Invesco Mortgage Capital Inc.
For the period ended Mar 31, 2026. Filed May 6, 2026.
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.
Mar 31, 2026 · Filed May 6, 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-Q
Period ended 2025-09-30; filed 2025-11-05.
0001437071-25-000051
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-06.
0001437071-26-000038
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 175 previous paragraphs and 167 current paragraphs.
80 unchanged; 70 reworded; 15 added; 21 removed; 4 previous and 2 current paragraphs rearranged.
Tables are not compared: 32 previous and 28 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 (15)
Current report
Following a strong recovery in the second half of 2025 and impressive start to the new year, financial conditions deteriorated in the latter half of the first quarter, initially weakening as market volatility rose amid signs of a softening labor market. The decline accelerated following the outbreak of conflict in the Middle East toward the end of February to end the quarter notably weaker. Against this backdrop of heightened geopolitical risk, equity markets reacted negatively with the S&P 500 and NASDAQ declining 4.6% and 7.1%, respectively. Credit markets followed a similar trajectory, as valuations across investment-grade credit, high yield bonds and emerging market debt came under pressure amid the sharp increase in volatility.
Current report
Inflation readings trended mostly higher during the first quarter, remaining above the Federal Reserve’s 2% target. The headline consumer price index (“CPI”) ended the quarter at 3.3%, up from 2.7% in December, reflecting a sharp rise in energy and commodity prices stemming from the outbreak of conflict in the Middle East. Core CPI, which excludes food and energy, remained steady at 2.6%. Amid heightened uncertainty around energy prices, investors revised inflation expectations higher, most clearly reflected in Treasury inflation-protected securities breakeven rates. The two-year breakeven rose sharply higher to 3.25% at quarter-end, up from 2.30% at year-end, while the five-year breakeven increased to 2.60%.
Current report
The Federal Open Market Committee (“FOMC”) kept the benchmark Federal Funds target rate unchanged at both meetings during the quarter, citing a balance between the risks of a weakening labor market and persistently elevated inflation. Expectations for future monetary policy action, as reflected in the Fed Funds futures market, were influenced by heightened volatility stemming from increased geopolitical risks related to the conflict in the Middle East. The futures market began the quarter with expectations for two rate cuts by year-end, driven by signs of labor market softness. However, as commodity and energy prices surged, those expectations reversed, with futures markets subsequently indicating that the FOMC is likely to maintain its current policy stance through the remainder of 2026.
Current report
Interest rates increased across the U.S. Treasury yield curve during the quarter, reflecting market expectations for higher inflation as elevated energy prices continued to work their way through the economy. The two-year U.S. Treasury yield increased by 33 basis points to 3.80%, the five-year yield rose by 23 basis points to 3.94% and the ten-year yield rose by 16 basis points to 4.31%. Interest rate volatility also moved higher during the quarter, driven by rising concerns around a weakening labor market and increasing geopolitical risks.
Current report
Against this macroeconomic backdrop, Agency RMBS delivered mixed performance relative to interest rate hedges during the quarter, as lower coupons performed well while higher coupons underperformed. Excess returns relative to U.S. Treasuries were strong in January as the robust performance in the second half of 2025 carried over into the new year, supported by declining interest rate volatility and the announcement of a $200 billion Agency MBS purchase program by Fannie Mae and Freddie Mac. Following the initial post-announcement surge of demand, however, performance languished, as profit-taking and uncertainty regarding the implementation of the purchase program emerged alongside a modest move higher in interest rate volatility. Underperformance accelerated in March at the onset of the geopolitical turmoil in the Middle East, as interest rate volatility rose sharply given higher interest rates and increased expectations for tighter monetary policy. Although lower coupon performance remained positive throughout the quarter, higher coupons were negatively impacted by rising prepayment concerns in the beginning of the quarter and their elevated sensitivity to increased interest rate volatility in the latter half of the quarter. In addition, swap spreads tightened notably during the quarter, negatively impacting Agency RMBS hedged with swaps relative to those hedged with U.S. Treasuries.
Current report
Despite elevated market volatility, heightened geopolitical concerns and relatively elevated supply, Agency CMBS risk premiums contracted during the first quarter as issuance was met with continued investor demand, particularly from banks and money managers attracted to the sector’s high-quality collateral, stable cash flows and relative value versus other spread products.
Current report
Risk sentiment has improved entering the second quarter, supported by a decline in interest rate volatility. A further de‑escalation of the Middle East conflict would likely provide additional support for risk assets. From a supply‑and‑demand perspective, Agency RMBS net issuance is expected to remain manageable, the GSEs continue to provide steady demand and bank participation is likely to increase, supported in part by recent Basel capital framework proposals that improve the relative capital efficiency of high-quality mortgage assets. Together, these macro and technical factors create a more constructive backdrop for our Agency RMBS holdings, particularly as wider spread levels relative to the prior quarter offer more attractive entry points. In addition, despite elevated supply, our 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
(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 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 implied market value and the implied cost basis of the TBAs. For further details of our U.S. GAAP accounting for TBAs, refer to Note 6 “Derivatives and Hedging Activities” in Part I. Item 1 of this report on Form 10-Q. Our TBA dollar roll transactions are 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
As of March 31, 2026, our holdings of TBAs represented approximately 17% of our total investment portfolio. We increased our allocation to TBAs during the first quarter of 2026 given attractive implied financing rates in the Agency RMBS TBA dollar roll market. As of March 31, 2026, our holdings of TBAs consisted of 4.5% to 5.5% coupons in Ginnie Mae collateral.
Current report
Financing
Current report
Our interest income increased $5.8 million for the three months ended March 31, 2026 compared to the same period in 2025 due to an increase in average earning assets, which was partially offset by a decrease in average earning asset yields.
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
During the three months ended March 31, 2026, we sold our holdings of 6.5% coupon Agency RMBS and realized net gains of $443,000. Net realized losses of $5.5 million during the three months ended March 31, 2025 reflect sales of 4.0% coupon Agency RMBS.
Current report
Our investing activities provided net cash of $195.0 million for the three months ended March 31, 2026 compared to net cash used by investing activities of $516.5 million for the three months ended March 31, 2025. We used cash of $228.9 million to purchase MBS for the three months ended March 31, 2026 (March 31, 2025: $884.4 million). We posted cash variation margin of $25.0 million on TBAs for the three months ended March 31, 2026 (March 31, 2025: received net cash of $525,000). Principal payments on MBS provided cash of $214.0 million (March 31, 2025: $95.3 million).We also generated $211.5 million in proceeds from sales of MBS for the three months ended March 31, 2026 (March 31, 2025: $373.6 million) and received net cash of $23.3 million to settle derivative contracts for the three months ended March 31, 2026 (March 31, 2025: cash used of $101.5 million).
Removed paragraphs (21)
Previous report
•U.S. Treasury securities; and
Previous report
•a real estate-related financing arrangement in the form of an unconsolidated venture.
Previous report
Financial conditions remained accommodative during the third quarter as volatility measures declined sharply and equity markets performed well, with the S&P 500 Index and the NASDAQ posting gains of 8.1% and 11.4%, respectively. Credit markets ended the quarter largely unchanged, with investment-grade and high-yield corporate bond spreads widening slightly, while emerging market debt spreads tightened modestly.
Previous report
Inflation continued to exceed the Federal Reserve’s 2% target over the quarter, with the headline consumer price index (“CPI”) rising 2.9% year-over-year in August, up from 2.7% at the end of June, and core CPI, which excludes food and energy, increased by 3.1% year-over-year, compared to 2.9% previously. Investor expectations for future inflation increased modestly, reflecting concerns about the potential impact of fiscal and trade policies on consumer prices. Breakeven rates on Treasury inflation-protected securities moved higher during the quarter, with the two-year breakeven rising to 2.6% from 2.5%, and the five-year breakeven increasing to 2.5% from 2.3%. Meanwhile, labor market data pointed to continued sluggish growth. The economy added an average of 51,000 jobs in July and August (with September data delayed due to the government shutdown), down slightly from the second quarter average of 55,000. The headline unemployment rate increased slightly, moving from 4.1% in June to 4.3% in August.
Previous report
Despite inflation levels consistently above the Federal Reserve’s 2% target, the Federal Open Market Committee (“FOMC”) lowered its benchmark Federal Funds target rate by 25 basis points in mid-September, citing signs of a weaker labor market. As of the end of September, Federal Funds futures reflected expectations for an additional 50 basis points of rate cuts by year end. Quantitative tightening continued through the third quarter, with the Federal Reserve maintaining its monthly runoff of U.S. Treasuries at $5 billion, while maintaining the $35 billion cap on Agency MBS runoff.
Previous report
Interest rates declined across the Treasury yield curve during the third quarter, reflecting market expectations for a more accommodative policy stance from the Federal Reserve and continued weakness in the labor market. The yield on the two-year Treasury fell 12 basis points to 3.60%, the five-year yield declined 6 basis points to 3.73% and the ten-year yield decreased by 8 basis points to 4.15%. Interest rate volatility declined notably throughout the quarter, as the market coalesced around expectations for two additional rate cuts by the Federal Reserve before year end.
Previous report
Agency RMBS performed well during the third quarter, benefiting from the persistent decline in interest rate volatility as well as the overall supportive environment for risk assets. While demand from commercial banks and overseas investors remained relatively subdued during the quarter, the steepening of the yield curve in the front end, aided by expectations for additional monetary policy easing in the coming months, improved investor sentiment for Agency RMBS as money managers and mortgage REITs deployed inflows into the sector. The outperformance was broadly distributed across the 30-year conventional mortgage coupon stack, with discount coupons recording the largest gains. Coupons ranging from 2.0% to 5.0% outperformed their Treasury hedges by 90 to 130 basis points, while 5.5% to 6.5% coupons posted more modest excess returns relative to Treasuries of 30 to 80 basis points. Performance in higher coupons was dampened by elevated prepayment risk, as 30-year mortgage rates declined approximately 0.5% during the quarter.
Previous report
Prepayment speeds increased marginally during the quarter as the seasonal decline in housing turnover was offset by a notable increase in refinancing activity, which is expected to persist in higher coupons over the next few months. Positively, premiums on specified pool collateral improved in higher coupons during the quarter as investors sought prepayment protection. Agency CMBS risk premiums continued to decline with broader financial markets.
Previous report
Given the notable decline in interest rate volatility, we remain constructive on Agency RMBS, though we view near term risks as balanced following its recent strong performance. Our longer-term outlook for the sector remains favorable, as we expect investor demand to broaden given lower interest rate volatility, a steeper yield curve and attractive valuations. In addition, Agency CMBS continues to offer attractive risk-adjusted yields and diversification benefits relative to our Agency RMBS holdings, supported by its stable cash flow profile and lower sensitivity to interest rate fluctuations. Lastly, we believe anticipated changes to bank regulatory capital rules would increase demand for Agency RMBS and Agency CMBS, providing further support for both sectors.
Previous report
We sold our remaining investments in non-Agency securities during 2025. As of December 31, 2024 and September 30, 2024, our holdings of non-Agency securities represented less than 1% of our total investment portfolio.
Previous report
Financing and Other Liabilities
Previous report
Our interest income is subject to interest rate risk. Refer to Item 3. "Quantitative and Qualitative Disclosures about Market Risk" for more information relating to interest rate risk and its impact on our operating results.
Previous report
During the three and nine months ended September 30, 2025, we sold MBS and realized net gains of $1.2 million and net losses of $2.4 million, respectively (three and nine months ended September 30, 2024: net gains of $5.0 million and net losses of $4.8 million, respectively). Net realized gains during the three months ended September 30, 2025 reflect a decrease in our allocation to higher coupon Agency RMBS. Net realized losses during the nine months ended September 30, 2025 primarily reflect sales of lower coupon Agency RMBS during the first quarter. Net realized gains and losses during the three and nine months ended September 30, 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 report
We did not hold any U.S. Treasury securities during the three and nine months ended September 30, 2025 or the three months ended September 30, 2024. We recorded net realized and unrealized losses of $458,000 on U.S. Treasury securities in the nine months ended September 30, 2024.
Previous report
(Increase) Decrease in Provision for Credit Losses
Previous report
We recorded an $80,000 decrease and $222,000 increase in the provision for credit losses during the three and nine months ended September 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 report
Equity in Earnings (Losses) of Unconsolidated Ventures
Previous report
For the nine months ended September 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 report
Our effective net interest income decreased in the three months ended September 30, 2025 compared to the same period in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower average cost of funds and an increase in average earning asset yields. Our effective net interest income decreased in the nine months ended September 30, 2025 compared to the same period in 2024 due to a decrease in contractual net interest income on interest rate swaps, which was partially offset by a lower average cost of funds.
Previous report
Our investing activities used net cash of $372.5 million in the nine months ended September 30, 2025 (September 30, 2024: $898.8 million). We used cash of $2.0 billion to purchase MBS during the nine months ended September 30, 2025 (September 30, 2024: $1.9 billion). Our primary source of cash from investing activities for the nine months ended September 30, 2025 was proceeds from sales of MBS of $1.5 billion (September 30, 2024: $887.2 million from the sales of MBS and $10.8 million from the sale of U.S. Treasury securities). We also generated $364.8 million from principal payments of MBS during the nine months ended September 30, 2025 (September 30, 2024: $261.9 million) and used cash of $198.3 million to settle derivative contracts in the nine months ended September 30, 2025 (September 30, 2024: $146.5 million).
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 for which we have elected the fair value option 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 annual report on Form 10-K for the year ended December 31, 2024.
Reworded paragraphs (70)
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”); and
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”);
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”).
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 Fannie Mae or Freddie Mac (collectively “Agency CMBS”); and
Previous wording
•CMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS”);
Current wording
During the periods presented in these condensed consolidated financial statements, we also invested in CMBS and RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency CMBS” and “non-Agency RMBS”, respectively).
Previous wording
We have elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits our exclusion from the definition of “Investment Company” under the 1940 Act.
Current wording
We have elected to be taxed as a real estate investment trust (“REIT”) for U.S. federal income tax purposes under the provisions of the Internal Revenue Code of 1986. To maintain our REIT qualification, we are generally required to distribute at least 90% of our REIT taxable income to our stockholders annually. We operate our business in a manner that permits our exclusion from the “Investment Company” definition under the 1940 Act.
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 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 the third quarter of 2025.
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 the first quarter of 2026.
Previous wording
(3)Agency CMBS spreads represent the difference between the yields on new issue Freddie Mac K Certificates and Fannie Mae Delegated Underwriting and Servicing MBS (“DUS”) and a U.S. Treasury security with a similar maturity.
Current wording
(3)Agency CMBS spreads represent the difference between the yields on new issue Fannie Mae Delegated Underwriting and Servicing MBS (“DUS”) and a U.S. Treasury security with a similar maturity.
Previous wording
The table below shows the composition of our investment portfolio as of September 30, 2025, December 31, 2024 and September 30, 2024.
Current wording
The table below shows the composition of our investment portfolio including TBAs as of March 31, 2026, December 31, 2025 and March 31, 2025.
Previous wording
As of September 30, 2025, our holdings of 30 year fixed-rate Agency RMBS represented approximately 83% of our total investment portfolio compared to 83% as of December 31, 2024 and 87% as of September 30, 2024. Our 30 year fixed-rate Agency RMBS holdings as of September 30, 2025, December 31, 2024 and September 30, 2024 consisted of specified pools with coupon distributions as shown in the table below.
Current wording
As of March 31, 2026, our holdings of 30 year fixed-rate Agency RMBS represented approximately 70% of our total investment portfolio including TBAs, compared to 85% as of December 31, 2025 and 84% as of March 31, 2025. Our 30 year fixed-rate Agency RMBS holdings as of March 31, 2026, December 31, 2025 and March 31, 2025 consisted of specified pools with coupon distributions as shown in the table below.
Previous 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 September 30, 2025, December 31, 2024 and September 30, 2024.
Current wording
Our holdings of 30 year fixed-rate Agency RMBS are focused in 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, 2026, December 31, 2025 and March 31, 2025.
Previous wording
As of September 30, 2025, our holdings of Agency CMBS represented approximately 16% of our total investment portfolio compared to 15% as of December 31, 2024 and 11% as of September 30, 2024. Our holdings of 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 September 30, 2025, approximately 81% of our Agency CMBS holdings were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.
Current wording
As of March 31, 2026, our holdings of Agency CMBS represented approximately 12% of our total investment portfolio including TBAs, compared to 14% as of December 31, 2025 and 15% as of March 31, 2025. 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 March 31, 2026, approximately 80% of our Agency CMBS holdings were Fannie Mae DUS and 20% were Freddie Mac Multifamily Participation Certificates.
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 the secured overnight financing rate (“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”). Additionally, we view our TBAs that are accounted for as derivative financial instruments under U.S. GAAP as a form of off-balance sheet financing. Refer to Non-GAAP Financial Measures below for information on how we evaluate our at-risk leverage.
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.
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 pay fixed interest rates and receive floating interest rates indexed to SOFR.
Previous wording
We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes. During the nine months ended September 30, 2025, we entered into interest rate swaps with a notional amount of $745.0 million and terminated existing interest rate swaps with a notional amount of $630.0 million.
Current 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, 2026, we entered into interest rate swaps with a notional amount of $1.0 billion and terminated or settled interest rate swaps with a notional amount of $730.0 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 nine months ended September 30, 2025, we entered into futures contracts with a notional amount of $4.2 billion and terminated existing futures contracts with a notional amount of $4.6 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 three months ended March 31, 2026, we entered into U.S. Treasury futures contracts with a notional amount of $1.3 billion and terminated or settled U.S. Treasury futures contracts with a notional amount of $1.4 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 condensed consolidated statements 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 condensed consolidated statements of comprehensive income (loss).
Previous wording
As of September 30, 2025, we had 20,388,007 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 nine months ended September 30, 2025 and 2024.
Current wording
As of March 31, 2026, we had 36,840,411 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 three months ended March 31, 2026 and 2025.
Previous wording
For information on dividends declared during the nine months ended September 30, 2025 and 2024, see Note 10 - “Stockholders' Equity” of our condensed consolidated financial statements in Part I. Item 1 of this quarterly report on Form 10-Q.
Current wording
For information on dividends declared during the three months ended March 31, 2026 and 2025, see Note 10 - “Stockholders' Equity” of our condensed consolidated financial statements in Part I. Item 1 of this quarterly report on Form 10-Q.
Previous wording
During the nine months ended September 30, 2025, we did not repurchase any shares of our common stock.
Current wording
During the three months ended March 31, 2026, 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 and nine months ended September 30, 2025, we repurchased and retired 89,223 and 276,172 shares of Series C Preferred Stock, respectively. During the three and nine months ended September 30, 2024, we repurchased and retired no shares and 138,008 shares of Series B Preferred Stock, respectively, and 66,507 and 267,916 shares of Series C Preferred Stock, respectively. We redeemed all outstanding shares of our Series B Preferred Stock in December 2024. As of September 30, 2025, we had authority to repurchase 430,487 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 C Preferred Stock. During the three months ended March 31, 2026, we repurchased and retired 64,688 of Series C Preferred Stock (three months ended March 31, 2025: 90,146 shares). As of March 31, 2026, we had authority to repurchase 289,443 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 5.7% as of September 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.
Current wording
Our book value per common share decreased 7.3% as of March 31, 2026 compared to December 31, 2025. The decrease in our book value per common share was primarily due to unrealized losses on investments, dividends declared and expenses, which were partially offset by net interest income and gains on derivative instruments.
Previous wording
The table below presents information from our condensed consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024.
Current wording
The table below presents information from our condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2026 and 2025.
Previous wording
The table below presents information related to our average earning assets and earning asset yields for the three and nine months ended September 30, 2025 and 2024.
Current wording
The table below presents information related to our average earning assets and earning asset yields for the three months ended March 31, 2026 and 2025.
Previous wording
(1)Average balances for each period are based on weighted month-end balances.
Current wording
(1)Average balances for each period are based on weighted month-end balances. Average earning assets do not include TBAs that are treated as derivative instruments under U.S. GAAP.
Previous wording
(2)Average earning asset yields for the period were calculated by dividing interest income, including amortization of premiums and discounts, by average earning assets based on the amortized cost of the investments. All yields are annualized.
Current wording
(2)Average earning asset yields for the period are calculated by dividing interest income, including amortization of premiums and discounts, by average earning assets based on the amortized cost of the investments. All yields are annualized.
Previous wording
Total average earning assets decreased $184.1 million for the three months ended September 30, 2025 and increased $164.3 million for the nine months ended September 30, 2025 compared to the same periods in 2024. Changes in our average earning assets are a factor of our total stockholders' equity and our desired leverage levels.
Current wording
Average earning assets increased $523.9 million for the three months ended March 31, 2026 compared to the same period in 2025. Changes in our average earning assets are a factor of our total stockholders' equity, our desired leverage levels and our allocation to TBAs.
Previous wording
Average earning asset yields increased 11 basis points for the three months ended September 30, 2025 and were unchanged for the nine months ended September 30, 2025 compared to the same periods 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 9 basis points for the three months ended March 31, 2026 compared to the same period in 2025. 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 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 principal value, 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.
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 for the three and nine months ended September 30, 2025 and 2024.
Current wording
The following table presents net (premium amortization) discount accretion recognized for the three months ended March 31, 2026 and 2025.
Previous wording
The change in net (premium amortization) discount accretion for the three and nine months ended September 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.
Current wording
The change in net (premium amortization) discount accretion for the three months ended March 31, 2026 compared to the same period in 2025 was the result of an increase in the amortized costs of our securities relative to par value and faster prepayment rates on higher-coupon, premium-priced securities, which was partially offset by the acceleration of discount accretion on certain Agency CMBS that fully repaid during the period.
Previous wording
The table below presents information related to our borrowings and cost of funds for the three and nine months ended September 30, 2025 and 2024.
Current wording
The table below presents information related to our borrowings and cost of funds for the three months ended March 31, 2026 and 2025.
Previous wording
(1)Average borrowings for each period are based on weighted month-end balances.
Current wording
(1)Average borrowings for each period are based on weighted month-end balances. Average borrowings do not include the off-balance sheet financing component of TBAs that are treated as derivative instruments under U.S. GAAP.
Previous wording
Total average borrowings decreased $114.7 million for the three months ended September 30, 2025 and increased $238.7 million for the nine months ended September 30, 2025 compared to the same periods in 2024. Changes in our average borrowings are a factor of our total stockholders' equity and our desired leverage levels.
Current wording
Average borrowings increased $437.2 million for the three months ended March 31, 2026 compared to the same period in 2025. Changes in our average borrowings are a factor of our total stockholders' equity, our desired leverage levels and our allocation to TBAs.
Previous wording
Our average cost of funds decreased 78 basis points and 95 basis points for the three and nine months ended September 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 was set at a range of 4.25% to 4.50% for the majority of the three and nine months ended September 30, 2025 and a range of 5.25% to 5.50% for the majority of the three and nine months ended September 30, 2024.
Current wording
Cost of funds decreased 54 basis points for the three months ended March 31, 2026 compared to the same period in 2025. Changes in our cost of funds are substantially driven by the Federal Funds target rate, which was set at a range of 3.50% to 3.75% during the three months ended March 31, 2026 and a range of 4.25% to 4.50% during the three months ended March 31, 2025.
Previous wording
The table below presents the components of interest expense for the three and nine months ended September 30, 2025 and 2024.
Current wording
The table below presents the components of interest expense for the three months ended March 31, 2026 and 2025.
Previous wording
Our interest expense decreased $11.0 million for three months ended September 30, 2025 compared to the same period in 2024 due to a lower cost of funds and a decrease in average borrowings. Our interest expense decreased $24.1 million for the nine months ended September 30, 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 $2.4 million for three months ended March 31, 2026 compared to the same period in 2025 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 and nine months ended September 30, 2025 and 2024.
Current wording
The table below presents the components of net interest income for the three months ended March 31, 2026 and 2025.
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 September 30, 2025 compared to the same period in 2024 due to a lower cost of funds and an increase in average earning asset yields. Our net interest income and net interest rate margin increased for the nine months ended September 30, 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 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, 2026 compared to the same period in 2025 due to a lower cost of funds, which was partially offset by lower 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
The table below summarizes the components of gain (loss) on investments, net for the three and nine months ended September 30, 2025 and 2024.
Current wording
The table below summarizes the components of gain (loss) on investments, net for the three months ended March 31, 2026 and 2025.
Previous wording
We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $48.3 million and $128.8 million in the three and nine months ended September 30, 2025, respectively, primarily due to a sharp decline in interest rates during the year, as valuations on fixed-rate securities increased as interest rates fell. We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $160.2 million and $59.0 million in the three and nine months ended September 30, 2024, respectively, due to lower interest rates during the third quarter resulting in improved valuations on Agency RMBS and Agency CMBS.
Current wording
Under the fair value option, changes in fair value are recognized in income on the condensed consolidated statements of comprehensive income (loss). As of March 31, 2026 and December 31, 2025, all of our MBS were accounted for under the fair value option. We recorded net unrealized losses of $55.4 million on our MBS during the three months ended March 31, 2026 due to an increase in interest rates and wider spreads. We recorded net unrealized gains of $87.6 million on our MBS portfolio accounted for under the fair value option during the three months ended March 31, 2025 due to a sharp decline in interest rates.
Previous wording
We record all derivatives on our condensed consolidated balance sheets at fair value. Changes in the fair value of our derivatives are recorded in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations. Net interest paid or received under our interest rate swaps is also recognized in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations.
Current wording
We record all derivatives on our condensed consolidated balance sheets at fair value. Changes in the fair value of our derivatives are recorded in gain (loss) on derivative instruments, net in our condensed consolidated statements of comprehensive income (loss). Net interest paid or received under our interest rate swaps is also recognized in gain (loss) on derivative instruments, net in our condensed consolidated statements of comprehensive income (loss).
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Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Our net interest income, which equals total interest income less total interest expense, increased for the three months ended March 31, 2026 compared to the same period in 2025 due to a lower cost of funds and higher average earning assets, which were partially offset by higher average borrowings and lower average earning asset yields.
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 condensed 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 condensed consolidated statements of comprehensive income (loss).
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
During the periods presented in this Quarterly Report, we also invested in:
Previous report — wording carried elsewhere
•RMBS that are not guaranteed by a U.S. government agency or a federally chartered corporation (“non-Agency RMBS”);
Previous report — wording carried elsewhere
Under the fair value option, changes in fair value are recognized in income on the condensed consolidated statements of operations. As of September 30, 2025, all of our MBS were accounted for under the fair value option (December 31, 2024: $5.4 billion or 99.7%).
Previous report — wording carried elsewhere
For the nine months ended September 30, 2025, our net income attributable to common stockholders was $39.9 million (September 30, 2024: $40.2 million) or $0.61 basic and diluted net income per average share available to common stockholders (September 30, 2024: $0.78 per share). The change in net income attributable to common stockholders was primarily due to (i) net gains on investments of $126.4 million in the 2025 period compared to net gains on investments of $53.8 million in the 2024 period; (ii) net losses on derivative instruments of $116.8 million in the 2025 period compared to net losses on derivatives of $5.9 million in the 2024 period; and (iii) a $31.0 million increase in net interest income.