Invesco Mortgage Capital Inc.
For the period ended Dec 31, 2025. Filed Feb 23, 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 23, 2026
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-K
Period ended 2024-12-31; filed 2025-02-20.
0001437071-25-000007
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-23.
0001437071-26-000015
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 186 previous paragraphs and 176 current paragraphs.
76 unchanged; 79 reworded; 17 added; 24 removed; 7 previous and 4 current paragraphs rearranged.
Tables are not compared: 30 previous and 30 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 (17)
Current report
Financial conditions ended 2025 slightly improved, falling sharply after elevated uncertainty around U.S. trade policy in April before rebounding over the remainder of the year. Conditions remained accommodative in the fourth quarter as the Federal Open Market Committee (“FOMC”) reduced rates twice, volatility measures remained subdued and equity markets performed well. During the fourth quarter, the S&P 500 Index and the NASDAQ continued their strong performance, posting gains of 2.3% and 2.6%, respectively. For 2025, the S&P 500 gained 16.4% and the NASDAQ was up 20.4%. Credit market valuations improved over the course of 2025 and ended the fourth quarter largely unchanged, despite experiencing a period of notable deterioration driven primarily by uncertainty regarding U.S. trade policy.
Current report
Despite inflation remaining above the Federal Reserve’s 2% target, the FOMC responded to the weakening job market by lowering its benchmark Federal Funds target rate by 25 basis points on three occasions during 2025, including at both meetings in the fourth quarter. By year-end, Federal Funds futures priced in expectations for an additional 50 basis points of rate cuts by the end of 2026, reflecting investor anticipation of a more accommodative Federal Reserve moving forward. The FOMC ended its program of quantitative tightening during the fourth quarter after reducing its portfolio of U.S. Treasury securities and Agency MBS by over $2.2 trillion since June 2022.
Current report
Interest rates declined across the U.S. Treasury yield curve in 2025, reflecting market expectations for a more accommodative monetary policy stance and continued weakness in the labor market. The two-year U.S. Treasury security yield fell 78 basis points to 3.47%, the five-year yield declined 68 basis points to 3.71% and the ten-year yield decreased by 43 basis points to 4.15%. Interest rates were little changed during the fourth quarter, as the yield on two-year U.S. Treasury securities decreased by 13 basis points, while the yields on five- and ten-year U.S. Treasury securities fell by two basis points and remained unchanged, respectively. Despite increasing significantly in April after the U.S. trade policy announcements, interest rate volatility declined notably throughout the remainder of the year. This decline reflected market expectations for an accommodative Federal Reserve, which were confirmed when the FOMC lowered its benchmark rate by 25 basis points at each of the last three meetings of 2025.
Current report
Against this macroeconomic backdrop, Agency RMBS delivered robust performance during the fourth quarter, capping an exceptional year for the sector. Relative to U.S. Treasury securities, 2025 marked the strongest calendar-year performance for Agency RMBS since 2010, which is particularly notable given the ongoing runoff in Agency RMBS from the Federal Reserve’s balance sheet and the continued lack of meaningful demand from commercial banks. Three key themes emerged in the second half of the year that supported valuations following the sector’s underperformance amid April’s trade policy-related instability: a sharp decline in interest rate volatility, significant inflows into fixed income funds and mortgage REITs, and the unexpected emergence of Fannie Mae and Freddie Mac as additional sources of demand. With organic net supply totaling just $164 billion for the year, money manager, mortgage REIT and GSE demand drove higher valuations. As a result, the sector outperformed investment grade corporates relative to U.S. Treasury securities for the first time since 2018. Prepayment speeds increased modestly but remained low, constrained by subdued housing activity and mortgage rates that, despite falling nearly 100 basis points over the year, remain elevated. Premiums on higher coupon specified pool collateral were well supported by the decline in mortgage rates, improving notably in the second half of the year.
Current report
Agency CMBS risk premiums finished 2025 largely unchanged, retracing the spread widening seen in April amid heightened U.S. trade policy uncertainties. The rebound in valuations began in mid-to-late April and continued through the fourth quarter, supported by improving clarity in trade relations and growing confidence in the path toward monetary policy easing. Additionally, slightly higher issuance levels relative to the prior year were well absorbed due to money manager inflows and continued bank demand for stable cash flow profiles.
Current report
Given the meaningful decline in interest rate volatility, we remain constructive on Agency RMBS, though we view near-term risks as balanced following the sector's strong performance, reinforced by the recent announcements that Fannie Mae and Freddie Mac will purchase $200 billion in Agency RMBS. In addition, Agency CMBS continues to offer attractive risk-adjusted yields and diversification benefits given its stable cash flow profile and lower sensitivity to interest rate fluctuations.
Current report
Longer term, the environment for Agency MBS investments is likely to remain favorable given reduced interest rate volatility and expectations for broadening investor demand and a steeper yield curve.
Current report
Additionally, we have used and may in the future use short positions in TBAs to manage risk and economically hedge a
Current report
portion of our exposure to changes in Agency RMBS valuations.
Current report
Results of Operations
Current report
Faster prepayment rates on securities purchased at a premium relative to par value result in higher premium amortization and a decrease in interest income. Conversely, faster prepayment rates on securities purchased at a discount relative to par value result in higher discount accretion and an increase in interest income.
Current report
The change in net (premium amortization) discount accretion for the year ended December 31, 2025 compared to 2024 was primarily a result of repositioning a portion of our investment portfolio into higher coupon securities that have higher amortized costs relative to par value.
Current report
Our average cost of funds decreased 95 basis points for the year ended December 31, 2025 compared to 2024. Changes in our cost of funds are substantially driven by the Federal Funds target rate, which was set at a range of 4.25% to 4.50% for the majority of 2025 and a range of 5.25% to 5.50% for the majority of 2024.
Current report
Our interest expense decreased $29.9 million for the year ended December 31, 2025 compared to 2024 due to a lower cost of funds, which was partially offset by an increase in average borrowings.
Current report
As of December 31, 2025 and 2024, we held the following U.S. Treasury futures contracts.
Current report
Gain (Loss) on Repurchase and Retirement of Preferred Stock
Current report
Our interest rate swaps and U.S. Treasury futures contracts require us to post initial margin and daily variation margin based on subsequent changes in their fair value. Daily variation margin requirements also entitle us to receive collateral from our counterparties if the value of amounts owed to us under the derivative agreement exceeds the minimum margin requirement.
Removed paragraphs (24)
Previous report
Financial conditions were predominantly accommodative throughout 2024, buoyed by strong equity market performance, tightening spreads across investment grade, high yield and emerging market bonds, declining interest rate volatility and the start of the Federal Open Market Committee’s (“FOMC”) easing cycle. The fourth quarter saw these trends continue following the resolution of the US elections, despite sharply higher interest rates in the intermediate and long end of the yield curve.
Previous report
Strong labor markets, inflation persistently higher than the FOMC’s target of 2% and uncertainty about the impact of future policy action led to a re-pricing of the market’s expectations of future monetary policy. Following the 100 basis point reduction in the Federal Funds target rate over the course of the third and fourth quarters, Federal Funds futures market expectations as of year-end 2024 reflected only one to two additional cuts in the target rate through the end of 2025. This compares to an expectation of ten cuts through the end of 2025 priced in as recently as mid-September 2024. Quantitative tightening continued in the fourth quarter of 2024, as the Federal Reserve passively reduced the size of its balance sheet through maturities of U.S. Treasuries and paydowns of Agency RMBS. Paydowns of Agency RMBS from the balance sheet added approximately $16 billion of net supply to the market each month, well below the Federal Reserve's monthly cap of $35 billion. Although quantitative tightening is anticipated to conclude over the next several quarters, runoff of the Agency RMBS portion of the balance sheet is expected to continue, with proceeds redeployed into Treasuries.
Previous report
Interest rates were quite volatile during 2024, with rates falling for the first three quarters of the year on expectations of future policy action by the FOMC before sharply reversing during the fourth quarter as the market priced the majority of those cuts out. Over the year, the yield on the two-year Treasury was flat at 4.25%, the yield on the five-year Treasury increased 56 basis points to 4.39% and the yield on the ten-year Treasury finished at 4.58%, up 72 basis points on the year. During the fourth quarter interest rates were higher across the board, with the two-year, five-year and ten-year Treasury yields up 60 basis points, 81 basis points and 78 basis points, respectively. Short-dated interest rate volatility reflected the market’s shifting expectations of both monetary and potential fiscal policy, increasing ahead of the U.S. elections and FOMC meeting in November before settling in December to end the year slightly lower.
Previous report
Against this macroeconomic backdrop, Agency RMBS underperformed Treasuries during the fourth quarter while still ending the year with modest outperformance. Underperformance during the quarter primarily took place in lower coupons, as the sharp move higher in interest rates limited demand for deep discount securities. Although interest rate volatility moved higher during the quarter, supply and demand technicals for higher coupon Agency RMBS were supportive as supply was limited while bank and overseas demand improved. Prepayment speeds largely remained at low levels given limited housing activity and elevated mortgage rates, but recently originated loans did display significant responsiveness to the short-lived notable decline in mortgage rates in the third quarter. Premiums on higher coupon specified pool collateral declined modestly given the increase in interest rates but remain relatively well-supported as implied financing via the dollar roll market for TBA investments remained largely unattractive throughout the quarter.
Previous report
Agency CMBS risk premiums contracted notably during the fourth quarter and throughout 2024 given increased optimism regarding eventual monetary policy normalization, money manager inflows, renewed bank demand for stable cash flow profiles amidst elevated interest rate volatility and relatively modest new issuance.
Previous report
In the near-term, we remain cautious on Agency RMBS as shifting expectations for monetary and fiscal policy may result in elevated interest rate volatility, reducing investor demand. Our long-term outlook for Agency RMBS is favorable, however, as we expect demand to improve in higher coupons given attractive valuations, an eventual decline in interest rate volatility, and a steeper yield curve. Lastly, we expect a gradual increase in Agency CMBS new issuance to be met with robust investor demand, as the sector continues to offer value relative to other fixed income investments due to its prepayment protection and attractive risk-adjusted return profiles.
Previous report
We generally hedge as much of our interest rate and foreign exchange risk as we deem prudent because of market conditions. No assurance can be given that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Our investment policies do not contain specific requirements as to the percentages or amount of risk that we are required to hedge.
Previous report
Hedging may fail to protect or could adversely affect us because, among other things:
Previous report
•available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought;
Previous report
•the duration of the hedges may not match the duration of the related liabilities;
Previous report
•our counterparty in the hedging transaction may default on its obligation to pay;
Previous report
•the values of derivatives used for hedging are adjusted in accordance with accounting rules to reflect changes in fair value.
Previous report
Net discount accretion decreased slightly for the year ended December 31, 2024 compared to 2023 as the impact of repositioning into securities with higher book prices was largely offset by modestly faster prepayment rates.
Previous report
The table below presents our average borrowings and cost of funds for the years ended December 31, 2024, 2023 and 2022.
Previous report
Our average cost of funds increased 36 basis points for the year ended December 31, 2024 compared to 2023 as the FOMC raised the Federal Funds target rate from a range of 4.25% to 4.50% as of January 1, 2023 to a maximum of 5.25% to 5.50% before lowering the target rate in the second half of 2024. Our cost of funds for the year ended December 31, 2024 was also significantly impacted by the completion of amortization of net deferred gains on de-designated interest rate swaps in December 2023. The amortization of these net deferred gains previously offset a portion of our current period interest expense on repurchase agreement borrowings.
Previous report
Our interest expense increased $21.5 million for the year ended December 31, 2024 compared to 2023 due to a decrease in amortization of net deferred gains on de-designated interest rate swaps and increases in total average borrowings and borrowing rates.
Previous report
Amounts recorded in accumulated other comprehensive income before we discontinued cash flow hedge accounting for our interest rate swaps were reclassified to interest expense on the consolidated statements of operations as interest was accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements.
Previous report
Our net interest income, which equals total interest income less total interest expense, decreased $12.9 million for the year ended December 31, 2024 compared to 2023 due to a decrease in amortization of net deferred gains on de-designated interest rate swaps, a higher average Federal Funds target rate and higher average borrowings, which were partially offset by higher average earning assets and average earning asset yields.
Previous report
As of December 31, 2024, we had $4.9 billion of repurchase agreement borrowings with a weighted average remaining maturity of 29 days (December 31, 2023: $4.5 billion and 20 days). We typically refinance each repurchase agreement at market interest rates upon maturity. We use interest rate swaps to manage our exposure to changing interest rates and add stability to interest rate expense.
Previous report
During the third quarter of 2024, we began using futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance. The table below presents certain details of our futures contracts as of December 31, 2024. We did not hold any futures contracts as of December 31, 2023.
Previous report
Other Investment Income (Loss), net
Previous report
Our other investment income (loss), net for the year ended December 31, 2023 consisted of foreign currency transaction gains and losses and the reclassification of our foreign currency translation adjustment that was previously recorded in accumulated other comprehensive income related to an unconsolidated venture.
Previous report
Gain on Repurchase and Retirement of Preferred Stock
Previous report
As discussed above, our distribution requirements are based on REIT taxable income rather than U.S. GAAP net income. The primary differences between our REIT taxable income and U.S. GAAP net income are: (i) unrealized gains and losses on investments that we have elected the fair value option for that are included in current U.S. GAAP income but are excluded from REIT taxable income until realized or settled; (ii) gains and losses on derivative instruments that are included in current U.S. GAAP net income but are excluded from REIT taxable income until realized; and (iii) temporary differences related to amortization of premiums and discounts on investments. For additional information regarding the characteristics of our dividends, refer to Note 11 – “Stockholders' Equity” of our consolidated financial statements in Part IV, Item 15 of this Report.
Reworded paragraphs (79)
Previous wording
We are a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities (“MBS”) and other mortgage-related assets. Our objective is to provide attractive risk-adjusted returns to our stockholders, primarily through dividends and secondarily through capital appreciation.
Current wording
We are a Maryland corporation primarily focused on investing in, financing and managing MBS and other mortgage-related assets. Our objective is to provide attractive risk-adjusted returns to our stockholders, primarily through dividends and secondarily through capital appreciation.
Previous wording
Our operating results can be affected by a number of factors and primarily depend on the level of our net interest income and the market value of our assets. Our net interest income, which includes the amortization of purchase premiums and accretion of purchase discounts, varies primarily as a result of changes in market interest rates and prepayment speeds, as measured by the constant prepayment rate (“CPR”) on our assets. Interest rates and prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. The market value of our assets can be impacted by credit spread premiums (yield advantage over U.S. Treasury notes) and the supply of, and demand for, assets in which we invest.
Current wording
Our operating results can be affected by a number of factors and primarily depend on the level of our net interest income and the market value of our assets. Our net interest income, which includes the amortization of purchase premiums and accretion of purchase discounts, varies primarily as a result of changes in market interest rates and prepayment speeds, as measured by the constant prepayment rate (“CPR”) on our assets. Interest rates and prepayment speeds vary according to the type of investment, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. The market value of our assets can be impacted by spreads and the supply of, and demand for, assets in which we invest.
Previous wording
Macroeconomic factors that affect our business include inflation, economic growth, employment conditions, interest rates, interest rate volatility, fiscal and monetary policy, financial conditions, spread premiums, residential and commercial real estate prices, credit availability, the health of the banking system, consumer personal income and spending and corporate earnings. Of these macroeconomic factors, financial conditions, inflation, employment conditions, monetary policy, interest rates and interest rate volatility had the most direct impacts on our performance and financial condition during 2024.
Current wording
Macroeconomic factors that affect our business include inflation, economic growth, employment conditions, public policy, fiscal and monetary policy, interest rates, interest rate volatility, financial conditions, spread premiums, residential and commercial real estate prices, credit availability, the health of the banking system, consumer spending, personal income and corporate earnings. Of these macroeconomic factors, financial conditions, inflation, employment conditions, monetary policy, interest rates and interest rate volatility had the most direct impact on our performance and financial condition during 2025.
Previous wording
Inflation readings trended lower during 2024. The headline consumer price index (“CPI”) ended the year at 2.9%, down from 3.4% in December of 2023, while CPI (ex. food and energy) declined from 3.9% to 3.2%. The disinflationary trend stalled during the fourth quarter, however, as headline CPI increased from 2.4% to 2.9% and CPI (ex. food and energy) declined modestly from 3.3% to 3.2%. Investors responded to the stalled progress, along with fresh uncertainty regarding the potential impacts of future fiscal and trade policies, by adjusting expectations for future inflation sharply higher. This was reflected most directly in Treasury inflation-protected securities breakeven rates. The two-year breakeven ended the year at 2.54% (up from 1.77% at the end of September, and up from 2.02% in December of 2023) and the five-year breakeven ended at 2.39% (up from 2.09% in September and 2.15% last December). The employment picture was strong throughout 2024, with the economy adding a total of over 2.2 million jobs. This trend continued during the fourth quarter, as the economy added an average of 170,000 jobs per month.
Current wording
Inflation readings trended modestly lower during 2025 but continued to exceed the Federal Reserve’s 2% target. The headline consumer price index (“CPI”) ended the year at 2.7%, down from 2.9% in December 2024. Core CPI (CPI excluding food and energy) declined from 3.2% to 2.6%. The disinflationary trend was also evident in the fourth quarter, as headline CPI decreased from 3.0% to 2.7% and core CPI declined modestly from 3.0% to 2.6%. Investors responded to the improved inflation readings by lowering expectations for future inflation, most directly reflected in Treasury inflation-protected securities breakeven rates. The two-year breakeven ended the year at 2.30% (down from 2.63% at the end of September and 2.54% in December 2024) and the five-year breakeven ended at 2.27% (down from 2.45% in September and 2.39% last December). The labor market weakened in 2025, as the economy added 181,000 jobs compared to 1.5 million jobs in 2024. This weakening trend continued during the fourth quarter, as the economy lost 51,000 jobs.
Previous wording
As of December 31, 2024 and 2023, our holdings of 30 year fixed-rate Agency RMBS represented 83% and 98% of our total investment portfolio, respectively. Our 30 year fixed-rate Agency RMBS holdings as of December 31, 2024 and 2023 consisted of specified pools with coupon distributions as shown in the table below.
Current wording
As of December 31, 2025 and 2024, our holdings of 30 year fixed-rate Agency RMBS represented approximately 85% and 83% of our total investment portfolio, respectively. Our 30 year fixed-rate Agency RMBS holdings as of December 31, 2025 and 2024 consisted of specified pools with coupon distributions as shown in the table below.
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 December 31, 2024 and 2023.
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 December 31, 2025 and 2024.
Previous wording
We resumed investing in Agency CMBS in the first quarter of 2024 because these securities benefit from prepayment protection characteristics and have an attractive return profile. Further, the hedging costs related to these holdings are economical as they are less sensitive to interest rate risk given prepayment protection and scheduled balloon maturity payments. As of December 31, 2024, our holdings of Agency CMBS represented approximately 15% of our total investment portfolio.
Current wording
As of December 31, 2025 and 2024, our holdings of Agency CMBS represented approximately 14% and 15% of our total investment portfolio, respectively. These securities offer attractive risk-adjusted yields and diversification benefits. Further, the hedging costs associated with these holdings are economical as Agency CMBS is less sensitive to interest rate risk given prepayment protection and scheduled balloon maturity payments. As of December 31, 2025, approximately 81% of our Agency CMBS holdings were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.
Previous wording
As of December 31, 2024 and 2023, our holdings of non-Agency CMBS and non-Agency RMBS represented less than 1% of our total investment portfolio. In the first quarter of 2024, we received a final distribution from our sole remaining unconsolidated venture. Following this distribution, we no longer have any investments in unconsolidated ventures.
Current wording
We sold our remaining investments in non-Agency securities during 2025. As of December 31, 2024, our holdings of non-Agency securities represented less than 1% of our total investment portfolio.
Previous wording
We finance the majority of our investment portfolio through repurchase agreements. Repurchase agreements are generally settled on a short-term basis, usually from one to six months, and bear interest at rates that are expected to move in close relationship to SOFR.
Current wording
We finance the majority of our investment portfolio through repurchase agreements. Repurchase agreements are generally settled on a short-term basis, usually from one to six months, and bear interest at rates that are expected to move in close relationship to the secured overnight financing rate (“SOFR”).
Previous wording
We enter into interest rate swap agreements that are designed to mitigate the effects of changes in interest rates for a portion of our borrowings. Under these swap agreements, we generally pay fixed interest rates and receive floating interest rates indexed to SOFR. To a lesser extent, we have also used interest rate swap agreements whereby we make floating interest rate payments indexed to SOFR and receive fixed interest rate payments as part of our overall risk management strategy.
Current wording
We enter into interest rate swap agreements that are designed to mitigate the effects of changes in interest rates for a portion of our borrowings. Under these swap agreements, we generally pay fixed interest rates and receive floating interest rates indexed to SOFR. To a lesser extent, we have in the past entered into and may in the future enter into interest rate swap agreements whereby we make floating interest rate payments indexed to SOFR and receive fixed interest rate payments as part of our overall risk management strategy.
Previous wording
We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes. During the year ended December 31, 2024, we entered into new interest rate swaps with a notional amount of $2.6 billion and terminated or settled existing interest rate swaps with a notional amount of $3.4 billion.
Current wording
We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes. During the year ended December 31, 2025, we entered into interest rate swaps with a notional amount of $1.3 billion and terminated or settled interest rate swaps with a notional amount of $790.0 million.
Previous wording
During the third quarter of 2024, we began entering into futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance. During the year ended December 31, 2024, we entered into futures contracts with a notional amount of $2.8 billion and terminated or settled existing futures contracts with a notional amount of $1.4 billion.
Current wording
We also use U.S. Treasury futures contracts as an alternative way to help mitigate the potential impact of changes in interest rates on our performance. During the year ended December 31, 2025, we entered into U.S. Treasury futures contracts with a notional amount of $5.6 billion and terminated or settled U.S. Treasury futures contracts with a notional amount of $5.9 billion.
Previous wording
Daily variation margin for interest rate swaps and futures contracts is characterized as settlement of the derivative itself rather than collateral and is recorded as a realized gain or loss in our consolidated statement of operations.
Current wording
Daily variation margin for interest rate swaps and U.S. Treasury futures contracts is characterized as settlement of the derivative itself rather than collateral and is recorded as a realized gain or loss in our consolidated statements of operations.
Previous wording
As of December 31, 2024, we may sell up to 11,095,561 shares of our common stock from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents. The table below shows sales of our common stock under equity distribution agreements during the years ended December 31, 2024 and 2023.
Current wording
As of December 31, 2025, we had 19,538,020 shares of our common stock remaining available for sale from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents. The table below shows issuances of our common stock under equity distribution agreements during the years ended December 31, 2025 and 2024.
Previous wording
For information on dividends declared and paid during the years ended December 31, 2024 and 2023, see Note 11 - “Stockholders' Equity” of our consolidated financial statements in Part IV, Item 15 of this report on Form 10-K.
Current wording
For information on dividends declared during the years ended December 31, 2025 and 2024, see Note 10 - “Stockholders' Equity" of our consolidated financial statements in Part IV, Item 15 of this annual report on Form 10-K.
Previous wording
During the year ended December 31, 2024, we did not repurchase any shares of our common stock.
Current wording
During the years ended December 31, 2025 and 2024, 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 year ended December 31, 2024, we repurchased and retired 138,008 shares of Series B Preferred Stock (prior to the redemption discussed below) and 338,780 shares of Series C Preferred Stock. During the year ended December 31, 2023, we repurchased and retired 151,637 shares of Series B Preferred Stock and 271,031 shares of Series C Preferred Stock. As of December 31, 2024, we had authority to repurchase 706,659 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 year ended December 31, 2025, we repurchased and retired 352,528 shares of Series C Preferred Stock. During the year ended December 31, 2024, we repurchased and retired 138,008 shares of Series B Preferred Stock prior to redemption and 338,780 shares of Series C Preferred Stock. We redeemed all outstanding shares of our Series B Preferred Stock in December 2024. As of December 31, 2025, we had authority to repurchase 354,131 additional shares of our Series C Preferred Stock under the current preferred stock share repurchase program.
Previous wording
Our book value per common share decreased 10.8% as of December 31, 2024 compared to December 31, 2023 primarily due to losses recognized on investments and dividends declared, which were partially offset by net interest income and gains recognized on derivative instruments.
Current wording
Our book value per common share decreased 2.2% as of December 31, 2025 compared to December 31, 2024. The decrease in our book value per common share was primarily due to losses on derivative instruments, dividends declared and expenses, which were partially offset by net interest income and gains on investments.
Previous wording
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. All of these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effects based on information available as of the date of these financial statements. If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in valuation of our investment portfolio, allowances for credit losses on our available-for-sale MBS, and a change in our interest income recognition among other effects.
Current wording
Our consolidated financial statements are prepared in accordance with U.S. GAAP, which requires the use of estimates and assumptions that involve the exercise of judgment and use of assumptions as to future uncertainties. Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. All of these estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effects based on information available as of the date of these financial statements. If conditions change from those expected, it is possible that the judgments and estimates described below could change, which may result in a change in valuation of our investment portfolio or derivative instruments and a change in our interest income recognition among other effects.
Previous wording
Mortgage-Backed Securities. We have elected the fair value option for all of our MBS purchased on or after September 1, 2016 and all of our RMBS IOs. Under the fair value option, changes in fair value are recognized in the consolidated statement of operations. In our view, the fair value option election more appropriately reflects the results of our operations because MBS fair value changes are accounted for in the same manner as fair value changes in economic hedging instruments. As of December 31, 2024, $5.4 billion (December 31, 2023: $5.0 billion) or 99.7% (December 31, 2023: 99.7%) of our MBS are accounted for under the fair value option. We record our MBS purchased before September 1, 2016, as available-for-sale and report these MBS at fair value.
Current wording
Mortgage-Backed Securities. We have elected the fair value option for all of our MBS held as of December 31, 2025 (December 31, 2024: $5.4 billion or 99.7%). Under the fair value option, we recognize changes in fair value in our consolidated statement of operations. In our view, the fair value option election more appropriately reflects the results of our operations because MBS fair value changes are accounted for in the same manner as fair value changes in economic hedging instruments.
Previous wording
Refer to the preceding discussion under “Market Conditions and Impacts” for information on how conditions in 2024 impacted valuations of our Agency securities, which constituted substantially all of our investment portfolio during 2024. Additionally, refer to Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for the estimated impact of an instantaneous shift in the yield curve on the market value of our interest rate-sensitive investments.
Current wording
Refer to the preceding discussion under “Market Conditions and Impacts” for information on how conditions in 2025 impacted valuations of our Agency securities, which constituted substantially all of our investment portfolio during 2025. Additionally, refer to Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for the estimated impact of an instantaneous shift in the yield curve on the market value of our interest rate-sensitive instruments.
Previous wording
For Agency RMBS and Agency CMBS that cannot be prepaid in such a way that we would not recover substantially all of our initial investment, interest income recognition is based on contractual cash flows. We do not estimate prepayments in applying the effective interest method.
Current wording
For Agency MBS that cannot be prepaid in such a way that we would not recover substantially all of our initial investment, interest income recognition is based on contractual cash flows. We do not estimate prepayments in applying the effective interest method.
Previous wording
Interest income on our MBS where we may not recover substantially all of our initial investment is based on estimated future cash flows. We estimate future expected cash flows at the time of purchase and determine the effective interest rate based on these estimated cash flows and our purchase price. Over the life of the investments, we update these estimated future cash flows and compute a revised yield based on the current amortized cost of the investment, unless those changes will be reflected in an allowance for credit losses. In situations where an allowance for credit losses is limited by the fair value of the investment, we compute the yield as the rate that equates expected future cash flows to the current fair value of the investment. In estimating these future cash flows, there are a number of assumptions that are subject to uncertainties and contingencies, including but not limited to the rate and timing of principal payments (prepayments, repurchases, defaults and liquidations), the pass through or coupon rate, and interest rate fluctuations. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimate and our interest income. Changes in our original or most recent cash flow projections may result in a prospective change in interest income recognized on these securities, or the amortized cost of these securities. For non-Agency RMBS not of high credit quality, when actual cash flows vary from expected cash flows, the difference is recorded as an adjustment to the amortized cost of the security, unless those changes will be reflected in an allowance for credit losses, and the security's yield is revised prospectively.
Current wording
Interest income on our MBS where we may not recover substantially all of our initial investment is based on estimated future cash flows. We estimate future expected cash flows at the time of purchase and determine the effective interest rate based on these estimated cash flows and our purchase price. Over the life of the investments, we update these estimated future cash flows and compute a revised yield based on the current amortized cost of the investment. In estimating these future cash flows, there are a number of assumptions that are subject to uncertainties and contingencies, including but not limited to the rate and timing of principal payments, the pass through or coupon rate and interest rate fluctuations. These uncertainties and contingencies are difficult to predict and are subject to future events that may impact our estimate and our interest income. Changes in our original or most recent cash flow projections may result in a prospective change in interest income recognized on these securities, or the amortized cost of these securities.
Previous wording
One of the most significant factors impacting our projected cash flows is changes in long-term interest rates. When interest rates fall, prepayments will generally increase and when interest rates rise, prepayments will generally decrease. However, there are a variety of factors that may impact the rate of prepayments on our securities. Accordingly, under different conditions, we could report materially different amounts.
Current wording
One of the most significant factors impacting our interest income recognition is changes in long-term interest rates. When interest rates fall, prepayments will generally increase and when interest rates rise, prepayments will generally decrease. However, there are a variety of factors that may impact the rate of prepayments on our securities. Accordingly, under different conditions, we could report materially different amounts.
Previous wording
Prepayment rates on our mortgage-backed securities increased modestly in 2024 compared to 2023 but remained relatively low given elevated interest rates. Refer to Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for an estimate of the percentage change in our net interest income, including interest paid or received under interest rate swaps, caused by an instantaneous 50 and 100 basis points increase or decrease in interest rates.
Current wording
Prepayment rates on our mortgage-backed securities accelerated in 2025 compared to 2024 as interest rates declined. Refer to Item 7A. “Quantitative and Qualitative Disclosures About Market Risk” for an estimate of the percentage change in our net interest income, including interest paid or received under interest rate swaps, caused by an instantaneous 50 and 100 basis points increase or decrease in interest rates.
Previous wording
Accounting for Derivative Financial Instruments. We use or have used derivatives to manage interest rate and currency exchange risk and as an alternative means of investing in and financing Agency RMBS. We record all derivatives on our consolidated balance sheets at fair value. Refer to Note 2 - “Summary of Significant Accounting Policies” of our consolidated financial statements included in Part IV, Item 15 of this Report for a description of how we determine the fair value of our futures contracts, interest rate swaps and TBAs. As of December 31, 2024, all of our futures contracts were exchange-traded and all of our interest rate swaps were centrally cleared by a registered clearing organization. Changes in the fair value of our derivatives are recorded in gain (loss) on derivative instruments, net in our consolidated statement of operations. Further information is provided in Note 7 - “Derivatives and Hedging Activities” of our consolidated financial statements included in Part IV, Item 15 of this Report.
Current wording
Accounting for Derivative Financial Instruments. We use or have used derivatives to manage interest rate risk and as an alternative means of investing in and financing Agency RMBS. We record all derivatives on our consolidated balance sheets at fair value. Refer to Note 2 - “Summary of Significant Accounting Policies” of our consolidated financial statements included in Part IV, Item 15 of this Report for a description of how we determine the fair value of our U.S. Treasury futures contracts, interest rate swaps and TBAs. As of December 31, 2025, all of our U.S. Treasury futures contracts were exchange-traded, and all of our interest rate swaps were centrally cleared by a registered clearing organization. Changes in the fair value of our derivatives are recorded in gain (loss) on derivative instruments, net in our consolidated statement of operations. Further information is provided in Note 6 - “Derivatives and Hedging Activities” of our consolidated financial statements included in Part IV, Item 15 of this Report.
Previous wording
The factors that impact valuations of our TBAs are similar to those that impact valuations of our Agency RMBS. Valuations of interest rate swaps and futures contracts are most significantly impacted by changing interest rate expectations. We recognized net gains on our interest rate swaps and futures contracts in 2024 primarily due to shifting expectations that interest rates would stay higher for longer.
Current wording
The factors that impact valuations of our TBAs are similar to those that impact valuations of our Agency RMBS. Valuations of U.S. Treasury futures contracts are impacted by changes in interest rates. Valuations of interest rate swaps are impacted by changes in swap rates, which includes changes in interest rates as well as changes in swap spreads. We recognized net losses on our interest rate swaps and U.S. Treasury futures contracts in 2025 as rates declined.
Previous wording
Our consolidated results of operations for the years ended December 31, 2024, 2023 and 2022 are summarized below.
Current wording
The table below presents information from our consolidated statements of operations for the years ended December 31, 2025, 2024 and 2023.
Previous wording
Total average earning assets increased $101.7 million for the year ended December 31, 2024 compared to 2023. 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 $231.0 million for the year ended December 31, 2025 compared to 2024. 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 increased 6 basis points for the year ended December 31, 2024 compared to 2023. Changes in our average earning asset yields are driven by the composition of our investments, book prices of our securities and prepayment rates.
Current wording
Average earning asset yields decreased 7 basis points for the year ended December 31, 2025 compared to 2024. Changes in our average earning asset yields are driven by the composition of our investments, amortized cost of our securities and prepayment rates.
Previous wording
We earned total interest income of $286.5 million during 2024 (2023: $277.9 million). Our interest income consists of coupon interest and net (premium amortization) discount accretion on MBS and other securities as well as interest income on our commercial loan as shown in the table below.
Current wording
Our interest income includes coupon interest and net (premium amortization) discount accretion as shown in the table below.
Previous wording
Our interest income increased $8.6 million for the year ended December 31, 2024 compared to 2023 due to higher average earning assets and average earning asset yields.
Current wording
Our interest income increased $8.7 million for the year ended December 31, 2025 compared to 2024 due to higher average earning assets, which was partially offset by lower average earning asset yields.
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 Agency RMBS purchased at a substantial premium relative to par value, expected future prepayment speeds are estimated on at least a quarterly basis.
Previous wording
The following table presents net (premium amortization) discount accretion recognized on our mortgage-backed and other securities portfolio during 2024, 2023 and 2022.
Current wording
The following table presents net (premium amortization) discount accretion recognized during 2025, 2024 and 2023.
Previous wording
Total average borrowings increased $96.8 million for the year ended December 31, 2024 compared to 2023. Changes in our average borrowings are a factor of our total stockholders' equity and our desired leverage levels.
Current wording
Total average borrowings increased $311.9 million for the year ended December 31, 2025 compared to 2024. Changes in our average borrowings are a factor of our total stockholders' equity and our desired leverage levels.
Previous wording
Our net interest rate margin, which equals the yield on our average earning assets for the period less the average cost of funds, decreased 30 basis points for the year ended December 31, 2024 compared to 2023 due to a decrease in amortization of net deferred gains on de-designated interest rate swaps and a higher average Federal Funds target rate, which were partially offset by higher average earning asset yields. Our 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 year ended December 31, 2025 compared to 2024 due to a lower cost of funds, which was partially offset by a decrease in average earning asset yields. Our cost of funds is generally more sensitive to changes in interest rates than the yield on our investment portfolio, which is largely comprised of 30 year fixed-rate Agency RMBS.
Previous wording
During the year ended December 31, 2024, we sold MBS and realized net losses of $9.1 million (2023: net losses of $158.0 million). Net realized losses during the year ended December 31, 2024 primarily reflect sales of 4.0% to 5.0% coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS. Net realized losses during the year ended December 31, 2023 primarily reflect the repositioning of Agency RMBS coupon allocations and sales of lower yielding Agency RMBS to purchase higher yielding Agency RMBS in an effort to improve the earnings power of the portfolio.
Current wording
During the year ended December 31, 2025, we sold MBS and realized net losses of $2.4 million (2024: net losses of $9.1 million). Net realized losses during the year ended December 31, 2025 primarily reflect sales of Agency RMBS during the first quarter as we rotated the portfolio into higher coupons. Net realized losses during the year ended December 31, 2024 primarily reflect sales of 4.0% to 5.0% coupon Agency RMBS with a portion of the proceeds being used to purchase Agency CMBS.
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 consolidated statements of operations. As of December 31, 2024, $5.4 billion or 99.7% (December 31, 2023: $5.0 billion or 99.7%) of our MBS were accounted for under the fair value option.
Current wording
As of December 31, 2025, all of our MBS were accounted for under the fair value option (December 31, 2024: $5.4 billion or 99.7%). Under the fair value option, changes in fair value are recognized in income on the consolidated statements of operations.
Previous wording
We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $124.3 million in 2024 (2023: net unrealized gains of $50.4 million). Net unrealized losses in the year ended December 31, 2024 were due to lower valuations on Agency RMBS and Agency CMBS given an increase in interest rates. Net unrealized gains in the year ended December 31, 2023 reflect favorable valuations on our assets held at year end.
Current wording
We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $151.8 million in 2025 (2024: net unrealized losses of $124.3 million). Net unrealized gains for the year ended December 31, 2025 were primarily due to the decline in interest rates and MBS spreads during the year, as valuations on fixed-rate securities increased as interest rates fell and spreads tightened. Net unrealized losses for the year ended December 31, 2024 were due to lower valuations on Agency RMBS and Agency CMBS given an increase in interest rates.
Previous wording
We recorded realized and unrealized losses of $458,000 on a U.S. Treasury security during the year ended December 31, 2024. We sold the security during the first quarter of 2024. We recorded net realized and unrealized gains of $384,000 on U.S. Treasury securities during the year ended December 31, 2023.
Current wording
We did not hold any U.S. Treasury securities during the year ended December 31, 2025. We recorded net realized and unrealized losses of $458,000 on a U.S. Treasury security during the year ended December 31, 2024.
Showing the first 40 of 79 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Current report — wording carried from elsewhere
The table below presents information related to our borrowings and cost of funds for the years ended December 31, 2025, 2024 and 2023.
Current report — wording carried from elsewhere
Furthermore, gains and losses have not been accounted for consistently under U.S. GAAP. Under U.S. GAAP, certain gains and losses may be reflected in net income whereas other gains and losses may be reflected in other comprehensive income. For example, a portion of our mortgage-backed securities were historically classified as available-for-sale securities, and changes in the valuation of these securities were recorded in other comprehensive income on our consolidated balance sheets. We elected the fair value option for our mortgage-backed securities purchased on or after September 1, 2016, and changes in the valuation of these securities are recorded in other income (loss) in our consolidated statements of operations.
Current report — wording carried from elsewhere
As of December 31, 2025, one counterparty held collateral that exceeded the amounts borrowed under the related repurchase agreements by more than 5% of our stockholders’ equity.
Rearranged previous paragraphs (7)
Previous report — wording carried elsewhere
Approximately 79% of our Agency CMBS were Fannie Mae DUS and 21% were Freddie Mac Multifamily Participation Certificates.
Previous report — wording carried elsewhere
On December 27, 2024, we redeemed all issued and outstanding shares of our Series B Preferred Stock for $106.2 million. The cash redemption price for each share of Series B Preferred Stock was $25.00. The excess of the consideration transferred over carrying value was accounted for as a deemed dividend and resulted in a reduction of $3.5 million in net income attributable to common stockholders during the year ended December 31, 2024.
Previous report — wording carried elsewhere
For the year ended December 31, 2024, our net income attributable to common stockholders was $34.8 million (2023: net loss of $37.5 million) or $0.65 basic and diluted net income per average share available to common stockholders (2023: $0.85 net loss per share).
Previous report — wording carried elsewhere
We present an economic debt-to-equity ratio, a non-GAAP financial measure of leverage that considers the impact of the off-balance sheet financing of our investments in TBAs that are accounted for as derivative instruments under U.S. GAAP. We include our TBAs at implied cost basis in our measure of leverage because a forward contract to acquire Agency RMBS in the
Previous report — wording carried elsewhere
Our investing activities used net cash of $536.8 million for the year ended December 31, 2023. Our primary use of cash from investing activities during the year ended December 31, 2023 was $5.9 billion to purchase MBS and $59.5 million to purchase U.S. Treasury securities. We also paid $179.5 million to settle derivative contracts during the year ended December 31, 2023. We received proceeds from the sale of MBS of $5.2 billion and proceeds from the sale of U.S. Treasury securities of $49.0 million during the year ended December 31, 2023. We also generated $348.5 million from principal payments of MBS during the year ended December 31, 2023.
Previous report — wording carried elsewhere
Our financing activities provided net cash of $218.9 million for the year ended December 31, 2023. Our primary source of cash from financing activities during the year ended December 31, 2023 was net proceeds on our repurchase agreements of
Previous report — wording carried elsewhere
$223.5 million and proceeds from issuance of common stock of $109.1 million. We paid dividends of $102.2 million and used $8.7 million to repurchase Series B and Series C Preferred Stock.