Invesco Mortgage Capital Inc.
For the period ended Sep 30, 2026. Filed Nov 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.
Sep 30, 2026 · Filed Nov 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 2026-06-30; filed 2026-08-05.
0001437071-26-000064
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-06.
0001437071-26-000086
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 169 previous paragraphs and 170 current paragraphs.
110 unchanged; 55 reworded; 5 added; 4 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 32 previous and 33 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 (5)
Current report
Financial conditions tightened during the quarter as investors increasingly priced in more restrictive monetary policy amid resilient economic growth and persistent inflation. Rising energy prices and ongoing geopolitical tensions further contributed to a higher-for-longer interest rate outlook. Against this backdrop, equity markets remained supported by strong earnings, optimism surrounding AI-driven investment and productivity gains, and continued economic resilience. Credit markets generally remained constructive, although risk premiums widened modestly across some portions of the fixed income market as higher interest rates and increased volatility weighed on investor risk appetite.
Current report
This macroeconomic backdrop weighed on investor risk appetite and contributed to materially wider Agency RMBS spreads and modestly wider Agency CMBS spreads. Agency RMBS supply and demand technicals weakened as higher interest rates and wider spreads led to notable selling from the levered community, while GSE, bank and money manager demand was subdued amid the volatile interest rate environment. In addition, net supply reached its seasonal peak, totaling $76 billion for the quarter despite limited refinancing activity and persistent housing affordability constraints. Specified pool pay-ups, which are the premiums paid over generic collateral for certain underlying loan characteristics, declined notably during the quarter as 30 year mortgage rates moved more than 90 basis points higher to end the quarter near 7.4%, reducing the value of prepayment protection. Positively, Agency CMBS exhibited notable stability throughout most of the quarter, only widening modestly at the end of the quarter as the relative value became less attractive given the significant widening in Agency RMBS.
Current report
Our outlook for both Agency RMBS and Agency CMBS remains constructive. While uncertainty surrounding inflation, monetary policy, and geopolitical developments remains elevated, recent spread widening has enhanced the relative value and prospective return potential of both sectors. Looking ahead, we believe Agency RMBS is well positioned to benefit from increased participation by GSEs, banks, money managers, and other institutional investors as compelling risk-adjusted returns continue to attract capital. Agency CMBS also remains attractive, supported by elevated yields, stable cash flow characteristics, and meaningful diversification benefits.
Current report
We believe an eventual de-escalation of geopolitical tensions in the Middle East, coupled with moderation in interest rate volatility, could provide an additional tailwind for our target assets. Until then, we remain focused on maintaining prudent leverage, ample liquidity, and strategic portfolio diversification. We believe our measured approach positions us well to navigate uncertainty while seeking to deliver attractive risk-adjusted returns and create long-term shareholder value.
Current report
In addition to changes caused by the underlying floating rate index, the amount of contractual net interest income or expense on interest rate swaps that we recognize has changed based on changes in the size and composition of our interest rate swap portfolio. In September 2026, we terminated $500.0 million notional amount of interest rate swaps with a weighted average fixed pay rate of 0.24% and remaining maturities of less than one year as part of our interest rate risk management. We expect the termination of these swaps to negatively affect our effective interest expense, effective net interest income and earnings available for distribution in subsequent quarters.
Removed paragraphs (4)
Previous report
Financial conditions improved during the second quarter of 2026 despite periodic bouts of volatility driven by geopolitical developments in the Middle East, elevated energy prices and shifting expectations for monetary policy. Strong labor market conditions, resilient economic growth and moderating interest rate volatility supported risk assets, while investors navigated uncertainty surrounding inflation and energy prices. Against this backdrop, equity markets generated strong returns during the quarter, with broad market indices recovering from periods of volatility and ending the quarter at or near record highs. Credit markets also performed well, as risk premiums across investment grade, high yield and securitized bonds generally tightened amid improving investor confidence and continued demand for income-oriented assets.
Previous report
Against this macroeconomic backdrop, Agency RMBS performance relative to interest rate hedges was mixed across the coupon stack. Higher coupon securities, which benefitted from improving risk sentiment, declining interest rate volatility and favorable market technicals, generally outperformed lower coupon securities. Demand from banks, asset managers, mortgage REITs and other institutional investors remained robust throughout the quarter, while net supply was readily absorbed despite elevated gross issuance activity, underscoring the sector's resilience amid elevated inflation and evolving monetary policy expectations. Attractive carry, strong investor demand and favorable relative valuations versus other high-quality fixed-income sectors continued to support investor interest in Agency RMBS throughout the period.
Previous report
During the quarter, Agency CMBS risk premiums remained relatively unchanged as supply was readily absorbed by continued institutional demand from banks, insurance companies and asset managers seeking high-quality spread assets. Supported by stable cash flows and attractive risk-adjusted yields relative to other spread sectors, Agency CMBS remained well positioned within the fixed income market.
Previous report
Our outlook for Agency RMBS and Agency CMBS remains constructive. While uncertainty surrounding monetary policy and geopolitical developments persists, we believe valuations remain compelling as interest rate volatility and inflation expectations have moderated from their first quarter peaks. Supply and demand dynamics remain favorable, as net issuance is expected to be contained, and broad-based investor demand remains supportive. Agency CMBS is also well positioned, supported by its attractive risk-adjusted yields, relatively low sensitivity to interest rate fluctuations, and diversification benefits. Taken together, these macroeconomic and market technical factors create a favorable backdrop for our investment strategy as we enter the second half of 2026.
Reworded paragraphs (55)
Previous 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 second quarter of 2026.
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, 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 2026.
Previous wording
Inflation remained notably above the Federal Reserve’s 2% target throughout the quarter. The year-over-year increase in the headline consumer price index (“CPI”) increased during the quarter, rising from approximately 3.3% in March to 3.5% by quarter end, reflecting the impact of higher energy prices and broader inflationary pressures. The year-over-year increase in core CPI, which excludes food and energy, was unchanged from the beginning of the quarter at 2.6%. Despite uncertainty around energy prices, investors revised their inflation expectations lower, most clearly reflected in Treasury inflation-protected securities breakeven rates. The two-year breakeven declined sharply to 2.00% at quarter end from 3.25% at the end of the first quarter, while the five-year breakeven decreased to 2.27% from 2.60%.
Current wording
Inflation remained notably above the Federal Reserve’s 2% target throughout the quarter. The year-over-year increase in the headline consumer price index (“CPI”) accelerated, rising from approximately 3.5% in June to 3.7% in September, driven in part by the impact of higher energy prices. The year-over-year change in core CPI, which excludes food and energy, was 2.6% in September, unchanged from June. Despite uncertainty around energy prices, future inflation expectations remained relatively well anchored. The two-year Treasury inflation-protected securities breakeven rate increased to approximately 2.50% at quarter-end from 2.00% at the end of the second quarter, while the five-year breakeven rate increased to 2.38% from 2.27%.
Previous wording
The Federal Open Market Committee (“FOMC”) maintained its target range for the Federal Funds rate at 3.50% to 3.75% throughout the second quarter, citing continued economic resilience, a strong labor market and inflation that remained above its long term objective. Expectations for future monetary policy shifted meaningfully during the quarter. Investors entered the period anticipating that moderating inflation and slowing economic growth would eventually lead to policy easing. However, stronger than expected economic data, elevated energy prices and a modest reacceleration in inflation prompted market participants to reassess this outlook. By quarter end, Federal Funds futures reflected growing expectations that the FOMC's next move would be a hike rather than a cut.
Current wording
The Federal Open Market Committee (“FOMC”) maintained its target range for the Federal Funds rate at 3.50% to 3.75% in July before raising it by 25 basis points to 3.75% to 4.00% in September, citing resilient economic activity and inflation that remained above its long-term objective. Expectations for future monetary policy shifted meaningfully tighter during the quarter given resilient economic growth, persistent inflation, and rising energy prices.
Previous wording
Interest rates increased across the U.S. Treasury yield curve during the quarter as investors reassessed the outlook for inflation and monetary policy amid resilient economic growth, a strong labor market and elevated energy prices. The two-year U.S. Treasury yield increased by 37 basis points to 4.17%, the five-year yield rose by 29 basis points to 4.23% and the ten-year yield rose by 16 basis points to 4.47%. Interest rate volatility remained relatively well contained during the quarter despite periodic bouts of market uncertainty driven by geopolitical developments in the Middle East and evolving policy expectations.
Current wording
Interest rates increased across the U.S. Treasury yield curve during the quarter as investors reassessed the outlook for inflation and monetary policy. The two-year U.S. Treasury yield increased by 72 basis points to 4.89%, the five-year yield rose by 86 basis points to 5.09%, and the ten-year yield rose by 81 basis points to 5.28%. Interest rate volatility also increased, rising modestly in the first two months of the quarter as geopolitical risks escalated before moving sharply higher in September given the more hawkish tone from the FOMC at their September meeting.
Previous wording
As of June 30, 2026, our holdings of 30 year fixed-rate Agency RMBS represented approximately 73% of our total investment portfolio including TBAs, compared to 85% as of December 31, 2025 and 81% as of June 30, 2025. Our 30 year fixed-rate Agency RMBS holdings as of June 30, 2026, December 31, 2025 and June 30, 2025 consisted of specified pools with coupon distributions as shown in the table below.
Current wording
As of September 30, 2026, our holdings of 30 year fixed-rate Agency RMBS represented approximately 83% of our total investment portfolio including TBAs, compared to 85% as of December 31, 2025 and 83% as of September 30, 2025. Our 30 year fixed-rate Agency RMBS holdings as of September 30, 2026, December 31, 2025 and September 30, 2025 consisted of specified pools with coupon distributions as shown in the table below.
Previous wording
As of June 30, 2026, our holdings of TBAs represented approximately 15% of our total investment portfolio. We increased our allocation to TBAs during the first half of 2026 given attractive implied financing rates in the Agency RMBS TBA dollar roll market. As of June 30, 2026, our holdings of TBAs consisted of 5.0% to 6.0% coupon securities.
Current wording
As of September 30, 2026, our holdings of TBAs represented approximately 8% of our total investment portfolio. We did not have any TBAs outstanding as of September 30, 2025 and December 31, 2025. We increased our allocation to TBAs during 2026 given attractive implied financing rates in the Agency RMBS TBA dollar roll market. Our TBA holdings as of September 30, 2026 consisted of 30 year Agency RMBS TBAs with coupon distributions as shown in the table below.
Previous wording
As of June 30, 2026, our holdings of Agency CMBS represented approximately 11% of our total investment portfolio including TBAs, compared to 14% as of December 31, 2025 and 17% as of June 30, 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 June 30, 2026, approximately 81% of our Agency CMBS holdings were Fannie Mae DUS and 19% were Freddie Mac Multifamily Participation Certificates.
Current wording
As of September 30, 2026, our holdings of Agency CMBS represented approximately 9% of our total investment portfolio including TBAs, compared to 14% as of December 31, 2025 and 16% as of September 30, 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 September 30, 2026, approximately 87% of our Agency CMBS holdings were Fannie Mae DUS and 13% were Freddie Mac Multifamily Participation Certificates.
Previous wording
We actively manage our interest rate swap portfolio as the size and composition of our investment portfolio changes. During the six months ended June 30, 2026, we entered into interest rate swaps with a notional amount of $1.9 billion and terminated or settled interest rate swaps with a notional amount of $930.0 million.
Current 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, 2026, we entered into interest rate swaps with a notional amount of $3.0 billion and terminated or settled interest rate swaps with a notional amount of $1.7 billion.
Previous 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 six months ended June 30, 2026, we entered into U.S. Treasury futures contracts with a notional amount of $2.7 billion and terminated or settled U.S. Treasury futures contracts with a notional amount of $2.5 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 nine months ended September 30, 2026, we entered into U.S. Treasury futures contracts with a notional amount of $4.7 billion and terminated or settled U.S. Treasury futures contracts with a notional amount of $4.1 billion.
Previous wording
As of June 30, 2026, we had 21,992,905 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 and six months ended June 30, 2026 and 2025.
Current wording
As of September 30, 2026, we had 15,285,982 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 and nine months ended September 30, 2026 and 2025.
Previous wording
(1)During the three and six months ended June 30, 2026, we also paid other costs of $139,000 related to issuances of common stock.
Current wording
(1)During the three and nine months ended September 30, 2026, we also paid other costs of $195,000 and$334,000, respectively, related to issuances of common stock (three and nine months ended September 30, 2025: $47,000).
Previous wording
For information on dividends declared during the three and six months ended June 30, 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.
Current wording
For information on dividends declared during the three and nine months ended September 30, 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 six months ended June 30, 2026, we did not repurchase any shares of our common stock.
Current wording
During the nine months ended September 30, 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 C Preferred Stock. During the three and six months ended June 30, 2026, we repurchased and retired 47,222 and 111,910 of Series C Preferred Stock, respectively (three and six months ended June 30, 2025: 96,803 and 186,949 shares). As of June 30, 2026, we had authority to repurchase 242,221 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 and nine months ended September 30, 2026, we repurchased and retired 17,415 and 129,325 shares of Series C Preferred Stock, respectively (three and nine months ended September 30, 2025: 89,223 and 276,172 shares). As of September 30, 2026, we had authority to repurchase 224,806 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 7.9% as of June 30, 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.
Current wording
Our book value per common share decreased 22.7% as of September 30, 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 comprehensive income (loss) for the three and six months ended June 30, 2026 and 2025.
Current wording
The table below presents information from our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2026 and 2025.
Previous wording
The table below presents information related to our average earning assets and earning asset yields for the three and six months ended June 30, 2026 and 2025.
Current 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, 2026 and 2025.
Previous wording
Average earning assets increased $1.6 billion and $1.0 billion for the three and six months ended June 30, 2026, respectively, compared to the same periods 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.
Current wording
Average earning assets increased $2.2 billion and $1.4 billion for the three and nine months ended September 30, 2026, respectively, compared to the same periods 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 decreased 41 and 25 basis points for the three and six months ended June 30, 2026, respectively, compared to the same periods 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.
Current wording
Average earning asset yields decreased 19 and 23 basis points for the three and nine months ended September 30, 2026, respectively, compared to the same periods 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 interest income increased $14.8 million and $20.6 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 due to an increase in average earning assets, which was partially offset by lower average earning asset yields.
Current wording
Our interest income increased $26.0 million and $46.6 million for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025 due to an increase in average earning assets, which was partially offset by lower average earning asset yields.
Previous wording
The following table presents net (premium amortization) discount accretion recognized for the three and six months ended June 30, 2026 and 2025.
Current wording
The table below presents net (premium amortization) discount accretion recognized for the three and nine months ended September 30, 2026 and 2025.
Previous wording
The increase in net premium amortization for the three and six months ended June 30, 2026 compared to the same periods in 2025 was due to changes in the size and composition of our investment portfolio, including the purchase price of the securities relative to par value, and faster prepayment speeds on higher-coupon securities. Net premium amortization for the three and six months ended June 30, 2026 was partially offset by our rotation out of 6.5% coupon Agency RMBS and, solely with respect to the six months ended June 30, 2026, the acceleration of discount accretion on Agency CMBS that fully repaid during the first quarter of 2026.
Current wording
The amount of net (premium amortization) discount accretion that we recognize changes based on the size and composition of our investment portfolio, including the purchase price of the securities relative to par value, and prepayment speeds.
Previous wording
The table below presents information related to our borrowings and cost of funds for the three and six months ended June 30, 2026 and 2025.
Current wording
The table below presents information related to our borrowings and cost of funds for the three and nine months ended September 30, 2026 and 2025.
Previous wording
Average borrowings increased $1.4 billion and $896.2 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. Changes in our average borrowings are a factor of our total stockholders' equity, our desired leverage levels and our allocation to TBAs.
Current wording
Average borrowings increased $1.9 billion and $1.2 billion for the three and nine months ended September 30, 2026, respectively, compared to the same periods 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
Cost of funds decreased 89 and 72 basis points for the three and six months ended June 30, 2026, respectively, compared to the same periods 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 six months ended June 30, 2026 and a range of 4.25% to 4.50% during the six months ended June 30, 2025.
Current wording
Cost of funds decreased 67 and 70 basis points for the three and nine months ended September 30, 2026, respectively, compared to the same periods 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% for the majority of the three and nine months ended September 30, 2026, and a range of 4.25% to 4.50% for the majority of the three and nine months ended September 30, 2025.
Previous wording
The table below presents the components of interest expense for the three and six months ended June 30, 2026 and 2025.
Current wording
The table below presents the components of interest expense for the three and nine months ended September 30, 2026 and 2025.
Previous wording
Our interest expense increased $2.4 million for three months ended June 30, 2026 compared to the same period in 2025 due to an increase in average borrowings, which was partially offset by a lower cost of funds. Our interest expense was relatively unchanged for the six months ended June 30, 2026 compared to the same period in 2025 as a lower cost of funds was offset by an increase in average borrowings.
Current wording
Our interest expense increased $9.7 million for both the three and nine months ended September 30, 2026, compared to the same periods in 2025 due to an increase in average borrowings, which was partially offset by a lower cost of funds.
Previous wording
The table below presents the components of net interest income for the three and six months ended June 30, 2026 and 2025.
Current wording
The table below presents the components of net interest income for the three and nine months ended September 30, 2026 and 2025.
Previous wording
Our net interest income, which equals total interest income less total interest expense, increased for the three and six months ended June 30, 2026 compared to the same periods in 2025 due to higher average earning assets and a lower cost of funds, which were partially offset by higher average borrowings and lower average earning asset yields.
Current wording
Our net interest income, which equals total interest income less total interest expense, increased for the three and nine months ended September 30, 2026 compared to the same periods in 2025 due to higher average earning assets and a lower cost of funds, which were partially offset by higher average borrowings and lower average earning asset yields.
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, increased for the three and six months ended June 30, 2026 compared to the same periods 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.
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 and nine months ended September 30, 2026 compared to the same periods 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 six months ended June 30, 2026 and 2025.
Current wording
The table below summarizes the components of gain (loss) on investments, net for the three and nine months ended September 30, 2026 and 2025.
Previous wording
During the six months ended June 30, 2026, we sold our holdings of 6.5% coupon Agency RMBS and realized net gains of $443,000. During the three and six months ended June 30, 2025 we realized net gains of $1.8 million and net losses of $3.6 million, respectively. Net realized gains during the three months ended June 30, 2025 primarily reflect sales of Agency RMBS during the period of heightened market volatility experienced early in the second quarter. Net realized losses during the six months ended June 30, 2025 primarily reflect sales of lower-coupon Agency RMBS during the first quarter.
Current wording
During the three and nine months ended September 30, 2026, we sold MBS and realized net losses of $3.6 million and $3.2 million, respectively (three and nine months ended September 30, 2025: net gains of $1.2 million and net losses of $2.4 million). Net realized losses during the three and nine months ended September 30, 2026 primarily reflect net losses of $9.7 million on sales of Agency CMBS, which were partially offset by net gains of $6.7 million on sales of Agency CMO. 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 of 2025.
Previous 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 June 30, 2026 and December 31, 2025, all of our MBS were accounted for under the fair value option. We recorded net unrealized losses of $21.2 million and $76.6 million during the three and six months ended June 30, 2026, respectively, due to an increase in interest rates. We recorded net unrealized losses on our MBS portfolio accounted for under the fair value option of $7.1 million in the three months ended June 30, 2025 as the heightened market volatility that negatively impacted valuations in April 2025 largely subsided prior to quarter end. We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $80.5 million in the six months ended June 30, 2025 primarily due to a sharp decline in interest rates during the first quarter.
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 September 30, 2026 and December 31, 2025, all of our MBS were accounted for under the fair value option. We recorded net unrealized losses of $398.4 million and $475.0 million during the three and nine months ended September 30, 2026, respectively, due to an increase in interest rates and wider spreads. We recorded net unrealized gains on our MBS portfolio accounted for under the fair value option of $48.3 million and $128.8 million during the three and nine months ended September 30, 2025, respectively, primarily due to a decline in interest rates during 2025.
Previous wording
We use interest rate swaps to manage our exposure to changing interest rates and add stability to our borrowing costs. During the six months ended June 30, 2026, we entered into interest rate swaps with a notional amount of $1.9 billion and terminated or settled existing interest rate swaps with a notional amount of $930.0 million. We recorded net gains of $30.1 million and $47.6 million on interest rate swaps for the three and six months ended June 30, 2026, respectively (three and six months ended June 30, 2025: net losses of $16.2 million and $63.8 million). Net gains during the three and six months ended June 30, 2026 were due to an increase in swap rates.
Current wording
We use interest rate swaps to manage our exposure to changing interest rates and add stability to our borrowing costs. During the nine months ended September 30, 2026, we entered into interest rate swaps with a notional amount of $3.0 billion and terminated or settled existing interest rate swaps with a notional amount of $1.7 billion. We recorded net gains of $201.5 million and $249.1 million on interest rate swaps for the three and nine months ended September 30, 2026, respectively, due to an increase in swap rates. We recorded net losses of $595,000 and $64.4 million on interest rate swaps for the three and nine months ended September 30, 2025, respectively. Net losses during the nine months ended September 30, 2025 were due to a decline in swap rates.
Previous wording
We 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 six months ended June 30, 2026, we entered into U.S. Treasury futures contracts with a notional amount of $2.7 billion and terminated or settled existing U.S. Treasury futures contracts with a notional amount of $2.5 billion. We recognized net gains of $3.3 million and $7.7 million on U.S. Treasury futures contracts during the three and six months ended June 30, 2026, respectively (three and six months ended June 30, 2025: net losses of $13.5 million and $46.4 million). Net gains during the three and six months ended June 30, 2026 were due to an increase in interest rates.
Current wording
We 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 nine months ended September 30, 2026, we entered into U.S. Treasury futures contracts with a notional amount of $4.7 billion and terminated or settled existing U.S. Treasury futures contracts with a notional amount of $4.1 billion. We recognized net gains of $107.2 million and $114.8 million on U.S. Treasury futures contracts during the three and nine months ended September 30, 2026, respectively, due to an increase in interest rates. We recorded net losses of $8.6 million and $55.0 million during the three and nine months ended September 30, 2025, respectively, due to a decrease in interest rates.
Previous wording
We primarily use long positions in TBAs as an alternative means of investing in and financing Agency RMBS. Additionally, during the second quarter of 2025, we used short positions in TBAs in response to heightened market volatility to manage risk and economically hedge a portion of our exposure to changes in Agency RMBS valuations. We recorded net losses of $1.8 million and $10.8 million on TBAs during the three and six months ended June 30, 2026, respectively (three and six months ended June 30, 2025: net losses of $1.2 million and net gains of $2.6 million). Net losses on TBAs during the three and six months ended June 30, 2026 were due to an increase in interest rates.
Current wording
We primarily use long positions in TBAs as an alternative means of investing in and financing Agency RMBS. Additionally, during the second quarter of 2025, we used short positions in TBAs in response to heightened market volatility to manage risk and economically hedge a portion of our exposure to changes in Agency RMBS valuations. We recorded net losses of $30.9 million and $41.7 million on TBAs during the three and nine months ended September 30, 2026, respectively, due to an increase in interest rates and wider spreads. We did not hold any TBAs during the three months ended September 30, 2025. We recorded net gains of $2.6 million on TBAs during the nine months ended September 30, 2025.
Previous wording
We incurred management fees of $3.3 million and $6.3 million for the three and six months ended June 30, 2026, respectively (three and six months ended June 30, 2025: $2.8 million and $5.8 million). Our management fees are determined by our average stockholders' equity. Refer to Note 9 – “Related Party Transactions” of our condensed consolidated financial statements for a discussion of our relationship with our Manager and a description of how our fees are calculated.
Current wording
We incurred management fees of $3.6 million and $9.9 million for the three and nine months ended September 30, 2026, respectively (three and nine months ended September 30, 2025: $2.7 million and $8.5 million). Our management fees are determined by our average stockholders' equity. Refer to Note 9 – “Related Party Transactions” of our condensed consolidated financial statements for a discussion of our relationship with our Manager and a description of how our fees are calculated.
Previous wording
Our general and administrative expenses not covered under our management agreement amounted to $2.1 million and $4.0 million for the three and six months ended June 30, 2026, respectively (three and six months ended June 30, 2025: $2.0 million and $3.7 million). General and administrative expenses not covered under our management agreement primarily consist of directors and officers insurance, legal costs, accounting, auditing and tax services, filing fees and miscellaneous general and administrative costs.
Current wording
Our general and administrative expenses not covered under our management agreement amounted to $1.6 million and $5.6 million for the three and nine months ended September 30, 2026, respectively (three and nine months ended September 30, 2025: $1.8 million and $5.5 million). General and administrative expenses not covered under our management agreement primarily consist of directors and officers insurance, legal costs, accounting, auditing and tax services, filing fees and miscellaneous general and administrative costs.
Previous wording
In May 2022, our board of directors approved a share repurchase program for our Series C Preferred Stock. During the three and six months ended June 30, 2026, we repurchased and retired 47,222 and 111,910 shares of Series C Preferred Stock, respectively (three and six months ended June 30, 2025: 96,803 and 186,949 shares). Gains and losses on repurchases and retirements of preferred stock represent the difference between the consideration transferred and the carrying value of the preferred stock.
Current wording
In May 2022, our board of directors approved a share repurchase program for our Series C Preferred Stock. During the three and nine months ended September 30, 2026, we repurchased and retired 17,415 and 129,325 shares of Series C Preferred Stock, respectively (three and nine months ended September 30, 2025: 89,223 and 276,172 shares). Gains and losses on repurchases and retirements of preferred stock represent the difference between the consideration transferred and the carrying value of the preferred stock.
Previous wording
For the three months ended June 30, 2026, our net income attributable to common stockholders was $31.8 million (three months ended June 30, 2025: net loss of $26.6 million) or $0.34 basic and diluted net income per average share available to common stockholders (three months ended June 30, 2025: $0.40 net loss per share). The change in net income (loss) attributable to common stockholders was primarily due to (i) net losses on investments of $21.2 million in the 2026 period compared to net losses on investments of $5.3 million in the 2025 period; (ii) net gains on derivative instruments of $31.6 million in the 2026 period compared to net losses on derivatives of $30.9 million in the 2025 period; and (iii) a $12.4 million increase in net interest income.
Current wording
For the three months ended September 30, 2026, our net loss attributable to common stockholders was $98.8 million (three months ended September 30, 2025: net income of $50.2 million) or $0.92 basic and diluted net loss per average share available to common stockholders (three months ended September 30, 2025: $0.74 net income per share). The change in net income (loss) attributable to common stockholders was primarily due to (i) net losses on investments of $402.1 million in the 2026 period compared to net gains on investments of $49.5 million in the 2025 period; (ii) net gains on derivative instruments of $277.7 million in the 2026 period compared to net losses on derivatives of $9.2 million in the 2025 period; and (iii) a $16.3 million increase in net interest income.
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