitative tightening continued at a slower pace in the second quarter, as the Federal Reserve reduced the monthly runoff of U.S. Treasuries on its balance sheet to $5 billion, down from $25 billion, while maintaining the $35 billion cap on Agency MBS runoff.
Current report
Interest rates declined across the front end of the Treasury yield curve during the second quarter, while long-end rates moved higher. This reflected market expectations for more accommodative policy from the FOMC, alongside concerns about a potential increase in Treasury issuance over the coming years. The yield on the two-year Treasury fell 19 basis points to 3.72%, the five-year Treasury yield declined 19 basis points to 3.79% and the yield on the ten-year Treasury decreased 1 basis point to 4.23%. In contrast, the yield on the 30-year Treasury increased 16 basis points to 4.77%. Interest rate volatility spiked in early April as the market digested the potential impact of the April 2 nd tariff announcements but quickly subsided. By quarter end, both long and short-dated volatility had declined.
Current report
As a result of the spike in interest rate volatility and broad selloff in risk assets, Agency RMBS sharply underperformed Treasuries in early April. However, the 90-day pause in tariff implementation announced on April 9 th provided support for financial markets, benefiting the Agency MBS sector. Performance was relatively consistent across the 30-year conventional coupon stack, with coupons ranging from 2.5% to 6.5%, outperforming their Treasury hedges by 20 to 30 basis points. Supply and demand technicals for higher coupon Agency RMBS were supportive despite muted demand from banks and overseas investors. A modest seasonal uptick in origination activity was more than offset by strong inflows into fixed income funds, with money managers allocating a significant portion of these flows to the sector given its attractive relative value. Prepayment speeds increased during the quarter due to the combination of higher refinancing activity related to the decline in mortgage rates earlier in the year and the seasonal increase in housing turnover. However, premiums on specified pool collateral were largely unchanged during the quarter with mortgage rates relatively stable since March. Agency CMBS risk premiums increased with broader financial markets during April before improving in May and June.
Current report
(1)Our presentation of TBAs in the table above represents management's view of our investment portfolio and does not reflect how we record TBAs on our condensed consolidated balance sheets under U.S. GAAP. Under U.S. GAAP, we record TBAs that we do not intend to physically settle on the contractual settlement date as derivative financial instruments. We value TBAs on our condensed consolidated balance sheets at net carrying value, which represents the difference between the fair market value and the implied cost basis of the TBAs. We view our TBA dollar roll transactions as a form of off-balance sheet financing. For further information on how management evaluates our at-risk leverage, see Non-GAAP Financial Measures below.
Current report
Additionally, we have used and may in the future use short positions in TBAs to manage risk and economically hedge a portion of our exposure to changes in Agency RMBS valuations.
Removed paragraphs (4)
Previous report
Financial conditions tightened during the first quarter, shifting from a largely accommodative position to more balanced as equity markets, credit spreads and volatility measures all reacted negatively to the potential impacts of significant changes to U.S. fiscal and trade policies. Equity markets repriced lower during the first quarter, with the S&P 500 declining 4.6% while the NASDAQ fell 10.4%. The CBOE SPX Volatility Index (“VIX”) reflected the uncertainty brought on by these policy changes, increasing by over 28% during the quarter. Credit spreads reacted similarly, with investment grade credit, high yield and emerging markets spreads all materially wider.
Previous report
Even as inflation expectations were increasing, softer employment data and fears that the combination of potential trade wars and fiscal austerity would contribute to an economic slowdown led to a re-pricing of the market’s expectations of future monetary policy. Federal Funds futures market expectations as of March 31, 2025 reflected a further 75 basis point reduction of the target rate through the end of the year. Quantitative tightening continued in the first quarter of 2025, as the Federal Reserve passively reduced the size of its balance sheet through maturities of U.S. Treasuries and paydowns of Agency RMBS. At their March meeting, the Federal Reserve announced that they would begin slowing the pace of quantitative tightening by lowering the cap on the amount of Treasuries allowed to mature per month without being reinvested to $5 billion from $25 billion, while leaving the cap on mortgage-backed securities unchanged at $35 billion per month.
Previous report
Interest rates dropped across the maturity spectrum during the first quarter. The yield on the two-year Treasury decreased 34 basis points to 3.91%, the yield on the five-year Treasury decreased 41 basis points to 3.98% and the yield on the ten-year Treasury decreased 34 basis points to 4.24%. Short-dated interest rate volatility increased over the quarter, reflecting the market’s shifting expectations of monetary and trade policy, while longer-dated volatility declined modestly.
Previous report
Against this macroeconomic backdrop, Agency RMBS performance was relatively consistent with Treasuries during the first quarter, with higher coupons modestly outperforming. Supply and demand technicals for higher coupon Agency RMBS were supportive as originations remained subdued given slower housing seasonals and elevated mortgage rates, while banks, money managers and mortgage REITs net added exposure during the quarter. Prepayment speeds remained at low levels given limited purchase and refinancing activity. However, a notable decline in mortgage rates in the latter half of the quarter should result in faster prepayment speeds in the coming months, as the decline coincided with the seasonal increase in housing activity. Premiums on specified pool collateral were largely unchanged during the quarter as the move lower in mortgage rates led to support for prepayment protection. Additionally, Agency CMBS risk premiums increased during the first quarter, reflecting weakness in broader fixed income markets.
Reworded paragraphs (63)
Previous wording
•residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”), or a federally chartered corporation such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”) (collectively “Agency RMBS”);
Current wording
•residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S. government agency such as the Government National Mortgage Association (“Ginnie Mae”), or a federally chartered corporation such as the Federal National Mortgage Association (“Fannie Mae” or “FNMA”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac” or “FHLMC”) (collectively “Agency RMBS”); and
Previous wording
•commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as Ginnie Mae or a federally chartered corporation such as Freddie Mac or Fannie Mae (collectively “Agency CMBS”); and
Current wording
•commercial mortgage-backed securities (“CMBS”) that are guaranteed by a U.S. government agency such as Ginnie Mae or a federally chartered corporation such as Freddie Mac or Fannie Mae (collectively “Agency CMBS”).
Previous wording
Macroeconomic factors that affect our business include inflation, economic growth, employment conditions, interest rates, interest rate volatility, fiscal and monetary policy, public policy, financial conditions, spread premiums, residential and commercial real estate prices, credit availability, the health of the banking system, consumer personal income and spending and corporate earnings. Of these macroeconomic factors, financial conditions, inflation, employment conditions, monetary policy, public policy, interest rates and interest rate volatility had the most direct impacts on our performance and financial condition during the first quarter of 2025.
Current wording
Macroeconomic factors that affect our business include inflation, economic growth, employment conditions, interest rates, interest rate volatility, fiscal and monetary policy, public policy, financial conditions, spread premiums, residential and commercial real estate prices, credit availability, the health of the banking system, consumer personal income and spending and corporate earnings. Of these macroeconomic factors, financial conditions, inflation, employment conditions, monetary policy, public policy, interest rates and interest rate volatility had the most direct impacts on our performance and financial condition during the second quarter of 2025.
Previous wording
While inflation readings trended lower during the quarter, they remained above the Federal Reserve’s 2% inflation target. The headline consumer price index (“CPI”) ended the quarter 2.4% higher on a year-over-year basis, down from a rate of 2.9% at year end, while the year-over-year change in CPI (excluding food and energy) fell to 2.8% from 3.2%. Despite the improvement in CPI reports, investors increased expectations for future inflation given concerns about the potential impact of shifting trade policy. Treasury inflation-protected securities breakeven rates increased during the quarter, with the two-year breakeven ending the quarter at 3.3% (up from 2.5% at year-end) and the five-year breakeven ending at 2.6% (up from 2.4%). Meanwhile, employment data released during the quarter reflected a slowing labor market, as the economy added an average of 152,000 jobs per month during the first quarter after adding an average of 209,000 jobs during the fourth quarter.
Current wording
Inflation remained relatively stable during the quarter, though it continued to exceed the Federal Reserve’s 2% target. The headline consumer price index (“CPI”) rose to 2.7%, up from 2.4% at the end of March. Core CPI, which excludes food and energy, increased modestly to 2.9% year-over-year, compared to 2.8% previously. Despite these increases, investor expectations for future inflation declined, reflecting concerns about the potential impact of fiscal and trade policies on long-term economic growth. Breakeven rates on Treasury inflation-protected securities moved lower during the quarter. The two-year breakeven fell to 2.5% from 3.3%, while the five-year breakeven declined to 2.3% from 2.6%. Meanwhile, labor market data pointed to continued stability. After revisions, the economy added an average of 64,000 jobs per month during the second quarter, down from an average of 111,000 jobs in the first quarter. The headline unemployment rate decreased slightly during the second quarter, dropping to 4.1% from 4.2%.
Previous wording
Recently proposed changes to U.S. fiscal and trade policy have negatively impacted financial markets and could result in slower economic growth, higher inflation and further market volatility. As such, we remain cautious on the near-term outlook for Agency RMBS. However, our long-term outlook for Agency RMBS is favorable, as we expect demand to improve in higher coupons given attractive valuations, an eventual decline in interest rate volatility and a steeper yield curve. Lastly, while Agency CMBS risk premiums may remain elevated until sentiment in the broader fixed income market improves, limited issuance, strong fundamental performance and stable cash flow profiles should provide favorable support for this sector.
Current wording
We remain cautious on the near-term outlook for Agency RMBS, reflecting our belief that elevated near-term uncertainty regarding trade, fiscal and monetary policy warrants a modestly more defensive posture. However, our long-term outlook for Agency RMBS is favorable, as we expect demand to improve in higher coupons given attractive valuations, continued stabilization in interest rate volatility and a steeper yield curve. Lastly, we remain positive on Agency CMBS as limited issuance, strong fundamental performance and stable cash flow profiles should provide favorable support for this sector.
Previous wording
As of March 31, 2025, our holdings of 30 year fixed-rate Agency RMBS represented approximately 84% of our total investment portfolio versus 83% as of December 31, 2024 and 93% as of March 31, 2024. Our 30 year fixed-rate Agency RMBS holdings as of March 31, 2025, December 31, 2024 and March 31, 2024 consisted of specified pools with coupon distributions as shown in the table below.
Current wording
As of June 30, 2025, our holdings of 30 year fixed-rate Agency RMBS represented approximately 81% of our total investment portfolio versus 83% as of December 31, 2024 and 87% as of June 30, 2024. Our 30 year fixed-rate Agency RMBS holdings as of June 30, 2025, December 31, 2024 and June 30, 2024 consisted of specified pools with coupon distributions as shown in the table below.
Previous wording
Our purchases of Agency RMBS have been primarily focused on specified pools with attractive prepayment profiles. We seek to capitalize on the impact of prepayments on our investment portfolio by purchasing specified pools with characteristics that optimize borrower incentive to prepay for both our premium and discount priced investments. The table below shows the specified pool characteristics of our 30 year fixed-rate Agency RMBS holdings as of March 31, 2025, December 31, 2024 and March 31, 2024.
Current wording
Our holdings of Agency RMBS are primarily focused on specified pools with attractive prepayment profiles. We seek to capitalize on the impact of prepayments on our investment portfolio by purchasing specified pools with characteristics that optimize borrower incentive to prepay for both our premium and discount priced investments. The table below shows the specified pool characteristics of our 30 year fixed-rate Agency RMBS holdings as of June 30, 2025, December 31, 2024 and June 30, 2024.
Previous wording
As of March 31, 2025, our holdings of Agency CMBS represented approximately 15% of our total investment portfolio versus 15% as of December 31, 2024 and 5% as of March 31, 2024. Our Agency CMBS benefit from prepayment protection characteristics and have an attractive return profile. Further, the hedging costs related to these holdings are economical as they are less sensitive to interest rate risk given prepayment protection and scheduled balloon maturity payments. As of March 31, 2025, approximately 81% of our Agency CMBS were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.
Current wording
As of June 30, 2025, our holdings of Agency CMBS represented approximately 17% of our total investment portfolio versus 15% as of December 31, 2024 and 8% as of June 30, 2024. Our Agency CMBS benefit from prepayment protection characteristics and have an attractive return profile. Further, the hedging costs related to these holdings are economical as they are less sensitive to interest rate risk given prepayment protection and scheduled balloon maturity payments. As of June 30, 2025, approximately 81% of our Agency CMBS were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.
Previous wording
As of March 31, 2025, December 31, 2024 and March 31, 2024, our holdings of non-Agency securities represented less than 1% of our total investment portfolio. In the first quarter of 2025, we sold our remaining non-Agency CMBS investment.
Current wording
We sold our remaining investments in non-Agency securities during 2025. As of December 31, 2024 and June 30, 2024, our holdings of non-Agency securities represented less than 1% of our total investment portfolio.
Previous wording
We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes. During the three months ended March 31, 2025, we entered into interest rate swaps with a notional amount of $725.0 million and terminated existing interest rate swaps with a notional amount of $350.0 million.
Current wording
We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes. During the six months ended June 30, 2025, we entered into interest rate swaps with a notional amount of $725.0 million and terminated existing interest rate swaps with a notional amount of $485.0 million.
Previous wording
We also use futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance. During the three months ended March 31, 2025, we entered into futures contracts with a notional amount of $1.4 billion and terminated existing futures contracts with a notional amount of $1.9 billion.
Current wording
We also use futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance. During thesix months ended June 30, 2025, we entered into futures contracts with a notional amount of $2.9 billion and terminated existing futures contracts with a notional amount of $3.5 billion.
Previous wording
As of March 31, 2025, we had 6,883,504 shares of our common stock remaining available for sale from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents. The table below shows sales of our common stock under equity distribution agreements during the three months ended March 31, 2025 and 2024.
Current wording
As of June 30, 2025, we had 6,600,754 shares of our common stock remaining available for sale from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents. The table below shows sales of our common stock under equity distribution agreements during the three and six months ended June 30, 2025 and 2024.
Previous wording
For information on dividends declared during the three months ended March 31, 2025 and 2024, see Note 10 - "Stockholders' Equity" of our condensed consolidated financial statements in Part I. Item 1 of this report on Form 10-Q.
Current wording
For information on dividends declared during the six months ended June 30, 2025 and 2024, see Note 10 - "Stockholders' Equity" of our condensed consolidated financial statements in Part I. Item 1 of this report on Form 10-Q.
Previous wording
During the three months ended March 31, 2025, we did not repurchase any shares of our common stock.
Current wording
During the six months ended June 30, 2025, we did not repurchase any shares of our common stock.
Previous wording
In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock. During the three months ended March 31, 2025, we repurchased and retired 90,146 shares of Series C Preferred Stock. During the three months ended March 31, 2024, we repurchased and retired 93,347 shares of Series B Preferred Stock and 95,917 shares of Series C Preferred Stock. We redeemed all outstanding shares of our Series B Preferred Stock in December 2024. As of March 31, 2025, we had authority to repurchase 616,513 additional shares of our Series C Preferred Stock under the current preferred stock share repurchase program.
Current wording
In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock. During the three and six months ended June 30, 2025, we repurchased and retired 96,803 and 186,949 and shares of Series C Preferred Stock, respectively. During the three and six months ended June 30, 2024, we repurchased and retired 44,661 and 138,008 shares of Series B Preferred Stock, respectively, and 105,492 and 201,409 shares of Series C Preferred Stock, respectively. We redeemed all outstanding shares of our Series B Preferred Stock in December 2024. As of June 30, 2025, we had authority to repurchase 519,710 additional shares of our Series C Preferred Stock under the current preferred stock share repurchase program.
Previous wording
Our book value per common share decreased 1.2% as of March 31, 2025 compared to December 31, 2024. The decrease in our book value per common share was primarily due to losses on derivative instruments, dividends declared and expenses, which were partially offset by net interest income and gains on investments. Refer to Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for interest rate risk and its impact on fair value.
Current wording
Our book value per common share decreased 9.8% as of June 30, 2025 compared to December 31, 2024. The decrease in our book value per common share was primarily due to losses on derivative instruments, dividends declared and expenses, which were partially offset by net interest income and gains on investments. Refer to Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for interest rate risk and its impact on fair value.
Previous wording
The table below presents information from our condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024.
Current wording
The table below presents information from our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024.
Previous wording
The table below presents information related to our average earning assets and earning asset yields for the three months ended March 31, 2025 and 2024.
Current wording
The table below presents information related to our average earning assets and earning asset yields for the three and six months ended June 30, 2025 and 2024.
Previous wording
Total average earning assets increased $450.3 million for the three months ended March 31, 2025 compared to the same period in 2024. Changes in our average earning assets are a factor of our total stockholders' equity and our desired leverage levels.
Current wording
Total average earning assets increased $231.8 million and $340.1 million for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively. Changes in our average earning assets are a factor of our total stockholders' equity and our desired leverage levels.
Previous wording
Average earning asset yields decreased 7 basis points for the three months ended March 31, 2025 compared to the same period in 2024. Changes in our average earning asset yields are driven by the composition of our investments, amortized cost of our securities and prepayment rates.
Current wording
Average earning asset yields decreased 5 basis points and 6 basis points for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively. Changes in our average earning asset yields are driven by the composition of our investments, amortized cost of our securities and prepayment rates.
Previous wording
Our interest income increased for the three months ended March 31, 2025 compared to the same period in 2024 due to an increase in average earning assets.
Current wording
Our interest income increased for the three and six months ended June 30, 2025 compared to the same periods in 2024 due to higher average earning assets.
Previous wording
Our RMBS portfolio is subject to inherent prepayment risk primarily driven by changes in interest rates, which impacts the amount of premium and discount on the purchase of these securities that is recognized into interest income. Generally, in an environment of falling interest rates, prepayment speeds will increase as homeowners are more likely to prepay their existing mortgage and refinance into a lower borrowing rate. In an environment of rising interest rates, prepayment speeds will generally decrease as homeowners are not as incentivized to refinance. For Agency RMBS where we do not estimate prepayments, premium amortization and discount accretion are not impacted by prepayments until actual prepayments occur. For those securities on which we do estimate prepayments, expected future prepayment speeds are estimated on at least a quarterly basis. If the actual prepayment speed during the period is faster than estimated, the amortization on securities purchased at a premium to par value will be accelerated, resulting in lower interest income recognized. Conversely, for securities purchased at a discount to par value, interest income will be reduced in periods where prepayment speeds were slower than expected.
Current wording
Our Agency RMBS portfolio is subject to inherent prepayment risk primarily driven by changes in interest rates, which impacts the amount of premium and discount on the purchase of these securities that is recognized into interest income. Generally, in an environment of falling interest rates, prepayment speeds will increase as homeowners are more likely to prepay their existing mortgage and refinance into a lower borrowing rate. In an environment of rising interest rates, prepayment speeds will generally decrease as homeowners are not as incentivized to refinance. For Agency RMBS where we do not estimate prepayments, premium amortization and discount accretion are not impacted by prepayments until actual prepayments occur. For those securities on which we do estimate prepayments, expected future prepayment speeds are estimated on at least a quarterly basis. If the actual prepayment speed during the period is faster than estimated, the amortization on securities purchased at a premium to par value will be accelerated, resulting in lower interest income recognized. Conversely, for securities purchased at a discount to par value, interest income will be reduced in periods where prepayment speeds were slower than expected.
Previous wording
The following table presents net (premium amortization) discount accretion recognized for the three months ended March 31, 2025 and 2024.
Current wording
The following table presents net (premium amortization) discount accretion recognized for the three and six months ended June 30, 2025 and 2024.
Previous wording
Net discount accretion decreased for three months ended March 31, 2025 compared to the same period in 2024 as we have repositioned a portion of our investment portfolio into higher coupon securities that have higher amortized costs relative to principal value.
Current wording
Net premium amortization was $356,000 for the three months ended June 30, 2025 compared to net discount accretion of $1.8 million for the same period in 2024. Net premium amortization was $144,000 for the six months ended June 30, 2025 compared to net discount accretion of $2.9 million for the same period in 2024. The change in net (premium amortization) discount accretion for the three and six months ended June 30, 2025 compared to the same periods in 2024 was primarily a result of repositioning a portion of our investment portfolio into higher coupon securities that have higher amortized costs relative to principal value.
Previous wording
The table below presents information related to our borrowings and cost of funds for the three months ended March 31, 2025 and 2024.
Current wording
The table below presents information related to our borrowings and cost of funds for thethree and six months ended June 30, 2025 and 2024.
Previous wording
Total average borrowings increased $510.5 million for the three months ended March 31, 2025 compared to the same period in 2024. Changes in our average borrowings are a factor of our total stockholders' equity and our desired leverage levels.
Current wording
Total average borrowings increased $325.6 million and $417.1 million for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively. Changes in our average borrowings are a factor of our total stockholders' equity and our desired leverage levels.
Previous wording
Our average cost of funds decreased 111 basis points for the three months ended March 31, 2025 compared to the same period in 2024. Changes in our costs of funds are substantially driven by the Federal Funds target rate, which the FOMC lowered from a range of 5.25% to 5.50% as of January 1, 2024 to 4.25% to 4.50% as of March 31, 2025.
Current wording
Our average cost of funds decreased 97 basis points and 104 basis points for the three and six months ended June 30, 2025 compared to the same periods in 2024, respectively. Changes in our costs of funds are substantially driven by the Federal Funds target rate, which the FOMC lowered from a range of 5.25% to 5.50% as of January 1, 2024 to 4.25% to 4.50% as of June 30, 2025.
Previous wording
The table below presents the components of interest expense for the three months ended March 31, 2025 and 2024.
Current wording
The table below presents the components of interest expense for the three and six months ended June 30, 2025 and 2024.
Previous wording
Our interest expense decreased for the three months ended March 31, 2025 compared to the same period in 2024 due to a lower cost of funds, which was partially offset by an increase in average borrowings.
Current wording
Our interest expense decreased $6.5 million and $13.1 million for the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024 due to a lower cost of funds, which was partially offset by an increase in average borrowings.
Previous wording
The table below presents the components of net interest income for the three months ended March 31, 2025 and 2024.
Current wording
The table below presents the components of net interest income for the three and six months ended June 30, 2025 and 2024.
Previous wording
Our net interest income, which equals total interest income less total interest expense, and our net interest rate margin, which equals the yield on our average earning assets for the period less the average cost of funds, increased for the three months ended March 31, 2025 compared to the same period in 2024 due to a lower cost of funds. Our cost of funds is generally more sensitive to changes in interest rates than the yield on our investment portfolio, which is largely comprised of 30 year fixed-rate Agency RMBS.
Current wording
Our net interest income, which equals total interest income less total interest expense, and our net interest rate margin, which equals the yield on our average earning assets for the period less the average cost of funds, increased for the three and six months ended June 30, 2025 compared to the same periods in 2024 due to a lower cost of funds. Our cost of funds is generally more sensitive to changes in interest rates than the yield on our investment portfolio, which is largely comprised of 30 year fixed-rate Agency RMBS.
Previous wording
The table below summarizes the components of gain (loss) on investments, net for the three months ended March 31, 2025 and 2024.
Current wording
The table below summarizes the components of gain (loss) on investments, net for the three and six months ended June 30, 2025 and 2024.
Previous wording
During the three months ended March 31, 2025, we sold MBS and realized net losses of $5.5 million (March 31, 2024: $3.2 million). Net realized losses during the three months ended March 31, 2025 reflect sales of 4.0% coupon Agency RMBS. Net realized losses during the three months ended March 31, 2024 reflect sales of lower coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS.
Current wording
During the three and six months ended June 30, 2025, we sold MBS and realized net gains of $1.8 million and net losses of $3.6 million, respectively (June 30, 2024: net losses of $6.5 million and $9.8 million). Net realized gains during the three months ended June 30, 2025 primarily reflect sales of Agency RMBS during the period of heightened market volatility experienced early in the second quarter. Net realized losses during the six months ended June 30, 2025 primarily reflect sales of lower coupon Agency RMBS during the first quarter. Net realized losses during the three and six months ended June 30, 2024 reflect sales of 4.0% to 5.0% coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS.
Previous wording
We have elected the fair value option for all of our MBS purchased on or after September 1, 2016. Before September 1, 2016, we had also elected the fair value option for our non-Agency RMBS interest-only securities. Under the fair value option, changes in fair value are recognized in income in the condensed consolidated statements of operations. As of March 31, 2025, $5.9 billion (December 31, 2024: $5.4 billion) or 99.9% (December 31, 2024: 99.7%) of our MBS were accounted for under the fair value option.
Current wording
Under the fair value option, changes in fair value are recognized in income on the condensed consolidated statements of operations. As of June 30, 2025, all of our MBS were accounted for under the fair value option (December 31, 2024: $5.4 billion or 99.7%).
Previous wording
We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $87.6 million in the three months ended March 31, 2025 compared to net unrealized losses of $62.5 million in the three months ended March 31, 2024. Net unrealized gains in the three months ended March 31, 2025 resulted from a sharp decline in interest rates during the quarter, as valuations on fixed-rate securities increased as interest rates fell. Net unrealized losses in the three months ended March 31, 2024 resulted from higher interest rates during the quarter, as valuations on fixed-rate securities declined as interest rates rose.
Current wording
We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $7.1 million in the three months ended June 30, 2025 as the heightened market volatility that negatively impacted valuations in April largely subsided prior to quarter end. We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $80.5 million in the six months ended June 30, 2025 primarily due to a sharp decline in interest rates during the first quarter of the year, as valuations on fixed-rate securities increased as interest rates fell. We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $38.7 million and $101.2 million in the three and six months ended June 30, 2024, respectively, due to higher interest rates and wider spreads on fixed-rate Agency RMBS as valuations declined given an increase in interest rates and elevated interest rate volatility.
Previous wording
We recorded net realized and unrealized losses of $458,000 on U.S. Treasury securities in the three months ended March 31, 2024. We did not hold any U.S. Treasury securities during the three months ended March 31, 2025.
Current wording
We did not hold any U.S. Treasury securities during the three and six months ended June 30, 2025 or the three months ended June 30, 2024. We recorded net realized and unrealized losses of $458,000 on U.S. Treasury securities in the six months ended June 30, 2024.
Previous wording
As of March 31, 2025, $5.1 million of our MBS are classified as available-for-sale and subject to evaluation for credit losses (December 31, 2024: $15.0 million). During the three months ended March 31, 2025, we sold the only security for which we had recorded an allowance for credit losses. We recorded a $39,000 increase in the provision for credit losses during the three months ended March 31, 2024 on the same security based on a comparison of the security's amortized cost basis to discounted expected cash flows.
Current wording
We recorded a $263,000 and $302,000 increase in the provision for credit losses during the three and six months ended June 30, 2024, respectively, on a single security based on a comparison of the security's amortized cost basis to discounted expected cash flows. We sold the security in 2025 and no longer own any securities that are classified as available-for-sale and, therefore, subject to evaluation for credit losses.
Previous wording
For the three months ended March 31, 2024, we recorded equity in losses of $193,000. We received a final distribution from our sole remaining unconsolidated venture during the first quarter of 2024, and the venture was dissolved in April 2024.
Current wording
For the six months ended June 30, 2024, we recorded equity in losses of $193,000. We received a final distribution from our sole remaining unconsolidated venture during the first quarter of 2024, and the venture was dissolved in April 2024.
Previous wording
During the three months ended March 31, 2025, we entered into interest rate swaps with a notional amount of $725.0 million and terminated existing interest rate swaps with a notional amount of $350.0 million. We recorded net losses of $47.6 million on interest rate swaps for the three months ended March 31, 2025 (March 31, 2024: net gains of $93.2 million) primarily due to changes in interest rate expectations.
Current wording
During the six months ended June 30, 2025, we entered into interest rate swaps with a notional amount of $725.0 million and terminated existing interest rate swaps with a notional amount of $485.0 million. We recorded net losses of $16.2 million and $63.8 million on interest rate swaps for the three and six months ended June 30, 2025, respectively, due to notably tighter swap spreads during the second quarter and a sharp decline in interest rates during the first six months of the year. We recorded net gains of $29.3 million and $122.4 million for the three and six months ended June 30, 2024 primarily due to changes in interest rate expectations.
Previous wording
As of March 31, 2025, we had $5.4 billion of repurchase agreement borrowings with a weighted average remaining maturity of 25 days. We typically refinance each repurchase agreement at market interest rates upon maturity. We use interest rate swaps to manage our exposure to changing interest rates and add stability to interest rate expense.
Current wording
As of June 30, 2025, we had $4.6 billion of repurchase agreement borrowings with a weighted average remaining maturity of 24 days. We typically refinance each repurchase agreement at market interest rates upon maturity. We use interest rate swaps to manage our exposure to changing interest rates and add stability to interest rate expense.
Showing the first 40 of 63 pairs. Open the source sections for the rest.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
138,008 shares of Series B Preferred Stock, respectively, and 105,492 and 201,409 shares of Series C Preferred Stock, respectively. Gains and losses on repurchases and retirements of preferred stock represent the difference between the consideration transferred and the carrying value of the preferred stock.
Current report — wording carried from elsewhere
For the six months ended June 30, 2025, our net loss attributable to common stockholders was $10.3 million (June 30, 2024: net income of $5.0 million) or $0.16 basic and diluted net loss per average share available to common stockholders (June 30, 2024: net income per share of $0.10). The change in net income (loss) attributable to common stockholders was primarily due to (i) net gains on investments of $76.9 million in the 2025 period compared to net losses on investments of $111.4 million in the 2024 period; (ii) net losses on derivative instruments of $107.6 million in the 2025 period compared to net gains on derivatives of $121.4 million in the 2024 period; and (iii) a $20.9 million increase in net interest income.